They got it wrong…

What senator/Adelup occupant Eddie Calvo was crowing about in his address was an action led by the Democrats that underfunded GovGuam health insurance obligations. I am not certain it was Senator Benjamin Cruz who actually led that folly.

I do know however, that it was definitely Senator Cruz who had to repeatedly remind Calvo that his family could not keep millions of dollars in rebate monies that rightly belongs to enrollees and group policyholders.

Of course, Calvo jumped at the chance to point out the mistake made by Democrats. Considering his own ignorance on the matter, it was an easy way to try to make himself look like he actually has a clue.

He doesn’t…and he didn’t then either because neither Calvo or anyone representing his administration pointed out the flaw in the Democrats’ ploy at the time.

Under the PPACA (the healthcare reform law), health insurance companies are required to spend at least 80 percent (for individual and small group) or 85 percent (for large group) of their policy premiums, in a given state or territory, on actual claims.

If their Medical Loss Ratio (the claims over premiums) is less than the required percentage, then the difference MUST be paid to enrollees and group policyholders as a rebate.

IN PLAIN ENGLISH…

If the employees made premium contributions, and the employer receives a rebate check, the employer must determine:

(1) what portion of the rebate is attributable to participant contributions and 

(2) how the participants’ share of the rebate will be used for their benefit.

The portion of the rebate attributable to participant contributions is usually based on the share or percentage of premiums paid by the employees. For example, if employees pay 25% of the premium cost and the employer receives a rebate of $4000, $1000 (25% x $4000) is deemed to be attributable to participant contributions and must be used for the benefit of the participants.

Once the employer has determined the portion of the rebate that is attributable to participant contributions, it must then decide how to use the participants’ share of the rebate. The Dept. of labor considers this amount to be a “plan asset” and any use must be made under ERISA’s general standards of fiduciary conduct.

In determining how to allocate the rebate, the initial inquiry must determine who paid the premiums for the health insurance policy.

• If the premiums were paid 100% by the employer, the employer can retain 100% of the rebate.

• If the premiums were paid 100% by the employees, the employees should receive 100% of the rebate.

• If the premiums were paid partly by the employer and partly by the employees, the rebate must be split between the employer and the employees.

The payment is in proportion to their contribution to the cost of coverage and is meant for the individual enrollee - not GovGuam coffers.

Importantly, an employer should not assume that it can simply deposit the rebate in its general checking account. If in the absence of any plan provision to the contrary, the DOL will generally take the position that a portion of the rebate attributable to the share of the premiums paid by the employees constitutes “plan assets” and must be used for the exclusive benefit of participants and beneficiaries.

In this situation, if the employer retained the rebate, it will have engaged in a prohibited transaction and be subject to fines and penalties and the possibility of a lawsuit by participants.

That natty little plot by Democrats to throw a monkeywrench into Calvo’s profiteering scheme for the family backfired because they did not do their homework - AGAIN!

On this point, very specifically, former senator Calvo, is correct: the Democrats made a big (and might I add, dumb) mistake.

The information is out there for anyone who cares to actually spend the time doing the research. Maybe it’s time for less chatter and more reading. But the real problem is that most legislative office staff think talking is work, and that is all they are willing to do - so expect to witness even more such needless fumbles by folks on both sides of the aisle.