On Wednesday, August 17, three federal agencies released proposed regulations describing how employers and insurers should comply with the four-page “summary of benefits and coverage” (“SBC”) rules. The SBC is intended to serve as an easy-to-read, informative summary of benefits available under a plan — in some senses, a “mini-SPD.” The rules apply to both fully insured and self-funded health plans. If the proposed regulations and sample forms are adopted as proposed, employers and insurers must customize the sample forms for their specific health plans and implement procedures to ensure that the forms are distributed to participants, beneficiaries and prospective enrollees.
Background. The health care reform law (now called the “Affordable Care Act” or “ACA” by the federal regulatory agencies) requires that individuals receive a “four-page” SBC. (The regulations effectively double this to an eight-page SBC by interpreting a “page” to be double-sided.) The SBC is intended to provide important plan information to individuals, such as common benefit scenarios and definitions for frequently used terms.
SBC Contents. An SBC must describe numerous features of the plan, including:
- Uniform definitions of standard insurance and medical terms, along with an Internet address for obtaining a “uniform glossary” of key terms;
- A description of coverage, including cost sharing, for each category of benefits;
- Exceptions, reductions and limitations of the coverage;
- Cost-sharing provisions of the coverage, including deductible, coinsurance and copayment information;
- Renewability and continuation of coverage provisions (e.g., COBRA);
- Coverage examples;
- A statement that the SBC is only a summary;
- Contact information for questions and to obtain a copy of the plan document or insurance policy;
- If a provider network is used, an Internet address (or similar contact information) for obtaining a list of network providers;
- For plans that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage;
- Premiums or, for a self-funded plan, the “cost of coverage;” and
- Beginning in 2014, whether the plan provides minimum essential coverage.
Sample Forms. The above list is a significant amount of information to include in a four-page (or eight-page) SBC. However, the three federal agencies that enforce the SBC rules (the Internal Revenue Service, the Department of Labor and the Department of Health and Human Services) provide sample forms with the framework employers and insurers must follow. Some of the requirements in the sample forms are quite detailed. For example, the font size cannot be smaller than 12-point font; the list of excluded services must be in alphabetic order and must use “bullets” (but not any other symbol) next to the list; and complete sentences often must be used (e.g., the SBC must raise the question of whether there are out-of-pocket limits on expenses and, if there are none, respond “No. There’s no out-of-pocket limit on your expenses” rather than simply saying “No”).
The forms were developed by an insurance industry group. The forms are designed for insurers and their fully insured policies; they are not currently customized for employers and their group health plans. The agencies seek comments on how the forms should be modified for employers and their plans. Some clarifications would be helpful. For example, the instructions for the sample forms specifically state the SBC does not apply to “excepted benefits” (such as many health FSAs, dental plans and vision plans), but the regulations themselves do not discuss this topic.
Who Distributes the SBC. For a fully insured plan, either the insurer or the employer will distribute the SBC. Employers likely should contractually agree with their insurer about who will distribute the SBC. For self-funded plans, the plan and its administrator must distribute the SBC.
Who Receives the SBC. The SBC must be distributed to participants, beneficiaries, prospective enrollees and special enrollees. The time to distribute the SBC is often short. It usually must be distributed with initial enrollment materials. For future plan years, the SBC must be provided again, along with the new enrollment materials (or, if renewal is automatic, no later than 30 days prior to the first day of coverage under the new plan year). Participants and beneficiaries can request an SBC, and a plan must accommodate that request within seven days. If participants and beneficiaries are “known” to reside at different addresses, multiple SBCs may need to be provided.
An SBC generally can be distributed electronically if the Employee Retirement Income Security Act’s (“ERISA”) electronic disclosure rules are satisfied. An SBC also must be provided in a “culturally and linguistically appropriate manner.” This requires, in certain circumstances, that plans translate the SBC into a non-English language upon request. This translation process could be a significant burden for employers.
Advance Notice of Modifications. One of the most eagerly anticipated aspects of the proposed regulations relates to an “advance notification” requirement. The ACA provides that if a plan (or, presumably, an employer) makes any “material modification” in a plan term that is not reflected in the most recent SBC, the plan must provide enrollees notice of such modification at least 60 days in advance of its effective date. This could have forced employers to make plan design changes earlier than usual, in order to provide the 60-day advance notice.
The proposed regulations provide employers with helpful leeway on this point. The regulations provide that this 60-day advance notice requirement only applies if the material modification “occurs other than in connection with a renewal or reissuance of coverage (that is, a mid-plan or mid-policy year change).” In other words, the 60-day advance notification rule only applies to mid-year plan changes, not plan changes that occur as of the beginning of each new plan year. This is helpful for employers.
Effective Date of Regulations. The regulations are only proposed, not final. Final regulations will be issued, likely either later this year or in early 2012. The proposed regulations state that they would apply — if adopted as currently written — on March 23, 2012. Note that this would be in the middle of the plan year for most plans.
Links to Further Guidance. The regulations can be found here: http://www.ofr.gov/OFRUpload/OFRData/2011-21193_PI.pdf. The sample forms and instructions for the forms can be found here: http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/2011-21192.pdf.