On March 23, 2010, the Patient Protection and Affordable Care Act ("PPACA") added Section 2718 to the Public Health Services Act ("PHSA"). The new section requires health insurance companies to submit an annual earned premium and expenditure report to the Department of Health and Human Services and comply with specific medical loss ratios (80% for employers with less than 100 employees and 85% for employers with more than 100 employees). If an insurance company's spending on reimbursement for clinical services, activities to improve health care quality and other non-claims costs fails to meet the required percentages (80% or 85%), the insurance company is required to refund part of the premium received to policyholders. The first premium refund was due and paid to some companies in August 2012.
As a result of this continuing healthcare reform mandate, on or about August 1, 2013, companies may have received a premium refund from its group medical insurance carrier if the carrier failed to meet the specified medical loss ratios. Below, we have summarized the analysis necessary to determine if the company can keep the refund in whole or in part: