The Affordable Care Act (ACA) requires all group health plans, including grandfathered plans and self-insured plans, to provide participants and beneficiaries a summary of benefits and coverage (SBC). The effective date for compliance with the SBC requirements under the ACA was delayed pending further guidance (proposed regulations had been issued in August 2011). The Departments of Labor, Treasury and Health and Human Services (the Departments) issued final rules regarding these provisions which will take effect beginning in September 2012.
This article focuses on SBCs provided by insurance carriers and plan sponsors to participants, beneficiaries and eligible individuals. The new rules also separately cover SBCs provided by insurers to plans and by insurers to the individual market.
In addition to the final regulations, the Departments finalized a companion document, which provides guidance for compliance with the SBC regulations and includes templates, instructions and related materials. Helpful links can be found at the end of this article.
What Type of Coverage Requires an SBC?
In general, all group health plans are required to provide SBCs. The final regulations clarify that SBCs are not required for excepted benefits (e.g., certain stand-alone dental and/or vision plans and many health flexible spending accounts (FSAs)). Health reimbursement accounts (HRAs) are generally not considered excepted benefits and will require an SBC to be provided. Health savings accounts (HSAs) are not typically considered group health plans and will not be subject to the SBC requirements. Plans that cover only retirees are also exempt from the SBC requirement.
Who Must Provide an SBC?
For fully-insured plans, both the carrier and the plan administrator (typically the employer) are responsible for providing the SBC to participants and beneficiaries. The final regulations provide that as long as either one of them provides a complete SBC in a timely manner, the requirement will be deemed satisfied for the other party. Employers should reach out to their carriers to discuss who will take on this responsibility. For self-insured plans, the plan administrator is responsible to provide the SBC and employers should contact their third-party administrator for assistance. The final regulations clarify that a single SBC may be provided to a participant and any beneficiaries at the participant’s last known address. If a beneficiary’s last known address is different than the participant’s, a separate SBC must be furnished to such address.
When Must an SBC be Provided?
An SBC must be provided to participants and beneficiaries for each benefit package offered by the carrier or plan for which the individual is eligible. It must be provided as follows:
Initial Application/Enrollment: The SBC must be provided as part of any written application materials that are distributed for enrollment. If no written application materials are distributed, it must be provided by the first date the participant is eligible to enroll in the coverage.
Renewal: If written application is required for renewal (whether paper or electronic form), the SBC must be provided no later than the date the written application materials are distributed. If renewal is automatic, it must be provided no later than 30 days prior to the first day of the new plan year.
Special Enrollment: HIPAA special enrollees must be provided the SBC no later than 90 days from enrollment.
By Request: Upon request, the SBC must be provided to a participant or beneficiary within 7 business days.
In the event a group health plan offers multiple benefit packages, an SBC is only required to be furnished upon renewal for the plan in which the participant and beneficiary is enrolled, unless requested. For non-U.S. based benefits, a plan or carrier may provide an internet address for obtaining information rather than an SBC.
How Must the SBC be Provided?
The SBC may be provided as either a stand-alone document, or in combination with other summary materials (e.g., an SPD), but only if the SBC information is intact and prominently displayed at the beginning of the material (such as immediately after the Table of Contents in an SPD), and the timing requirements are satisfied. It is important to note that the SBC must be provided more frequently than the SPD, and must be delivered to participants and beneficiaries, whereas the SPD is provided to just participants. It may simply be easier to provide the SBC as a stand-alone document.
The SBC may also be provided electronically. For participants and beneficiaries covered under the plan, it may be provided in accordance with the DOL electronic delivery rules (which may be cumbersome to satisfy). For participants and beneficiaries who are eligible but not enrolled for coverage, the SBC may be provided electronically as long as (1) the format is readily accessible; (2) upon request it is provided in paper form, free of charge; and (3) if using an internet posting, participants and beneficiaries are timely notified in paper form (such as a postcard) or email of the internet address where it can be found, as well as told they may request a paper copy.
What is Required to be in the SBC?
The following information must be included in the SBC:
- Uniform definition of standard insurance terms and medical terms;
- Description of the coverage, including cost sharing for each category of benefits;
- Exceptions, reductions and limitations of coverage;
- Cost sharing provisions including deductibles, coinsurance and copay obligations;
- Renewability and continuation of coverage provisions;
- Coverage examples;
- Statement that the SBC is only a summary and that the plan document, policy or certificate of insurance should be consulted;
- Contact information for questions and to obtain the plan document, policy or certificate of insurance;
- Internet address to obtain a list of network providers;
- If the plan has a prescription drug formulary, an internet address to obtain information on prescription drug coverage; and
- Internet address to review the uniform glossary, and a statement that paper copies are available, as well as contact information for how to get them.
The SBC does not need to include premium or cost of coverage information. Further, on or after January 1, 2014, the content requirements will change and a statement about whether the plan or coverage provides minimum essential coverage and whether the plan’s or coverage’s share of total allowed costs of benefits meets applicable minimum value requirements will be required. We are currently awaiting guidance on minimum essential coverage and minimum value statements.
Appearance and Language
The SBC must be presented in a uniform format, and use terminology understandable by the average plan enrollee. It cannot exceed four double-sided pages in length and cannot include print smaller than 12-point font. Model documents can be found on the websites set forth at the end of this article. The final regulations recognize that the template may not work for all plans, and requires plans to use its best efforts to comply.
The SBC must be provided in a culturally and linguistically appropriate manner. This may require plans to issue SBCs in different languages in the event that 10% or more of the population residing the participant’s county is literate only in such language. To help plans meet the language requirements, HHS will make available written translations of the SBC template, sample language and uniform glossary in all required languages.
Modifications to the SBC
Where a carrier or plan makes a material modification to the SBC, other then at renewal or reissuance (e.g., a mid-year plan design change) that would require a change in the SBC, it must provide notice of such modification to enrollees no later than 60 days prior to the date the modification will take effect. Until this time, advance notification of such modifications has not been required. ERISA requires a Summary of Material Modification (SMM) for group health plans not later than 60 days after the date of the adoption of the change. The regulations clarify that if a carrier or plan timely provides a complete notice under the SBC provisions, it will also satisfy the SMM requirement under ERISA.
Group health plans and carriers offering group health insurance must make a uniform glossary of health coverage and medical terms available to participants and beneficiaries in either paper or electronic form. A template for the glossary can be found at the link set forth below. The glossary must be provided within 7 business days of a participant’s or beneficiary’s request.
For open enrollment periods that begin on or after September 23, 2012, the SBC must be provided to participants and beneficiaries who enroll or re-enroll during this period. For participants and beneficiaries who enroll in group health plan coverage outside of open enrollment (such as newly eligible individuals and special enrollees), the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012. Thus, most calendar year plans with November open enrollments will have to comply this fall.
The willful failure of a carrier or plan to provide the SBC to a participant or beneficiary is subject to a fine of up to $1,000 for each failure. A failure with respect to a participant or beneficiary constitutes a separate offense for purposes of assessing the fine. Additionally, the Department of Treasury may impose an excise tax of $100 per day per individual for each day the plan fails to comply with the requirement. Such amount may be reduced for failure due to reasonable cause and not willful neglect.
- Summary of Benefits and Coverage Template
- Instructions for Completing the SBC – Group Plans
- Uniform Glossary of Coverage and Medical Terms
This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2012 Emerson, Reid & Co. All Rights Reserved.