The Health Care Reform legislation (now referred to as the Affordable Care Act, or ACA) requires group health plans (both grandfathered and non-grandfathered) and insurers to provide participants and beneficiaries a Summary of Benefits and Coverage (SBC) in order to allow consumers to compare available health coverage options in a standard format. The final rules generally apply as of open enrollment periods and plan years beginning on or after September 23, 2012 (health care insurers must comply as to both group and individual policies by September 23, 2012), which is an extended effective date.
The SBC rules require disclosure of the basic coverage features in a document limited to four double-sided pages of not less than 12-point type. The required disclosures include information on deductibles, coinsurance and co-payments; an outline of available benefits for each category of benefits, including two specific coverage examples; exceptions, reductions and limitations of coverage; COBRA rights; contact information for questions; an internet address or comparable contact information for obtaining a list of any network providers or information on prescription drug coverage for plans with drug formularies. Disclosure of premium costs is not required but is permitted (if added, it must be added at the end of the SBC).
The SBC is required to use standardized terminology set out in a glossary for which the SBC must provide an internet address and a contact telephone number for a hard copy. An example of a completed SBC in the prescribed format is available at the EBSA website: http://www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf
The final rules and supplemental Frequently Asked Questions issued by the Department of Labor also clarify the following:
- Separate SBCs are not required with respect to each coverage "tier" (such as employee-only coverage, employee plus spouse coverage and family coverage) but are required for each "benefit package" (such as HMO and PPO coverage options).
- SBCs sent to an address in a county in which ten percent or more of the population is literate only in a language other than English must contain a notice in the non-English language. For Chicago area plans and insurers, this will require a Spanish language notice to be included in SBCs sent to addresses in Kane County (additional services and notices in Spanish will be required for non-grandfathered plans).
- Written translations of the SBC template and the uniform glossary are to be available in Spanish, Chinese, Tagalog and Navajo at a government website.
- Group health plans can engage another party (such as a third party administrator) to prepare and distribute the SBC to its participants and beneficiaries with a "binding contract," but the plan must monitor the party's performance and take steps to correct any violation of the final rules.
- SBCs must also be distributed to qualified beneficiaries who are receiving continuation coverage under COBRA.
- SBC information can be included in a summary plan description but it must be "intact" and prominently located near the front of the document. An SBC may not provide coverage information by simply cross-referencing the provisions of a summary plan description.
- FSA, HSA and HRA benefits can be described in the SBC for the associated group health plan, but most FSAs and HSAs, like stand-alone dental and vision plans, will not be subject to the SBC requirement.
- Plans must provide 60 days advance notice of any mid-year change (that is, a change not related to the annual renewal of insurance coverage) in a plan provision that is inconsistent with the current SBC.
- For fully insured group health plans, both the insurer and the employer will be responsible if the SBC is not properly prepared and distributed. Similarly, for self-funded plans, a TPA may be employed to prepare and distribute the SBC, but the plan will have responsibility if there is a compliance failure.
Recommendations: Sponsors of insured group health plans need to touch base with their insurers to be assured of timely availability of the SBC. For self-insured plans, sponsors need to work with their third party administrator (TPA) or other plan service provider to make arrangements (a "binding contract") for the timely preparation and distribution of their plan's SBC. Just as important, group health sponsors, their HR staff and in-house counsel need to make sure that all SBC requirements are satisfied in order to avoid possible penalties for non-compliance of up to $1,000 for each willful failure. Consider discussing your compliance concerns with a benefits professional who already is familiar with the SBC rules, particularly if your current providers are not in a position to provide information tailored to your circumstances.
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