Final Regulations Issued for the Summary of Benefits and Coverage, Uniform Glossary and Notice of Modification Required Under the Patient Protection and Affordable Care Act
On February 14, 2012, the Departments of Labor, Health and Human Services (“HHS”), and the Treasury (the “Agencies”) published final regulations related to Public Health Service Act section 2715(d) (4) that require group health plans and health insurance issuers in the group and individual insurance markets to provide a four page summary of benefits and coverage (“SBC”) and a Uniform Glossary of Coverage and Medical Terms (“Uniform Glossary”), as well as a notice of modification when there are changes that impact the SBC. On August 22, 2011, the Agencies published proposed regulations regarding these requirements that were the subject of our August 2011 issue. This article will highlight some of the significant changes in the final regulations.

In addition to the final regulations, the Agencies published a Compliance Guide, an SBC template, a sample completed SBC, detailed instructions for completing the SBC, HHS information for simulating the coverage examples, and the Uniform Glossary. Links to all of the guidance appear at the end of this article.

Note that these regulations apply to grandfathered health plans and non-grandfathered health plans, self-insured and insured health plans, group health plans and individual insurance coverage. Special rules that may apply to expatriate coverage are discussed below.

Applicability Date
The requirement to provide the SBC, the Uniform Glossary, and a notice of modification to the SBC was originally to be effective as of March 23, 2012. However, the final regulations generally delay this requirement for six months so that it applies as follows:

• For disclosures to participants and beneficiaries who enroll or re-enroll in health coverage during an open enrollment period, it applies beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For example, if a calendar year plan administers an open enrollment period for coverage in 2013 that begins on November 1, 2012, the SBC must be provided as of November 1, 2012.
• For disclosures to participants and beneficiaries who enroll in health coverage other than during an open enrollment period, e.g., newly eligible employees and special enrollees, it applies beginning on the first day of the first plan year that begins on or after September 23, 2012 (i.e., January 1, 2013, for a calendar year plan).
• For disclosures with respect to plans and with respect to individuals and dependents enrolling in the individual insurance market, it applies to health insurance issuers beginning on September 23, 2012.

SBCs Provided to Participants and Beneficiaries
The SBC must be provided without charge to a participant or beneficiary by a group health plan and a group health insurance issuer for each benefit package offered by the plan or issuer for which the participant or beneficiary is eligible as follows:

• The SBC must be provided as part of any written application materials. If written application materials are not required for enrollment, the SBC must be distributed no later than the first date on which the participant is eligible to enroll in coverage.
• If, before the first day of coverage, there is any change to the information required to be in the SBC that was provided upon application, then a current SBC must be provided no later than the first day of coverage.
• A separate rule applies with respect to special enrollees. The final regulations state that an SBC must be provided to special enrollees no later than the date that a Summary Plan Description is required to be provided in accordance with ERISA section 104(b)(1)(A), which is 90 days from enrollment. However, if an individual who is eligible for special enrollment requests an SBC with respect to any particular plan, policy or benefit package, the SBC must be provided as soon as practicable, but in no event later than seven business days following receipt of the request.
• If written application is required for renewal (in either paper or electronic form), the SBC must be provided no later than the date on which the written application materials are distributed.
• If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of the new plan or policy year. The final regulations contain a new rule that applies to insured plans. If the policy, certificate, or contract of insurance has not been issued or renewed before such 30-day period, the SBC must be provided as soon as practicable but in no event later than seven business days after issuance of the new policy, certificate, or contract of insurance, or the receipt of written confirmation of intent to renew, whichever is earlier.
• If a participant or beneficiary requests an SBC or summary information about the health coverage, the plan or issuer must provide the SBC as soon as practicable, but in no event later than seven business days following receipt of the request.

With respect to a group health plan, the final regulations hold the plan administrator for self-insured and insured plans responsible for providing the SBC, the Uniform Glossary, and any required notice of modification to the SBC. This generally means that, even if the insurer has agreed to furnish the SBC, the plan sponsor of an insured plan must take steps to ensure that the insurer timely provides it to participants, otherwise the plan administrator could face liability for non-compliance.

To prevent duplicative disclosures, the regulations state that an entity that is required to provide an SBC will satisfy its requirement if another party provides the SBC, but only if the SBC is timely and complete in accordance with the other requirements. Thus, with respect to insured group health coverage, if the insurer timely provides a properly completed SBC, then the plan administrator will not also have to provide an SBC.

Note that an SBC is to be provided to both participants and beneficiaries. The final regulations provide that a single SBC may be provided to a family unless any beneficiaries are known to reside at a different address. If any beneficiary is known to reside elsewhere, then a separate SBC should be sent to that beneficiary’s address.

SBCs Provided by Insurers to Group Health Plans
The SBC must be provided without charge by a group health insurance issuer to a group health plan as follows:

• As soon as practicable following receipt of an application for coverage, but in no event later than seven business days following receipt of the application. If, prior to the first day of coverage, there are changes in the information provided, a current SBC must be provided to the plan or plan sponsor no later than the first day of coverage.
• The SBC must also be provided upon renewal. If written application is required for renewal, the SBC must be provided no later than the date the written application materials are distributed.
• If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of the new plan or policy year. The final regulations contain a new rule for circumstances where the policy, certificate or contract of insurance has not been issued or renewed prior to this 30-day period. In such case, the SBC must be provided as soon as practicable, but in no event later than seven business days after issuance of the new policy, certificate, or contract of insurance, or the receipt of written confirmation of intent to renew, whichever is earlier.
• A health insurance issuer offering group health plan coverage must also provide the SBC to a group health plan or the plan sponsor upon request as soon as practicable, but in no event later than seven business days following receipt of the request.

Note that the final regulations substitute a seven business day period for the seven calendar day period in the proposed regulations for all situations under which an SBC must be provided.

Special Rules for HIPAA Excepted Benefits, HRAs, HSAs
An SBC does not need to be provided for a health flexible spending account (health FSA) or a stand-alone dental or vision plan if such plan is an excepted benefit under the HIPAA regulations. If a health FSA does not qualify as a HIPAA excepted benefit then it is a group health plan and an SBC must be provided. A health FSA is generally considered a “HIPAA excepted benefit” if the account is funded exclusively by employee salary reductions. If the health FSA is integrated with other major medical coverage, then the SBC for that other major medical coverage can indicate the effects of the health FSA in the sections of the SBC for deductibles, copayments, coinsurance, and benefits otherwise not covered by the major medical coverage.

An HRA is a group health plan, and a stand-alone HRAmust provide an SBC. If the HRA is integrated with other major medical coverage, then the SBC for that other major medical coverage can indicate the effects of employer allocations to an account under the HRA. This information should be included in the appropriate sections of the SBC for deductibles, copayments, coinsurance, and benefits otherwise not covered by the other major medical coverage.

HSAs are generally not subject to the SBC requirements because HSAs are generally not group health plans. However, the final regulations provide that an SBC prepared for a high deductible health plan associated with an HSA can mention the effects of employer contributions to HSAs in the appropriate sections of the SBC for deductibles, copayments, coinsurance, and benefits otherwise not covered by the high deductible health plan.

Special Rules for Expatriate Plans
The final regulations provide that, in lieu of summarizing coverage for items and services provided outside the United States, a plan or issuer may provide an Internet address (or similar contact information) for obtaining information about benefits and coverage provided outside the United States.

However, to the extent the plan or policy provides coverage available within the United States, the plan or issuer is required to provide an SBC that accurately summarizes the benefits and coverage available within the United States.

SBC Appearance Requirements
The SBC must be presented in a uniform format utilizing terminology understandable by the average plan enrollee that does not exceed four pages (the proposed regulations provided that the four-page limitation is four double-sided pages so this is really eight pages), and does not include print smaller than 12-point font.

The Agencies have provided a template SBC that must be used to satisfy the disclosure requirement. When completing the template SBC it will be extremely important to review the SBC template, the sample completed SBC, the instructions for completing the SBC and the HHS information for simulating the coverage examples because the SBC must be completed and presented exactly as stated in these guidance documents.

SBCs provided in connection with group health plan coverage may be provided either as a stand-alone document or in combination with a Summary Plan Description (“SPD”) or other summary materials. However, the final regulations state that the SBC information must be intact and must be prominently displayed at the beginning of the materials — “such as immediately after the Table of Contents in an SPD.” Further, this material must be provided in accordance with the timing requirements for providing an SBC. SBCs provided for health insurance coverage offered in the individual insurance market must be provided as a stand-alone document.

Note the final regulations state that: “This guidance regarding appearance may be modified for years after the first year of applicability.”

SBC Content Requirements
The final regulations generally retain the content requirements set forth in the proposed regulations with the following exceptions:

• The final regulations do not require the SBC to include premium or cost of coverage information.
• The final regulations provide that the minimum essential coverage and minimum value statements do not have to be included in an SBC at this time. This information will need to appear with respect to coverage beginning on or after January 1, 2014. The final regulations also state that: “Future guidance will address the minimum essential coverage and minimum value statements.”
• The number of coverage examples has been reduced to two (from three). Coverage examples must be provided for having a baby (normal delivery) and managing type 2 diabetes (routine maintenance of a well-controlled condition).

Language Requirements
The SBC must be “presented in a culturally and linguistically appropriate manner.” This requirement will be met if the plan or health insurance issuer follows the rules for providing notices with respect to claims and appeals in a culturally and linguistically appropriate manner under Public Health Service Act section 2719 and its applicable implementing regulations.

To facilitate compliance with this requirement, in the Compliance Guide issued with the final regulations, the Agencies have stated that “HHS will provide (at http://cciio.cms.gov, also accessible via hyperlink from www.dol.gov/ebsa/healthreform) written translations of the SBC template, sample language, and Uniform Glossary in Spanish, Tagalog, Chinese, and Navajo. HHS may also make these materials available in other languages to facilitate voluntary distribution of SBCs to other individuals with limited English proficiency.”

Form of Disclosure
An SBC must be provided free of charge and may always be provided in paper form. Under certain circumstances, an SBC may also be provided electronically. Different rules apply with respesct to an SBC provided by a health insurance issuer offering group health coverage to a health plan or plan sponsor, and an SBC provided by a group health plan or health insurance issuer to a participant or beneficiary.

Disclosure by a Health Insurance Issuer to a Plan or Plan Sponsor
As an alternative to providing the SBC in paper form, a health insurance issuer may provide the SBC to a health plan or plan sponsor in electronic form if all the following requirements are met:

• The format is readily accessible by the plan or plan sponsor
• The SBC is provided in paper form free of charge upon request
• If the electronic form is an Internet posting, the issuer timely advises the plan or plan sponsor in paper form or email that the documents are available on the Internet and provides the Internet address

Disclosure by Group Health Plan or Health Insurance Issuer to a Participant or Beneficiary

As an alternative to providing the SBC in paper form, a group health plan or health insurance issuer may provide the SBC to a participant or beneficiary in electronic form if all the following requirements are met:

• With respect to participants and beneficiaries who are covered under the plan or policy, the SBC may be provided electronically if the requirements of the Department of Labor’s electronic disclosure regulation found at 29 CFR 2520.104b –1 are met. (The usual ERISA electronic disclosure requirements.)
• With respect to participants and beneficiaries who areeligible for coverage but who are not enrolled under the plan or policy, the SBC may be provided electronically if:
  • The format is readily accessible
  • The SBC is provided in paper form free of charge upon request
  • In a case in which the electronic form is an Internet posting, the plan or issuer timely notifies the individual in paper form (such as a postcard) or email that the documents are available on the Internet, provides the Internet address, and notifies the individual that the documents are available in paper form upon request

Notice of Material Modification to an SBC
A group health plan or health insurance issuer offering group or individual health insurance coverage must provide a notice of modification if it makes a material modification in any of the terms of the plan or coverage that is not reflected in the most recently provided SBC. A material modification could be either a benefit enhancement or a material reduction in covered services or benefits.

The final regulations provide that if a plan or policy implements a mid-year change that is a material modification that affects the content of the SBC, other than in connection with a renewal or reissuance of coverage, the notice of modification must be provided 60 days in advance of the effective date of the change. Note that this timing is different than the ERISA required timing for providing a Summary of Material Modifications. The final regulations provide that if the SBC notice of material modification is timely provided then it will also meet the ERISA Summary of Material Modification requirements.

Uniform Glossary
Only minor changes were made to the Uniform Glossary, which must be provided as it appears on the Department of Labor and HHS websites. The SBC must include an Internet address where an individual may review and

obtain the Uniform Glossary, a contact phone number to obtain a paper copy of the Uniform Glossary, and a disclosure that paper copies are available upon request. The Internet address can be to the Uniform Glossary on the plan’s or issuer’s website, or the website of either the Department of Labor or HHS. The Uniform Glossary must be provided by a plan or health insurance issuer in either paper or electronic form within seven business days after receipt of a request.

Conclusion
The delay in applicability dates is welcome relief for plan sponsors. Although compliance will not be required until later this year, plan sponsors should review the sample SBC, the instructions for completing the SBC and the other guidance documents as soon as possible, and begin working with their vendors to determine who will prepare and provide the SBC.

If you have any questions about the SBC, the Uniform Glossary or the notice of modification, or would like our assistance with implementation of these requirements, please contact the author of this article or the attorney with whom you normally work.

Guidance Documents
All of the guidance issued on the SBC and the Uniform Glossary can be found at the following links.

Final Regulations, available at: http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3228.pdf

Compliance Guide, available at: http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3230.pdf

Summary of Benefits and Coverage Template, available at: www.dol.gov/ebsa/pdf/SBCtemplate.pdf

Sample Completed SBC, available at: www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf

Instructions for Completing the SBC — Group Health Plan Coverage, available at: www.dol.gov/ebsa/pdf/SBCInstructionsGroup.pdf

Instructions for Completing the SBC — Individual Health Insurance Coverage, available at: www.dol.gov/ebsa/pdf/SBCInstructionsIndividual.pdf

Why This Matters language for “Yes” Answers, available at: www.dol.gov/ebsa/pdf/SBCYesAnswers.pdf

Why This Matters language for “No” Answers, available at: www.dol.gov/ebsa/pdf/SBCNoAnswers.pdf

HHS Information for Simulating Coverage Examples, available at: http://cciio.cms.gov/resources/other/index.html#sbcug

Uniform Glossary of Coverage and Medical Terms, available at: www.dol.gov/ebsa/pdf/SBCUniformGlossary.pdf