Plan sponsors have work to do on their summary of benefits and coverage (“SBC”) in the coming months. The government recently published proposed regulations related to the Patient Protection and Affordable Care Act’s (“PPACA”) SBC requirement. The proposed regulations would modify the 2012 final regulations and are intended to streamline and shorten the SBC in order to make it more useful and user-friendly to individuals, issuers, and group health plans.
The proposed regulations also incorporate a number of clarifying FAQs released by the government after the adoption of the 2012 final regulations. In conjunction with the release of the proposed regulations, the government contemporaneously made available proposed revisions to the SBC template, instruction guides, uniform glossary, and other supporting guidance. Plan sponsors should analyze how the proposed regulations and guidance impact their SBC compliance efforts. For participants who enroll during an open enrollment period, the proposed regulations and revised guidance are scheduled to apply as of the first day of the first annual open enrollment period beginning on or after September 1, 2015. For participants that enroll in coverage outside of the open enrollment period (i.e., new or special enrollees), the requirements of the proposed regulations and guidance will apply as of the first day of the first plan year beginning on or after September 1, 2015. Thus, time is of the essence.
Some highlights of the proposed regulations and revised guidance include:
- Specific Content Added. The proposed regulations add a number of content requirements to the SBC:
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- First, the proposed regulations require the SBC to include a statement regarding whether the plan provides minimum essential coverage and whether the plan meets the applicable minimum value requirements. The 2012 regulations had permitted these statements to be conveyed to plan participants in separate communications. Such practice would no longer be permitted under the proposed regulations.
- Second, the proposed regulations require a statement disclosing whether a qualified health plan issuer covers or excludes coverage for abortion services and a statement regarding whether coverage is limited to services for which federal funding is allowed.
- Third, all plans and issuers must include on the SBC contact information for questions. However, only issuers are required to include an internet address for obtaining a copy of the policy or certificate.
- Fourth, the proposed regulations add a third coverage example (in addition to having a baby and managing type 2 diabetes) related to a simple foot fracture with an emergency room visit. Additionally, updates to the underlying pricing data have been proposed to reflect more accurate charges to consumers. Plans could continue to use the HHS calculator for completing the coverage examples.
- Reduction in Number of Pages. The sample completed proposed SBC template has been reduced from four double-sided pages to only two and a half double-sided pages. The reduction in length of the SBC is the result of the removal of certain information that is not statutorily required and has been identified as not particularly useful to consumers. Examples of removed content include references to preexisting condition exclusions and annual limits. Additionally, certain explanations about certain terms defined in the uniform glossary have been removed.
- SBC Distribution. The proposed regulations and related guidance clarify and revise certain distribution requirements.
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- First, the proposed regulations clarify that if the plan or issuer provides the SBC prior to application for coverage, it is not required to automatically provide another SBC upon application if there is no change to the information required to be in the SBC. However, if there is any change to the information required to be in the SBC by the time the application is filed, the plan or issuer must update and provide a current SBC as soon as practicable following receipt of the application, but in no event later than seven business days following receipt of the application.
- Second, the proposed regulations clarify that if a plan sponsor is still negotiating coverage terms following the application, the issuer is not required to provide an updated SBC (unless requested) until the first day of coverage.
- Third, the proposed regulations permit a group health plan to utilize certain binding contractual arrangements with a third party to provide the SBC. Specifically, if a plan enters into a binding contract with another party to provide the SBC, then the plan will be treated as satisfying the requirement to provide the SBC if the plan (1) monitors the other party’s performance under the contract; (2) corrects any known noncompliance determined to have occurred as soon as practicable; and (3) communicates with affected participants and beneficiaries about the known noncompliance and takes “significant” steps as soon as practicable to avoid future violations in the event that the plan does not have the information necessary to correct the noncompliance.
- Fourth, where a group health plan uses two or more insurance products provided by separate issuers to insure benefits (or includes a fully-insured and a self-funded option) with respect to the plan, the group health plan administrator is responsible for providing a complete SBC with respect to the plan.
- Finally, the proposed regulations codify the electronic delivery safe harbor adopted in previous FAQs. The safe harbor generally permits SBCs to be delivered electronically to participants in connection with their online enrollment or renewal, or to participants who request an SBC online. In either case, the individual must have the option to receive a paper copy upon request.
Failure to provide a compliant SBC can result in penalties up to $1,000 per occurrence. In assessing fines against plans, the proposed regulations clarify that the Department of Labor will use the same process and procedures it currently uses to enforce the Form 5500 filing rules. Additionally, the IRS will enforce the SBC regulations using a process consistent with Code section 4980D for failure to meet the Code’s group health plan requirements. Thus, plan sponsors should set aside time and resources in the coming months to properly address the new SBC requirements. Sponsors of insured plans should check with their insurance carriers to ensure that the carriers will be providing the revised SBCs in a timely manner. Sponsors of self-funded plans will likely need to take a more hands-on approach.
A recently released Frequently Asked Question indicates that the government intends to finalize changes to the regulations in the near future, which will apply to coverage that renews or begins on the first day of the plan year that begins on or after January 1, 2016 (including fall 2015 open enrollment). Revisions to the SBC template and associated documents will be finalized by January 1, 2016 and will apply to coverage that renews or begins on the first day of the first plan year that begins on or after January 1, 2017 (including fall 2016 open enrollment).
This alert serves as a general summary of the lengthy and comprehensive proposed regulations and guidance. The proposed guidance can be found at this link. The recently released Frequently Asked Question can be found at this link.