On February 14, 2012, federal agencies (the DOL, IRS, and HHS) published final regulations implementing PPACA’s requirement that group health plans and insurers provide applicants and enrollees with a four-page uniform summary of benefits and coverage (“SBC”), and separately issued model SBC templates, samples, and instructions developed by the NAIC.1 These regulations replace proposed regulations originally issued on August 22, 2011,2 and establish when and to whom an SBC must be provided, who must provide the SBC, formatting and content requirements, rules on electronic delivery, and penalties for noncompliance. The key points of the final regulations are summarized below.
PPACA requires group health plans and insurers to provide a four-page SBC to applicants and enrollees before enrollment or re-enrollment in the plan or insurance coverage. The SBC must accurately describe the benefits and coverage under the plan or policy. The requirement to provide this SBC is in addition to ERISA’s existing disclosure requirements for group health plans, including the requirement to provide an SPD and SMMs. PPACA directed HHS to coordinate with the NAIC3 to issue regulations implementing the SBC requirement no later than March 23, 2011 (12 months in advance of the original statutory effective date for providing SBCs), but final regulations were not actually issued until February 2012.
Who must provide the SBC, and to whom must it be provided?
The SBC requirements apply to insured and self-funded group health plans, including stand-alone HRAs4 and grandfathered plans, and insurers offering group or individual health insurance. The preamble to the final regulations clarifies that like other PPACA mandates, the SBC requirements do not apply to plans, policies, or benefit packages that constitute excepted benefits (for example, a stand-alone dental or vision plan).5
For self-funded plans, the plan administrator is responsible for providing the SBC. For insured plans, both the plan and the insurer are obligated to provide the SBC, although this obligation is satisfied for both entities as long as either one provides the SBC. (Therefore, plans and insurers will need to work together to determine which entity will be responsible for providing the SBCs). The SBC must be furnished to all participants and beneficiaries who are eligible to enroll in the plan.6 The regulations also include rules related to the provision of SBCs by insurers to insured group health plans.
When do the SBC requirements first apply?
The final regulations contain a staggered applicability schedule. Under these rules, the requirement to provide an SBC, notice of modifications, and uniform glossary apply as follows:
- Open Enrollment: With respect to participants and beneficiaries who enroll or re-enroll during an open enrollment period, the SBC requirements apply beginning on the first day of the first open enrollment period that begins on or after September 23, 2012.
- Other Enrollments: With respect to participants and beneficiaries who enroll in plan coverage other than through open enrollment (i.e., individuals who are newly eligible for coverage and HIPAA special enrollees), the SBC requirements apply beginning on the first day of the first plan year that begins on or after September 23, 2012. However, plans with an annual coverage period that differs from their plan year may wish to comply with the SBC requirements earlier – i.e., beginning with the first coverage period starting on or after September 23, 2012 – since SBC materials will already have been developed in connection with open enrollment for that coverage period.
- Disclosures to Plans: The SBC requirements apply to insurers, for disclosures with respect to insured plans, beginning September 23, 2012.
When and how must the SBC be provided?
Once the regulations are applicable to a plan under the schedule above, the plan must generally furnish the SBC to participants and beneficiaries at three separate times:
- Initial Enrollment: A separate SBC must be provided for each benefit option in which an individual is eligible to enroll with any written application materials distributed by the plan, or if the plan does not distribute written application materials, by the first date the individual is eligible to enroll. If there is any change to the SBC before the first day of coverage, an updated SBC must be provided no later than the first day of coverage. In addition, HIPAA special enrollees must be provided with an SBC no later than 90 days after enrollment (which is the date by which an SPD is required to be furnished under ERISA).
- Open Enrollment/Renewal: During open enrollment/renewal, the plan must provide an individual with a new SBC for the option in which he or she is currently enrolled, but only if there have been changes to that SBC. (Plans may, of course, choose to include copies of all applicable SBCs in open enrollment materials for all individuals). If application (in either written or electronic form) is required to renew coverage, the SBC must be provided no later than the date the plan distributes application materials. If application is not required, the SBC must be provided no later than 30 days prior to the first day of the new plan year.7
- Upon request: An SBC must be provided as soon as practicable after a request by a participant or beneficiary, but in no case later than 7 business days after the request. The SBC must always be provided free of charge.
The obligation to provide an SBC may always be satisfied by furnishing a paper copy. However, electronic disclosure (such as by email or Internet posting) is permitted in the following circumstances:
- With respect to participants and beneficiaries that are already covered by a plan, the SBC may be provided electronically if the requirements of DOL Regulation § 2520.104b-1(c) (the DOL’s electronic disclosure safe harbor) are satisfied.8
- With respect to participants and beneficiaries who are eligible but not enrolled for coverage, the SBC may be provided electronically if: (1) the format is readily accessible; (2) the SBC is provided in paper form and free of charge upon request; and (3) if the electronic form is an Internet posting, the plan timely notifies the individual in paper form (such as a postcard) or email that the documents are available on the Internet, provides the Internet address, and notifies the individual that the documents are available in paper form upon request.
What notice is required for material modifications to the SBC?
Plans must provide 60 days’ advance notice of any material modifications to the terms of the plan that are not reflected in the most recently-distributed SBC, and which do not occur in connection with renewal or reissuance of coverage.9 Thus, a separate notice of material modifications is not required for changes in coverage that occur in connection with a renewal of coverage (i.e., at the start of the plan or coverage year), or plan changes that do not impact the content of the SBC. The notice can be either a separate notice describing the change, or an updated SBC.
How must the SBC be formatted?
The SBC must be provided using the template, and in accordance with the instructions for completing the SBC, specified in the regulations and other guidance from the federal agencies.10 However, the final regulations provide that where a plan’s terms must be described in the SBC, but cannot reasonably be described in a manner consistent with the template and instructions, the plan must describe the relevant plan terms using its best efforts to do so in a manner that is as consistent with the instructions and template as reasonably possible.
The SBC must use terminology readily understandable by the average plan enrollee, must not exceed four double-sided pages in length, and must not include print smaller than 12-point font. Additionally, the SBC must be provided in a “culturally and linguistically appropriate manner.”11 The SBC may be provided as a stand-alone document, or may be provided in combination with other summary materials (such as an SPD), provided that the SBC information is intact and prominently displayed at the beginning of the materials (for example, immediately after the table of contents in an SPD) and in accordance with the timing requirements for providing the SBC.
What information must the SBC include?
The SBC must include the following content:
- A description of the coverage, including cost-sharing, for each category of benefits identified by the agencies;
- Exceptions, reductions, and limitations on coverage;
- Cost-sharing provisions, including deductible, co-insurance, and co-payment obligations;
- Renewability and continuation of coverage provisions;
- A coverage facts label that includes examples simulating claims processing for and illustrating how the particular plan or benefit option covers two common benefit scenarios: having a baby and managing Type 2 diabetes;12
- For coverage beginning on or after January 1, 2014, a statement of whether the plan or coverage provides “minimum essential coverage,” as defined in Code § 5000A(f), and whether the plan’s share of the total allowed cost of benefits provided under the plan or coverage meets applicable requirements;
- A statement that the SBC is only a summary and that the plan document, policy, or certificate should be consulted to determine the governing contractual provisions;
- Contact information for questions and to obtain a copy of the plan document or contract (such as a phone number for customer service and an Internet address for obtaining a copy of the plan document);
- For plans that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of the network providers;
- For plans that maintain a prescription drug formulary, an Internet address (or similar contact information) where an individual can obtain more information about the prescription drug coverage under the plan; and
- An Internet address for obtaining the uniform glossary of standard insurance and medical terms (such as “coinsurance” or “usual, customary and reasonable”), in the format specified by the Departments, so that consumers may compare health coverage and understand the terms of (or exceptions to) their coverage, a statement that a paper copy of the glossary is available upon request, and a contact phone number to obtain a paper copy.13
Although the uniform glossary does not need to be automatically furnished with each SBC, the final regulations provide that the uniform glossary must be provided to a participant or beneficiary upon request, in either paper or electronic form (whichever is requested) within seven business days of the request.
What penalties apply to noncompliance?
A plan that willfully fails to provide the SBC as required by the regulations is subject to a fine of up to $1,000 for each failure. In addition, group health plans that fail to provide an SBC as required (whether the failure is willful or not) are also subject to a self-reported excise tax of up to $100 per day per individual under Code § 4980D. The DOL intends to issue separate enforcement regulations in the future.
- The regulations and other guidance documents (including the SBC templates, instructions, and uniform glossary) are available on the DOL’s website, at http://www.dol.gov/ebsa/healthreform/.
- For an overview of the August 2011 proposed regulations, please see our October 2011 Bulletin
- The National Association of Insurance Commissioners (NAIC) is a non-profit organization comprised of state insurance commissioners. It is not a regulatory agency, but works with states to propose and enact uniform insurance regulations. See www.naic.org.
- Information about health FSAs and HRAs that are not excepted benefits, but which are integrated with a plan’s major medical coverage, can be provided in the major medical SBC, and need not be provided in a stand-alone document.
- The regulations also contain a special rule providing limited relief from the SBC requirements with respect to expatriate plans and other plans covering items and services outside of the United States.
- To avoid unnecessary duplication, the regulations provide that a plan’s obligation to furnish an SBC is satisfied with respect to all participants and beneficiaries known to reside at the same address by providing a single copy of the SBC. However, if a beneficiary’s last-known address is different from that of the participant, the beneficiary must be provided with a separate SBC.
- Separate rules govern the timing of this disclosure for insured plans where the policy, certificate, or contract of insurance has not been issued or renewed before this 30-day period.
- Separate rules govern electronic disclosures by non-Federal governmental plans, insurers offering coverage to plans, and insurers offering coverage in the individual market.
- Importantly, the deadline to provide a notice of material modifications under these regulations is well in advance of the deadline to provide an SMM under Title I of ERISA, which must generally be provided no later than 210 days after the close of the plan year in which the change is adopted, or, in the case of a material reduction in covered services or benefits, no later than 60 days after the date of adoption of the modification or change.
- As explained in our Bulletin on the proposed regulations, many of the sample documents, instructions, and coverage examples were heavily influenced by the NAIC’s recommendations, which were drafted primarily with individual coverage and insurers in mind, rather than self-insured plans, It was anticipated that the final regulations would include appropriate modifications and exceptions for self-insured plans. Unfortunately, the final regulations provide little flexibility or relief for self-insured plans, leaving the administrators of such plans responsible for fitting all of the necessary information about their plans into the SBC templates.
- To satisfy this obligation, the plan must meet the standards and thresholds for providing linguistically appropriate appeals notices under PPACA’s claims procedure requirements. (This requirement is discussed in detail in our July 2011 Bulletin on PPACA’s claims and appeal procedures). In general, this rule provides that plans and insurers must provide notices – including the SBC and uniform glossary – in a culturally and linguistically appropriate manner when 10% or more of the population of a participant’s or beneficiary’s country is literate only in the same non-English language. (The DOL will identify and post annual updates to the list of countries subject to this requirement on its website.) To help plans and insurers meet these language requirements, HHS will provide written translations of the SBC templates, sample SBC language, and uniform glossary in four prominent languages: Spanish, Tagalog, Chinese, and Navajo. Although HHS may provide additional translation in the future, until that time plans will need to obtain translations for any other applicable language on their own.
- In addition to these two coverage scenarios, the proposed regulations included a third scenario: treating breast cancer. Although this example was removed in the final regulations, HHS may add additional examples in the future.
- Unlike the proposed regulations, the final regulations do not require the SBC to include premium or cost of coverage information.