Due to a recent United States Supreme Court (USSC) decision, employers who sponsored small group plans in 2014, 2015, and/or 2016 may receive Medical Loss Ratio (MLR) rebates from insurers. Employers who receive these MLR rebates have a fiduciary obligation to distribute the rebate (or any portion thereof) that are considered “plan assets” to plan participants.

Compliance Snapshot

Employers who receive MLR rebates for the 2014, 2015, or 2016 plan years should do the following:

  1. Determine whether the rebate is a plan asset;
  2. If so, determine how to distribute the rebate to plan participants; and
  3. Distribute any rebate within 3 months of receipt.

Employers can accomplish these three steps by following the process outlined in our insurance premium credit blog article. Employers should be sure to document their decision-making process for the distribution method chosen.


On April 27, 2020, the USSC ruled that the federal government owed health plan insurers more than $12 billion in “risk corridor” (RC) payments from 2014 to 2016. Following the USSC decision, CMS issued proposed guidance on how insurers must treat RC payments received for the 2014-2016 plan years with respect to calculating MLR rebates. Generally, insurers must take into account RC payments when calculating MLR rebates, which are annual rebates insurers must provide to policyholders (e.g. employers) of fully insured group health plans if a certain percentage of the plan’s premiums were not spent on health care services that year.

Under the proposed guidance, CMS would require insurers to re-calculate MLR rebates for the year(s) they received new RC payments to determine whether they owe additional rebates to policyholders. In addition, insurers would need revise past MLR reports to reflect these changes (insurers are required to file MLR reports annually with CMS) by December 31st or 60 days after receiving a payment, whichever is later. After filing the revised report, insurers would have 60 days to distribute any additional MLR rebate.

Impact on Employers

The revised MLR calculations may result in insurers issuing MLR rebates to employers who sponsored small group plans in 2014, 2015, or 2016. As with all MLR rebates, employers will be required to distribute the rebate (or any portion thereof) that is considered a “plan asset” solely for the benefit of plan participants. To determine whether a MLR rebate is considered a plan asset and how to use the MLR rebate for the benefit of plan participants, employers can use the same step-by-step process outlined in our insurance premium credit blog article.

Additional Resources

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.