Reprinted with permission from Employee Benefit Review - June 2015
In December of 2014, the Employee Benefits Security Administration of the Department of Labor ("DOL"), the Internal Revenue Service ("IRS") and the Department of Health and Human Services ("HHS") (collectively, the "Agencies") issued a new proposed regulation related to the summary of benefits and coverage (the "SBC") and the uniform glossary for group health plans and health insurance coverage in the group and individual markets under the Patient Protection and Affordable Care Act ("ACA") (the "Proposed Regulation"). The Proposed Regulation changes the current regulation related to the SBC disclosure requirements. The new Proposed Regulation provides an updated SBC template, new sample SBC language, a revised guide for coverage example calculations and updates the uniform glossary. A goal of the Proposed Regulation is to help individuals better understand their health plan coverage and other coverage options that may be available to them. Comments were due on the Proposed Regulation in March of 2015, so hopefully the final regulation will be promulgated soon.
The ACA contained a direction to the Agencies to develop standards for a health plan or health insurer to use to describe the benefits under a health plan or health coverage. As well, the ACA instructed the Agencies to develop a standard glossary of the terms used in health coverage. In February of 2012, the Agencies published the initial final regulation regarding SBCs (the "2012 final regulation"). The 2012 final regulation sets forth the standards for providing SBCs that were designed to accurately set forth a uniform description of health benefits and coverage. After the issuance of the 2012 final regulation, the Agencies released additional guidance in the form of Frequently Asked Questions related to SBCs. These Q&As were designed to update and clarify the 2012 final regulation.
In a further effort to update the guidance, on December 30, 2015, the Agencies issued the Proposed Regulation as well as the new model form and guidance materials.
The Proposed Regulation updates the SBC requirements for changes under the ACA that have occurred since the 2012 final regulation was published and also formalizes the guidance that has been issued in the Q&As published since 2012. Items impacted by the Proposed Regulation include the content of SBCs, the delivery of the SBCs and the exclusion of Medicare Advantage Plans from the requirements of SBCs. If finalized, the regulation will be effective for SBCs provided on and after September 1, 2015. With respect to changes from the 2012 final regulation related to the content of SBCs, the Proposed Regulation addresses a few items, the most significant of which may be the reduction in required content from 4 double sided pages to 2 ½ double sided pages. This allows for additional room for other disclosures such as additional examples, premium costs or for nothing additional at all. Some of this extra space is gained because of the changes in mandated benefits under the ACA since 2012. (For example there is no need to describe pre-existing condition exclusions or annual limits on essential health benefits since those are no longer permitted under the ACA). Employers are still limited with the extra information that may be provided in that the 12-point font requirement has not changed nor may the original maximum of 4 double sided pages be exceeded.
The content provisions of the Proposed Regulation also require that the SBC disclose whether the benefit package meets "minimum value" or if it qualifies as "minimum essential coverage" as those terms are described in the ACA. This information is important for covered individuals as they need to report such coverage in connection with the individual mandate.
The Proposed Regulation also provides additional guidance on the timing and delivery of SBCs. In particular, the Proposed Regulation reiterates the information originally set forth in the Q&As that timely providing an SBC means sending it within seven business days of a request. The Proposed Regulation does not require that the SBC be received within that 7-day time period.
As well, with respect to delivering SBCs, the Proposed Regulation outlines guidance on the steps that need to be taken to properly delegate the delivery of SBCs by a third party. The guidance provides that where such a delegation of an obligation to provide an SBC occurs under a binding contract, the delegating party will be considered to have done its duty only if all of the following happens:
- the delegating party must monitor the contracting party's performance of its delivery duties;
- the delegating party must correct an SBC failure by the contracting party as soon as practicable once it has the appropriate information; and
- the delegating party must inform participants about any SBC delivery noncompliance about which it learns, but is unable to correct and it must take significant steps as soon as it can to avoid future violations.
The Proposed Regulation does permit (but does not require) a plan or issuer to provide multiple SBCs if there are multiple benefit providers available under the plan. The rules allow the plan administrator to synthesize the information into a single document. If the plan administrator chooses to use multiple partial SBCs, the Proposed Regulations provide that such an administrator should take steps such as using a cover memo to indicate that multiple providers are available under the plan and the plan administrator can be contacted for more information.
The Proposed Regulation also addresses certain efficiencies in the delivery process. In order to reduce duplication, if an SBC is provided to an individual prior to the individual applying for coverage, a new SBC does not need to be provided upon that individual's application for coverage, if there are no changes to the SBC since the time it was originally provided.
In sum, the Proposed Regulation provides a needed update to the previous guidance and 2012 final regulations in light of the ACA changes that have occurred. In particular, it appears that plan administrators are encouraged by having the additional space in the new model SBCs to help them provide additional clarity to the document. As well, the other updated forms and materials are also helpful to participants when making health coverage choices.
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.