The HR guide to Summary of Benefits and Coverage

(photo: jscreationzs/freedigitalphotos.net) (photo: jscreationzs/freedigitalphotos.net)

Enrollment season this year will bring an added compliance requirement for employers, which is intended to help plan enrollees know exactly what they’re getting out of their policy.

Beginning on Sept. 23, 180 million Americans with private health insurance will need to be provided with two pieces of information. One is a Summary of Benefits and Coverage, or SBC, that clearly explains their health plan and allows them to compare different coverage options.

The other document will be a uniform glossary of terms commonly used in health insurance coverage.

“The [SBC] rules put special obligations on health insurance issuers and group health plans with respect to the presentation of these summaries and the glossary of terms that was required under the [Patient Protection and Affordable Care Act]. And these are intended to help plans and individuals better understand not only their health insurance coverage but also other coverage options that they might have available to them,” said James McElligott, a Richmond, Va., partner with law firm McGuireWoods, at a recent informational webinar assembled by Bloomberg BNA.

Experts agree the SBC mandate is unlikely to be struck down when the Supreme Court reaches a final decision on health reform in June. Unless, of course, the entire law is repealed.

Non-compliance with regulations could result in a civil penalty of up to $100 per day per affected individual; an excise tax of $100 per day per affected individual; and fines of up to $1,000 per affected individual for willful violations.

Luckily, notes McElligott, the law is not hard to understand.  “I found in working with the PPACA regulations that it's often easiest just to use the electronic Code of Federal Regulations, which you can get online,” he said. “The actual regulations on the SBCs are not very long and they constitute about four pages, so they’re fairly readable.”

Still, as with any new regulation, there are certain details employers should review in order to ensure full compliance. The next few pages will guide you through the new SBC requirements, as well as provide additional details on the laws >

Or, you can jump to:

Who needs to provide the SBC?

“Typically just about every type of group health plan and health insurance issuer is required to provide an SBC. That would include plans that are grandfathered. This is one of those few requirements out there that is applicable to grandfathered plans,” said Jeff Capwell, a partner at the Charlotte office of McGuireWoods.

Responsibility for compliance depends on the nature of the plan. If it’s a self-insured group health plan, the plan (including the plan administrator) is responsible for providing an SBC.

If it’s a fully-insured plan, both the insurer and the plan are jointly responsible.

Generally, SBCs will be drafted by insurers and third-party administrators. The plan or insurer is not liable for enforcement if they have an arrangement with a TPA, they monitor the TPA, and they take action in the event of a violation.

“The rules are also clearly applicable to health reimbursement arrangements, however. If that health reimbursement arrangement is coordinated with another major medical plan you won't have to actually have two separate SBCs,” said Jeff Capwell, a partner in the Charlotte, N.C., office of McGuireWoods.

Additionally, “The so called stand alone retiree health plan exemption allows for retiree plans to be exempt from this requirement.”

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Next: Who must be provided with the SBC?

Who must be provided with the SBC?

“All participants and beneficiaries have a right to receive the SBC,” Capwell said. “The Supreme Court has ruled that participants are essentially people who have a ‘colorable claim’ to benefits. Anybody who is actually enrolled in the plan or a beneficiary who has rights under the plan by virtue of some participant will need to receive the SBC.”

“Colorable means [that] they have an argument to entitlement,” McElligott adds.

Health plans may send a single SBC to both participants and beneficiaries.

The health insurance issuer must provide an SBC (or summary information about coverage) to a group health plan or plan sponsor upon request within seven business days.  

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Next: When must SBCs be provided?

When must SBCs be provided?

“[The SBC] is going to be a key component of enrollment processes going forward.” Capwell says. "There are essentially five circumstances in which the document and the glossary will need to be provided":

1. At enrollment (i.e., initial enrollment) - with any written enrollment application materials the plan provides

  • If no such materials are provided, then no later than the first date the participant is eligible to enroll himself or any beneficiary in coverage

2. If there are changes to the SBC - no later than the first day of coverage

3. HIPAA special enrollees - no later than 90 days following enrollment

  • Coordinated with timing requirement for SPD delivery
  • Early delivery required upon enrollee’s request

4. Upon renewal (i.e., annual enrollment) - if applicable, only for those benefit options in which the participant or beneficiary is enrolled, by either the date the written renewal application materials are distributed to the plan sponsor or, in the case of automatic renewal, no later than 30 days prior to the first day of the new plan year

  • A participant or beneficiary can also request an SBC during renewal for an option in which they are not enrolled.
  • “Automatic renewal” – no requirement to renew and no opportunity to change coverage

5. Upon request – no later than seven business days

What if plan coverage is materially modified (change to coverage that would be considered by the average plan participant to be an important change)?

  • Current ERISA rules require notice after plan changes are made
    • 60 days after a material reduction in benefits
    • 210 days after adoption of any other amendment
  • SBC rules require advance notice of material modifications in certain cases
    • Material modification to plan that affects SBC content
    • Modification is not reflected in the most recent SBC, and
    • Modification occurs other than in connection with renewal (new enrollment period)
  • Timing of depends upon effective date of the material modification
    • If a material modification is effective as of the first day of the a plan year, SBC to be provided in connection with the open enrollment preceding the effective date must reflect the modification
    • If a material modification is effective during the plan year, notice of the material modification (or updated SBC) must be distributed at least 60 days before the change takes effect
  • Notice must be provided to all “enrollees”
    • Recommended approach – all who received an SBC
  • Format
    • Either an updated SBC or another format delivered in paper or by electronic format

“It's important to note that a separate SBC must be provided for each benefit package that's offered under the plan for which the participant is eligible,” said Felicia Mitchell, an associate in the Charlotte office of McGuireWoods. "So if a group health plan offers an HMO and a PPO option, the participant must be provided [with] two separate SBCs in order to describe those benefit packages separately."

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Next: Checklist: What must be included in an SBC?

Checklist: What must be included in an SBC?

  • Uniform definitions
  • Cross references to Summary Plan Descriptions are not permitted to substitute content requirements
    • But may include cross references to address items not required to be addressed in the SBC, such as plan eligibility
  • A description of the plan’s coverage for each category of benefits, including exceptions, reductions and limitations
  • The plan’s cost-sharing provisions, such as deductibles, co-pays and coinsurance
  • Information about renewability and continuation of coverage
  • Hypothetical coverage examples selected by HHS to illustrate the benefits that would be provided for certain common benefits scenarios (these examples are included in the final regulations)
  • For coverage beginning on or after Jan. 1, 2014, a statement as to whether the plan provides minimum essential coverage and whether the plan pays at least 60 percent of the total cost of benefit
  • An internet address (or similar) for obtaining a list of the network providers
  • An internet address where an individual may find more information about the prescription drug coverage under the group health plan or health insurance coverage
  • An internet address where an individual may review and obtain the uniform glossary
  • A disclosure that paper copies of the uniform glossary are available, and a contact phone number for obtaining a paper copy of the uniform glossary
  • A statement that the SBC is only a summary, and that the plan document, insurance policy, contract or certificate of insurance should be consulted for more information about the coverage provided under the plan
  • Contact information for questions or for obtaining a copy of the plan document or the insurance policy, contract or certificate of insurance
  • Premium information
  • Statement about the grandfathered status of the plan
  • Barcodes and control numbers
  • Generic names for benefit package options (i.e., standard option, high option)
  • Plan’s eligibility requirements
  • Optional: Add-ons to major medical coverage that can affect cost sharing and other information can be combined in the SBC provided the appearance of the SBC remains understandable (examples: FSAs, HSAs)

“I think it's smart for health plans to [also] include some reference to the eligibility requirements in their SBCs, so you're reducing the likelihood of someone claiming that they were told that they have coverage because they received the SBC,” McElligott notes. “There's no requirement to have anything about eligibility in there, but I think a reference to the eligibility requirements in the summary plan description is the prudent thing to do.”

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Next: Electronic delivery

Electronic Delivery

  • Rule 1 = Delivery to participants and beneficiaries enrolled in group health plan

DOL safe harbor:

    • Active employees with ability to effectively access electronic documents at any location where performing job duties and access to the employer’s electronic information system as an integral part of job duties
    • Affirmative consent required for all others (e.g., non-safe harbor employees, retirees, COBRA beneficiaries, and spouses and dependents)
  • Rule 2 = Delivery to participants and beneficiaries eligible for but not enrolled
    • Electronic delivery permitted under a more streamlined process
    • Format must be readily accessible and a paper copy must be provided free of charge upon request
    • Internet posting is permitted, provided participant and beneficiary is timely advised of the posting by paper postcard or email
      • Must have notice that the documents are available, the Internet address, and notify that the documents are available in paper form upon request.
      • Sample postcard is available

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Next: Formatting

Formatting

Summary of Benefits and Coverage Page 1

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(Above: Sample completed Summary of Benefits and Coverage)

  • Cross references to SPDs are NOT permitted to substitute content requirements
  • Uniform format based on template and instructions (i.e., 12 pt font or larger, font type) with some flexibility if terms cannot reasonably be described in manner consistent with the template instructions
  • No longer than four double-sided pages (i.e., 8 pages of content)
  • Can be provided as a stand-alone document or included with a summary plan description or other participant disclosure document
  • Terminology must be understandable by average enrollee
  • Minor adjustments to column and row sizes are permitted, but deletion of columns or rows is NOT
  • Paper or electronic format is permitted

“The header and footer information that's listed [on page 1] actually does not have to be repeated on the subsequent pages of the SBC,” says Mitchell. “The header only has to be on the first page. The footer information has to be repeated on the first and last page of the document.”

What’s more, “The content information that's on page one has to remain always on page one. Similarly the content information that's on page two has to always be included on page two. So the instructions are very clear that there can be no deviation from that respect.”

Summary of Benefits and Coverage Page 2

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Next: SBC page 3

Summary of Benefits and Coverage Page 3

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“This section for the prescription drug requirements [is] actually under the column of services you may need. That's one area where the plan itself, or the plan administrator, can list out the categories of the prescription drug coverage…this plan had generic drugs, preferred drugs, specialty drugs; they actually listed those out. And there has to be the same cost explanations or descriptions for the purposes of the participating provider, non-participating provider, and limitations or exceptions with respect to that,” Mitchell explains.

“The costs associated with a particular common medical event: the SBC must contain participating provider information and non-participating provider information to the extent that the plan provides for different cost sharing based on a network program.” (see image below)

“The very last column (limitations and exceptions)  is for interpretation by the plan administrator. The rules for the SBC provide the plan administrator a certain level of discretion with respect to what needs to be identified. However, there has to be an identification [for] any limitations and exceptions that are significant for the purposes of explaining the benefit coverage.

“So various examples of that might be limits on the number of visits, limits on specific dollar amounts that are paid by the plan, prior authorization requirements and things of that nature. With respect to the prescription drugs you can see the example lists the differences in the coverage for purposes of 30-day and 90-day supply, depending on whether retailer mail order prescriptions are bring ordered.”

 Summary of Benefits and Coverage Page 4

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Next: SBC page 5

Summary of Benefits and Coverage Page 5

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“One of the things that has to be identified is the services that are and are not covered under the group health plan," Mitchell says. "Under the instructions there are an enumerated category of services that a plan must identify whether or not they are covered or aren't covered and then there also are permissible additions in the section for other covered services just to provide the participants a little bit more information as to what's covered and what's not.”

Summary of Benefits and Coverage Page 6

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Next: SBC final pages

Summary of Benefits and Coverage Page 7 

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“It's important to note that you have to make clear what your assumptions are with respect to calculating [stock examples]. In this example, there's an assumption that a wellness plan was used with respect to calculating some of the costs that were identified in the previous [page] and that's one of the things that you want to make sure that you describe in this section.”

 Summary of Benefits and Coverage Page 8

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