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Health Care Reform: Final Rules Issued on the Summary of Benefits and Coverage and the Uniform Glossary

Brian McLaughlin on 2/16/2012

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Vice President USI Affinity I Benefit Solutions Group

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The Departments of Labor, Treasury and Health and Human Services (the Departments) have issued final guidance on the requirements to furnish a Summary of Benefits and Coverage (SBC) and Uniform Glossary, and have established a new set of effective dates beginning September 23rd of this year.

Under the Patient Protection and Affordable Care Act (PPACA), all group health plans, including grandfathered plans and self-insured plans, are required to provide participants and beneficiaries with a simple, standardized summary of coverages (commonly referred to as the "4 page summary"). These requirements were originally effective this coming March 23, but the Departments provided a delay in order to develop much needed additional guidance.

Briefly, the guidance:

  • Excludes excepted benefits (e.g., stand-alone dental and vision coverage, health FSAs) from the SBC requirement;
  • Describes how the SBC will coordinate with HRAs and other account-based programs;
  • Identifies the various requirements for providing the SBC, the parties responsible for providing the SBC, and the timing of the disclosure;
  • Clarifies that participants and beneficiaries must receive the SBC, but allows for a single disclosure when a family resides at the same address;
  • Summarizes the content requirement for the SBC and provides model templates;
  • Eliminates premium and contribution information proposed in the earlier guidance;
  • Addresses the 60-day prior notice requirement for changes made to the SBC outside of renewal; and provides guidance on the uniform glossary and on the examples of coverage required to be included in the SBC.

These new requirements are effective as follows:

  • For open enrollment periods that begin on or after September 23, 2012, the SBC must be provided to participants and beneficiaries who enroll or re-enroll during this period.
  • With respect to participants and beneficiaries who enroll in group health plan coverage outside of open enrollment (e.g., newly eligible individuals and special enrollees), the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012.


OVERVIEW AND TERMINOLOGY

Under PPACA, all group health plans, including grandfathered plans and self-insured plans, are required to provide participants and beneficiaries with an SBC. At the core of this requirement is the use of standardized formatting and terminology, as detailed in the final guidance.

A participant is defined as any employee or former employee of an employer who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer, or whose beneficiaries may be eligible to receive any such benefit. This includes active employees and COBRA qualified beneficiaries.

A beneficiary is a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit. This may include spouses, domestic partners, children, and COBRA qualified beneficiaries.

The SBC is a summary of health plan information that is provided in a uniform format to help consumers better understand their coverage and compare coverage options.

The Uniform Glossary is a document that identifies and defines common health care and medical terminology.


COVERAGES REQUIRING AN SBC

Most group health plans are subject to this requirement, except:

  • Excepted benefits which include certain stand-alone dental and/or vision plans and many, if not most, Health Flexible Spending Accounts (FSAs); and
  • Retiree-only plans( No current employees as participants)

Health Reimbursement Arrangements (HRAs) generally do not meet the definition of an excepted benefit. Thus, the plan administrator of an HRA (generally the employer) will need to provide an SBC with respect to that coverage. If integrated with the major medical coverage, the HRA can be included in the SBC for the major medical plan. The effect of the employer contributions to the HRA can be denoted in the appropriate spaces in the SBC. A stand-alone HRA will need to provide its own SBC.

Health Savings Accounts (HSAs) are generally not group health plans and are not subject to the SBC requirements. Nevertheless, an SBC prepared for a qualified high-deductible health plan associated with the HSA can mention the effect of employer contributions to the HSA in the appropriate spaces.


PROVIDING THE SBC

Obligations and Timing

Responsibility for Furnishing the SBC

For insured plans, the carrier and the group health plan (plan sponsor) are both responsible to provide the SBC to participants and beneficiaries. However, if one entity provides a timely and complete SBC to individuals, it will satisfy the obligation for the other party. For example, an insured plan will satisfy the requirement to provide an SBC if the carrier timely provides a complete SBC to individuals. The Departments expect plans and carriers to make contractual arrangements for sending the SBC.

For self-insured plans, the burden is on the plan administrator (generally the employer) to develop and provide the SBC. Self-insured plans will want to coordinate with their third-party administrators (TPAs) to assist with this disclosure requirement.

From the Insurance Carrier to the Group Health Plan (or Plan Sponsor/Employer)

In a fully insured arrangement, the carrier must provide the SBC to the plan sponsor of a group health plan at the following times:

  • Application. Within 7 days following receipt of an application for group health plan coverage.4
  • Renewal. If the insurance carrier renews or reissues the policy, certificate or contract of insurance (for example, for a succeeding plan year), the carrier must provide the SBC as follows:
    • If a written application is required, the SBC must be provided no later than the date the written application materials are due.
    • If renewal is automatic, the SBC must be provided no later than 30 days prior the first day of the new plan year.
  • By Request. If the plan sponsor requests an SBC or summary information about a health insurance product, the SBC must be provided within 7 business days.

From the Insurance Carrier and/or the Plan Administrator (generally the employer) to Participants and Beneficiaries

An SBC must be furnished to participants and beneficiaries with respect to each benefit package offered by the plan or carrier for which the individual is eligible at the following times:

  • Initial Application/Enrollment. As part of any written application materials that are distributed for enrollment (written or electronic). If no written application materials are distributed for enrollment, the SBC must be provided by the first date on which the participant is eligible to enroll in the coverage.
  • Renewal. If participants or beneficiaries are required to renew coverage in order to maintain it (for example, in a succeeding plan year), the SBC must be issued as follows:
    • If written application is required for renewal (either paper or in electronic form), the SBC must be provided no later than the date on which the written application materials are distributed.
    • If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of the new plan year.
  • Special Enrollment. The SBC must be provided to HIPAA special enrollees no later than 90 days from enrollment (following the SPD requirements). This is a change from the proposed rule, which required the SBC to be provided within 7 days of receipt of the special enrollment request.
  • By Request. The SBC must be provided upon request to a participant or beneficiary who requests this document or any summary of health coverage within 7 business days.

The SBC must be provided to participants and beneficiaries. A single SBC can be provided to a participant and any beneficiary residing at the participant's last known address to satisfy the requirement. However, if the beneficiary's last know address is different from the participant, then a separate SBC must be furnished to the beneficiary at his or her last know address.

If a group health plan offers multiple benefit packages, an SBC is required to be furnished upon renewal only with respect to the benefits package in which the participant and beneficiary is enrolled. An SBC is not required to be furnished automatically at renewal with respect to benefit packages in which the participant and beneficiary are not enrolled. However, if a participant or beneficiary requests an SBC with respect to another benefits package, then that SBC must be provided within 7 business days of the request.

The content requirements for the SBC include:

  • A uniform definition of standard insurance terms and medical terms so that consumers may compare health coverage and understand the terms of (and exceptions to) their coverage;
  • A description of the coverage, including cost-sharing, for specific benefits;
  • The exceptions, reductions and limitations of coverage;
  • The cost-sharing provisions of coverage (including deductibles, copays and coinsurance);
  • Renewability and continuation of coverage provisions;
  • Coverage examples as prescribed by the regulations (guidance has been provided on how to construct the examples - see the link at the end of this Bulletin);
  • A statement that the SBC is only a summary and the terms of the plan document, policy, certificate or contract of insurance should be consulted to determine the governing contractual provisions;
  • Contact information for questions and obtaining a copy of the plan document or the insurance policy, certificate, or contract of insurance (such as a telephone number for customer service and an Internet address for obtaining a copy of the plan document or the insurance policy, certificate, or contract of insurance);
  • An Internet address (or similar contact information) for obtaining a list of network providers;
  • If the plan has a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage; and
  • An Internet address for obtaining the uniform glossary, as well as a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies are available.

The final regulations do not require the SBC to include premium or cost of coverage information. This is a change from the proposed rule. The content requirements will change effective for the first plan year that begins on or after January 1, 2014. At that time, the SBC will need to contain a statement about whether the plan or coverage provides minimum essential coverage and whether the plan's or coverage's share of total allowed costs of benefits meets applicable minimum value requirements. Additional guidance will be issued to address the minimum essential coverage and minimum value statements.

Appearance

The SBC must meet strict guidelines in its appearance and form. It must be presented in a uniform format, use terminology understandable by the average plan enrollee, not exceed four double-sided pages in length, and not include print smaller than 12-point font.

There are model documents available on the DOL website, http://www.dol.gov/ebsa/. The SBC can be provided in color or in grayscale.

Delivery Requirements

From the Insurance Carrier to the Group Health Plan (Plan Sponsor)

An SBC provided by a carrier offering group health insurance coverage to a plan (and its sponsor), may be provided in paper form.

Alternatively, the SBC may be provided electronically (such as by email or an Internet posting) if the following three conditions are satisfied:

  • The format is readily accessible by the plan (or its sponsor);
  • The SBC is provided in paper form free of charge upon request; and
  • If the electronic form is an Internet posting, the issuer timely advises the plan (or its sponsor) in paper form or email that the documents are available on the Internet and provides the Internet address.

From the Insurance Carrier and/or the Plan Administrator (generally the employer) to Participants and Beneficiaries

The SBC can be provided as a stand-alone document. It may also be provided in combination with other summary materials (e.g., SPD), only if the SBC information is intact and prominently displayed at the beginning of the materials (such as immediately after the Table of Contents in the SPD), assuming the timing requirement of the SBC can be satisfied. However, there are potential issues with satisfying the SBC requirement through the SPD, as the SBC must be provided more frequently than the SPD and the SBC must be delivered to participants and beneficiaries, while the SPD is provided to just participants. Thus, attempting to satisfy the SBC requirements through the SPD could be challenging. An SBC provided by a group health plan or carrier to a participant or beneficiary may be provided in paper form. Alternatively, the SBC may be provided electronically (such as by email or an Internet posting) if the following requirements are met:

  • With respect to participants and beneficiaries covered under the plan, the SBC may be provided electronically in accordance with the DOL electronic delivery rules. Note however, there is a significant burden on employers attempting to provide documents under the DOL electronic delivery rules to individuals who do not have work-site access to the employer's electronic system (e.g., participants who don't use a computer as a daily part of their work activities, COBRA qualified beneficiaries, spouses and dependents).
  • With respect to participants and beneficiaries who are eligible but not enrolled for coverage, the SBC may be provided electronically if:
    • The format is readily accessible;
    • The SBC is provided in paper form free of charge upon request; and
    • In a case in which the electronic form is an Internet posting, the plan or issuer timely notifies the individual in paper form (such as a postcard) or email that the documents are available on the Internet, provides the Internet address, and notifies the individual that the documents are available in paper form upon request.

Language Requirements

The SBC must be provided in a culturally and linguistically appropriate manner. Pursuant to the regulations, plans and carriers must issue notices in a culturally and linguistically appropriate manner when 10 percent or more of the population residing in the claimant's county are literate only in the same non-English language. There are 255 counties in the U.S. that meet this threshold, with Spanish being the most prevalent language.

Health&Human Services (HHS) will make available written translations of the SBC template, sample language, and uniform glossary in Spanish, Tagalog, Chinese, and Navajo.

Modifications to the SBC Outside of Renewal - 60-Day Prior Notice Rule

If the group health plan or health insurance carrier makes a material modification to the SBC outside of renewal or reissuance (e.g., a mid-year plan design change) that would require a change in the SBC, the plan or carrier must provide notice of the modification to enrollees no later than 60 days prior to the date the modification will take effect. Notice must be provided in a form consistent with the requirements outlined above. This is a departure from current practice and will need to be addressed by employers as they respond to changing demands.


UNIFORM GLOSSARY OF HEALTH COVERAGE AND MEDICAL TERMS

A group health plan and insurance carrier offering group health insurance coverage must make a uniform glossary of health coverage and medical terms available to participants and beneficiaries, in either paper or electronic form. The glossary must be provided within 7 days of a request made by a participant or beneficiary.


PENALTIES

A group health plan or insurance carrier who willfully fails to provide the SBC to a participant or beneficiary is subject to a fine of up to $1,000 for each failure. A failure with respect to a participant or beneficiary constitutes a separate offense for purposes of assessing the fine.

The Department of Labor will issue separate regulations in the future describing the procedures for assessment of this fine.

Also, the Department of Treasury (IRS) may impose an excise tax of $100 per day per individual for each day that the plan fails to comply with the requirement. The amount can be reduced for failures due to reasonable cause and not willful neglect. These failures are reported on IRS Form 8928.


CONCLUSION

Employers will want to review this guidance and discuss the impact to their plans with carriers and TPAs. Compliance is required beginning on and after September 23, 2012, so employers will want to be mindful of when they hold open enrollment and when the plan year begins in order to satisfy the new disclosure requirement. Special attention may be needed for October and November renewals, where the plan year begins after the new effective date, but the open enrollment period may begin before that date.

For over 75 years, the divisions of USI Affinity have developed, marketed and administered insurance and financial programs that offer affinity clients and their members unique advantages in coverage, price and service. Our programs offer clients, from associations to financial institutions, the edge they need to both retain existing and attract new members and customers. As the endorsed provider of affinity groups representing over 20 million members, USI Affinity has the experience and know-how to navigate the marketplace and offer the most comprehensive and innovative insurance packages available.

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