The agencies responsible for enforcing the Affordable Care Act (the "ACA") published final regulations in February that prescribe the distribution, appearance, content, form and language requirements for the SBC. Last month, the agencies issued guidance in the form of FAQs that aims to answer some of the questions raised to date about the SBC requirements. In the FAQs, the agencies state that their approach to implementation will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others who are working diligently and in good faith to understand and comply with the new law.
The effective date of the SBC requirements has been delayed from March 23, 2012 to the following:
- With respect to participants and beneficiaries who enroll or re-enroll though an open enrollment period (including re-enrollees and late enrollees), the first day of the first open enrollment period that begins on or after September 23, 2012.
- With respect to participants and beneficiaries who enroll in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the first day of the first plan year that begins on or after September 23, 2012 (i.e., January 1, 2013 for calendar year plans).
Timing of SBC Distribution
A group health plan must generally provide an SBC for each benefit package offered by the plan for which the applicable participant or beneficiary is eligible as follows:
At Enrollment — To a participant or beneficiary as part of any written enrollment materials that are distributed for enrollment. If the plan or issuer does not distribute written enrollment materials (in either paper or electronic form), no later than the first day the participant is eligible to enroll in coverage for the participant or any beneficiary. An SBC must be provided for each benefit package for which the participant or beneficiary is eligible.
To a special enrollee, within 90 days after enrollment.
If there is any change to the information required to be in the SBC before the first day of coverage, no later than the first day of coverage.
- Upon Renewal — If a participant or beneficiary is required to affirmatively elect to maintain coverage during open enrollment, or has an opportunity to change coverage options during open enrollment, no later than the date the open enrollment materials are distributed. If renewal is automatic (i.e., there is no requirement to renew and no opportunity to change coverage options), no later than 30 days prior to the first day of the new plan year.1 An SBC need only be provided automatically upon renewal with respect to the benefit package in which the participant or beneficiary is enrolled. However, an SBC must be provided with respect to another benefit package for which the participant or beneficiary is eligible, but not enrolled, upon request (i.e., as soon as practicable, but in no event later than seven business days following the request).
- Upon Request — To a participant or beneficiary upon request, as soon as practicable, but in no event later than seven business days following the request.
The plan administrator (typically, the employer sponsoring the group health plan) is responsible for providing the SBC. With respect to insured plans, the issuer is also responsible for providing the SBC. If, however, the plan administrator or the issuer provides a timely and accurate SBC, the SBC requirement is satisfied for both parties
Appearance and Content of SBC
The SBC must be provided using the template prescribed by the agencies and must include the following information:
- uniform definitions;
- a description of the coverage;
- the exceptions, reductions and limitations of the coverage;
- the cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations;
- the renewability and continuation of coverage provisions;
- for coverage beginning on or after January 1, 2014, a statement about whether the plan provides minimum essential coverage and whether the plan's share of the total allowed costs of benefits meets applicable requirements;
- a statement that the SBC is only a summary and that the plan document should be consulted to determine the governing contractual provisions of the coverage;
- contact information for questions and obtaining a copy of the plan document;
- for plans that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers;
- for plans that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage;
- an Internet address for obtaining the uniform glossary,2 as well as a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies are available; and
- coverage examples that illustrate the benefits provided under the plan for common benefit scenarios (i.e., having a baby and managing type 2 diabetes).
Note: The final regulations do not require premium or cost of coverage information to be included in the SBC. This differs from the proposed regulations published on August 2, 2011.
The SBC may not exceed four double-sided pages in length and may not use print smaller than 12-point font.
The FAQs indicate that, to the extent a plan's terms that are required to be described in the SBC template cannot reasonably be described in a manner consistent with the template and instructions, the plan or issuer must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still consistent with the instructions and template format as reasonably possible.
The SBC may be provided as a stand-alone document or in combination with other summary materials (e.g., an SPD), if the SBC information is (i) prominently displayed in its entirety at the beginning of the materials (e.g., immediately after the Table of Contents in an SPD) and (ii) provided in accordance with the applicable timing requirements described above.
The SBC may be provided in paper form. Alternatively, the SBC may be provided electronically (e.g., via email or Internet posting) if:
- With respect to participants and beneficiaries covered under the plan, the requirements of the Department of Labor's disclosure regulations are met.3
- With respect to individuals who are eligible but not enrolled for coverage, (a) the format is readily accessible (e.g., in an html, MS Word or pdf format), (b) the SBC is provided in paper form free of charge upon request, and (c) in a case in which the electronic form is an Internet posting, the plan or issuer timely advises the individuals in paper form (e.g., postcard) or email that the documents are available on the Internet, provides the Internet address and notifies the individuals that the documents are available in paper form upon request. The FAQs provide model language that satisfies this notice requirement.
The SBC must be provided in a "culturally and linguistically appropriate manner." This requires, with respect to any SBC sent to an address in a county in which ten percent or more of the population is literate only in the same non-English language, that (i) the plan have language services available, (ii) the SBC include a statement in the non-English language clearly indicating how to access these language services and (iii) the SBC is provided in the non-English language upon request.
Advance Notice of Modifications
If a mid-year material modification is made to the plan that would affect the content of the SBC, enrollees must be notified of the modification no later than 60 days prior to the date on which the modification will become effective. This requirement does not apply to modifications that occur in connection with a renewal. The notice may take the form of a separate notice describing the modification or an updated SBC.
A group health plan that willfully fails to provide the information described above is subject to a fine of up to $1,000 for each such failure. A failure with respect to each participant or beneficiary constitutes a separate offense. The failures are also subject to the excise tax applicable to group health plans under Internal Revenue Code Section 4980D.
1 With respect to an insured plan, if the policy/certificate/contract of insurance has not been issued or renewed before such 30-day period, the SBC must be provided as soon as practicable but in no event later than seven business days after issuance of the new policy/certificate/contract of insurance, or the receipt of written confirmation of intent to renew (whichever is earlier).
2 The uniform glossary of health insurance and medical terms that includes uniform definitions for health-coverage-related terms and medical terms (e.g., deductible, copayment) is available at www.dol.gov/ebsa/healthreform and www.cciio.cms.gov. The uniform glossary may not be modified and must be made available to participants and beneficiaries upon request within seven business days.
3 Those regulations include a safe harbor for disclosure through electronic media to participants who have the ability to effectively access documents furnished in electronic form at an location where the participant is reasonably expected to perform duties as an employee and with respect to whom access to the employer's or plan sponsor's electronic information system is an integral part of those duties. Under the safe harbor, other individuals may also opt into electronic delivery.© 2013 Schiff Hardin LLP