Since the massive Health Care Reform law passed in March 2010, we have been waiting for guidance regarding a 4-page summary of plan benefits and advance notice of changes that group health plans and health insurance carriers must provide to participants in 2012.  The DOL, IRS and HHS (the "Departments") issued the proposed standards for these new disclosure materials on August 22, 2011.  Under the proposed regulations, group health plans and health insurance carriers must make available a summary of benefits and coverage ("SBC") and a uniform glossary of health coverage terminology by March 23, 2012.  Group health plans must also provide 60 days advance notice of mid-year modifications of the SBC to eligible employees and their dependents. 

Who is Responsible for Providing the SBC?

Group health plans, health insurance carriers, and plan administrators of group health plans are each responsible for providing a SBC to eligible employees and dependents.  Insurers also have an obligation to provide a SBC to each fully-insured group health plan, so the plan administrator (employer) can comply with its delivery requirements. 

When Must an Insurer Provide an SBC to a Group Health Plan? (For Fully-Insured Plans Only)

  • Upon Application or Request for Information.

For a fully-insured plan, the health insurance carrier must provide the SBC to the group plan administrator as soon as practicable following an application for a policy or request for information is made, but in no event later than 7 days following the request.  If there is a change in SBC information before the coverage is offered, or before the first day of coverage, the insurer must update and provide a current SBC no later than the date of the offer, or than the first day of coverage. 

  • At Renewal.

Additionally, an insurer must provide a new SBC if and when the policy, certificate, or contract is renewed or issued, no later than the date the renewal materials are distributed, or if renewal or reissuance is automatic, no later than 30 days prior to the first day of each new policy year.

Basically, virtually every communication from an insurer to an employer will now be accompanied by the SBC.

When Must Insurers and Group Health Plans Provide a SBC to Eligible Employees and Dependents? (For Both Self-Insured and Fully-Insured Plans)

  • At Initial Enrollment.

Self-insured plans, fully-insured plans, and health insurance carriers must provide a SBC to new hires and their dependents with respect to each benefit option offered for which the new hires or dependents are eligible with the plan's enrollment materials.  If the plan does not distribute written enrollment materials, the SBC must be distributed no later than the first date the employee is eligible to enroll in coverage.  If the information in the SBC changes before the first day of coverage, the plan or insurer must update and provide a current SBC to the employee or dependent no later than the first day of coverage. 

  • At Open Enrollment.

The SBC must always be included with open enrollment materials. If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of coverage in the new plan year.  Group health plans that offer more than one benefit option can provide just the SBC for the benefit option the participant is already enrolled in with the open enrollment materials.  However, if an employee or dependent requests a SBC for another available benefit option, the SBC for the other option(s) must be provided as soon as practicable, but no later than 7 days following the request. 

  • At Special Enrollment.

HIPAA special enrollees are entitled to a SBC within 7 days of a request for enrollment. 

  • Upon Request.

Employees and dependents may request a SBC outside of the plan's initial and open enrollment periods.  If requested, a plan or insurer must provide a SBC as soon as practicable, but in no event later than 7 days following request. 

Because both plans and insurers for fully-insured plans have an obligation to provide the SBC, the Departments expect plans and insurers to make contractual arrangements to assign responsibility for sending SBCs.  As long as one of the parties sends the SBCs to employees and dependents, the other party will be considered to have satisfied its obligation. 

What Must be Included in the SBC?

The SBC must use language understandable by the average plan enrollee, be written in at least 12-point font, may not exceed 4 double-sided pages and must include information on the list below.  The rules include a template (available here: Summary of Benefits and Coverage (SBC) Template).  The template's language and formatting must be precisely reproduced, unless the instructions allow or instruct otherwise. 

Here's the information required to be included: 

  • Certain uniform definitions of standard insurance terms and medical terms so that employees can compare health coverage and understand the terms of (or exceptions to) their coverage.
  • A description of the coverage, including cost sharing, for each category of benefits identified by the Departments.
  • The exceptions, reductions, and limitations on coverage.
  • The cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations.
  • The renewability and continuation of coverage provisions.
  • Coverage examples to illustrate what proportion of care expenses a policy or plan would cover for 3 common benefits scenarios (having a baby (normal delivery), treating breast cancer, and managing diabetes).  For specific instructions and information necessary to prepare these coverage examples, see: Guide for Coverage Examples Calculations and page 5 of this document for the coverage examples: Summary of Benefits and Coverage (SBC) Template.
  • A statement that the SBC "is only a summary" and that the plan document, policy, or certificate of insurance should be consulted to determine the governing contractual provisions of the coverage.
  • A contact number to call with questions and an Internet web address where a copy of the actual policy or group certificate of coverage can be reviewed and obtained.
  • For plans and insurers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of the network providers.
  • For plans and insurers that maintain a prescription drug formulary, an Internet address where an individual may find more information about the prescription drug coverage under the plan or coverage.
  • An Internet address where an individual may review and obtain the uniform glossary of health coverage terms (more on this below).
  • The cost to employees of the coverage.

Starting in 2014, the SBC must contain a statement about whether the plan provides "minimum essential coverage," and whether portion of the total allowed costs of benefits that are paid for under the plan or coverage meets applicable requirements.  This statement is being delayed until 2014 because it is not relevant until other elements of the Health Care Reform law are implemented. 

The SBC must be presented in a "culturally and linguistically appropriate manner."  This means that in certain counties—where at least 10% of the population residing in the county is literate only in the same non-English language—interpretive services and written translations of the SBC in that non-English language must be provided upon request. 

The proposed template for the SBC and proposed instructions and sample language for completing the template can be found here: Summary of Benefits and Coverage (SBC) Template, Instructions for Completing the SBC - Group Health Plan Coverage, Why This Matters language for "Yes" Answers, and Why This Matters language for "No" Answers.

The SBC must be a stand-alone document.  The Departments are seeking comments on whether the SBC might be included with the summary plan description for the plan. 

How is the SBC to be Provided to Eligible Employees and Dependents?

A plan or insurer may provide a SBC in paper form or electronically, if the requirements of the Department of Labor's electronic disclosure safe harbor are met.  If SBCs are to be mailed and the employee and any eligible dependents are known to reside at the same address, a single SBC may be provided to that address.  However, if a dependent's last known address is different from the employee's last known address, a separate SBC must be provided to the dependent at the dependent's last known address.  The DOL's electronic disclosure safe harbor currently requires these steps:

  • The method of delivery must be reasonably calculated to ensure that the system for providing the SBC results in actual receipt of the SBC (e.g., using return-receipt or notice of undelivered electronic mail features, conducting periodic reviews or surveys to confirm receipt of the transmitted information) and protects the confidentiality of personal information, if any, relating to the individual's accounts and benefits.
  • Eligible employees or dependents must be notified of the significance of the SBC when it is provided and of their right to request and obtain a paper version of the SBC.
  • The eligible employee must have the ability to effectively access electronic documents at any location where the participant works and the electronic information system must be an integral part of his or her work.
  • For an employee who does not use an electronic information system as an integral part of his or her work and for eligible dependents, the plan must obtain their affirmative consent to receipt of the SBC electronically.

The DOL is considering changes to its electronic disclosure regulations.  You may rely on the safe harbor as described above until the DOL issues revisions. 

Uniform Glossary

Each group health plan and each health insurance carrier offering group health insurance coverage must make available to enrolled employees and dependents a uniform glossary of health-coverage-related terms and medical terms. The Departments responsible for issuing the rules for this requirement have prepared a uniform glossary that plans and insurers must use to satisfy this requirement.  The uniform glossary can be found here: Uniform Glossary of Coverage and Medical Terms.

The Uniform Glossary must be available upon request within 7 days of the request.  A plan or insurer may satisfy this disclosure requirement by providing an Internet address where an individual may review and obtain the Uniform Glossary.  This Internet address may be a place the document can be found on the plan's or insurer's Web site or on the Web site of either the Department of Labor or the Department of Health and Human Services.  However, a plan or insurer must provide a paper copy of the Uniform Glossary upon request.   

60 Days Advance Notice of Plan Changes that Impact SBC Disclosure

Group health plans or health insurance carriers offering group or individual health insurance coverage must provide enrollees with notice of any material change in the plan that changes the information included in the most recently provided SBC.  A material change is any modification to the coverage offered under a plan or policy that, independently, or conjunction with other modifications or changes, would be considered to be an important change in coverage benefits or the terms of coverage under the plan or policy by an average plan participant.  A material modification could be an enhancement of covered benefits or services or other more generous plan or policy terms, or a material reduction in covered services or benefits. 

Notice of a material change must be provided to enrollees no later than 60 days prior to the date on which the change will become effective, other than changes that are in connection with a renewal or reissuance of coverage.  This notice requirement may be satisfied either by a separate notice describing the material modification or by providing an updated SBC reflecting the modification. 

Penalties for SBC Failures

A group health plan (including its administrator, which is generally the employer) and a health insurance carrier offering group or individual health insurance coverage that willfully fails to provide the new disclosure information will be fined up to $1,000 for each failure.  A separate fine may be imposed for each individual for whom a SBC or Uniform Glossary is not timely provided.  Additionally, an excise tax of $100 per day per individual for each day that the plan fails to comply with respect to that individual may be imposed on group health plans.  Group health plans are required to self-report such failures and the amount of the excise tax on IRS Form 8928.