Client Alert: Updated SBC Guidance and Templates for Second Year of Applicability

A group health plan and a health insurance issuer offering group health insurance coverage must provide an SBC to participants and beneficiaries (including COBRA qualified beneficiaries under certain circumstances) with respect to each benefit package offered by the plan or issuer for which the participant or beneficiary is eligible.

The first round of SBCs was required on or after September 23, 2012 (for periods of open enrollment/plan years occurring on or after this date).  [Please see our previous detailed memorandum dated July 11, 2012 outlining the SBC requirements, including format, content, and timing and method of distribution.]  Guidance and changes for the second round of SBCs was released Tuesday, April 23rd.

On April 23, 2013, the Departments of Health & Human Services, Labor and Treasury (Departments) jointly prepared and released additional Frequently Asked Questions specifically regarding Summary of Benefits and Coverage (SBC) requirements for the second year of applicability (for coverage beginning on or after January 1, 2014 and before January 1, 2015).  See FAQs about the Affordable Care Act Implementation Part XIV.

The updated guidance and templates can be found at:

Significantly, only two specific additions are required for the second round of SBCs:

1)      Whether the plan or coverage provides minimum essential coverage (MEC) as defined under section 5000A(f) of the Internal Revenue Code of 1986;

2)      Whether the plan or coverage meets the minimum value (MV) requirements (whether the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage is not less than 60 percent of such costs).

MEC and MV

The updated templates (page 4) have a designated entry line for the plan or issuer to indicated whether the plan or coverage “does” or “does not”: (1) provide MEC; and (2) meet the MV requirements.

However, the FAQs also provide that no enforcement will be taken against a plan or issuer who (1) is unable to modify the SBC template for the second year, (2) uses the authorized template for the first year, and (3) includes a cover letter or similar disclosure setting for the MEC and MV information as follows:

Does this Coverage Provide Minimum Essential Coverage?
The Affordable Care Act requires most people to have health care coverage that qualifies as “minimum essential coverage.” This plan or policy [does/does not] provide minimum essential coverage.

Does this Coverage Meet the Minimum Value Standard?
The Affordable Care Act establishes a minimum value standard of benefits of a health plan. The minimum value standard is 60% (actuarial value). This health coverage [does/does not] meet the minimum value standard for the benefits it provides.

Annual Limits

Although it was the intent of the Departments to remove language regarding annual limits as they will no longer be allowed in 2014, this change has not been made and the FAQ in Q3 set forth the appropriate responses to the SBC questions and charts on annual limits.  However, the FAQ states that removal of the section on annual limits is allowed, specifically:

To the extent a plan or issuer wishes to modify the SBC template for disclosures required to be provided for the second year of applicability to remove this information, the Departments will not take any enforcement action against a plan or issuer for removing the entire row in the Important Questions chart on page 1 of the SBC (with the question: “Is there an overall annual limit on what the plan pays?”).

See FAQs about the Affordable Care Act Implementation Part XIV, Q3.

Coverage Examples

A previous FAQ indicated that additional coverage examples would be included in subsequent SBCs; however, the Departments believe it is important to maintain the current coverage examples.  Therefore, the second round of SBCs will include the same two coverage examples that existed for the first year of applicability (normal delivery when having a baby and managine type 2 diabetes).

Extension of Relief

The FAQs bring a welcome extension of relief, such as continuing with the Departments’ basic approach to implementation of the SBC requirements during the first year of applicability and electronic distribution of SBCs in certain circumstances.  Please see FAQ5 for a full list of extensions.

Additionally, FAQ6 addresses extended relief for closed blocks of business (insurance products that are no longer being offered for purchase) as long as certain conditions are met.

Last, FAQ7 informs us that HHS is extending the anti-duplication rule for group health coverage (which is set forth in the final SBC regulations) to student health insurance coverage, as defined in in 45 CFR 147.145(a).  “Therefore, the requirement to provide an SBC with respect to an individual will be considered satisfied for an entity (such as an institution of higher education) if another party (such as a health insurance issuer) provides a timely and complete SBC to the individual.”

If you should have any questions regarding this latest round of FAQs, SBC requirements in general, or would like assistance in drafting or reviewing your SBCs, please do not hesitate to contact us.

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