Bottom line: Effective March 23, 2012, a summary of benefits and coverages (SBC) must be provided to health plan participants and beneficiaries. The SBC consists of a 4 page (double sided) summary in a prescribed format and includes examples of how certain conditions will be covered by the plan. A separate glossary of terms is also required. The SBC is a standalone document and is required in addition to the summary plan description.
The health insurance issuer and the plan in the case of an insured group health plan or the plan sponsor in the case of a self-insured plan are responsible for providing the SBC. If either the issuer or the plan provides the SBC, both parties will have satisfied their obligation. The government expects plans and issuers to make contractual obligations for sending SBCs.
A voluminous amount of information was generated to describe the SBC. We have decided to approach this topic in two parts. This ErisaALERT provides an overview of the proposed regulations; Part II will discuss the subregulatory guidance.
As with many regulations, the preamble is worth a read. The three government agencies, (HHS, IRS, DOL) responsible for issuing the regulations, are seeking comments in many areas.
Background
The Affordable Care Act (ACA) incorporates sections of the Public Health Services (PHS) Act into ERISA and the Internal Revenue Code. Section 2715 of the Public Health Service Act is one of the incorporated sections.
Section 2715 provides rules regarding:
- The length of the SBC ( 4 pages with at least 12 point font)
- Language (culturally and linguistically appropriate)
- Contents (a list of specific items to enable comparability among plans)
- Rules for updating
In developing the requirements for SBC, the government was required to consult with the National Association of Insurance Commissioners (NAIC).
On August 18, the following items were posted to the EBSA website:
On August 22, the regulations were published in the Federal Register.
The Sub-regulatory Guidance
The sub-regulatory guidance contains
- The SBC template and sample completed SBC for individual health insurance
- Instructions for group health plan coverage and individual health insurance coverage
- Why This Matters language (a column on the SBC) for “yes” and “no” answers.
- A Guide for coverage example calculations
- A uniform glossary
The SBC template and related documents were drafted by the NAIC primarily for use by health insurance issuers.
The subregulatory guidance will be covered in a separate ErisaALERT – SBC Part II.
The Proposed Regulations
The proposed regulations (132 pages as originally posted last week on the EBSA website) consist of 97 pages of preamble (pages 1 to 43 discuss the regulations and pages 44 to 97 cover the government’s analysis of the Economic Impact and Paperwork Burden) and pages 98 to 132 present the regulations as issued by the IRS, the DOL and HHS. As noted previously, the regulations were published in the Federal register on August 22, 2011 and are 37 pages.
Observation: to obtain a quick understanding of the SBC content requirement read one of the agency regulations (approximately 10 double spaced pages as originally posted).
The proposed regulations solicit a number of comments and offer rules relating to:
- Who must provide the SBC
- When it must be provided
- The content, appearance, form, language and glossary
- Preemption rules
- Penalties for failure to provide
Who must provide the SBC and when must it be provided?
Group health insurance issuer to a group health plan
The SBC must be provided:
- upon application or request for information as soon as practicable following the request but not later than seven days following the request. If the plan sponsor subsequently applies for coverage, a second SBC must be provided only if there is a change required in the first SBC
- If there is a change in the information required to be in the SBC before the coverage is offered or before the first day of coverage
- Upon renewal or reissuance
- Within 7 days of request by the group health plan or plan sponsor.
Group health insurance issuer/group health plan to participants and beneficiaries
The SBC must be provided:
- For each benefit package offered for which the participant or beneficiary is eligible
- As part of any written application materials distributed for enrollment or no later than the first date the participant is eligible to enroll if no written application is required
- If there is a change to the information required to be in the SBC before the first day of coverage
- Within seven days of request for HIPAA special enrollment
- Upon re-enrollment if the plan requires re-enrollment to maintain existing coverage.
- If a written application is required for renewal the SBC must be distributed with open enrollment materials.
- If renewal is automatic, the SBC must be provided 30 days before the beginning of the plan year.
- Within seven days of request
- If a participant and any beneficiary reside at the same address, a single SBC to the same address will satisfy the distribution requirements.
- If a beneficiary’s last known address is different than the participant’s, the SBC must be sent to beneficiary’s last known address
- If a group health plan offers multiple packages, the SBC must be provided upon renewal only with respect to the benefit package in which the participant or beneficiary is enrolled; SBC’s are not required to be provided automatically with respect to benefit packages in which the participant or beneficiary is not enrolled but must be provided upon request.
Observation: Plan sponsors generally provide a description of all benefit packages during open enrollment.
The content, appearance, form, language and glossary
Content
The content requirements generally mirror the statue requirements and will not be repeated here. However, the NAIC template includes four additional items on which the government is soliciting comments.
Observation: In our experience,the content requirements are typically already included in the summary plan descriptions provided by self-insured plan sponsors.
Form, language and glossary
The SBC must be a standalone document in a form authorized by the government and in accordance with instructions for completing (included in the subregulatory guidance and covered in Part II of our ErisaALERTs regarding the SBC). The SBC must not exceed four double sided pages and at least 12 point font.
The SBC may be provided in paper form or electronically if:
- The format is readily accessible by the plan sponsor
- Provided on paper upon request at no cost
- If the electronic form is an internet posting, the issuer must advise the plan in paper form or email that the document is available on the internet and provide the internet address
- The SBC provided by the plan to the participant or beneficiary may be provided in paper form or electronically if the DOL rules for electronic communication are satisfied.
A notice of modification must be provided no later than 60 days prior to the effective date if there are any material modifications made in any of the terms of the plan or coverage that would affect the content of the SBC, that is not reflected in the most recent SBC.
A uniform glossary must be provided in the specific format authorized in regulatory guidance and can be provide in paper or electronically.
Preemption
If State laws require less information, then State law is preempted. If State law requires more information, then State law governs.
Penalties
A group health plan or issuer that willfully fails to provide the information required to a participant or beneficiary is subject to a fine of not more than $1,000 for each failure. The penalty cal be assessed per participant or beneficiary.
Comments requested
Summarized below are some of the comments requested by the government.
- Should the SBC be allowed to be provided within an SPD if the SBC is intact and prominently displayed at the beginning of the SPD and if the timing requirements are met?
- Input regarding the four additional elements on NAIC template not required by statute and primarily relating to providing internet addresses as well as providing premium costs.
- Should the SBC include premium information and if yes, what should be included?
- A simple efficient method for employers to report information related to employer sponsored health plans as required by Health Care Reform.
- Opinions regarding whether it would be feasible or desirable to permit plans and issuers to input plan or policy specific information into a central internet portal, such as the Federal health care reform website that would use the information to generate the coverage examples for each plan or policy. Also requested are comments on the cost and benefits of any of these alternatives.
- The statue required that the SBC be provided in four pages; the proposed regulations interpret four pages as four double sided pages. What do you think?
- As noted previously, can the SBC coordinated with the SPD and other group health plan materials?
- The SBC may be provided electronically if it is readily accessible. Should there be standards for readily accessible, e.g., passwords?
- Are modifications or adaptations of the SBC necessary to facilitate or improve electronic disclosure?
- Whether and how to provide the SBC in non English languages.
- Content of the uniform glossary and whether there are additional terms that should be included.
- What are the practical implications that will affect timing of the implementation? Should there be a phase in of the requirements?
What should Plan Sponsors do?
- Read the regulations; form an opinion and comment either individually or through your consultant/attorney.
- If you offer insured health plans, stay in frequent contact with your insurance carrier and broker to ensure their compliance with the regulations.
- If your health plans are self-insured, compare the SBC content requirement with what you currently provide and comment!!! You may find that you already provide much of the required information and will be required to repeat it in the standalone SBC.
- Read our Part II SBC ErisaALERT.
- Stay up to date on these requirements especially if there is no movement in the effective date.
Keep in mind that if you wish to comment on the regulation, comments are due on or before 60 days after the proposed regulations are published in the Federal Register. The regulations were published August 22, 2011.
Given the number of items on which the government is soliciting comments and what will probably be a voluminous response by all interested parties, it just doesn’t seem possible or practicable that the 2012 effective date will hold. All the more reason for you to comment and stay current on the SBC requirements.
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.
