De Minimis Amounts: The MLR rules allow for employers to set a de minimis threshold under which rebates would not be processed. For example, if the amount of a rebate is less than the administrative cost of processing it, an employer can avoid passing through the rebate. It is important that this process be specifically documented and only applied to amounts less than a reasonable de minimis threshold. A Full Plan Year Approach: Acknowledging that the administrative process could be significant for relatively small refund amounts (for any specific employee), it may also be possible for employers to apply a specific-month premium rebate across the employee contributions for the entire Plan Year. This will effectively reduce the overall impact of a single month’s premium rebate to a level such that the actual change in annual premium contribution (as compared to the promised percentage premium sharing) falls under a reasonable standard for not processing the refund under the de minimis threshold guidelines. It should be noted that this would be considered a very aggressive strategy. COBRA Premiums Applies to COBRA: The premiums paid by COBRA Qualified Beneficiaries are, by statute, equal to premiums paid by employers (plus a 2% administrative fee). Thus, when carriers reduce premiums for employers, those premium reductions must be passed through to Qualified Beneficiaries, as well. No Alternate Approach: While employers may have some latitude in passing through contribution rebates for active employees, such latitude is not available for COBRA premiums. Any discount to premiums should be fully passed through to COBRA beneficiaries.
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