The Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Internal Revenue Service (IRS) (the agencies) have released proposed regulations with respect to the disclosure of the summary of benefits and coverage (called SBC) by a group health plan or health insurance issuer. The regulations would carry out the requirements of section 2715 of the Public Health Service Act as amended by the Affordable Care Act.¹ Under the law and the proposed regulations, group health plans and health insurance issuers would have to provide the SBC to enrollees, applicants, and policyholders at specified times, free of charge, or face a possible monetary penalty of up to $1,000 per person.

Applicability Date: The agencies have proposed March 23, 2012, as the date that the regulations would take effect if adopted as proposed.

Action to Take: If Plan sponsors wish to provide comments, they need to do so by October 21, 2011. Comments can be sent to any of the three agencies. For regular mail, the address for HHS is Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9982-P, P.O. Box 8016, Baltimore, MD 21244-1850. Plan sponsors should also begin to consider how they would comply with the regulations.

Background

Section 2715 of the Public Health Service Act as amended by the Affordable Care Act provides that the agencies are to develop standards for use by a group health plan and a health insurance issuer in compiling and providing a summary of benefits and coverage (SBC) that "accurately describes the benefits and coverage under the applicable plan or coverage." Section 2715 provides that, not later than 24 months after the date of enactment of the ACA (i.e., March 23, 2012), group health plans and health insurance issuers shall provide a summary of benefits and coverage. Penalties apply to the plan and/or the health insurance issuer for each failure to provide such summary.

What Must be Included in the Summary of Benefits and Coverage Documents

HHS has accepted the NAIC recommended template for the disclosure of the summary of benefits and coverage, as well as a uniform glossary. The content of the SBC is to include nine items specified by the law, which have been incorporated into the template. The completed template would include coverage examples, which are discussed further below. The NAIC template includes four items that are not found in the list specified by the law. Three of these items deal with an Internet address (or similar contact information). The fourth one is the inclusion of the premiums or cost of coverage. The agencies asked for comments on the inclusion of the premiums or cost of coverage.

The group health plan or heath insurance issuer must include in every distribution of the SBC:

1) Summary of benefits in the standard template format
2) Three required examples²
3) Glossary of Terms

Conceptually, because there is a standard template, an enrollee will be able to compare the benefits and costs of policies or benefit packages. The template has certain requirements as to the font size, length, use of standard terms, and the manner of presentation. A link to a completed sample template follows:

http://www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf

A link to the instructions for completing a template for a group policy is:

http://www.dol.gov/ebsa/pdf/SBCInstructionsGroup.pdf

As one of the required disclosures, the template includes coverage examples that illustrate the benefits provided under each of three scenarios: normal pregnancy and delivery, breast cancer and managing diabetes. Given the hypothetical costs set by HHS to facilitate comparison of coverage, the plan would have to determine how much the participant would pay and enter the numbers in the coverage examples.

Cheiron Observation: Plans should consider how clear it will be to participants that the hypothetical costs may differ significantly from actual costs, and make appropriate comments to the agencies.

How the SBC Must be Distributed

The proposed regulations require that the SBC be a stand-alone document. However, the agencies have invited comments as to how the SBC might best be coordinated with the Summary Plan Description and other group health plan disclosure materials.

The SBC can be furnished electronically but the participant can request a paper version.

When the SBC Must Be Provided

The distribution requirements begin March 23, 2012, regardless of plan year or type of plan.

Cheiron Observation: Since the agencies specifically requested comments on the ability to implement by March 23, 2012, plans should consider the practicality of this requirement in the context of their own plan schedule and potential plan updates.

Under the proposed regulations, there are rules as to when an SBC must be provided. A group health insurance issuer must provide the SBC to a group health plan (not the individual participants) in accordance with the following:

(A) Upon request for information, within seven days following the request;
(B) Upon applying for insurance, within seven days;
(C) Before the coverage is offered, if there is any change,
(D) When renewal materials are issued (upon distribution of materials if a written application is required for renewal); and
(E) If an automatic renewal, no later than 30 days prior to the renewal date.

A group health plan (and a group health insurer) must provide an SBC to a participant or beneficiary in accordance with the following:

(A) For each benefit package offered for which the participant or beneficiary is eligible;
(B) As part of any written application materials that are distributed for enrollment, or, if the plan does not distribute written application materials for enrollment, no later than the first date the participant is eligible to enroll in coverage;
(C) For any change in the required SBC information before the first date of coverage, a current SBC before the first day of coverage;
(D) To special enrollees, e.g., COBRA or qualifying dependent event, within seven days of a request for enrollment pursuant to a special enrollment right;
(E) If the participant or beneficiary is required to renew in order to maintain coverage, (1) no later than when materials are distributed for making a written application for renewal, or (2) if an automatic renewal, no later than 30 days prior to the first day of the new plan year; and
(F) Upon request within seven days.

Rules to Prevent Duplication

The proposed regulations contain three rules that are intended to prevent or limit unnecessary duplication of issuing the SBC with respect to group health coverage:

(A) An entity required to provide an SBC to an individual satisfies the requirement if another party provides the SBC (for example, the plan will satisfy the requirement if the insurance issuer provides a timely and complete SBC to the individual);
(B) If a participant and beneficiaries are known to reside at the same address, only one SBC needs to be sent to that address. (However, if a beneficiary's last known address is different, a separate SBC is required.)
(C) For a group health plan that offers multiple benefit packages, the plan is required to provide a new SBC automatically upon renewal only with respect to the benefit package in which a participant or beneficiary is currently enrolled. (However, an SBC can be requested for other benefit packages, and must be provided in accordance with the rules above.)

Cheiron Observation: Plans will have to decide whether they want to rely upon the health insurance issuer to provide the SBC for those packages that are insured. The agencies anticipate contractual arrangements between issuers and plans.

Advance Notice of Material Modifications

Last December, the agencies postponed the 60-day advance notice of material modifications until plans were required to provide the SBC. Under the proposed regulation, the date is now March 23, 2012. The new regulation includes additional details about the 60-day advance notice. It can be satisfied either by a separate notice describing the material modification or by providing an updated SBC reflecting the modification. The 60-day notice is not required in connection with a renewal of coverage.

Cheiron Observation: It is not clear whether notice would have to be given 60 days before a change that takes place on or shortly after March 23, 2012.

Cheiron consultants can assist with the analysis of the effects of providing the SBC to participants and beneficiaries in your plan.

¹The regulations were jointly issued by HHS, the IRS, and the DOL under the sections of law for which the agencies have responsibility.

²The number of required examples can be increased to six, but the agencies have stopped at three for now.