Group health plans and health insurance issuers offering group health insurance coverage are required to provide a written summary of benefits and coverage (SBC) for each benefit package that is offered. On February 9, 2012, the Department of Health and Human Services, Department of Labor, and Department of the Treasury released final regulations detailing the form, content, and delivery requirements pertaining to SBCs. The regulations include a template SBC document, instructions for completing the template, and a uniform glossary of medical and insurance terms.
Insured Group Health Plans
Health insurance issuers must provide SBCs to group health plans at the following times: 1) no later than seven days following the date the group health plan submits an application for health coverage; 2) prior to renewal of the insurance contract (at least 30 days prior to the beginning of the new year in some cases); and 3) as soon as practicable but in no event later than seven business days following receipt of a request. If there are changes in benefits or coverage after the initial SBC is furnished but before the first day of coverage, a revised SBC must be furnished by the first day of coverage.
Health insurance issuers and group health plans must, in turn, provide the SBC to participants and beneficiaries at the following times: 1) as part of the plan’s enrollment material; 2) by the first day of coverage, if there are changes in the benefits or coverage after the enrollment SBC is provided; 3) upon renewal, if the employer requires participants to renew in order to maintain coverage (at least 30 days prior to the new year in some cases); and 4) as soon as practicable but no later than seven business days following receipt of a request. In the case of special enrollment, an SBC must be provided within 90 days of enrollment.
Important: Under the final rule, both the insurer and the plan (acting through the administrator) have the obligation to provide the SBC. To prevent duplication of effort, the plan administrator is relieved of this responsibility provided the issuer provides a timely and complete SBC. Plan administrators that intend to rely upon an issuer for compliance should ensure that the issuer’s obligations are set forth in writing and that the written agreement contains appropriate hold-harmless provisions.
Self-Insured Group Health Plans
The plan administrator of a self-insured group health plan must provide the SBC to participants and beneficiaries at the same times described above for insured plans.
Important: Under the final rule, the plan administrator has the obligation to provide the SBC. A plan administrator may assign this responsibility to a third-party administrator and is relieved of the responsibility to comply provided the third-party administrator provides a timely and complete SBC. Plan administrators that intend to rely upon a third-party administrator for compliance should ensure that the tpa’s obligations are set forth in writing and that the written agreement contains appropriate hold-harmless provisions.
For participants and beneficiaries who enroll or reenroll through an open enrollment period, the rules apply as of the first day of the first open enrollment period that begins on or after September 23, 2012. For disclosures with respect to participants and beneficiaries who enroll in coverage other than through an open enrollment period (e.g., individuals who are newly eligible for coverage and special enrollees), the rules apply on the first day of the first plan year that begins on or after September 23, 2012.
SBCs are not required for plans or benefit packages that qualify as excepted benefits (e.g., stand-alone dental or vision plans or exempt health flexible spending accounts [FSAs]). SBCs are required for non-exempt FSAs and health reimbursement accounts (HRAs), although FSA and HRA information can be combined with the SBC for a major medical plan if the FSA or HRA is integrated with the major medical plan. Stand-alone HRAs and FSAs that are not exempt must satisfy the SBC requirements independently. If a health savings account (HSA) is not a group health plan (most are not), an SBC is not required for the HSA, although details concerning the HSA can be included with the SBC for the high-deductible plan benefit package.
Consequences for Failing to Comply
A group health plan or health insurance issuer that fails to comply can be liable for a fine of up to $1,000 for each “willful” failure. A failure with respect to each participant or beneficiary constitutes a separate offense. In addition, a group health plan maintained by an entity (other than a governmental entity) can be liable for an excise tax of $100 per day per individual.
Group Health Plan Action Steps
Group health plans and issuers should proceed as follows:
1. Identify the plans for which an SBC will be required.
2. Identify the effective date.
3. Reach out to insurers and third party administrators to determine the extent to which they will be providing assistance in the preparation and distribution of the SBC and enter into written agreements with appropriate indemnification provisions.
4. Develop a distribution strategy.