On December 30, the Departments of Treasury, Labor, and Health and Human Services published a joint notice of proposed rulemaking modifying the Summary of Benefits and Coverage (SBC) final regulations issued in 2012.1 In addition, the agencies also released proposed revisions to the current SBC template ,instruction guide and the uniform glossary. The proposed changes would update and clarify prior guidance regarding the distribution of the SBC, incorporate FAQ guidance issued since the 2012 final regulations, and add certain elements to the SBC and the uniform glossary. The proposed SBC template would also reduce the required content in the SBC from 4 to 2½ pages.

This Legal Alert will highlight the proposed changes as they apply to group health plans. If finalized, the new rules would be effective as of the first day of the first open enrollment period beginning on or after September 1, 2015. For participants and beneficiaries that enroll in group coverage other than during an open enrollment period (such as new or special enrollees), the new requirements would apply as of the first day of the first plan year beginning on or after September 1, 2015.

Background

The SBC was first introduced under section 2715 of the Public Health Service Act (PHSA), as added by the Patient Protection and Affordable Care Act. The SBC is a written document, no more than 4-pages long, that describes the benefits and coverage available under a group or individual health plan. The SBC is intended to help plan participants and individuals compare potential plans, and to provide a better understanding of the coverage in which they are enrolled.

The SBC rules generally apply to group health plans and health insurance coverage in the individual and group markets. The 2012 final regulations and subsequent agency FAQs addressed issues including plan exclusions, standards for delivery and content, and penalties for noncompliance. The new proposed rules would consolidate and modify the prior guidance regarding these and certain other issues.

Plans Excluded from SBC Requirements

The preamble to the proposed regulations clarifies that certain plans do not need to produce an SBC describing coverage, including (1) expatriate plans; (2) plans for closed blocks of business that have not been actively marketed since September 23, 2012; (3) certain Medicare Advantage plans; and (4) Health Insurance Portability and Accountability Act (HIPAA)-excepted benefit plans (including certain flexible spending accounts and employee assistance programs that qualify). However, the preamble to the proposed rules also points out that health reimbursement accounts do not constitute excepted benefits and are generally subject to the SBC requirements.

Providing the SBC to Plans and Participants

An SBC must be provided by a group health insurer to a group health plan, and by a group health insurer or self-insured group health plan to eligible individuals, participants and beneficiaries. Under the 2012 final rules, generally an SBC must be provided (1) upon application, (2) by the first day of coverage if there has been a change, (3) upon renewal, and (4) upon request. The proposed rules would clarify the following points relating to the requirement to provide an SBC:

  • Updated SBCs are not required during coverage negotiations. A group health insurer must provide an SBC when a plan sponsor applies for coverage. The proposed regulations would clarify that if a plan sponsor is still negotiating coverage terms following the application, the issuer is not required to provide an updated SBC (unless requested) until the first day of coverage.
  • New SBCs are not required again upon application if provided prior to application. If a plan or issuer provides an SBC prior to an application for coverage (as part of written pre-enrollment materials, for example), the plan or issuer is not required provide another SBC upon the application for coverage if there is no change to the information required to be included in the SBC.
  • An SBC must be provided upon automatic re-issuance or re-enrollment.If a plan or issuer automatically re-enrolls participants and beneficiaries, a new SBC must be provided upon reenrollment, but only for the product or benefit package in which the participant and beneficiary is re-enrolled.
  • A “safe-harbor” may be available for SBCs delivered by a third party.The proposed rules add two anti-duplication provisions under which a plan or issuer that contracts with a third party to provide an SBC to an individual will be considered to satisfy the requirement to provide an SBC provided the plan or issuer:
    • Monitors the performance of the contract;
    • Corrects any noncompliance with the contract it becomes aware of as soon as practicable; and
    • Communicates with individuals affected by any noncompliance that it does not have the information to correct, and takes significant steps to avoid future violations.

Delivery of the SBC

The proposed rules would codify the electronic delivery safe harbor adopted in FAQ Part IX, which provided that SBCs may be delivered to participants and beneficiaries in connection with their online enrollment or renewal, or may be provided electronically to participants and beneficiaries who request an SBC online.

Content Requirements

In addition to the existing SBC content requirements under PHSA section 2715(b)(3), the proposed regulations:

  • Require the SBC to contain a statement explaining whether the coverage offers minimum essential coverage and minimum value. The compliance safe harbor under FAQ Part XIV, which allowed this information to be distributed through a separate cover letter or similar disclosure, would not be extended.
  • Add a third coverage example for a simple foot fracture with emergency room visit. The coverage example published with the proposed rules also provides updated claims and pricing data underlying this third example and the existing two mandatory coverage examples (routine delivery and maintenance of type 2 diabetes).
  • Condense the required content in the SBC template to 2½ pages. The length of the template was reduced by eliminating certain information not required under the statute (including questions on plan limits and services not covered), deleting certain imbedded definitions, streamlining information regarding the right to continue coverage, and striking redundant headers and footers. The agencies are also inviting comments on how to reconcile the need for uniformity in plan comparisons with the need to describe individual plan features.
  • Expand the uniform glossary from four to six pages. The proposed changes would amend the existing definition of several terms and add a number of new terms, including “Claim”, “Cost Sharing” and “Individual Responsibility Requirement.” In addition, changes were also proposed to the SBC instructions and “Why this Matters” language.

Penalties for Noncompliance

A willful failure to provide an SBC can result in a fine of $1,000 for each such failure. In assessing fines against plans, the proposed regulations would clarify that the Department of Labor will use the same process and procedures it currently uses to enforce the Form 5500 filing rules. Furthermore, the IRS will enforce the SBC rules using a process consistent with Internal Revenue Code (Code) section 4980D for failure to meet the Code’s group health plan requirements.