United States: New PPACA Benefit Summary Rules Clarified

If their open enrollment periods start before September 23, 2012, health insurers and employers that sponsor health plans will not have to provide new summaries of benefits and coverage, or "SBCs," to new enrollees and existing health plan participants later this year, under new final regulations implementing the 2010 health care reform law.

By contrast, employers with open enrollment periods for 2013 starting on or after that date will have to provide these SBCs to existing participants (or others enrolling at open enrollment) as part of the open enrollment period later this year, according to regulations issued by the Departments of Treasury, Labor and Health and Human Services and to be published in the February 14, 2012 Federal Register. For employees who come into plans other than at annual enrollment, such as new hires or special enrollees, the new SBC rules will apply starting with the first day of the first plan year starting on or after September 23, 2012 – January 1, 2013, for calendar year plans. If a plan does not distribute written materials at enrollment, an SBC would have to be provided no later than the first day an individual could enroll.

The regulations, along with templates of the related materials (available on the DOL's website) retain much of the 2011 proposed rules (see the August 18, 2011 issue of the Benefits eAuthority). But they do make some other notable changes, such as: allowing SBCs to be provided as part of a summary plan description (SPD) or other summary document, rather than only as stand-alone documents, and setting the standards for electronic disclosure of SBCs by adopting the standard ERISA rules on electronic disclosure for participants and separate rules for individuals who are eligible but not yet enrolled. The Departments note that the SBC template and related material only apply for the first year in which the guidance applies and such documents will be updated for future years.

Background

Section 2715 of the Patient Protection and Affordable Care Act (PPACA) requires plans and insurers to distribute SBCs. This is intended to promote better understanding and comparison shopping. Regulations, along with the SBC template, instructions, sample language, a guide for coverage example calculations and a uniform glossary, provide a compliance roadmap for the SBC requirements. Compliance failures trigger an excise tax liability of $100 per day under Internal Revenue Code Sec. 4980D and willful failure to provide required information could separately subject a plan to fines of up to $1,000 per failure.

This article focuses on SBCs provided by insurers and plan sponsors to participants, beneficiaries and eligible individuals. The new rules also separately cover SBCs provided by insurers to plans and by insurers in the individual market.

General SBC Requirements

Little changed in the final rules on the general SBC distribution requirements. The plan administrator of the group health plan initially must provide an SBC to a participant or beneficiary for each benefit package for which the participant or beneficiary is eligible. The SBC must be provided as part of any written application materials distributed at enrollment, including during open enrollment. Any change to the SBC after the open enrollment period would require an updated SBC prior to the start of the plan year. If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first day an individual can enroll.

In a significant change from the proposed regulations, individuals who enter the plan under a HIPAA special enrollment must be provided with an SBC no later than when an SPD is required to be provided. Under ERISA, this is generally 90 days from enrollment. This provides plan administrators with additional time as the proposed regulation required distribution within seven days of when an individual requested special enrollment.

Group health plans or health insurance issuers have certain time frames in which to provide an SBC to participants and beneficiaries upon renewal. If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of the new plan (or policy) year. For insured plans, if the policy, certificate or contract has not been issued or renewed before the 30-day period, the SBC must be provided as soon as practicable but no later than seven business days after issuance of the new policy, certificate or contract, or the receipt of written confirmation of intent to renew (whichever is earlier).

The final regulations contain special rules to prevent duplication. Of note, the final regulations made minor modifications to the requirements to provide a single SBC to a participant and beneficiaries. The SBC requirement is satisfied if it is sent to the participant's last known address. However, if a beneficiary's last known address is different from the participant's last known address, an additional SBC must be sent to the beneficiary.

An SBC must be provided to participants or beneficiaries upon request as soon as practicable but in no event later than seven business days following a request. Under the proposed regulations, this was seven calendar days.

SBC Content Requirements

In a significant shift, the content requirements under the final rule do not include premiums or employee costs. Among the key content requirements are the following:

• Uniform definitions of standard insurance and medical terms so that consumers may compare and understand health coverages as well as exceptions;
• A description of coverage, including cost-sharing, for each category of benefits;
• Exceptions, reductions and limitations of the coverage;
• The cost-sharing provisions including deductibles, co-payments and coinsurance;
• Renewability and continuation of coverage provisions;
• Coverage examples (up to six can be included, though only two (having a baby through a normal delivery and managing type 2 diabetes) are addressed in the final rules, which dropped breast cancer treatment as an example in the proposed rules);
• Beginning January 1, 2014, a statement as to whether the plan provides "minimum essential coverage" under the PPACA and whether the plan's share of the total allowed costs of benefits provided under the plan meets applicable requirements;
• A statement that the SBC is only a summary and that the plan document, policy or certificate of insurance should be consulted to determine the governing provisions;
• Contact information for questions and obtaining a copy of the plan document, insurance policy, certificate or contract of insurance, as applicable;
• Internet addresses for obtaining (1) any formulary related to prescription drug coverage, or (2) any list of network providers used by a plan; and
• Internet addresses for obtaining the uniform glossary as well as a contact phone number to obtain a paper copy and a disclosure that paper copies are available (the listing of phone number and paper copy disclosure new provisions under the final regulations).

The final regulations also add a new requirement related to coverage provided outside of the United States. In such situations, a plan may provide an Internet address or similar contact information to obtain information about the benefits provided outside of the country.

Formatting and Distributing the SBC

Strict requirements are retained from the proposed regulations, including the four double-sided pages in length limitation and 12-point type requirement.

In one significant change, SBCs can be either a stand-alone document or in combination with other summary material such as an SPD. If combined with another document, the SBC must be intact and prominently displayed at the beginning of such materials. For example, if combined with an SPD, the SBC would have to come immediately after the SPD Table of Contents. In addition, the combined document must be issued in accordance with the timing requirements for issuance of an SBC.

SBCs may be distributed via paper or electronically. For electronic disclosures, the rules vary. For participants and beneficiaries already covered under the group health plan, the SBC may be provided electronically under the current DOL electronic communication regulations. For those individuals who are eligible but not enrolled, the SBC may be provided electronically if: (1) the format is readily accessible; (2) the SBC is provided in paper upon request free of charge; and (3) in the event that the electronic format is an Internet posting, the plan properly notifies the individual of the documents being available online.

The final regulations retain the requirement that SBCs must be provided in a "culturally and linguistically appropriate manner." This follows separate PPACA guidance affecting claims and appeal notices for non-grandfathered plans. In short, this may require plans to issue SBCs in different languages (currently Spanish, Chinese, Tagalog and Navajo) in the event that 10 percent or more of the population residing in the participant's county is literate only in such language (as determined based on the American Community Survey data published by the U.S. Census Bureau). To assist plans in meeting this language requirement, the HHS will provide written translations of the SBC template, sample language and a uniform glossary.

Any material modification to any term that would impact the content of the most recently issued SBC that occurs other than in connection with renewal requires a notice of modification to be provided no later than 60 days prior to the effective date of the modification.

Uniform Glossary

In addition to the SBC requirements, plan sponsors must make available (upon request) a uniform glossary of commonly used health coverage and medical terms (for example, co-payment, deductible, in-network, etc.) in accordance with the appearance requirements specified by the Departments. A uniform glossary has been issued by the Departments.

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.