In December 2014, the government issued new proposed rules regarding the requirements for providing a summary of benefits and coverage (SBC). Simultaneous with the proposed rules, the government also published an updated SBC template and uniform glossary.
Final rules on the SBCs were issued in 2012, and since that time, the government has issued additional guidance on the SBC rules in the form of “frequently asked questions” (FAQs). The new proposed rules not only incorporate some of this guidance, but propose to make certain changes to the 2012 final rules.
If finalized, the proposed rules would take effect as of the first open enrollment period beginning on or after September 1, 2015, for participants and beneficiaries enrolling through an open enrollment period, and the first day of the first plan year beginning on or after September 1, 2015, for other participants and beneficiaries. Comments on these rules are accepted until March 2, 2015. The new proposed rules include a number of updates relating to the form, content and delivery of SBCs, including the following provisions affecting group health plans:
Form and Content of SBCs
- Reduced length of SBC – The rules propose to reduce the required content of the SBC in the template from 4 double-sided pages to 2 ½ double-sided pages.
- Expanded uniform glossary – The updated proposed uniform glossary includes several new definitions.
- Required statement regarding “minimum essential coverage” and “minimum value” – The rules propose to require the SBC (and not a separate disclosure, as previously permitted) to include a statement regarding whether the plan provides minimum essential coverage and meets the minimum value requirements.
- New coverage example – In addition to the current coverage examples relating to having a baby and managing type 2 diabetes, the rules propose a third example, a simple foot fracture with an emergency room visit.
- Revised pricing data – The rules propose to revise the pricing data underlying all three coverage examples (the two existing examples and the new example) to improve accuracy.
- Continued use of the coverage example calculator – The new rules propose to authorize the coverage example calculator for continued use, extending it beyond the original transitional period.
Providing SBCs to Plans, Participants and Beneficiaries
- Safe harbor for electronic delivery – The rules propose to codify the safe harbor previously issued in FAQs, which permits SBCs to be delivered electronically to participants and beneficiaries who enroll or renew coverage online, as well as to those participants and beneficiaries who request an SBC online.
- SBCs provide prior to application not required again if no changes made – Under the proposed rules, if the SBC is provided prior to applying for coverage and there is no change to the information, it is not required to be provided again upon application, unless requested. In addition, if the coverage terms are changed after coverage is applied for, the updated SBC need not be provided until the first day of coverage, unless requested earlier.
- SBC required upon automatic enrollment – Under the proposed rules, a new SBC is required to be provided to a participant or beneficiary upon automatic enrollment, but only for the plan or product in which the participant or beneficiary is enrolled (similar to the requirement for renewal or reissuance).
- Safe harbor for contracts with third parties to provide SBCs – The proposed rules provide that the use of a third-party to satisfy the SBC delivery requirements will be acceptable if the following conditions are met:
- The entity monitors performance under the contract;
- If the entity knows the SBC is not being provided in compliance with the rules and has the necessary information to correct the noncompliance, it does so as soon as practicable; and
- If the entity knows the SBC is not being provided in compliance with the rules but doesn’t have the necessary information to make a correction, it communicates with affected participants and beneficiaries and takes significant steps to avoid future violations.
- SBCs for plans with multiple issuers – Where a plan uses two or more insurance products provided by separate issuers, the new rules propose to place the responsibility for providing complete SBCs on the group health plan administrator. The rules also reiterate that the safe harbor previously provided, which permits a group health plan to provide one synthesized SBC or multiple partial SBCs that together provide all of the required information, will still apply and have requested comment on whether to codify it in regulation.
Penalties for Noncompliance
Willful failure to provide an SBC will result in a fine of up to $1,000 for each such failure. The Department of Labor has indicated that it will use the same process and procedures for assessing fines for failure to provide SBCs as it uses for failure to file an annual report under Form 5500. The IRS has clarified that it will enforce the SBC requirements consistent with Section 4980D of the Code.