Wednesday, August 08, 2012

MLR Rebates - The Fun Continues

As insurance agents get more involved in Obamacare, and specifically the MLR rebates, we are beginning to see what a helluva mess this really is.

A fellow agent posted this on an insurance forum.

Here's another fun wrinkle in the MLR rebate game - Anthem's group policies in VA are individually priced for each employee when there are less than 15 employees in the group, so everyone pays a different rate. Now the employer would have to go back and manually calculate the rebate for each individual employee since the older employees and people with families would get a bigger rebate than the younger, single employees. Fun times.

I've spoken with 3 CPA clients of mine that deal with HR and nobody knows whether this is taxable to the employee for 2011 or 2012, and if it's taxable for 2011, is everyone that got a refund really going to be required to amend their tax returns? Should/will the employer and/or insurance company eventually be required to pay the employees interest on the money that was withheld from them for a year? While the money was rebated to the employees this year, technically it was earned in 2011, and the employees were therefore denied the opportunity to earn interest on that money during the time it was withheld. You know the insurance company was earning interest on that money the whole time.

PPACA rocks. 

Actually, most small group plans use age rated premiums so this is not unique to Anthem or Virginia policies.

As for the CPA question, it seems logical to me that the money was not received in 2011, taxpayers report on a cash basis, and there was no constructive receipt. Therefore, it seems plausible this is a 2012 taxable event, not 2011.

OK, someone pointed out that this is the government and logic doesn't work. I betcha Sebelius and Geithner are meeting right now trying to figure out a way to help fix this problem. Probably one of those Michelob teaching moments.

Yeah . . .
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