Summary of Benefits and Coverage Defined.
On August 22, the Departments of Labor, Treasury and Health and Human Services issued proposed regulations defining the content, format and timing of the issuance of the summary of benefits and coverage ("SBC") as mandated by the Affordable Care Act. The SBC is a four-page description that is intended to provide individuals with a consistent and accurate description of the benefits and coverage available under a group health plan or group or individual health insurance. An SBC must be provided effective March 23, 2012. The regulations provide much needed guidance on who must provide the SBC, what must be provided and when it must be provided.
Who Must Provide the SBC?
Generally, either the plan administrator (in the case of a group health plan) or an insurer (in the case of individual or group health insurance) must provide the notice to eligible individuals. The SBC may be provided electronically if the applicable Department of Labor regulations would permit electronic distribution of notices. The Departments are seeking comments on whether there are circumstances under which it is appropriate for the SBC to be provided as part of a summary plan description.
What Must Be Provided?
The SBC must be no longer than four double-sided pages. The SBC must allow the reader to easily compare alternative coverages. The following information must be included in the SBC:
- uniform glossary of terms;
- description of coverage, including cost sharing, for each category of benefits;
- exceptions, reductions and limitations on coverage;
- cost-sharing provisions of the coverage, including deductibles, coinsurance, and co-payment obligations;
- renewability and continuation provisions of the coverage provisions;
- illustrations of common coverage scenarios including cost sharing;
- statement regarding whether coverage qualifies as minimum essential coverage;
- statement that SBC is only a summary and that plan or policy will govern; and
- contact information.
In addition to the elements required by the statute, the regulations provide that four additional elements must be included:
- Internet address where a list of network providers may be obtained;
- Internet address where information regarding prescription drug coverage, if available, may be obtained;
- Internet address where an individual may review the uniform glossary of terms; and
- Premiums (or cost of coverage if a self-insured plan).
As minimum essential coverage has not yet been fully defined and does not have an impact until January 1, 2014, the regulations provide that a statement regarding minimum essential coverage is not required at this time.
With respect to illustrations of common coverage, the regulations require that the SBC provide three coverage examples, including child birth, breast cancer and diabetes, to show how the plan or policy would address particular issues from diagnosis through final appeal. The purpose of the coverage examples is to permit an individual to compare the benefits under the offered health plan or health insurance. The regulations leave open the possibility of requiring as many as six coverage examples.
When Must the SBC Be Provided?
Generally, the SBC must be provided to any participant (as defined by ERISA) or beneficiary upon first becoming eligible for coverage, upon renewal of coverage, modification of coverage or upon request. Importantly, the modified SBC must be provided no less than 60 days in advance of the effective date of a material modification of coverage. If drafted and distributed properly, the SBC notifying individuals of a material modification could satisfy the ERISA to provide a summary of material modification.
Comment: Plan administrators will need to consider how to coordinate the delivery of the SBC with other important enrollment materials to participants. The regulations have left open the possibility of combining certain notices to satisfy this requirement along with the notice requirements of ERISA.
A failure to comply with the SBC requirement can result an excise tax of up to $1,000 per day per participant imposed by the DOL and IRS. The Department of Health and Human Services will also have authority to enforce in the event of a failure to comply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
