Section 2715 of the Public Health Service Act, as amended by the Patient Protection and Affordable Care Act (“PPACA”), required the Departments of Health and Human Services, Labor, and the Treasury (“Departments”) to develop standards to guide group health plans and health insurance issuers in compiling summaries to better inform plan participants of the benefits and coverage under each particular plan. These standards were to also include standard definitions of terms used in health insurance coverage. The Departments issued their final regulations promulgating these standards on February 14, 2012.
Plans and issuers must issue Summaries of Benefits and Coverage (SBCs) to participants and beneficiaries who enroll or re-enroll through an open enrollment period starting with the first day of the first open enrollment period beginning on or after September 23, 2012. If a plan follows the calendar year and begins fall open enrollment after this date, an SBC must be prepared for distribution for that open enrollment period.
For those participants and beneficiaries who enroll in coverage other than through an open enrollment period (including newly eligible employees), an SBC must be issued no later than the first day of the first plan year beginning on or after September 23, 2012.
Issuers must also provide SBCs to plans and must begin providing SBCs to consumers on the individual market starting September 23, 2012.
The regulations require three new documents or disclosures: 1) Summary of Benefits and Coverage; 2) Notice of Modification; and 3) Uniform Glossary.
Summary of Benefits and Coverage.
The PPACA, as enacted on March 23, 2010, requires group health plans and health insurance issuers to provide an SBC that “accurately describes the benefits and coverage” under a group health plan or insurance coverage. SBCs communicate certain coverage and benefit information to plans and plan participants in a uniform format not to exceed four double-sided pages. An SBC may be provided as a stand-alone document or as a part of the summary plan description.
Employers must pay attention to these new requirements because employers are often named as the plan administrator of their health plan. The plan administrator is responsible for compliance with the SBC distribution requirement and providing an SBC to participants and beneficiaries free of charge. If an employer has not yet received assistance from its insurance carrier or administrative service provider (for self-insured plans), it should contact its carrier or a member of the Fraser Stryker Patient Protection and Affordable Care Act & Health Care Reform Response Team as soon as possible in order to meet the approaching deadlines.
SBCs provided to group health plans. A heath insurance issuer offering group health insurance must provide an SBC to a group health plan upon application for coverage, upon renewal, upon request, and on the first day of coverage if there are changes to the SBC contents between application and coverage commencement.
SBCs provided to participants or beneficiaries. A group health plan and health insurance issuer offering group health insurance coverage must provide an SBC to a participant, beneficiary, or special enrollee for each benefit package offered by the plan or issuer for which the participant or beneficiary is eligible. The SBC must be provided with written application materials, by the first date the participant is eligible to enroll in coverage, on the first day of coverage if changes have been made between the initial disclosure and the commencement of coverage, upon renewal, and upon request.
SBCs provided to those seeking individual coverage. Issuers offering individual coverage must provide an SBC to an individual upon receiving an application for a policy or upon a request for such information made by the individual.
Only one entity need actually provide the SBC, to avoid duplication. SBCs are not required to be automatically provided upon renewal of benefit packages in which the participant is not enrolled.
Required Contents. The regulations require an SBC to include thirteen elements in the uniform format provided by the Departments. The Departments have provided a sample template, a sample completed SBC, and instructions for completing the form.
The thirteen elements include the following:
- Uniform definitions of standard insurance terms
- Description of coverage and cost sharing for each category of benefits
- Exceptions, reductions, and limitations of the coverage
- Cost-sharing provisions of the coverage
- Renewability and continuation of coverage provisions
- Coverage examples
- A statement regarding whether the plan provides minimum essential coverage
- A statement that the SBC is only a summary and that the plan document, policy, certificate, or contract of insurance should be consulted
- Contact information for questions and to obtain a copy of the plan document
- An internet address for obtaining a list of network providers
- An internet address for obtaining information on prescription drug coverage
- An internet address and phone number for obtaining the Uniform Glossary
- Summary or internet address for coverage provided outside the United States.
Notice of Modification
If a health insurance issuer or group health plan makes any material modifications to any terms that would affect the content of the SBC, and those changes are not reflected in the most recently provided SBC, the plan or issuer must provide notice of the modification to enrollees at least 60 days before the modification’s effective date. This notice need not be given if the modification occurs with a renewal or reissuance of coverage.
Group health plans and health insurance issuers offering group health insurance coverage must make available to participants and beneficiaries a uniform glossary containing uniform definitions of health coverage and medical terms. The glossary must be delivered within seven days of a request by a participant. The Departments have provided an example uniform glossary.
A group health plan or insurer that willfully fails to provide an SBC, a notice of modification, or a uniform glossary to a plan, participant, or beneficiary could be fined up to $1,000. Each plan, participant, or beneficiary who did not receive the appropriate information is deemed a separate offense.
Fraser Stryker is a leader in tax and employee benefits law. Attorneys in the Firm’s Taxation and Employee Benefits Practice Groups advise individuals, business entities, governments, and nonprofit/tax-exempt organizations on a wide variety of tax and employee benefits matters and transactions. Fraser Stryker works with employers to implement and maintain employee benefit plans that help attract and retain top talent. For more information on the summary of benefits and coverage requirements, please contact Nicole R. Konen.
This article is provided by Fraser Stryker for general informational purposes and is not intended to be and should not be construed as legal advice on any specific facts or circumstances.
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