The IRS, DOL and HHS jointly published final regulations regarding the Summary of Benefits and Coverage and Uniform Glossary as well as other guidance regarding the SBC in February. The regulations indicate that this guidance is for the first year of applicability and the Departments intend to issue updated material for later years. You can find the following guidance on the DOL website:
Regulations and Guidance
- Final Regulations
- Guidance for Compliance
- Proposed Regulations
- Solicitation of comments – Templates, Instructions, and Related Materials
- Culturally and Linguistically Appropriate Services (CLAS) County Data
Templates, Instructions, and Related Materials
- Summary of Benefits and Coverage (SBC) Template | MS Word Format
- Sample Completed SBC | MS Word format
- Instructions for Completing the SBC – Group Health Plan Coverage
- Instructions for Completing the SBC – Individual Health Insurance Coverage
- Why This Matters language for “Yes” Answers
- Why This Matters language for “No” Answers
- HHS Information For Simulating Coverage Examples
- Uniform Glossary of Coverage and Medical Terms
We provided an extensive description of the proposed regulation in ErisaALERT 2011-11 and ErisaALERT 2011-12.
In this ALERT, we will mention many of the changes to the proposed regulations; present a quick review of the requirements and provide next steps for plan sponsor consideration.
The Changes
Effective date
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first day of the first open enrollment period that begins on or after September 23, 2012 for participants and beneficiaries who enroll or re-enroll though an open enrollment period.
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first day of the first plan year that begins on or after September 23, 2012 for participants and beneficiaries who enroll other than through an open enrollment period, e.g. new hires
Observation: Plans with plan years beginning October 1, 2012 have a very short time frame to get ready for the SBC disclosure for new hires but have a year to get ready for the next open enrollment assuming the open enrollment period begins before September 23, 2012. Calendar year plans will generally be subject to the SBC requirements for the 2013 open enrollment.
Coverage examples – reduced from three to two – having a baby and type 2 diabetes. The coverage examples are in the form of nutrition labels.
Appearance– the SBC can be provided as a standalone document or in combination with other summary materials, e.g. a summary plan description if the SBC is intact and prominently displayed at the beginning of the materials.
Language – plans and issuers must provide notices in culturally and linguistically appropriate manner when 10% or more of the population residing in the claimant’s county are literate only in the same non-English language. Currently there are 255 US counties meeting this threshold and the overwhelming majority are Spanish. However Chinese, Tagalog and Navajo are present in a few counties affecting five states (Alaska, Arizona, California, New Mexico and Utah). HHS will provide written translations of the SBC, sample language and uniform glossary in these languages.
Premiums do not have to be included in the SBC.
Timing – there were some timing changes with respect to distribution of the SBC
- from 30 days before the first day of coverage to as soon as practicable but not later than 7 days for insured plans that do not have provisions finalized at the 30 day point.
- From 7 business days for a special enrollee to 90 days from enrollment; this is consistent with the summary plan description requirement
Quick Review
Basic requirement
SBCs must be provided by both insured and self-insured group health plans except:
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HIPAA excepted benefits (generally stand alone dental and vision plans and the majority of health care FSAs) and
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HSAs
Special note regarding HRAs and health care FSAs:
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Stand alone HRAs are subject to the SBC requirements
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If either the health care FSA is not an excepted benefit or the FSA/HRA is integrated with other major medical coverage, the SBC requirement can be satisfied if the major medical SBC takes into account the effect of the HRA and or health care FSA
The delivery
The SBC is provided by the group health plan issuer to the group health plan. The group health plan provides the SBC to the participant and beneficiary. The group health plan issuer can provide the SBC directly to the participant and beneficiary.
Observation: If your service provider agrees to provide the SBC directly to the participant and beneficiary, make sure you get it in writing. In the case of a self-insured plan, plan sponsors should work with their claims administrator to determine who will develop and deliver the SBC.
The group health plan issuer must provide the SBC to the group health plan:
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Upon application for health coverage as soon as practicable but no later than seven business days following receipt of the application
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By the first day of coverage if there is any change in information in the SBC provided at application
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Upon renewal
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If written application is required, the SBC must be provided no later than the date the written application materials are distributed
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If renewal is automatic, the SBC must be provided no later than 30 days before the first day of the new plan/policy year; if the plan is insured and policy has not been issued or renewed before the 30 day period, then the SBC must be provided as soon as practicable but not later than seven days after issuance of new policy/certificate/contract whichever is earlier.
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Upon request – as soon as practicable but no later than 7 business days following receipt of request.
The group health plan or the group health plan issuer must provide the SBC to participants and beneficiaries as follows:
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Initial enrollment – for each benefit package for which the participant or beneficiary is eligible, the SBC must be provided as part of any written application materials that are distributed for enrollment. If a written application is not required, the SBC must be distributed no later than the first date on which the participant or beneficiary is eligible to enroll,
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An updated SBC must be provided if there are any changes to the SBC that was provided upon application but before first day of coverage,
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Special enrollees must receive the SPD no later than the date the summary plan description is required to be distributed, i.e., 90 days from enrollment,
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Upon renewal or reenrollment
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For plans with multiple packages, the plan sponsor is required to provide a new SBC automatically only with respect to the benefit package in which the participant or beneficiary is enrolled. However, SBCs for other benefit packages must be provided upon request.
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If the plan requires participants to complete a written application to renew, the SBC must be provided no later than date on which written application materials are distributed.
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If renewal/reenrollment is automatic, the SBC must be provided no later than 30 days before the first day of the plan year. For insured plans only (not self-insured plans), if the insurance contract hasn’t been finalized before the 30 day period, then as soon as practicable but no later than 7 business days after the issuance of new policy/contract/certificate or receipt of written confirmation of intent to renew, whichever is earlier.
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Upon request – as soon as practicable but no later than seven business days following receipt of request.
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A single SBC can be provided to one address if there is more than one participant or beneficiary at the same address. A separate SBC must be provided if a beneficiary’s address is different than the participant’s address.
Penalties for non-compliance
A fine of not more than $1,000 per willful failure can be imposed. A failure with respect to each participant or beneficiary is considered a separate offense. In addition, the IRC provides that an excise tax of $100 per day per individual for each day can be applied if the plan fails to comply.
What should Plan Sponsors do now?
- Determine who will be preparing and distributing the SBC and get it in writing!
- Identify which plans will require an SBC.
- Develop a strategy for distributing the SBC – will eligible employees receive SBCs for all benefit packages or just for the package in which they are currently enrolled.
- If you decide not to distribute an SBC for all benefit packages, you must set up a process to respond to requests for SBCs for the remaining benefit packages.
- Carefully review the SBC template prepared by your service provider and understand and verify all the entries.
You may want to check our new blog periodically for quick updates on compliance issues.
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
