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Health care reform requires group health plans and insurers to provide a summary of benefits and coverage (SBC) to applicants and enrollees describing certain details of the plan. For group health plans, this is in addition to the requirement to provide a summary plan description (SPD).
The effective date for the SBC requirement is the first open enrollment period beginning on or after Sept. 23, 2012, for participants and beneficiaries enrolling or re-enrolling through open
enrollment. For individuals enrolling other than through open enrollment (e.g., newly eligible individuals or special enrollees), the requirement applies beginning on the first day of the first plan year that begins on or after Sept. 23, 2012.
The SBC requirement applies to group health plans (both insured and self-insured) and insurers, but not to HIPAA-excepted benefits. Health savings accounts (HSA) are generally not subject to the SBC requirements because they are not group health plans. However, information about the employer’s contributions to the HSA may be included in the associated high-deductible health plan’s SBC. Similarly, information related to flexible spending accounts and health reimbursement arrangements may be included with the associated medical plan’s SBC.
Who Must Provide the SBC?
The SBC must be provided by plan administrators and insurers. Thus, when a plan is fully insured, both the plan administrator and the insurer are obligated to comply with the SBC requirement; however, the rules do not require duplication so the entities may determine which one will distribute the SBC to enrollees.
The FAQ guidance provides that a plan or insurer will not be subject to enforcement action if it enters into a binding agreement under which another party assumes responsibility to 1) complete the SBC; 2) provide required information to complete a portion of the SBC; or 3) deliver SBCs. For the enforcement safe harbor to apply, the following obligations must be satisfied:
- The plan or insurer must monitor performance under the contract;
- If a plan or insurer has knowledge of a violation of the SBC rules and has the information to correct it, the plan or insurer must correct it as soon as practicable; and
- If a plan or insurer has knowledge of a violation of the SBC rules and does not have the information to correct it, the plan or insurer must communicate with participants and beneficiaries regarding the lapse and begin taking significant steps as soon as practicable to avoid future violations.
Who Must be Furnished the SBC?
The SBC must be distributed to all applicants, policyholders and enrollees (i.e., participants and beneficiaries), including COBRA-qualified beneficiaries. However, a single SBC may be provided to a family unless any beneficiaries are known to reside at a different address.
When Must the SBC Be Distributed?
The SBC must be included upon application, with open enrollment materials, at renewal, upon request and at special enrollment.
Each enrollee must receive, as part of any written application materials distributed, an SBC for each benefit package offered for which the participant is eligible. If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage.
If renewal is automatic, the SBC must be furnished no later than 30 days prior to the first day of the new plan year or as soon as practicable, but no later than seven business days after the issuance of the policy. If a participant or beneficiary requests a copy of the SBC at times other than open enrollment, renewal or special enrollment, then the plan or insurer must provide the SBC to a participant or beneficiary upon request, as soon as practicable, but no later than seven business days following the request.
The plan or insurer must also provide the SBC to special enrollees (employees and dependents with the right to enroll in coverage midyear) within 90 days after enrollment pursuant to a special enrollment right.
SBCs may be provided either on a stand-alone basis or in combination with the SPD if certain requirements are met. If the SBC is provided with the SPD, it must be prominently displayed at the beginning of the materials (such as immediately after a table of contents), and the timing requirements for providing the SBC must still be satisfied. One consideration in providing the SBC in combination with the SPD is that SPDs are required to be furnished only to covered participants, while the SBC must be furnished to participants and beneficiaries. Accordingly, it may be desirable to maintain a stand-alone version of the SBC.
Plans and insurers are required to use the full SBC template, but to the extent a plan’s terms cannot reasonably be described in a manner consistent with the template and instructions, the plan or insurer must accurately describe the relevant terms while using “best efforts” to do so in a manner as consistent as reasonably possible with the instructions and template format.
Further, the Patient Protection and Affordable Care Act (PPACA) requires the SBC to be presented in a “culturally and linguistically appropriate manner.” The regulations require plans or insurers to follow the analogous rules for providing appeals notices in a culturally and linguistically appropriate manner under Public Health Service Act Section (PHSA) 2719, which requires the English versions of SBCs sent to individuals residing in specified counties of the United States to include a one-sentence statement clearly indicating how to access the language services provided by the plan or insurer. The counties in which this must be done are those in which at least 10 percent of the population residing in the county is literate only in the same non-English language. The U.S. Department of Health and Human Services (HHS) website provides a list of all such U.S. counties. This determination is based on U.S. Census data and includes four languages: Spanish, Chinese, Tagalog and Navajo.
Written translations of the SBC must be provided upon request in the applicable non-English languages. To assist with compliance with this language requirement, HHS will provide written translations of the SBC template, sample language and uniform glossary in the four applicable languages (Spanish, Tagalog, Chinese and Navajo) and may also make these materials available in other languages.
An SBC must be provided to participants and beneficiaries with respect to each “benefit package” offered for which the participant or beneficiary is eligible. Information may be combined for different coverage tiers (e.g., self-only coverage, employee-plus-one coverage, family coverage) within a benefit package, provided the information is understandable. In such circumstances, the coverage examples should be completed using the cost-sharing for the self-only coverage tier. However, the coverage examples should note this assumption.
The SBC template includes coverage examples, which is intended to estimate what proportion of expenses under an illustrative benefits scenario might be covered by a given plan. HHS will provide a hypothetical situation consisting of a sample treatment plan for a specified medical condition during a specific period of time, based on recognized clinical practice guidelines. Currently, the template uses two coverage examples: 1) having a baby (normal delivery) and 2) routine maintenance of well-controlled Type 2 diabetes.
PPACA requires that the agencies develop standards for definitions for certain insurance-related terms. The uniform glossary is available on the Department of Labor (DOL) and HHS websites. A plan or insurer may satisfy this disclosure requirement by providing an Internet address where an individual may review and obtain the uniform glossary. However, a plan or insurer must make a paper copy of the glossary available upon request within seven business days.
Penalties for Noncompliance
A penalty of up to $1,000 per failure can be assessed on plan administrators and insurers (for insured health plans) and plan administrators (for self-insured health plans) that “willfully fail” to timely provide the SBC. A failure with respect to each participant or beneficiary constitutes a separate offense. The fine cannot be paid from plan or trust assets.
In addition, for plan sponsors (other than governmental plans), failure to comply may potentially trigger an excise tax of $100 per day under the IRS Code with respect to each individual to whom such failure relates.