Plan sponsors have work to do on their summary of benefits and coverage (“SBC”) in the coming months. The government recently published final regulations related to the Patient Protection and Affordable Care Act’s (“PPACA”) SBC requirement. The final regulations modify the 2012 final regulations and are generally applicable to group health plans for plan years beginning on or after September 1, 2015. Consistent with a governmental FAQ issued in March 2015, the preamble to the final regulations states that the government anticipates finalizing revisions to the SBC template, instructions, uniform glossary, and corresponding materials in January 2016. The new templates and corresponding materials will then apply to plan years beginning on or after January 1, 2017 (including the fall 2016 open enrollment periods). These revisions 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.
Some highlights of the 2015 final regulations include:
- Provision of the SBC by an Issuer to a Plan. The final regulations clarify that an issuer offering group health insurance coverage is not required to automatically provide the SBC again if the issuer already provided the SBC before application to any entity or individual, provided there is no change in the information required to be in the SBC. In contrast, if there has been a change in the information required to be included in the SBC, a new SBC that includes the changed information must be provided as soon as practicable following receipt of the application, but in no event later than seven business days following receipt of the application. Additionally, the final regulations clarify that if the plan sponsor is still negotiating coverage terms after an application has been filed and the information required to be in the SBC changes, an updated SBC is not required to be provided to the plan or its sponsor (unless an updated SBC is requested) until the first day of coverage.
- Provision of the SBC by a Plan or Issuer to Participants and Beneficiaries. The final regulations clarify that if the plan or issuer provides the SBC prior to application for coverage, the plan or issuer is not required to automatically provide another SBC upon application, if there is no change to the information required to be in the SBC. In contrast, 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. The final regulations continue to provide that the plan or issuer must provide the SBC to individuals enrolling through a special enrollment period, no later than when a summary plan description is required to be provided under ERISA (i.e., 90 days from enrollment).
- Special Rules to Prevent Unnecessary Duplication With Respect to Group Health Coverage. The final 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 (assuming the plan has all information necessary to correct the noncompliance); 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. Additionally, to address unnecessary duplication, 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. The group health plan administrator may contract with one of its issuers (or other service providers) to perform that function. Absent a contract to perform the function, an issuer has no obligation to provide coverage information for benefits that it does not insure. To this end, the final regulations codify a previous enforcement safe harbor permitting a group health plan administrator to synthesize the information into a single SBC or provide multiple partial SBCs that, together, provide all the relevant information to meet the SBC content requirements.
- Self-Funded Non-Federal Governmental Plans. Under the final regulations, self-insured non-federal governmental plans may provide an SBC in either paper form, or electronically if the plan conforms to either the substance of the provisions applicable to ERISA plans or to individual health insurance coverage.
- Minimum Essential Coverage and Minimum Value Statement. The SBC is required to include a statement regarding whether the plan provides minimum essential coverage and whether the plan meets the applicable minimum value requirements. Until the new template and associated documents are finalized and applicable, plans and issuers may continue to rely on the flexibility provided in a previously issued FAQ (permitting these statements to be conveyed to plan participants in separate communications) and the government will not take enforcement action against a plan or issuer that provides an SBC with a cover letter or similar disclosure with the required minimum essential coverage and minimum value statements.
- Contact Information for Questions. 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.
Appearance, Form, and Language
- Appearance. The Departments will address specific issues related to completing the four-page template, as well as the issues plans and issuers encounter meeting these requirements with the finalization of the new template and associated documents.
- Form. The final 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.
- Language. The final regulations continue to provide that a plan or issuer is considered to provide the SBC in a culturally and linguistically appropriate manner if the thresholds and standards for the form and manner of notices related to internal claims appeals and external review are met as applied to the SBC.
Again, a revised SBC template (and corresponding materials) is expected to be released in January 2016. It is anticipated that the revised materials will require plan sponsors and issuers to actively review and revise their current SBCs in order to ensure legal compliance. Failure to provide a compliant SBC can result in penalties up to $1,000 per occurrence. In assessing fines against plans, the final 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 to properly address the new SBC requirements.
This alert serves as a general summary of the lengthy and comprehensive final regulations, which can be found by clicking HERE.
This correspondence is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.