The Treasury Department, the Department of Labor, and the Department of Health and Human Services recently issued final regulations on the required Summary of Benefits and Coverage (SBC) and uniform glossary under the Patient Protection and Affordable Care Act (PPACA). The final regulations delay the effective date of the SBC requirements until (i) the first day of the first open enrollment period that begins on or after September 23, 2012, for participants and beneficiaries who enroll or re-enroll in group health coverage through open enrollment, and (ii) the first day of the first plan year after September 23, 2012 (i.e., January 1, 2013, for calendar year plans), for participants and beneficiaries who enroll in coverage other than through an open enrollment.
The SBC rule applies to both fully insured and selfinsured plans (whether grandfathered or not), as well as to health insurance issuers that offer group or individual health insurance coverage. Retiree-only and HIPAA-excepted benefit plans (e.g., standalone dental and vision plans) are not subject to the SBC requirements. For fully-insured plans, the insurer is responsible for developing the SBC and distributing it to group health plans and to the group health plan’s participants and beneficiaries. For self-insured plans, the group health plan sponsor or administrator is responsible for developing and distributing the SBC to participants and beneficiaries. The legal burden to distribute an SBC will be satisfied for both the insurer and group health plan, if applicable, if the SBC is provided by either entity, so long as all timing and content requirements are also satisfied. The SBC must be provided free of charge. Note that the SBC requirement does not change or eliminate the requirements for creating and distributing a timely summary plan description (SPD).
Health Insurance Issuer to Group Health Plan
- Upon Application or Request: An issuer must provide the SBC to a group health plan upon application for coverage by the plan or upon request. In either case, the SBC must be provided as soon as practicable, but not later than seven business days after the receipt of the application or request. If there is any change in information required to be reported in the SBC, the issuer must provide a current SBC to the plan prior to the first day of coverage.
- At Renewal: A new SBC must be provided if the issuer renews or reissues the policy. The SBC must be provided no later than the date in which the materials are distributed, if written application is required for renewal, or no later than 30 days prior to the first day of the new policy year, if the renewal or reissuance is automatic.
- Form of Distribution: An SBC provided by an issuer to a plan may be provided in paper or electronic format. If provided electronically (such as by email or an Internet posting), (i) the SBC must be in a format that is readily accessible by the plan, (ii) the SBC must be provided in paper form free of charge upon request, and (iii) if the electronic form is an Internet posting, the issuer must timely notify the plan in paper form or email that the documents are available.
Group Health Plan to Participants and Beneficiaries
- At Initial Enrollment: The SBC must be provided as part of any written application materials that are distributed for enrollment. If no application materials are distributed for enrollment, the SBC must be distributed by the first date that the participant or beneficiary is eligible to enroll in coverage. If there are any changes to the SBC prior to the first day of coverage, an updated SBC must be provided no later than the first day of coverage.
- Upon Renewal: If participants and beneficiaries are required to renew in order to maintain coverage, the SBC must be provided no later than the date the materials are distributed, if written application is required for renewal, or no later than 30 days prior to the first day of coverage for the new plan year, if the renewal is automatic.
- Upon Request: If requested by a participant or beneficiary, the SBC must be provided within seven business days.
- Special Enrollment: The SBC must be provided to special enrollees no later than 90 days following enrollment.
- Required Recipient: If a participant and beneficiary are known to reside at the same address, providing a single SBC to that address will satisfy the obligation to the provide the SBC for all individuals at that address. If the beneficiary’s last known address is different than the participant’s address, a separate SBC must be provided to the beneficiary.
- Form of Distribution: An SBC provided to a participant or beneficiary may be provided in paper or electronic format. For participants and beneficiaries already covered under the plan, the SBC may be provided electronically if the DOL electronic disclosure regulations are met. With respect to participants and beneficiaries who are eligible for, but not enrolled in, coverage, the SBC may be provided electronically if (i) the format is readily accessible, (ii) the SBC is provided in paper form free of charge upon request, and (iii) the plan or issuer notifies the individual in paper form or email that the documents are available (if posted on the Internet).
Insurers and group health plans must be prepared to provide an SBC to a participant or beneficiary for each benefit package for which a participant or beneficiary is eligible. If multiple benefit packages are available upon coverage renewal, an SBC is only required to be provided automatically with respect to the benefit package in which the participant or beneficiary is already enrolled. In other words, an SBC is not required upon renewal with respect to benefit packages in which the participant or beneficiary is eligible but not enrolled, unless so requested by the participant or beneficiary.
The SBC must include all of the following:
- Uniform definitions of standard insurance terms and medical terms;
- A description of coverage, including cost sharing;
- Exceptions, reductions, and limitations of coverage;
- Cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations;
- Renewability and continuation of coverage provisions;
- Coverage examples (baby delivery and managing diabetes);
- For coverage beginning on or after January 1, 2014, a statement about whether the plan or coverage provides minimum essential coverage under Code §5000A(f) and whether the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage meets the applicable requirements;
- A statement that the SBC is a summary only and that the plan document, policy or certificate of insurance should be consulted to determine the governing provisions;
- Contact information for questions and obtaining a copy of the plan document or policy (such as a telephone number for customer service and internet address for obtaining a copy of the plan or policy);
- For plans and issuers that maintain one or more networks of providers, an internet address (or other 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 other contact information) for obtaining information on prescription drug coverage; and
- An internet address for obtaining the uniform glossary.
Appearance and Format
The SBC is required to be presented in a uniform format, utilizing terminology understandable by the average plan enrollee, that does not exceed four double-sided pages in length and does not include print smaller than 12-point font. The SBC generally must follow the authorized template; however, if a plan’s terms cannot reasonably be described in a manner consistent with the template and instructions, the plan or issuer must describe the relevant terms in another manner which is still consistent with the instructions and template. Although the template is presented in color, the SBC may be provided either in color or grayscale.
The SBC may be provided as a stand-alone document or in combination with other summary materials (e.g., an SPD). If provided with other materials, the SBC must be intact and prominently displayed at the beginning of the materials (such as immediately after the table of contents). The SBC must be provided in a culturally and linguistically appropriate manner, as outlined in the PPACA claim and appeal notification requirements.
Notice of Modifications
If a plan or issuer makes a material modification (as defined in ERISA §102) in any of the terms of the plan or coverage that would affect the content of the SBC, which is not reflected in the most recently provided SBC, and that occurs other than in connection with a renewal or reissuance of coverage, the plan or issuer must provide notice of the modification to enrollees not later than 60 days prior to the date on which the modification will become effective.
Plans and issuers must make available a uniform glossary providing uniform definitions. The SBC must contain an internet address for obtaining the glossary free of charge. If requested, the glossary must be provided in paper or electronic format, within seven business days.
Failure to Provide
Willful failure to abide by these rules may subject a plan or issuer to a fine of not more than $1,000 for each failure. A failure with respect to each participant or beneficiary constitutes a separate offense for these purposes. Failure to provide the SBC may also be subject to the IRS excise tax penalty of $100 per day.
Group health plan sponsors should familiarize themselves with the final regulations and related guidance posted on the Department of Labor’s Employee Benefits Security Administration website, including the SBC Template, Sample Completed SBC, and the Instructions for Completing the SBC – Group Health Plan Coverage. Fully-insured plan sponsors should reach out to their insurers to ensure that the insurer will be in compliance with the regulations before the September 23, 2012 effective date. Self-insured plan sponsors should consider how they will complete the SBC and whether assistance from the third-party administrator is necessary. Additionally, all plan sponsors should evaluate how the SBCs will be distributed to participants and beneficiaries. Employers with multiple benefit packages should note that this process could be time-consuming.