As part of the Affordable Care Act, health insurers must limit the amount they charge for administrative expenses, profits and broker fees to 15 percent for large groups (more than 50 employees). This means they must spend 85 percent of the premium for health care claims and quality improvement.
This 85 percent is called a medical loss ratio (MLR). If the insurer fails to meet this MLR, a rebate must be issued in August 2012. The calculation is not based on a single employer, but the insurer's entire large group market.
Any rebates will be issued to the group policy holder (usually the employer), who can decide to use the amount of the rebate that is proportionate to the total amount of premium paid by all employees to reduce future premium contributions or provide a cash refund.
The goal of this national health care program is not to generate large rebates to customers but to penalize insurers who over-charge customers.
New York already had an 82 percent MLR requirement for some large group products prior to the legislation, so it is likely many insurers will meet the new standard. Your employer will provide more details later this year.