Continuing with the recent proliferation of guidance on health care reform, the U.S. Departments of the Treasury, Labor, and Health and Human Services have released proposed regulations and requested comments regarding the implementation of a new, simplified benefit summary requirement created by the Patient Protection and Affordable Care Act (the 2010 health care reform legislation).
The Affordable Care Act requires group health plans and insurers, beginning March 23, 2012, to provide a summary of benefits and coverage explanation (SBC), in easy to understand language, to plan participants, beneficiaries, and certain individuals who inquire about plan coverage. The SBC is intended to help individuals better understand their health coverage options. The new guidance provides a template for plans to use to create an SBC, instructions for completing the template, sample benefit scenarios, and a uniform term glossary.
Content of the SBC. The SBC, which is intended to be a stand-alone document, may be up to four double-sided pages in length in 12-point font. The SBC must include the following:
- Uniform definitions of standard insurance and medical terms
- A description of coverage, including cost sharing, for certain benefit categories
- Exceptions, reductions, and limitations on coverage
- Cost-sharing provisions, including deductibles, coinsurance, and copayments
- Renewability and continuation of coverage provisions
- Coverage examples explaining common benefit scenarios with hypothetical situations
- Beginning January 1, 2014, a statement as to whether the plan provides affordable minimum essential coverage (Click here to read our related alert.)
- A statement that the SBC is only a summary and the plan documents should be consulted
- Contact information, including a Web site
- Directions for obtaining a list of network providers, if applicable
- Directions for obtaining information about the prescription drug formulary, if applicable
- An Internet address for accessing the uniform glossary
- Premium information
Distribution of the SBC. An insurer (in an insured plan) or the plan administrator of a group health plan must provide an SBC to a participant or beneficiary as part of written enrollment materials (or if none, upon eligibility for enrollment), upon a change in information included in the SBC, upon a special enrollment event, and within seven days of a request.
For an insured plan, the insurer also must provide an SBC to the plan sponsor automatically upon application, when the policy is renewed, upon a change in information included in the SBC, and within seven days of a request.
The SBC may be provided by paper copy or electronically in accordance with the Department of Labor’s electronic distribution requirements (certain special distribution procedures apply to plans not subject to ERISA). The SBC must be provided in a “culturally and linguistically appropriate manner” in accordance with the requirements for claim appeal communications under health care reform. (Click here to read our related alert.) A revised SBC must be provided if any material modification is made to the plan that is not reflected in the most recently provided SBC 60 days before the effective date of the change.
A plan (or its administrator) that willfully fails to provide an SBC may be fined up to $1,000 for each failure.
Significantly, the proposed regulations do not include an extension of the March 23, 2012, compliance date, even though the Departments are late in issuing SBC guidance. The Departments specifically solicit comments on the new rules and indicate that the guidance will likely be changed before it is issued in final form. Plan sponsors should begin to consider the process by which they will prepare and communicate SBCs by the March 23, 2012, deadline and pay close attention to any changes in the final guidance, which will be issued in the next several months.