The Patient Protection and Affordable Care Act (the “Affordable Care Act”) added new Public Health Service Act section 2715(d)(4) that requires group health plans and health insurance issuers in the group and individual markets to provide a four page summary of benefits and coverage (“SBC”) and a uniform glossary to enrollees. On August 22, 2011, the Departments of Labor, Health and Human Services, and the Treasury (the “Agencies”) published proposed regulations regarding this requirement. These proposed regulations apply to both grandfathered plans and non-grandfathered plans, self-insured and insured plans, and group health plans and individual coverage.1
In general, the proposed regulations direct that an SBC be provided when a plan or individual is comparing health coverage options. If the information in the SBC changes between the time of the application and the date the coverage is offered, or the date the policy is issued, an updated SBC must be provided. If the information is unchanged, an SBC does not need to be provided again, except upon request. More details about how the proposed regulations apply to self-insured and insured group health plans is set forth below.
The requirement to provide the SBC and the uniform glossary becomes effective as of March 23, 2012.
Who Is Required To Provide The SBC?
Group Health Plans and Group Health Insurance Issuers
The proposed regulations make the plan administrator of a group health plan (generally, the employer), responsible for providing an SBC to participants and beneficiaries. However, this requirement to provide an SBC will be considered satisfied if the SBC is provided by any entity, as long as all timing and content requirements are met. For example, if the health insurance issuer offering group health plan coverage provides a complete, timely SBC to the plan’s participants and beneficiaries, the plan’s requirement to provide the SBC will be satisfied.
The SBC must be provided to participants and beneficiaries as follows:
An SBC must be provided with respect to each benefit package offered by the plan or issuer for which the participant or beneficiary is eligible. An SBC must be provided as part of any written application materials that are distributed by the plan or issuer for enrollment. If the plan does not distribute written application materials, an SBC must be distributed no later than the first date the participant is eligible to enroll in the coverage. If there is any change to the information required to be in the SBC before the first day of coverage, the plan or issuer must update and provide a current SBC no later than the first day of coverage.
If the coverage is automatically renewed, an SBC must be provided no later than 30 days prior to the first day of coverage. If an application is required for renewal, an SBC must be provided no later than the date the application materials are distributed. With respect to a group health plan that offers multiple benefit packages, the plan is required to provide a new SBC automatically upon renewal only with respect to the benefit package for which the participant or beneficiary is enrolled. SBCs for any other benefit packages for which the participant or beneficiary is eligible must be provided no later than seven days following a request.
UPON A REQUEST FOR SPECIAL ENROLLMENT UNDER THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (“HIPAA”)
A plan or issuer must provide an SBC to HIPAA special enrollees within seven days of a request for enrollment pursuant to a HIPAA special enrollment right.
A plan or issuer must provide an SBC to participants or beneficiaries upon request, as soon as possible, but in no event later than seven days after the request.
Group Health Insurance Issuers
A group health insurance issuer must provide an SBC to an insured group health plan as follows:
UPON APPLICATION OR REQUEST
- The issuer must provide an SBC as soon as practicable upon receipt of any application or request for information, but no later than seven days following the application or request.
- If the group health plan subsequently applies for the coverage, a second SBC must be provided if there has been a change in the information required to be in the SBC.
- If there is any change in the information required to be in the SBC before coverage is offered, or before the first day of coverage, the health insurance issuer must provide a current SBC to the group health plan no later than the date of the offer; or the first day of coverage (as applicable).
UPON RENEWAL OR REISSUANCE
- If the health insurance issuer renews or reissues the policy, certificate or contract of insurance, a new SBC must be provided to the group health plan at renewal or reissuance. If a written application is needed for the renewal or reissuance, an SBC must be provided no later than the date the application materials are distributed.
- If the renewal or reissuance is automatic, an SBC must be provided no later than 30 days prior to the first day of the new policy year.
How Must The SBC Be Delivered to Participants and Beneficiaries?
In general, the proposed regulations follow the ERISA requirements for providing documents such as the summary plan description or a summary of material modifications.
If a participant and any beneficiaries are known to reside at the same address, one SBC can be sent by U.S. mail to that address. If a beneficiary’s last known address is different from the participant’s, a separate SBC must be sent to the beneficiary. For ERISA group health plans, the SBC may be delivered electronically if the ERISA requirements set forth in Department of Labor Regulations section 29 CFR 2520.104b-1(c) for electronic disclosure are met.
What are the Appearance Requirements for the SBC?
The SBC must meet the following requirements:
- It must be provided as a stand-alone document. (However, the preamble to the proposed regulations requests comments regarding whether for an ERISA plan that is required to provide a summary plan description, the SBC could be included in the summary plan description.)
- It must be presented in a uniform format.
- It must utilize terminology understandable by the average plan enrollee.
- It cannot exceed four pages — the proposed regulations provide for four double-sided pages (so now eight pages).
- It must not include print smaller than 12-point font.
- It must be provided in a culturally and linguistically appropriate manner.
The requirement to provide the SBC in a culturally and linguistically appropriate manner is deemed to be met if the standards under the Affordable Care Act appeals regulations are met. In general, these require group health plans to disclose the availability of language services for notices sent to addresses in certain counties that have been identified in the regulations as having a high concentration of non-English speakers.
What is the Content Requirement for the SBC?
The SBC must include the following:
- Uniform definitions of standard insurance terms and medical terms
- A description of the coverage, including cost sharing, for each category of benefits identified by the Secretary of Health and Human Services in guidance
- The exceptions, reductions and limitations of the coverage
- The cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations
- The renewability and continuation of coverage provisions
- Coverage examples as provided by the Secretary of Health and Human Services, which currently include having a baby (normal delivery), treating breast cancer, and managing diabetes (but will be revised periodically)
- For coverage beginning on and after January 1, 2014, a statement about whether the plan or coverage provides minimum essential coverage and whether the plan’s or coverage’s share of the total allowed costs of benefits provided meets applicable requirements under the Affordable Care Act
- A statement that the SBC is only a summary and that the plan document, policy, or certificate of insurance should be consulted to determine the governing contractual provisions of the coverage
- Contact information for questions and obtaining a copy of the plan document or the insurance policy, certificate, or contract of insurance
- For plans and issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers
- For plans and issuers that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage
- An Internet address for obtaining the uniform glossary
- Premiums, or in the case of a self-insured group health plan, the cost of coverage2
The Agencies have provided a sample SBC that can be found at: http://www.dol.gov/ebsa/pdf/SBCtemplate.pdf
Draft instructions for group policies can be found at: http://www.dol.gov/ebsa/pdf/SBCInstructionsGroup.pdf
Note that states may impose additional disclosure requirements on health insurance issuers. However, the proposed regulations provide that any state law requiring a health insurance issuer to provide an SBC that supplies less information than required under the proposed regulations is preempted.
What is the Uniform Glossary?
The Agencies will develop standard definitions for certain plan terms (such as co-insurance, deductible, excluded services, preferred provider and other terms), certain medical terms (such as durable medical equipment, hospitalization, rehabilitative services, skilled nursing care and other terms) and other terms that will help individuals understand and compare coverage options (such as allowed amount and balance billing).
The SBC must also disclose the right to request a copy of the uniform glossary, and the group health plan or health insurance issuer must make it available upon request within seven days. A group health plan or health insurance issuer may satisfy this disclosure requirement by providing an Internet address where an individual may review and obtain the glossary. However, the group health plan or health insurance issuer must make a paper copy available upon request at no charge.
The plan or issuer may not modify the uniform glossary. A sample of the uniform glossary can be found at: http://www.dol.gov/ebsa/pdf/SBCUniformGlossary.pdf
What Rules Apply to Material Modifications to the SBC?
If there is a material modification to any of the terms of coverage that would affect the content of an SBC, then the plan or issuer must provide notice of the modification to enrollees no later than 60 days prior to the date on which such modification will become effective. This 60-day prior notice requirement does not apply to material modifications that are effective at renewal or reissuance.
A material modification is any modification to the coverage that would be considered by an average plan participant to be an important change in the covered benefits or other terms of the plan. A material modification could be an enhancement or a reduction in covered services or benefits.
This 60-day prior notice requirement for changes to an SBC is in addition to the current ERISA requirements for providing a summary of material modifications. Note that plans that are subject to ERISA are subject to both rules. The notice of material modifications can be provided to participants and beneficiaries via either a separate document that describes only the modification to the SBC or by issuing a new SBC.
FAQs Part V pertaining to the Affordable Care Act issued by the Agencies on December 22, 2010 states that this 60-day prior notice requirement for material modifications to an SBC will not apply until plans and issuers are required to provide the SBC, i.e., March 23, 2012.
What are the Penalties for Noncompliance?
A group health plan that willfully fails to provide an SBC can be fined up to $1,000 for each failure. A separate failure occurs for each enrollee who does not receive an SBC. For group health plans, the failure is subject to self-reporting on IRS Form 8928. If you have any questions about the new SBC or uniform glossary, or would like our assistance with implementation, contact the authors of this article or the attorney with whom you normally work.
¹ The preamble to the proposed regulations asks for comments on whether special rules should apply to expatriate health insurance coverage that is subject to ERISA.
² The preamble to the proposed regulations requests comments as to whether this should also include the amount the participant pays, taking into account the employer subsidy.