The Affordable Care Act ("ACA") requires, among many other things, that both insured and self-funded health plans must provide a summary of benefits and coverage ("SBC") to covered persons. The requirement to provide a SBC is effective on the first day of a health plan's or health insurance policy's open enrollment period beginning on or after September 23, 2012. For participants who enroll or participate in such coverage other than through an open enrollment period, the requirement to provide a SBC is effective the first day of the first plan year that begins on or after September 30, 2012. What this means for an employer with a calendar year plan is that the employer must provide a SBC either as of January 1, 2013 or as of the first day of the open enrollment period for that year beginning prior to January 1, 2013.
The requirement that a SBC be provided applies to traditional health benefits. HIPAA "excepted benefits" are exempt from the SBC disclosure requirements. These excepted plans include health savings account plans, stand-alone vision and dental plans, and most flexible spending account plans.
The purpose of the SBC, as stated by the federal government, is to "provide clear, consistent and comparable information about health plan benefits and coverage to the millions of Americans with private health coverage." This is done by providing the SBC in a uniform, standardized format prescribed by the federal government which contains the following information:
- definitions of insurance and medical terms used by the employer's plan or insurance policy;
- a description of the coverage -- including deductibles, coinsurance amounts, and copayments -- for each category of benefits provided by the employer's plan or insurance policy;
- limitations and exceptions relative to that coverage;
- designated plan or insurance policy specific coverage examples;
- renewability and continuation of coverage provisions;
- contact information for questions and obtaining a copy of the plan or insurance policy;
- for plans and insurance policies that use a formulary to provide prescription drug coverage, a website for obtaining information regarding that prescription drug coverage; and
- any websites containing information about the plan or insurance policy as well as a statement that the SBC is only a summary.
The SBC may be provided electronically to participants so long as ERISA's existing electronic disclosure requirements are satisfied. The SBC must be provided numerous times by the employer: upon application for coverage; by the first day of coverage if that coverage has changed in any way; upon the annual renewal of coverage; and upon request.
The ACA has also established a significant penalty for noncompliance by an employer. The penalty imposed upon an employer for failing to comply with the SBC disclosure requirement is $1,000 for each participant and beneficiary who does not receive a timely and accurate SBC.