Requirement of SBC
As reported in a prior Client Alert, one of the requirements imposed on plan administrators of insured or self-insured group health plans by the 2010 Patient Protection and Affordable Care Act (“PPACA”) is the obligation to furnish participants with a Summary of Benefits and Coverage (“SBC”). The initial SBC must be distributed to participants and beneficiaries who enroll or re-enroll during an open enrollment period that begins on or after September 23, 2012.
The purpose of the SBC is to provide individuals with standard information so that they are able to compare medical plans and determine which plan to select. The SBC must be culturally and linguistically appropriate so as to be easily understood, and must comply with format and content requirements set forth in joint regulations and related guidance issued by the Departments of Labor, Treasury, and Health and Human Services. The SBC cannot exceed four double-sided pages of material provisions presented in a uniform format and must be accompanied by a glossary of health coverage and medical terms. The joint regulations include a template and required disclosure language.
For an insured health plan, the insurer offering group health insurance coverage must provide the SBC to the plan administrator as soon as practicable after receiving a request, but in no event later than 7 business days following receipt of the request.
Content of SBC
The joint regulations identify 12 items which the SBC must contain, including:
- a description of coverage
- exceptions, reductions, and limitations on coverage
- cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations
- renewability and continuation of coverage provisions
- coverage examples specified by the joint regulations
- a statement that the SBC is only a summary
- contact information for questions and instructions for obtaining a copy of the plan and/or insurance policy
- an internet address for obtaining a list of network providers and information on prescription drug formulary
- an internet address for obtaining the uniform glossary
Distribution of SBC
The Plan Administrator must distribute the SBC to participants and beneficiaries (including a COBRA qualified beneficiary) with respect to each benefit package for which the participant or beneficiary is eligible as follows:
- as a part of the written application or enrollment materials, or, if the plan does not distribute written enrollment materials, the SBC must be distributed no later than the first date on which the participant is eligible to enroll for coverage
- by the first day of coverage, if there are any changes to the initial SBC
- within 90 days after enrollment for any special enrollee (generally, an employee who enrolls mid-year upon occurrence of a special enrollment event, such as marriage, birth of a child, or loss of other coverage)
- if a participant must affirmatively elect to maintain coverage, or has the opportunity to change coverage options during an annual open enrollment period, an SBC must be distributed as part of the open enrollment materials
- if renewal coverage is automatic, an SBC must be distributed no later than 30 days before the beginning of the plan or policy year
- within 7 business days after receipt of a request by the participant or beneficiary
The SBC must be provided free of charge. It may be provided in paper form, although it is also permissible to distribute the SBC electronically pursuant to Department of Labor electronic disclosure rules.
Whenever a material modification to the underlying coverage occurs which affects the content of the SBC, a special notice is required to be provided no later than 60 days prior to the effective date of the change.
The SBCs may be furnished with an ERISA summary plan description (SPD) provided that the SBC information is intact and prominently displayed at the beginning of the materials, such as after the SPD table of contents.
Exceptions to SBC Requirement
The SBC need not be provided for excepted benefits, such as stand-alone dental and vision plans and most employee-funded health care flexible spending accounts (FSAs). Employer-funded FSAs and health reimbursement accounts (HRAs) must issue SBCs. Health savings accounts (HSAs) need not issue an SBC; however, a high deductible health plan associated with an HSA can reference the effects of employer contributions to HSAs in its SBC.
Penalties for Noncompliance
There are fairly severe penalties for noncompliance. A willful failure to provide the SBC or notify participants of a modification is subject to a fine of up to $1,000 for such failure with respect to each participant. Additionally, a separate excise tax of $100 per day can be imposed for a failure to comply with the SBC rules.
Government Prescribed Forms
The SBC template, instructions, the information necessary for the coverage examples, the uniform glossary, and a sample completed SBC are available at http://www.dol.gov/ebsa/healthreform or http://cciio.cms.gov/resources/other.