Group health plan sponsors and health insurance issuers should take note (if they have not already taken action) that the deadline to provide the summary of benefits and coverage (SBC) as required by the Patient Protection and Affordable Care Act (PPACA) is fast approaching. Participants and beneficiaries must be provided the SBC with the first open enrollment period that begins on or after September 23, 2012. For participants and beneficiaries who enroll in group health plan coverage at a time other than an open enrollment period (such as new hires, special enrollees and others newly eligible for coverage), the requirement to provide the SBC applies for the first plan year beginning on or after September 23, 2012.
By now, most plan sponsors likely are aware that SBCs are required. Final regulations and guidance issued by the Department of Treasury, Department of Labor and Department of Health and Human Services contain specific content and appearance requirements for the SBC. An overview of the final regulations is available in Baker Hostetler's February 16, 2012 issue of the Health Law Update, and an overview of the guidance is available in the March 29, 2012 issue of the Health Law Update.
Nonetheless, as a reminder for plan sponsors who have not yet prepared the SBC or confirmed that the health insurance issuer (if the plan is insured) will be preparing the SBC, the SBC must contain specified information regarding the plan's coverage, including: cost-sharing (deductibles, coinsurance, copayments and the like) for each category of benefits; exceptions, reductions and limitations of the coverage; renewability and continuation of coverage provisions; and coverage examples explaining how benefits will be provided under the plan for specific health conditions. The SBC must also contain certain other statements and contact information, including: a statement that the SBC is only a summary of the plan, and that the plan document, certificate, or contract of insurance should be consulted to determine the governing contractual provisions; the contact information for questions about the plan and for obtaining a copy of the plan document; an Internet address for obtaining a listing of the plan's network providers (if applicable); and an Internet address for obtaining information on prescription drug coverage if the plan uses a formulary in providing prescription drug coverage. Finally, the SBC must be prepared using the template form prescribed by regulation. It cannot exceed four double-sized pages in length and cannot include print smaller than 12 point font. The SBC may be provided in paper form or electronically (if certain conditions for electronic disclosure are satisfied). A uniform glossary providing definitions of certain health-coverage related terms must also be made available to participants and beneficiaries.
Plan sponsors of group health plans also should take note that the final SBC regulations provide that a group health plan or a health insurance issuer who willfully fails to provide the SBC will be subject to a fine of not more than $1,000 for each failure. A separate fine can be imposed for each individual or entity for whom there is a failure to provide an SBC. While the regulations set forth this limit on penalties, enforcement of the penalty provisions will be left to the respective agency with regulatory authority governing the plan. For example, group health plans subject to ERISA and the tax code (generally, plans other than governmental plans and church plans) will be subject to the civil fine in accordance with regulations to be issued by the Department of Labor (DOL). The DOL will coordinate with the Treasury Department regarding the assessment of the penalty for plans subject to both the Code and ERISA. Special provisions under the tax code will apply to non-ERISA church plans. Health insurance issuers for non-federal governmental plans will be subject to enforcement of the penalty regimes under the applicable state; however, HHS has the ability to enforce the applicable penalties if the state fails to substantially enforce the applicable provisions.
In summary, plan sponsors must take action now to prepare the SBCs for distribution to participants and beneficiaries or confirm that the health insurance issuer of an insured plan prepares and distributes the SBC. Further, if prepared by another party, plan sponsors should review the content of the SBC to ensure the content accurately describes the terms of the plan and meets the appropriate regulatory requirements. Finally, plan sponsors may want to address, in a contract with its health insurance issuer, responsibility or indemnification for any penalties to which a plan may be subject in the event of a failure to provide SBCs to participants and beneficiaries.