You may have heard some recent news about insurance carriers offering premium credits on future bills.
MetLife was among the first major carriers to announce that it would give credits for dental premiums. More recently, Principal and United Healthcare have both made similar announcements pertaining to credits—and there will be more carrier updates to follow.
Before you start calculating the potential relief this may provide your organization, you may want to pause and consider the underlying rules you will need to follow.
What is a premium credit?
A premium credit is effectively a return or refund of a portion of monthly premiums paid to an insurance carrier. In most cases this means a credit will be applied to a future invoice, reducing the amount owed (rather than receiving a check in the mail).
Why are carriers offering credits?
The financial challenges that businesses and individuals are experiencing as a result of the COVID-19 pandemic are severe and many are desperately seeking relief from the bills piling up.
While many hospitals across the country have experienced a surge in patients related to COVID-19, routine visits and elective procedures have sharply declined in many medical and dental facilities. In fact, nearly all dental providers have been closed for any services outside of emergency needs and primary care and specialist visits have largely been conducted through virtual and telehealth tools.
The reduction in claims has naturally reduced expenses for insurance carriers, so many are taking the opportunity to do what they feel is right by the consumer and are responding with premium credits.
Is my company getting a premium credit?
At this time, only a handful of carriers have released information on premium credits and the bulk of the credits are for dental plans—we do, however, expect to see the number of carriers increase over the next several weeks.
The premium credits announced range anywhere from 5 percent to 100 percent and apply to one or more months’ worth of invoices, depending on the carrier and type of insurance.
Here is a list of current announcements:
- MetLife: 25 percent for April and May 2020 for fully insured dental PPO plans
- Principal: 10 percent for June to October 2020 for fully insured dental policies
- United Healthcare: 5 to 20 percent of May 2020 premium credited on invoices received in June 2020 for fully insured Medical and Dental plans, depending on the specific plan
- Delta Dental of Arizona: 25 percent of April and May 2020 applied to June 2020 for fully insured, non-terminated plans
- Delta Dental of Michigan, Ohio and Indiana: 100 percent of April’s premium applied to June 2020 invoice for fully insured plans
It’s important to note that typically only fully insured groups will receive these credits, as self-insured groups pay their own claims and will therefore experience claim reductions directly.
What happens if I get a credit?
Invoice relief of any kind will certainly be well-received by most groups, but the handling of such relief is more complicated than it may seem due to Employee Retirement Income Security Act (ERISA) rules. Most group premium credits will be considered ERISA plan assets and therefore should be treated like a Medical Loss Ratio (MLR) Rebate.
Most group health plans will fall into one of two categories following the sentence above. The first being, “I’ve dealt with these rebates in the past and know how to handle them,” and the other group is likely asking, “What’s a MLR rebate?”
If you’ve never heard of an MLR Rebate before or simply need a quick refresher, a colleague’s recent blog will get you up to speed. Follow the same guidelines outlined there to ensure compliance.
Decisions about how to allocate the participants’ portion of the rebate are subject to ERISA’s general standards of fiduciary conduct. Note that the first step is to review your group health Plan Document/Summary Plan Description as there may be language there that allows the employer to keep the full amount of the refund without distributing the employees’ share. If not, be aware that even when the amount of a participant’s portion would be considered “de Minimis,” the employer is not allowed to simply keep the money – the credit requires your action.
To simplify the process, we recommend taking the Premium Holiday approach to allocating the participant portion, which is outlined in option four in the blog referenced earlier. This ensures taxability is addressed correctly and requires limited administrative work.
When do I have to distribute the participants’ share of the credit?
The credit is considered an ERISA plan asset which generally must be held in a trust, however, recent guidance states employers are not required to hold the rebates in trust as long as they are distributed to participants within three months of receipt by the plan sponsor.
If you have questions about your specific carrier credits or how to handle compliance associated with this type of relief, don’t hesitate to contact me directly. If you are a Bolton Client, please reach out to your primary Bolton contact.
Michelle Cammayo contributed to this article.