Employers who maintain health plans may recall from our prior blogs (see “Health Care Plan Annual Enrollment Triage: The Summary of Benefits and Coverage Standards Have Not Been Issued Yet and May Just Have to Wait” and “Health Care Plan Summary of Benefits and Coverage: Still No Final Model, But Substantial Excise Taxes are Looming Anyway“) that they would soon need to address the new Summary of Benefits and Coverage (“SBC”), although urgent action would need to wait until the issuance of final guidance. Well, the wait is over. The Departments of Treasury, Labor, and Health and Human Services (the “Departments”) have published final regulations and a number of other materials to implement the disclosure requirements for group health plans and health insurance issuers related to the SBC. These materials describe the contents that an SBC must contain. Decisions need to be made regarding who will prepare SBCs, when and how SBCs must be provided, and what information must be set forth in the SBCs. The final regulations describe a number of circumstances in which either a health insurance issuer or a health plan must deliver an SBC. Employers will need to coordinate with their insurance providers to make sure these requirements are being satisfied.
On top of all that, the Departments did not provide much transition relief for employers to set up these processes. The SBC must be delivered starting in plan years that begin on or after September 23, 2012. Penalties for failure to comply with the SBC requirements remain steep. A group health plan (including its administrator) and a health insurance issuer offering group or individual coverage that “willfully” fails to comply with the SBC requirements could face a fine of up to $1,000 per failure. Further, the preamble to the final regulations provides that administrators of health plans that fail to comply with the SBC requirements are required to report this failure to the Treasury on Form 8928, and pay excise taxes under Internal Revenue Code Section 4980D. This excise tax is $100 per day per individual, subject to rules regarding failures due to reasonable cause and not willful neglect.
While the Departments needed twice as much time as allotted by Congress to issue final rules, and promised “sufficient time” for compliance, they are now requiring compliance in a fraction of the time allotted by Congress. Further, as pointed out by organizations such as American Benefits Council, the final rules are incomplete as they raise numerous and material questions that will have to be answered before compliance is feasible. Congress seemed to have high hopes for the usefulness of an SBC. Given the Departments’ own struggle to comply with the Congressional mandate, the potential to confuse or mislead participants with overly abbreviated and inconsistent information, and the very high potential penalties, this rush to slap pages and procedures into place seems counterproductive. While hoping the Departments will reconsider the timeframe, we encourage you to start tackling this requirement as soon as possible. The Departments have published the following supplemental materials to assist health plans and issuers:
- Final Regulations on the SBC
- Additional Guidance Regarding Compliance with the SBC Requirements
- SBC Template
- Sample Completed SBC
- Instructions for Completing an SBC for Group Health Plans
- Instructions for Completing an SBC for Individual Coverage
- Language to Use in the “Why This Matters” Section of the SBC for “Yes” Answers
- Language to Use in the “Why This Matters Section of the SBC for “No” Answers
- Health and Human Services Information for Preparing Coverage Examples
- Uniform Glossary to Accompany the SBC
An explanation of these requirements is provided in the following discussion.
I. Content. The SBC must contain various content items, including:
- A description of the coverage, including the cost sharing requirements such as deductibles, coinsurance, and copayments; as well as information on any exceptions, reductions, or limitations under the coverage. This information must be presented in a Q&A format and also in the form of a chart that shows coverage levels for specific benefits.
- Coverage examples to illustrate benefits provided under the plan or coverage for (1) having a baby and (2) managing Type 2 Diabetes. The SBC also must contain a Q&A about these coverage examples.
- A uniform glossary of common medical terms. The glossary requirement is meant to provide consumers with general, “plain English” definitions of common medical terms in order to help them understand the basics of insurance. If actual plan terms are different from these general terms, the SBC must contain language that warns that actual plan terms may differ from the definitions provided in the uniform glossary.
Although the statute requires the SBC not to exceed 4 pages in length (including the glossary), the final regulations and sample SBC allow the SBC to be 8 pages in length, not including the glossary. Further, the SBC must be printed in a font size that is no smaller than 12-point. The regulations grant limited relief, however, in providing that to the extent the plan’s terms cannot be described in a manner consistent with the SBC template and instructions, the plan or issuer should use its “best efforts” to describe the plan terms in a manner consistent with the instructions and template.
II. Who Must Deliver the SBC To Whom, and When. The final regulations describe (1) who must deliver the SBC, (2) who is entitled to receive the SBC, and (3) when these delivery requirements must be satisfied. These requirements are summarized below.
A. Group Health Insurance Issuer’s Obligations to a Group Health Plan. A group health insurance issuer’s requirements to deliver an SBC to a group health plan are summarized below.
- Application. The issuer must provide the SBC to the plan (or plan sponsor) within seven business days after the plan’s application or request for information about coverage. If the plan subsequently applies for health coverage, the issuer must send a second SBC only if coverage information has changed. The issuer must send this second SBC to the plan no later than the date of the offer or first day of coverage if there is any change to the SBC since the application date.
- Renewal. The issuer must also provide a new SBC to the plan when the policy is renewed or reissued. If a written application is required for renewal, the issuer must provide the SBC to the plan no later than the date materials are distributed. For automatic renewals, the issuer must provide the SBC no later than 30 days before the first day of coverage in the new plan year. 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 no 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.
- Upon Request. The issuer must provide the SBC to the plan within seven business days of a request.
B. Plans and Issuers to Participants and Beneficiaries. The plan or issuer must provide an SBC to participants and beneficiaries with respect to each benefit option for which they are eligible. In the case of a self-insured group health plan, the plan administrator is responsible for providing the SBC to participants and beneficiaries. For insured group health plans, both the group health plan and the issuer are responsible for delivering the SBC to participants and beneficiaries. To avoid unnecessary duplication with respect to group health plans, if the issuer properly delivers the SBC to the plan’s participants and beneficiaries, the plan’s obligation will be satisfied as well. These requirements are summarized below.
- Enrollment. The plan or issuer must include the SBC with any written application materials the plan distributes for enrollment. If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage. The plan or issuer must update and provide a current SBC no later than the first day of coverage if there is any change to the SBC. The plan or issuer must deliver an SBC to HIPAA special enrollees within 90 days from enrollment.
- Renewal. If written application is required for renewal, the plan or issuer must provide the SBC 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 before the first day of the new plan or policy year. 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 no 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. The plan and issuer only need to automatically provide a new SBC for the benefit package in which a participant or beneficiary is enrolled. If a participant or beneficiary is eligible for but does not participate in another benefits package, the plan or issuer must provide the SBC of that package upon request for information within seven business after the request.
- Upon Request. The plan or issuer must also provide the SBC within seven business days after a request by a participant or beneficiary.
III. Electronic Disclosure. Issuers can provide SBCs electronically to current enrollees, under the same electronic delivery rules that apply to other disclosures governed by ERISA. These rules generally allow electronic delivery where: i) employees have access to an employer’s electronic delivery system, or ii) employees consent to electronic delivery of materials. Issuers may send a postcard, either electronically or via regular mail, to inform employees who are eligible for coverage but not enrolled about the website where they can obtain the SBC.
IV. Next Steps. We have previously said that employers may wait to address the SBC and focus on more pressing items. The time for waiting is over and the time to act is quickly approaching. We recommend that employers take the following steps:
- Review the template documents and instructions provided in the links to get an understanding of what information their plans or issuers must provide.
- Determine what benefits packages need to have their own SBC prepared.
- Determine what role insurers will play in preparing and distributing the SBC. For self-insured plans, third party administrators may be able to assist in preparing the SBC, but the final regulations do not require an administrator to do so.