We have exciting news to share! By the end of September 2022, CCHP will return a portion of your 2021 health insurance premium. Below is important information on how this rebate works and what impact it has on our members.
The Affordable Care Act (ACA) requires health insurance companies to spend at least 80% of the individual premiums we collect each year on medical/pharmacy expenses as well as certain quality improvement initiatives. This percentage of total spend is called the Medical Loss Ratio (MLR). In 2021, CCHP’s total spend on medical/pharmacy expenses and quality improvement initiatives totaled more than 80% of the individual premium received. However, the MLR calculation is based on a 3-year average. From 2019-2021, CCHP spent less than 80% of total premium dollars on health care services and activities to improve health care quality. As a result, if you were enrolled with CCHP for any part of 2021, you will be receiving a refund check for a portion of the premiums you had paid. This is your money, so you may cash your check and use the funds however you see fit. All checks for the 2021 MLR rebate will be mailed by September 30, 2022.
As a non-profit organization, CCHP strives to only collect what premiums are needed to pay claims and maintain operational solvency. To that end, we are excited to pass this rebate back to our members and look forward to serving you in the future. We encourage members to utilize the FAQ below to gain a better understanding of the MLR rebate process and how it may affect you.
We encourage any questions related to taxation, be directed to a tax professional. All other questions can be directed to Customer Service at 844-201-4672.
MLR Rebate Frequently Asked Questions
- Insurance premiums are used by an insurance company to pay for one of two categories of services –clinical healthcare services or administrative costs. The percentage of premiums spent on healthcare services is called the Medical Loss Ratio (MLR).
- If too large of a percentage of premiums is spent on administrative costs instead of clinical healthcare services, health services for the insured may suffer. To prevent this, the Patient Protection and Affordable Care Act mandates that rebates be paid to insured individuals if at least 80% of premium dollars in the individual market are not spent on clinical healthcare services.
Rebates are determined on a state-by-state basis. Rebates are based on the claims and premiums for a group of policies in a state from the previous calendar year.
- The MLR rebate is taxable if you paid health insurance premiums with pre-tax dollars, such as a Health Savings Account, or if you received tax benefits by deducting premiums you paid on your Form 1040 tax return form.
- The MLR rebate is not taxable if you paid health insurance premiums with post-tax dollars or if you did not take a deduction on your Form 1040 tax return form for your premiums paid.
- Speak with your tax preparer to determine if you need to report your rebate as income when you file your next Form 1040 tax return form.
- You will not receive a Form 1099-MISC or any other tax preparation paperwork from CCHP.
- If you have specific questions on how the MLR rebate may affect your annual tax filing, please consult your tax advisor for more assistance.
- According to CMS, current guidance for the individual market requires the health insurer to refund the entire rebate to the policyholder regardless of whether the premium was subsidized by an Advance Premium Tax Credit (APTC). One notable exception applies in states that elected to expand Medicaid through ACA marketplaces; however, Wisconsin is excluded from this exception.
- Form 8962 Premium Tax Credit is included with an individual’s Form 1040 to determine the amount of premium tax credit and reconcile it with the APTC. Please consult with your tax advisor regarding the impact of the rebate on your credit.
- Please refer to the flow chart for basic direction, and consult your tax advisor for detailed assistance.
- When you pay for benefits, including health insurance, with pre-tax (also called before-tax) dollars, such as a Health Savings Account, the deductions are taken off your gross income before the calculation of income tax and after-tax deductions. Taxes are calculated based on this reduced taxable income amount (i.e. gross income minus pre-tax dollars).
- Having pre-tax dollar deductions results in less income tax paid than would otherwise be the case.
- An example of pre-tax dollars is the use of a Health Savings Account.
Be sure to seek a tax advisor for more detailed assistance on how this MLR rebate may impact your individual tax status.
Sources
“Medical Loss Ratio (MLR) Rebate FAQs.” Internal Revenue Service. 2019.
https://www.irs.gov/newsroom/medical-loss-ratio-mlr-faqs
“Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments.” Internal Revenue Service. 2019. https://www.irs.gov/affordable-care-act/individuals-and-families/premium-tax-credit-claiming-the-credit-and-reconciling-advance-credit-payments
“Questions and Answers Regarding the Medical Loss Ratio (MLR) Reporting and Rebate Requirements.” Centers Medicare and Medicaid Services. 2015. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/MLR-Guidance-Earned-Premium-and-APTC-Rebates-20150527.pdf
“Medical Loss Ratio.” Centers for Medicare and Medicaid Services. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Medical-Loss-Ratio.html
Photo: https://www.pexels.com/photo/computer-desk-laptop-stethoscope-48604/ RIA. (2019). 2019 RIA federal tax handbook. Retrieved from RIA Checkpoint database.