The Cigna Group · NYSE:CI
The Cigna — Cigna — Cigna Webinar: Understanding Medical Loss Ratio (MLR) Rebates (August 2012)
27 slides from The Cigna's conference presentation, Aug 2, 2012
Slide 1: Understanding Medical Loss Ratio (MLR) Rebates
UNDERSTANDING MEDICAL LOSS RATIO (MLR) REBATES A presentation by Download this presentation Groom Law Group on InformedOnReform.com under Reform News sponsored by Cigna August 2, 2012
Slide 2: Agenda
Download this presentation on InformedOnReform.com under Reform News AGENDA 1. 1Welcome Bryan Sautters Cigna 2. 2Understanding MLR Rebates Mark C. Nielsen Groom Law Group Thomas F. 3. 3Questions Fitzgerald and Groom Law Group Mark C. Nielsen 4. 4Closing Remarks Bryan Sautters Cigna © 2012 Cigna 2
Slide 3: Mark C. Nielsen, Principal – Groom Law Group
Mark C. Nielsen, Principal – Groom Law Group, Washington, D.C. z Mark C. Nielsen is a principal in the Groom Law Group, one of the premier employee benefits law firms in the country. z Mark specializes in various aspects of employee benefits law, particularly health care and litigation matters. z Ma
Slide 4: Thomas F. Fitzgerald, Principal – Groom Law Group
Thomas F. Fitzgerald, Principal – Groom Law Group, Washington, D.C. z Tom Fitzgerald is a principal at the Groom Law Group, the largest employee benefits firm in the country. z Tom specializes in health care and litigation matters, and works closely with insurers and plan sponsors in their complianc
Slide 5: Understanding Medical Loss Ratio Rebates
Download this presentation on InformedOnReform.com under Reform News Understanding Medical Loss Ratio Rebates Mark C. Nielsen, Esq. Groom Law Group, Washington DC Cigna Webinar August 2, 2012 5
Slide 6: Today's Agenda
Download this presentation on InformedOnReform.com under Reform News Today’s Agenda z What is a medical loss ratio (“MLR”)? z How are MLR rebates calculated? z When are rebates distributed? z What can you do with the rebates? 6
Slide 7: What is MLR?
Download this presentation on InformedOnReform.com under Reform News What is MLR? z The Affordable Care Act requires insurers to spend a minimum percentage of premium dollars on: ‒ Clinical services (e.g., reimbursement of provider claims) and ‒ Health care quality improvement activities. z Insurers
Slide 8: How is MLR Calculated?
Download this presentation on InformedOnReform.com under Reform News How is MLR Calculated? MLR is calculated for each insurer, broken down by: z State and z Line of business (individual, small group, and large group) Note: group customers with employees in multiple states are organized by employer
Slide 9: When Are MLR Rebates Distributed?
Download this presentation on InformedOnReform.com under Reform News When Are MLR Rebates Distributed? z If an insurer does not meet the applicable 80 or 85% MLR threshold, it must provide a rebate to individual and group policyholders ‒ Rebates must be distributed by August 1, following the end of
Slide 10: What Can You Do With MLR Rebates?
Download this presentation on InformedOnReform.com under Reform News What Can You Do With MLR Rebates? z It depends. z Critical Issue: Is the rebate (or a portion of it) a “plan asset?” ‒ If so, must be used for the benefit of plan participants and beneficiaries z Different rules for ERISA and non-E
Slide 11: ERISA Plans: Identifying Plan Assets
Download this presentation on InformedOnReform.com under Reform News ERISA Plans: Identifying Plan Assets DOL Technical Release 2011-04 Who is the policyholder? z If the plan (or trust): rebate is a plan asset unless language to the contrary in governing plan documents z If the employer: rebate is a
Slide 12: ERISA Plans: Identifying Plan Assets
Download this presentation on InformedOnReform.com under Reform News ERISA Plans: Identifying Plan Assets Where plan documents are silent, look to source of premium payment: z Premium is paid entirely out of trust assets: plan asset; z Premium paid entirely by employees: plan asset; z Premium paid e
Slide 13: ERISA Plans: Permissible Uses of MLR Rebates
Download this presentation on InformedOnReform.com under Reform News ERISA Plans: Permissible Uses of MLR Rebates If a “plan asset,” plan fiduciary generally must: z Distribute such amounts to enrollees; z Enhance benefits under the plan for current enrollees; or z Reduce future employee premium con
Slide 14: ERISA Plans: Permissible Uses of MLR Rebates–Flexibility
Download this presentation on InformedOnReform.com under Reform News ERISA Plans: Permissible Uses of MLR Rebates–Flexibility z Former Participants: if not cost-effective to track down and distribute, amounts may be allocated to current participants. z De minimis amounts: If not cost-effective to di
Slide 15: ERISA Plans: Permissible Uses of MLR Rebates
Download this presentation on InformedOnReform.com under Reform News ERISA Plans: Permissible Uses of MLR Rebates z Note: rebates must be used to benefit people covered by the policy that generated the rebate z “Unfunded” plans (exempt from ERISA trust requirements): ‒ Rebate must be used within 3 m
Slide 16: Non-ERISA Plans: Non-Federal Governmental Plans
Download this presentation on InformedOnReform.com under Reform News Non-ERISA Plans: Non-Federal Governmental Plans Rebate amounts “proportionate to the premium contributions made by all subscribers” must be used for the benefit of current participants. Permissible Options: z Reduce the subsequent
Slide 17: Non-ERISA Plans: Church Plans
Download this presentation on InformedOnReform.com under Reform News Non-ERISA Plans: Church Plans z Insurer must pay the entire rebate amount (in equal shares) to participants covered under the policy during 2011 z Exception: may be distributed to group policyholder if policyholder provides written
Slide 18: Tax Implications of Distributing MLR Rebates
Download this presentation on InformedOnReform.com under Reform News Tax Implications of Distributing MLR Rebates z Employee pre-tax premium contributions (e.g., 125 plans) z Employee after-tax premium contributions 18
Slide 19: Questions?
Download this presentation on InformedOnReform.com under Reform News Questions? 19
Slide 20: ERISA and Tax Issues
Download this presentation on InformedOnReform.com under Reform News ERISA and Tax Issues z Employer ability to retain rebate – “Plan asset”? z Timing for when rebates must be distributed/applied z Tax consequences of cash distributions z W-2 reporting 20
Slide 21: Calculations
Download this presentation on InformedOnReform.com under Reform News Calculations z Allocating rebates among participants – Degree of Flexibility z Cash distribution versus other uses – Document decision-making process z Multiple benefit options under one plan 21
Slide 22: COBRA, Retirees and Employees Who Have Left the Company
Download this presentation on InformedOnReform.com under Reform News COBRA, Retirees and Employees Who Have Left the Company z Terminated/retired employees z COBRA beneficiaries 22
Slide 23: Benefit Enhancements and Wellness
Download this presentation on InformedOnReform.com under Reform News Benefit Enhancements and Wellness z What is a “benefit enhancement”? z Wellness program incentives 23
Slide 24: Closing Remarks
Download this presentation on InformedOnReform.com under Reform News CLOSING REMARKS © 2012 Cigna 24
Slide 25: Cigna's Position on the MLR Provision
Download this presentation on InformedOnReform.com under Reform News CIGNA’S POSITION ON THE MLR PROVISION The MLR for the large group market should be calculated on a nationwide basis. Without additional changes, there could be unintended consequences including: • Less competition • Reduction in co
Slide 26: For More Information
Download this presentation on InformedOnReform.com under Reform News FOR MORE INFORMATION Visit our website, InformedOnReform.com Download today’s presentation under Reform News A replay will be available within a few days under Webinars © 2012 Cigna 26
Slide 27: Cigna service mark notice
“Cigna” is a registered service mark, and the “Tree of Life” logo, “Graded Funding,” “Level Funding” and “GO YOU” are service marks, of Cigna Intellectual Property, Inc., licensed for use by Cigna Corporation and its operating subsidiaries. All products and services are provided exclusively by such
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