Health Care Reform – Delayed Compliance Date for Summary of Benefits and Coverage

The Patient Protection and Affordable Care Act (PPACA) adds to the list of necessary health plan disclosures by requiring plans and issuers to distribute a summary of benefits and coverage (SBC) to applicants and enrollees. The SBC is intended to be a relatively short document that provides important plan information in plain language so that health consumers can better understand their coverage options. This disclosure requirement applies to both grandfathered and non-grandfathered plans.

On Aug. 22, 2011, the Departments of Health and Human Services, Labor and Treasury (Departments) issued proposed regulations for the SBC. The proposed regulations include guidance on providing and preparing the SBC as well as a proposed template for the SBC. The SBC regulations are not final. The Departments have indicated that they will likely make changes to the SBC regulations before they are finalized.

On Nov. 17, 2011, the Department of Labor (DOL) issued a set of Frequently Asked Questions (FAQs) that addresses when plans and issuers must start providing the SBC. The proposed regulations provided that plans and issuers must start providing the SBC by March 23, 2012. However, in the FAQs, the DOL delays the compliance date for providing the SBC. The DOL provides that plans and issuers can wait to start providing the SBC until after the final regulations are released. Thus, the March 23, 2012 deadline no longer applies.

It is uncertain when the final SBC regulations will be released. However, according to the DOL, plans and issuers will be given sufficient time after the final regulations are released to get ready for complying with the new requirements.

This delay is significant because it gives plans and issuers more time to develop the SBC. Also, because plans and issuers can wait until final regulations are released to complete the SBC, they will not need to prepare the SBC based on the proposed regulations only to have to update it later for the final guidance.

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GUIDANCE ISSUED ON ACA’S SUMMARY

The Affordable Care Act (ACA) requires each employer group health plan to provide a 4-page summary of its benefits to all individuals who are eligible for coverage.  This requirement takes effect on March 23, 2012 (two years after the enactment of the ACA).  The three agencies charged with implementing many of the ACA’s requirements have just issued proposed regulations, along with templates of proposed formats, under which a plan may furnish this new “summary of benefits and coverage” (SBC).

Under the proposed rules, employers or plan administrators (for self-funded plans) and insurers (for insured plans) must provide participants and beneficiaries with SBCs detailing, in a “culturally and linguistically appropriate manner,” simple and consistent information about health plan benefits and coverage.  Conceding that this cannot be done in only four pages, the agencies propose to read the statutory reference to “four pages” as four double-sided pages (i.e., eight pages).  Plans also must provide a separate glossary with uniform definitions of specific medical and coverage-related terms.

Each SBC must include the following:

  • Uniform definitions of standard insurance terms and medical terms;
  • A description of the coverage, including cost sharing, for certain benefit categories;
  • Exceptions, reductions, and limitations on coverage;
  • Cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations;
  • Renewability and continuation of coverage provisions;
  • Coverage examples illustrating three common benefit scenarios;
  • Beginning January 1, 2014, a statement as to whether the plan provides “minimum essential coverage” (a determination that will be important under the “Exchanges” that are to be established as of that date);
  • A statement that the SBC is only a summary and that the plan document, policy, or certificate of insurance should be consulted to determine the governing contractual provisions of the coverage;
  • A contact number to call with questions and an Internet address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained;
  • An Internet address or directions for obtaining a list of network providers, if applicable;
  • An Internet address or directions for obtaining information about the prescription drug formulary, if applicable;
  • An Internet address to access and review the uniform glossary; and
  • Premium information (or the cost of coverage under self-insured plans).

The SBC templates were prepared by the National Association of Insurance Commissioners (NAIC), and even the NAIC concedes that they will need some tweaking before they can be used by a self-funded plan.  They include not only a blank template, but also detailed instructions for completing the template and a sample of an SBC with the blanks completed.

The templates also include the glossary of uniform definitions, which would have to be used without modification.  Both the templates and the uniform definitions are designed to allow individuals (and employers looking to purchase a health insurance policy) to more easily compare the provisions of multiple plans or policies on an apples-to-apples basis.

Group health plans must provide SBCs as a part of their written enrollment materials (or if none, upon eligibility for enrollment); upon a change in information included in the SBC; upon a special enrollment event; and within seven days of a request.  SBCs need only be provided with respect to benefit packages in which a participant or beneficiary is enrolled, unless an individual requests an SBC for another option as to which he or she is eligible.

SBCs may be furnished in paper form or electronically.  For ERISA plans, SBCs may be delivered electronically so long as the Department of Labor’s electronic disclosure safe-harbor requirements are satisfied.  Group health plan sponsors should note that the obligation to provide SBCs is in addition to any current duty to furnish ERISA summary plan descriptions, summaries of material modifications, or other disclosures.

The proposed rules also require plans to give covered individuals at least 60 days’ advance notice of any mid-year material modifications that affect SBC content.  For this purpose, a “modification” includes not only a benefit reduction, but also a benefit improvement.  A plan (or its administrator) that willfully fails to provide an SBC may be fined up to $1,000 for each affected individual.

Comments on the proposed rules are due by October 21, 2011.  The agencies specifically request input on special considerations for self-funded plans and the feasibility of meeting the March 23, 2012, deadline to begin providing SBCs.  It appears likely that changes will be made to the proposed rules; therefore, group health plans should pay close attention to any changes in the final guidance, which should be issued within the next several months.

 

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