Open enrollment for employer-sponsored health and welfare benefits comes every year, usually with little fanfare as employers generally have a system in place to seamlessly handle enrollments. This changed with the passage of the Affordable Care Act (ACA) in 2010, but now seven years later, employers again mostly have open enrollment standardized. This year brings a new challenge – the Summary of Benefits and Coverage (SBC) document that was created by the ACA has undergone its first major restructuring since 2012 when employers were first required to provide the SBC. The new SBC template must be used for open enrollments that occur on or after April 1, 2017. For calendar year plans, the upcoming 2018 open enrollment is the first open enrollment where the new SBC templates must be used.
If you need a quick refresher, the SBC summarizes group health plan coverage for employees, describing many important plan features, such as deductibles, co-pays, co-insurance, and services covered, so that employees can better understand and make more informed choices about the available coverage options. SBCs have a required uniform format and must contain certain information and examples, so that employees can compare an employer’s coverage options and options from more than one employer. The uniform standard definitions of medical and health coverage terms and the required SBC template are distributed by the IRS, DOL, and HHS (the Departments). For more information on general SBC requirements, see our prior publication here.
While the insurance carrier or third party administrator normally provides the SBC to an employer for distribution with open enrollment materials, employers are ultimately responsible for the SBC’s accuracy and distribution, and for the recently increased penalties (of $1,087 per failure) for failure to distribute the SBC. Employers should review the SBC’s provided for the upcoming open enrollment to be sure they have changed to reflect the new rules. Employers should also distribute the Section 1557 nondiscrimination notice with the SBC to avoid potential penalties.
The details of the changes to the SBC and the Section 1557 nondiscrimination notice are discussed in the remainder of this legal update.
The new finalized guidance on SBCs was issued by the Departments in April of 2016. The guidance states that while all prior formatting must still generally be complied with (12 point font, maximum length of four pages front and back, required replication of all bolding and shading where applicable), SBCs can now have certain language and formatting alterations, such as differing font styles and margins in order to maintain the four page requirement. Definitions were also added to the Uniform Glossary, and the Departments state that SBCs may hyperlink the terms to a micro-site that HHS will maintain, at www.healthcare.gov/sbc-glossary/.
The required content of the SBC has also changed, with some of the most significant changes being:
- A description of what an SBC is and where consumers can find more information, located at the beginning of the SBC.
- A description of how family members must meet their own individual deductibles before the overall family deductible is met, and what services are covered.
- Changing of the term "person" to "individual."
- A statement that copays may not be included in out-of-pocket limits.
- The removal of the definitions of copayments and coinsurance.
- Change of the "Limitations & Exceptions" column to "Limitations, Exceptions, & Other Important Information" which must now include:
- When the plan does not cover a certain service category, or a substantial portion of a service category.
- When cost sharing for covered in-network services does not factor into the out-of-pocket limit.
- Visit and/or dollar limits.
- When services require preauthorization.
- Note: cross-referencing is allowed if including all information in this section would cause the SBC to exceed four pages.
- New language about minimum essential coverage, minimum value, and language access services.
- The addition of a third Coverage Example about costs for a fracture, and slightly altered formatting to the Coverage Examples section.
- A statement regarding whether abortions are covered by the plan.
One thing that is not part of the new SBC guidance is also important for employers: SBCs are likely considered "significant communications" for purposes of the nondiscrimination rules found in Section 1557 of the ACA, and the notice required by Section 1557 should be included with the SBC. The Section 1557 notice must be included with all “significant communications” involving the medical plan. It is not clear whether the Departments have considered the addition of the Section 1557 language and its impact on the four page SBC limit. We suggest including the 1557 notice with the new SBCs, but not as part of the new SBCs, in order to maintain the four-page length. For more information on the Section 1557 nondiscrimination requirements, see our prior publication here.
An updated SBC template can be found here. Be sure to review any draft SBCs prepared by your insurer or TPA before distribution to ensure they meet the new formatting requirements.