Proposed regulations on, and a proposed template for, the Summary of Benefits and Coverage (SBC) required by section 2715 of the Public Health Service Act (PHSA), as added by the Patient Protection and Affordable Care Act (PPACA), are the latest guidance from the tri-agency task force1 drafting PPACA rules for employer health plans. The proposed regulations, which were published in the Federal Register on August 22, 2011, address when, how and to whom the SBC must be distributed. The template for the SBC was also published in the August 22, 2011 Federal Register, along with a uniform glossary of health insurance and medical terms, instructions for completing the SBC and other related materials. Both documents include a number of requests for comments on the template, the related materials and the regulations, including the feasibility of complying with the SBC requirements beginning on or after March 23, 2012, the effective date specified in PPACA. These rules are applicable to both grandfathered and non-grandfathered health plans.
Section 2715 of PHSA provides that plans and health insurance issuers are to begin distributing SBCs beginning on March 23, 2012. The SBC requirements apply only to health plans or policies subject to the PHSA; excepted benefits, such as stand-alone vision and dental plans, are not required to issue an SBC. Insurers in the individual market must distribute SBCs to individuals. Insurers in the group market must distribute SBCs to plans or plan sponsors, as well as plan participants and beneficiaries. In addition, plans must distribute SBCs to participants and beneficiaries. PPACA directed HHS, DOL, Treasury and IRS to develop regulations implementing these rules in consultation with the National Association of Insurance Commissioners (NAIC). The NAIC convened a working group that included representatives of health insurance issuers, consumer advocacy groups, health care professionals and others that developed the template, uniform glossary and related materials that were published by the tri-agency task force. The preamble to the proposed regulations notes that the NAIC draft template is primarily for use by insurers and solicits comments on changes appropriate to accommodate plans or otherwise improve on the NAIC draft.
The proposed regulations set forth the rules for distribution of the SBCs. The rules are proposed to be effective March 23, 2012, for grandfathered and non-grandfathered health plans and insurers in the individual and group markets.
When to Provide SBCs. The proposed regulations provide similar rules for distributing SBCs to plans, individuals with health insurance and plan participants and beneficiaries.
A group health insurer must provide the SBC to a group health plan or the plan sponsor as soon as practicable after receiving a request for information about health insurance or an application for coverage, but no later than seven days after the request.
- If the insurer sends the SBC when the plan or sponsor first requests information, potentially it must send another SBC when the plan later applies for coverage and again by the first day of coverage; however, the proposed regulations require new SBCs to be provided in each case only if there is a change in the information in the SBC after it was first provided.
- A new SBC must be provided upon renewal or reissuance of the insurance, either by the date materials are distributed, if there is a written application for renewal, or 30 days before the beginning of the new policy year, if renewal is automatic.
- An SBC must also be provided as soon as practicable upon request by the plan or plan sponsor, but no later than seven days after the request.
Generally, the same rules apply for health insurers to provide SBCs to individuals applying for and obtaining insurance, though information on policies reported to the Federal health reform web portal will be deemed provided to an individual who requests information before applying for coverage.
- A special rule provides that an insurer may send one SBC to the policyholder for all covered individuals at the same address, and a separate SBC is required only for any other individual covered under the policy whose last known address is different than the last known address of the policyholder.
- If the insurer makes a material modification to the policy that would affect the SBC, other than at the time of renewal, the insurer must notify covered individuals at least 60 days before the change takes effect.
The rules for providing SBCs to plan participants and beneficiaries are also similar. For an insured plan, both the insurer and the plan administrator are responsible for distributing the SBC, though timely and complete distribution by either one satisfies the requirement for both.
- The SBC must be provided either with any written application materials or the first day a participant is eligible to enroll, if there are no written application materials.
- If there are changes to the SBC before coverage becomes effective, a new SBC must be distributed by the first day of coverage.
- Any special enrollee requesting coverage, for example, after the birth of a baby, must be given an SBC within seven days of the special enrollment request.
- Upon renewal of coverage for a new plan year or otherwise, a new SBC is to be provided with written renewal application materials or, if there are no written materials, at least 30 days prior to the effective date of renewal. If a plan has multiple coverage options, the only SBC required to be provided automatically at renewal is the SBC for the option in which a participant is currently enrolled; however, the participant can request SBCs for other options for which he or she is eligible.
- Also, an SBC must be provided as soon as practicable upon a participant’s or beneficiary’s request, but no later than seven days after the request.
- One SBC can be provided for a participant and his or her dependents known to reside at the same address, but a separate SBC must be sent to a beneficiary whose last known address is different.
- If the plan or an insurer makes a material modification to the coverage that would affect the SBC, other than at the time of renewal, the plan or the insurer must notify participants and beneficiaries at least 60 days before the change takes effect. Comments are requested on situations in which meeting this 60-day advance notice requirement might be difficult.
How to Provide SBCs. The SBC must be in a uniform format following the prescribed template and may not exceed four double-sided pages or include print smaller than 12-point font. The proposed regulations say the SBC must be a stand-alone document, though the agencies request comments regarding including it in the Summary Plan Description for a health plan subject to ERISA or with other materials distributed by a plan.
An SBC may always be sent on paper. An SBC being sent by an insurer to a plan or plan sponsor may be distributed electronically (e.g., via email or posting on the Internet) if three conditions are met:
- The electronic format is readily accessible to the plan or sponsor;
- A paper SBC is provided free of charge on request; and
- If the SBC is posted, the insurer timely notifies the plan or sponsor by email or on paper that the SBC is posted and the Internet address where it can be found.
Similar rules allow insurers to send SBCs electronically to individuals who request insurance information electronically or complete an application electronically. An SBC being sent to plan participants or beneficiaries of a plan subject to ERISA may be distributed electronically if the DOL rules for electronic disclosure are satisfied. As announced in April 2011, the DOL is currently reviewing its rules for electronic disclosure. If the DOL electronic disclosure rules are revised, any changes will automatically apply for this purpose.
Content of SBC and Additional Rules. The proposed regulations include general descriptions of the contents of the SBC, which generally follow the provisions of section 2715 of PHSA. The template, discussed below, provides more detailed information on the required content. The contents of the uniform glossary and the instructions for the template are also discussed below.
The SBC must be provided in a culturally and linguistically appropriate manner. According to the proposed regulations, this rule requires compliance with the similar rule under the recently revised external review regulations. Thus, in identified counties in which there are a significant number of, e.g., Hispanic-speaking residents, the SBC must include a statement in the appropriate language disclosing interpretive and translation services available. The agencies requested comments on whether and how translations of the SBC should be made available.
Under the proposed regulations, plans and health insurance issuers are to make the uniform glossary available in paper or electronic form upon request, within seven days of the request. The SBC is to say that the glossary is available upon request. The electronic disclosure requirement is satisfied if participants are directed to a copy of the glossary posted on the plan or insurer website or the DOL or HHS website, though a paper copy must also be available upon request.
The regulations say that any requirement under state law for insurers to provide a document like an SBC is preempted unless it requires more information to be provided.
A plan or an insurer may incur a penalty of up to $1,000 for each willful failure to provide an SBC to an individual or a plan participant or beneficiary. A separate failure occurs for each covered individual, plan participant or beneficiary who does not receive an SBC.
The Template and Related Materials
In conjunction with the proposed regulations, the tri-agency task force also issued proposed standards for the benefits and coverage information in the SBC and a draft uniform glossary of terms used in the SBC. By requiring coverage information in a standardized format, the SBC and the uniform glossary allow consumers and plan participants to make direct comparisons between the coverage available under different policies or coverage options. The proposed standards include, as appendices, a draft SBC template with coverage examples, instructions for completing the SBC, a sample completed SBC, a guide for completing the coverage examples that must be included in the SBC and a draft uniform glossary of coverage and medical terms used in the SBC. The agencies have requested comments on each of the draft documents, including suggested changes to the template for use with self-insured group health plans. Although the PHSA requires plans and insurers to include a statement in the SBC as to whether the plan or coverage provides minimum essential coverage that will satisfy the minimum value requirements of PPACA, this statement will not be required in SBCs prior to January 1, 2014, since the individual mandate and related rules are not effective until that date.
Draft Template and Instructions. The general instructions for completing the template state that the SBC must be completed in good faith and must follow the format and order of the template and the charts almost exactly as provided, without significant variations in the font, order or format. In addition, plans are required to use plain language in the SBC and present the information in a “culturally and linguistically appropriate manner.” According to the SBC instructions, employer-sponsored group health plans must provide each participant with a pre-enrollment version of the template during initial or open enrollment, and a final version once the participant has selected his or her benefit options. The pre-enrollment version must describe each available coverage option, and the benefits, options, and costs for each available tier of coverage (i.e., single, single plus one, family, etc.). Once an employee selects an option and a coverage tier, the participant must receive a final SBC relevant to the selected coverage. It is somewhat unclear how this rule coordinates with the rule in the proposed regulations that says a new SBC must be provided on enrollment only if information in the original SBC changed.
The draft template included in Appendix A of the guidance consists of a six-page document. The first page is a chart that details participant costs, including premium costs, out-of-pocket limits, deductibles, and any limits on coverage, including in-network provider requirements, annual and out-of-pocket limits, and excluded services. In addition to describing the costs and limitations associated with coverage, this page also contains language describing why each cost or limit is relevant in assessing the benefits offered under the plan, in a column labeled “Why this Matters.” The instructions for completing the SBC contemplate various benefits structures that may be available under a variety of plans and include very specific standard language for the “Why this Matters” column, depending on each plan’s benefit structure. The instructions state that the plan may not alter the suggested language, including generalized language explaining the impact of certain coverage limitations and cost-sharing requirements on participant coverage.
The second and third pages of the template describe the significance of certain coverage terms (for example, co-payment, co-insurance, etc.), followed by a separate chart that discloses the participant costs for using a participating or non-participating provider for certain common medical events, including office visits, mental health treatment, prescription drugs, and urgent care coverage. While issuers and plans may not alter the explanation of the coverage terms, the SBC instructions indicate that any inaccuracies in the standard language may be explained in the chart. The sample completed template includes the dollar amount or percentage of any co-payments or co-insurance for each medical event for treatment received from a participating or a non-participating provider.
Page four of the template lists services that are, and are not, covered by the plan, and a brief description of the insured’s continued coverage and appeals rights. The SBC instructions specifically designate 13 services that must be listed as covered or not covered, including chiropractic care, infertility treatment, and weight loss programs. While the plan or insurer must list any additional services not covered under the plan (even if designated as excluded elsewhere in the SBC), only the 13 designated services may be listed as covered services on this page. Services that require 100% payment of the cost for in-network services must be listed as not covered.
Page five of the template provides coverage examples for three medical events – having a baby, “treating breast cancer,” and “managing diabetes” – along with sample provider costs for each service. All SBCs must include the same three coverage examples, with the same sample provider costs, and the examples cannot be altered by the issuer or the plan. The chart also contains sample care costs for individual items associated with each service. The plan or issuer must complete the chart by populating the sections describing any applicable deductibles, co-pays, co-insurance, and limits or exclusions based on the specific plan or option. Information regarding the sample costs and other standardized data needed to complete the coverage summary (i.e., date of service, provider type, etc.) will be provided by an HHS website and updated annually. Once the plan or insurer completes the coverage examples, consumers and participants will be able to compare the actual participant costs for the three sample services across different plans or options. The agencies have asked for comments on several aspects of these coverage examples, including whether other examples would be helpful, the cost of providing examples and whether multiple examples promote or hinder understanding and comparison of coverage.
The final page of the template includes questions and answers about the coverage examples. These questions and answers explain much of the information regarding the sample care costs included in the coverage examples described above, and how the examples should be used to compare coverage options.
Uniform Glossary. The uniform glossary, which must be included with the SBC, includes general definitions of medical and coverage terms used in the SBC that should apply across all plans. Plans and insurers cannot modify the uniform glossary. In addition to the standardized definitions of relevant terms, the uniform glossary contains diagrams to facilitate understanding of these terms. The agencies are considering whether to define additional terms and request comments on the definitions provided and whether additional terms should be defined.
Comments on the proposed regulations, the template, and the uniform glossary are due by October 21, 2011. The preamble to the regulations includes several requests for comments on specific aspects of the proposed regulations, the template and the related materials, several of which are noted above. The regulations and the preamble say that, beginning on or after January 1, 2014, a statement as to whether a plan provides minimum essential coverage is to be included in an SBC. The preamble further indicates that the agencies are considering several reporting options under PPACA and other laws to minimize duplication and burdens on plans and employers, as well as individuals and insurance exchanges, with respect to reporting on whether coverage is minimum essential coverage.