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Frequently Asked Questions Insurance

Medical Loss Ratio

  • OPM has determined that using the rebates to reduce future premiums is the most efficient and timely way to ensure that the funds benefit Federal employees and agencies that pay FEHB premiums. OPM will apply rebates to lower rates, as applicable, either in the next plan year, or will put rebates into a plan’s reserves to lower rates in subsequent years. If OPM sent rebate checks to FEHB enrollees, it would involve establishing new administrative systems at considerable cost.  OPM’s approach assures that all funds from rebates go to lower premium costs rather than paying administrative expenses. Our approach uses existing staff and existing systems resulting in no additional cost. OPM has already factored the rebates into its rate negotiations with insurers for the 2014 plan year.  Using these rebates to lower premiums is also in accordance with how OPM is required to use other types of rebates, refunds, and overpayments. 
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  • OPM has communicated with health insurers that participate in the FEHB program and has determined that in 2012, 3 carriers, offering 16 plan options/service areas, covering 53,423 FEHB enrollees have rebated approximately $1,052,106 to the program.  The carriers owing a rebate are Aetna, GHI HMO, and Humana.  OPM deposited the rebates into the contingency reserves of these three carriers’ health plans on the basis of the amount received from the carrier. 
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  • Health insurers participating in the FEHB program are required to issue any MLR rebate to the policy holder. OPM is the policy holder for all FEHB plans, therefore we will receive the rebates from plans that exceed MLR limits.  OPM will deposit any MLR rebates into the contingency reserve of the health plan offered by the insurer that paid the rebate, and use it to directly reduce premiums for future years.  This ensures any rebates will be shared between health plan enrollees and the Federal agencies that pay for FEHB coverage.  OPM policy and regulations for handling the return of overpayments by FEHB plans are guided by the Federal Acquisition Regulation Section 31.201-5 entitled “Credits” which states, “The applicable portion of any income, rebate, allowance, or other credit relating to any allowable cost and received by or accruing to the contractor shall be credited to the Government either as a cost reduction or by cash refund.”
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  • We are still learning how other employers are distributing MLR rebates to their health plan enrollees. It is important to note that many other very large employers offer health insurance on a self-insured basis.  Such self-insured plans are not “health insurance issuers” as defined by section 2791(b)(2) of the PHS Act and are therefore not subject to the MLR provisions of the ACA.  As such, there are few very large employers with circumstances comparable to the FEHB. 
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  • Each carrier calculated and paid the rebate amounts by plan.  The rebate check will be deposited into that plan’s contingency reserve and used to lower future FEHB premiums for that plan.
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