Effective with open enrollment periods beginning on or after September 23, 2012, the Patient Protection and Affordable Care Act (ACA) requires group health plans, health insurance issuers and third-party administrators to provide a written Summary of Benefits and Coverage (SBC) for each benefit package without charge to participants and beneficiaries. These provisions of the ACA apply to both grandfathered and non-grandfathered plans. Notably, the regulation provides that so long as one of these parties provides the SBC in compliance with the regulation, the remaining parties are discharged from this obligation.

Delivery and Content of the SBC
The SBC must be provided as part of the written application materials at the time of enrollment. If there is any change in coverage between the date of enrollment and the effective date of coverage, an updated version of the SBC must be provided no later than the first day of coverage. If the health plan has a renewal provision, the plan must provide the SBC at the time that written applications are distributed; if the renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of the new plan year.

Significantly, the SBC is an additional disclosure requirement rather than a substitute for disclosure that is already required under ERISA. Furthermore, state insurance laws and regulations that may require more rigorous disclosure must still be followed.

The following apply to content:

  • Special rules apply to the provision of SBCs governing multiple benefit packages. 
  • The information that must be included in the SBC is provided by regulation. 
  • The SBC must include examples of coverage that illustrate common “benefit scenarios” under the plan. These benefit scenarios are hypothetical situations containing a sample treatment plan for a specified medical condition during a specified time period. 
  • Participants and beneficiaries must have access to a uniform glossary containing the definitions of certain specified terms.

Potential Litigation Issues
Group health plans that delegate the duty to provide the SBC may be subject to litigation in the event that the SBC is either not provided or is provided in a deficient manner. Accordingly, it will be important for contracts between group health plans and health insurance issuers and/or third-party administrators to include indemnification language specifically tailored to address failures relative to provisions of the SBC.

Although courts have previously found that the plan summary is the governing document, judicial interpretation of this regulation is as yet untested, so it seems likely there will be lawsuits involving ambiguities as to whether the SBC, plan document, policy, certificate or insurance contract govern the terms and conditions of coverage. While the regulation concerning the SBC states that it must contain a statement to the effect that the SBC is only a summary and that the plan document, policy, certificate or contract of insurance should be “consulted” to determine the governing contractual provisions of the coverage, the regulation does not set forth any definitive standard as to which document controls.

Finally, as outlined above, the regulation mandates that the SBC include hypothetical information or “benefit scenarios.” These “benefit scenarios” have the potential to generate litigation where the participant or beneficiary claims that the health coverage actually obtained varied from the type of coverage that the participant thought they were receiving based on the SBC – or that the actual cost of such coverage exceeded that shown in the SBC.

Understanding the SBC
Group health plans will need information concerning their obligations to provide the SBC as well as how to protect themselves in the event participants commence litigation relative to this ACA-required document.