In August 2011, federal regulators issued proposed regulations implementing PPACA's requirement that group health plans and insurance issuers 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 The proposed regulations 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 regulations are summarized below.
PPACA requires group health plans and health insurance issuers to provide a four-page SBC to applicants and enrollees before enrollment or re-enrollment in the plan or insurance coverage, first effective March 23, 2012. 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, including the requirement to provide an SPD and SMMs. PPACA directed HHS to coordinate with the NAIC2 to issue regulations implementing the SBC requirement no later than March 23, 2011 (12 months in advance of the effective date for providing SBCs), but proposed regulations were not actually issued until August 2011.
Who must provide the SBC, and to whom must it be provided?
The proposed regulations provide that the SBC requirement applies to insured and self-funded group health plans, including grandfathered plans, and health insurance issuers offering group or individual health insurance coverage. 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.3 The SBC must be furnished to all participants and beneficiaries (or enrollees) who are eligible to enroll in the plan.4
When and how must the SBC be provided?
Under the proposed regulations, plans must begin providing SBCs on March 23, 2012, the statutory effective date of the SBC requirement.5 It appears that the requirement to furnish an SBC applies to any enrollment, special enrollment, renewal of coverage, or participant request for an SBC after that date. However, the proposed regulations could also be read to require plans to initially distribute SBCs to all participants on or before March 23, 2012. Hopefully this issue will be clarified in the final guidance.
Plans 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 7 days after a request for special enrollment.
- Open Enrollment/Renewal: The plan must provide an individual with a new SBC for the option in which the individual is enrolled at renewal. If written application is required to renew, the SBC must be provided no later than the date the plan distributes written application materials. If written application is not required, the SBC must be provided no later than 30 days prior to the first day of coverage for the new plan year.
- 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 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, plans may provide an SBC to participants or beneficiaries electronically if the requirements of DOL Regulation § 2520.104b-1(c) (the DOL's electronic disclosure safe harbor) are satisfied.6
What notice is required for material modifications to the SBC?
Plans must provide 60 days' advance notice of any material modification to the terms of the plan not reflected in the most recently-distributed SBC.7 It appears from the regulations that a separate notice is not required for changes in coverage that occur in connection with a renewal of coverage (i.e., at the start of the plan 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 regulations currently provide that the SBC must be delivered as a stand-alone document,8 not to exceed four double-sided pages in length using at least 12-point font. Additionally, the SBC must be provided in a "culturally and linguistically appropriate manner." To satisfy this obligation, the plan must meet the standards and thresholds for providing linguistically appropriate appeals notices under PPACA's claims procedure requirements.9
What information must the SBC include?
Under the proposed regulations, SBCs must include the following content:
- A uniform glossary of standard insurance and medical terms (such as "coinsurance" or "usual, customary and reasonable"), so that consumers may compare health coverage and understand the terms of (or exceptions to) their coverage;
- 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 illustrating common benefits scenarios (such as pregnancy and serious or chronic medical conditions);
- 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;
- A telephone number to call for additional questions and an Internet web address where a copy of the group certificate of coverage or individual coverage policy can be reviewed and obtained;
- 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 where an individual can obtain more information about the prescription drug coverage under the plan;
- An Internet address where an individual may review and obtain the uniform glossary of terms; and
- Premium amounts.
In addition, the SBC must include specific coverage examples for three common benefit scenarios identified by HHS: having a baby, treating breast cancer, and managing diabetes. Plans must simulate claims processing for each of these scenarios, illustrating how these would be covered under the particular plan or option. HHS may add more examples in the future.
What penalties apply to noncompliance?
A plan that willfully fails to provide the SBC as required by the proposed 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.
Will these rules change before March 23, 2012?
Highly likely. The regulations are proposed, and comments on a wide range of issues are requested before October 21, 2011. In addition, the proposed regulations, and particularly the model SBC templates, coverage examples, and instructions, are heavily influenced by the NAIC's recommendations, many of which were proposed by the Departments without change. Accordingly, there are many instances where the regulations and sample documents are geared towards insurers, rather than self-funded plans. Exceptions and appropriate modifications for self-insured plans should be taken into account in the final regulations.
1 The proposed regulations are available at http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25258 and the sample documents are available at http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25259.
2 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.
3 The preamble to the proposed regulations indicates that the Departments anticipate that plans and insurers will work together to determine which entity will ultimately bear the responsibility to provide SBCs. The proposed regulations also include rules related to the provision of SBCs by health insurance issuers to group health plans.
4 To avoid unnecessary duplication, the proposed 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.
5 The Departments were approximately five months late in publishing these regulations. Accordingly, they have requested comments on whether a March 23, 2012 effective date is feasible, and the Departments have been willing to delay the effective dates of other PPACA requirements in the past. However, unless and until the effective date is officially delayed, plans should be prepared to comply with these requirements by March 23, 2012.
6 Separate rules govern electronic disclosures by non-Federal governmental plans, health insurance issuers offering coverage to plans, and issuers offering coverage in the individual market.
7 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. Additionally, the Departments have informally clarified that the 60-day advance notice requirement does not apply until after the requirement to provide the SBC first becomes effective - currently, March 23, 2012.
8 Comments have been requested regarding whether a plan should be permitted to incorporate the SBC into the SPD, provided that the SBC is left intact and prominently displayed at the front of the SPD.
9 The requirement to provide appeals notices in a culturally and linguistically appropriate manner is discussed in detail in our July 2011 Bulletin on PPACA's claims and appeal procedures, available at http://www.songmondress.com/Articles.
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