Updates Regarding Covered California Notification Letters and Medical Loss Ratio Rebates

We have noticed a dramatic increase in the amount of Affordable Care Act (ACA) questions this past week surrounding Covered California Notification Letters and Medical Loss Ratio Rebates.

The following provides some important information regarding these two topics:

Covered California is Issuing Letters to Employers

Under California Code, Title 10, Section 6476(i), Covered California is obligated to send out a letter when an employee has been determined eligible for a subsidy, also known as an Advanced Premium Tax Credit (APTC). It’s part of the Covered California “Eligibility Determination Process.” These letters are also generated when the aforementioned individual changes employers or renews his/her coverage.

If the employer is an Applicable Large Employer (ALE) and subject to ACA penalties, the Covered California Notification letter is a precursor to a potential Employer Shared Responsibility Payment (ESRP) penalty.

  • If your employer is an ALE and the employee was a full-time employee that was offered qualifying coverage, please take the time to appeal within 90 days using the link found in the Covered California letter. Please note that appealing may result in the employee’s subsidy being withdrawn; therefore, this may affect employee relations.

Medical Loss Ratio (MLR) Rebate Checks are arriving 

MLR rebates are issued from small group carriers who did not meet the 80/20 rule. You can learn more about the 80/20 rule here.

Inevitably, these rebates raise fundamental questions for employers, including:

  • How much (if any) of the rebate must be distributed to plan participants?
  • How quickly must I distribute the participants’ share?
  • What options do I have in distributing the employees’ share?
  • What are the tax consequences of the various distribution options that are available?

Click this link to read a notice issued by our compliance partner, Benefit Comply, that should address all of the above questions and more.


Michelle Cammayo

About Michelle Cammayo

Michelle Cammayo has more than 13 years of Employee Benefits experience specializing in all lines of health and welfare benefits. Today, Michelle works closely with clients and partners to provide guidance in areas of the law including ERISA, HIPAA, COBRA, FMLA and PPACA. She also oversees the Compliance Department at Bolton & Company to ensure we are helping our clients manage and eliminate risk with regards to employee benefit compliance.

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