Affordable Care Act (ACA)
Medical Loss Ratio (MLR) Rebate Information
Some CalPERS members may receive a notice from their health plan regarding MLR rebates. These notices are required by federal law and are sent whenever a health plan issues a rebate based on how premium dollars were used during the previous year. The following information provides answers to common questions to help explain what MLR means, why members received a letter, and how we handle rebates funds.
Frequently Asked Questions
The ACA established MLR rules to ensure health insurance carriers spend most premium dollars on medical care and health care quality improvement—not administrative costs. Carriers must spend between 80–85% of premium dollars on these activities. For CalPERS health plans, the required minimum is 85%.
MLR reporting happens every year, but notices are only sent when a health plan issues a rebate. If you haven’t received a letter before, your health plan met the MLR spending requirements in prior years.
Carriers report MLR data for the previous year to the U.S. Department of Health and Human Services by July 31. Rebates must be issued by September 30 for the previous plan year.
Federal law requires health insurance carriers to send a standardized Notice of Health Insurance Premium Rebate to all covered employees whenever an MLR rebate is issued. Covered employees receive the notice even if they are not directly receiving a payment.
The MLR is calculated for all policies in a specific block as categorized by the health plan, the state where the policy is issued, and the line of business (Individual, Small Group, or Large Group). All policies in a block will either receive a rebate or not, based on the computed MLR for the entire block. CalPERS is considered a Large Group plan and receives its portion of the rebate calculated for the entire block, while relevant group plan subscribers receive written notice that a rebate was issued.
Depending on the type of employer, rebates can be distributed differently. For us, rebates are paid to the group policyholder (CalPERS), with the obligation to use the portion of the rebate paid by subscribers in one of three ways:
- Lower the amount all subscribers pay for premiums in an upcoming plan year
- Lower premiums in an upcoming plan year for only the subscribers who were enrolled in the policy that generated the rebate
- Give a cash refund to subscribers who were enrolled in the policy that generated the rebate
Health plans send rebate funds to us either as a lump sum payment or as a credit that reduces future premium bills.
We applies rebate funds to lower the amount all subscribers pay for premiums in an upcoming plan year, as permitted under federal regulations.
Rebate amounts are typically small when calculated per member. Additionally, issuing direct payments would require administrative processing and tax withholding, which would reduce the amount members receive. Regulations allow us to use rebate dollars to offset premiums instead, ensuring the funds benefit members in the most efficient way.
Minimum Essential Coverage
The Affordable Care Act (ACA) requires most Americans to have qualifying health insurance called minimum essential coverage.
Under the ACA's individual shared responsibility provision (also known as the individual mandate
), most Americans must maintain minimum essential coverage. Currently, the individual mandate is still in effect, but the individual penalty has been set to zero.
All of CalPERS' health plans meet the minimum essential coverage requirement.
IRS Reporting/Form 1095-B
Health plans are required to report subscriber and dependent minimum essential coverage information to the IRS beginning in 2016 and annually thereafter. The IRS will use this information to determine if you and your family met the individual mandate for the year.
By March 2, subscribers (also known as the responsible individual
by the IRS) in a CalPERS Basic health plan (including an early retiree), may receive Form 1095-B from health plans showing the months of coverage the subscriber and any family members had during the year. The IRS issued proposed rules (PDF) on December 6, 2021, granting health plans an automatic 30-day extension to furnish form 1095-B to subscribers from January 31 to March 2. In addition, the IRS is allowing health plans to make Form 1095-B available upon request if health plans meet specific conditions, including posting a notice on their website with contact information and providing the form within 30 days from the date of request.
If you're a retiree in a Medicare or Medicare Advantage plan, you should receive a Form 1095-B from the Centers for Medicare & Medicaid Services (CMS).
If you have questions about Form 1095-B, or if any information is not correct, please contact your health plan directly. Find additional information from the IRS' Questions and Answers about Health Care Information Forms for Individuals.
To learn more about the individual mandate,
review the IRS' Individual Shared Responsibility Provision.
Social Security Number Solicitation
You may have been contacted by your CalPERS health plan if you or your dependents are missing any information required for IRS reporting, such as Social Security numbers (SSNs). It is to your benefit to provide all missing information. Doing so will help the IRS verify your and your family's health coverage for the year so that you aren't subject to a tax penalty. If you feel a solicitation request isn't legitimate or could be a scam, contact your health plan directly. Please also remember that at any time throughout the year you may log in to myCalPERS to view and update your and your family's information.
For additional information on reporting health coverage to the IRS, visit Affordable Care Act Tax Provisions for Individuals and Families.
This information is provided for general assistance purposes only and should not be construed as tax advice.
Dependent Coverage/Extended Coverage
CalPERS' health benefits cover all eligible family members including your spouse, domestic partner, and children. Under the ACA's extended dependent coverage, your child is eligible for benefits up to age 26, regardless of marital, student, housing, or employment status. However, your health coverage doesn't extend to your child's spouse or children, unless your grandchild qualifies as a dependent under a Parent-Child Relationship under CCR 599.500 (o). The payment for extended dependent coverage costs is consistent with premium payments for other dependents.
Variable-Hour Employees
If you're a temporary or variable-hour employee, you may be eligible for health coverage due to new provisions in the Public Employee Medical and Hospital Care Act (PEMHCA) that help large contracting employers meet ACA requirements. To check if you meet the expanded eligibility criteria, contact your employer. If you are not eligible for CalPERS health coverage, you may purchase coverage through Covered California, California's health insurance marketplace, and may be eligible for premium tax credits to subsidize costs.
Rescissions
CalPERS no longer allows employers to rescind health coverage based on a reduction in hours worked. Generally, the ACA defines a rescission as a retroactive cancellation of health coverage. A cancellation or discontinuance of health coverage with a prospective effective date is not considered a rescission.
Annual and Lifetime Limits/Out-of-Pocket Expenses
CalPERS' Preferred Provider Organization (PPO) plans no longer have annual or lifetime dollar limits on essential health benefits. In addition, beginning in 2014, out-of-pocket costs for in-network essential health benefits in all CalPERS health plans are limited. Refer to your health plan's Evidence of Coverage in Plans & Rates for more information on out-of-pocket limits.
Summary of Benefits and Coverage
Under the ACA, health plans must provide information about their plan benefits and coverage in an easy-to-understand Summary of Benefits and Coverage (SBC) document, along with a glossary of terms commonly used in the health insurance industry. The SBC documents allow you to easily compare your health plan choices to determine what is best for you and your family. Each year, CalPERS posts our plans' SBC and glossary, available in the Plans & Rates section (subsection Health Plans), and also provides information on how to request these tools directly from our health plans during Open Enrollment.
CalPERS Members and Covered California
If you lose your CalPERS health benefits, you may be eligible for COBRA coverage. As an alternative you may purchase health benefits through Covered California, California's health insurance marketplace. You may also be eligible for premium tax credits through Covered California to subsidize insurance costs. Visit Covered California for more information on coverage options and how to purchase health benefits.