Final Rules on Summary of Benefits and Coverage

The Affordable Care Act requires insurers and plan administrators to provide a Summary of Benefits and Coverage (SBC) that describes the benefits and coverage available under a health plan in straightforward understandable language. Final regulations were issued on February 9, 2012, by the Departments of Labor (DOL), Health and Human Services (HHS) and Treasury (IRS) (collectively, the “Departments”), and were supplemented most recently with Qs & As on March 19, 2012. These final rules require that SBCs be provided on the first day of any open enrollment period that begins on or after September 23, 2012, and otherwise during plan years that begin after that date.

Generally, all group health plans subject to the Affordable Care Act (including grandfathered plans and plans that have obtained an HHS waiver of annual benefit limit restrictions), and the insurers of benefits under such plans, must comply with the SBC requirements or face monetary penalties. However, SBCs are not required for “excepted benefits,” such as:

a. dental and vision insurance coverage if a participant may elect whether to receive coverage and must pay an additional premium if coverage is elected;

b. most flexible spending accounts (FSAs) if offered alongside other medical coverage;

c. most health reimbursement arrangements (HRAs) with a maximum benefit not exceeding $500; and

d. other insurance coverage for a specified disease or illness, or hospital or other fixed indemnity insurance coverage, that is not coordinated with any exclusion under other available benefits.

During the first compliance year, the Departments will not impose penalties on plans and issuers that work diligently and in good faith to comply with the final regulations.

The plan administrator (and the insurer, for insured plans) must provide covered individuals with a written SBC, free of charge, and access to a uniform glossary of terms. Separately, HHS and DOL will post a glossary at www.HealthCare.gov and www.dol.gov/ebsa/healthreform/. A single SBC can be provided to a covered family, but a separate SBC must be provided to a dependent with a different address on file. On request of a plan providing insured benefits, the insurer must provide the plan administrator with an SBC describing the plan’s insured benefits.

The final regulations require that the SBC be provided in several instances:

• Upon application – where written materials for enrollment are distributed.

• By first day of coverage – if there is any change in the SBC that was provided upon application and before the first day of coverage.

• To special enrollees – no later than 90 days following enrollment.

• Upon renewal – during open enrollment if participants and beneficiaries are required to elect actively to maintain coverage during open enrollment, or if they may change coverage options.

• Upon request – as soon as practicable as but no later than 7 business days following the request.

The SBC must summarize important features and terms of the coverage choices, such as covered benefits, limitations and exceptions, cost-sharing, renewability and coverage continuation, examples of common benefit scenarios, and whom to contact for more information. Uniform definitions of standard insurance terms must be used, and an internet address must be provided that references network providers, prescription drug information and glossary terms. The federal SBC requirements are not superseded by any state insurance notice requirement, and insured plans generally must also comply with any state insurance notice requirement that is more extensive than the SBC requirements.

An SBC for a coverage option in which the individual is not enrolled is not required, unless requested.  The SBC must be printed in no less than 12-point font, understandable terminology, in a culturally and linguistically appropriate manner, and on no more than eight pages (four pages, front and back). Though it can be provided along with the summary plan description (SPD), providing the SPD does not satisfy the SBC requirement. Plans covering large numbers of individuals who are not proficient in English must provide non-English language versions. Plans with different tiers of coverage (e.g., employee vs. family) and other variable features (e.g., deductibles and co-pays) may be combined into a single SBC, and “add-on” features such as FSAs, HRAs and HSAs may be addressed in the SBC. The final regulations provide a template to assist with the preparation of the SBC.

Any material plan modification must be reflected in an SBC update. Changes made outside of open enrollment may become effective only after having provided at least 60 days’ notice. Otherwise, SBCs must be updated annually and provided with open enrollment materials.

FCE Benefit Administrators will be preparing SBCs for plans it administers, or working with applicable insurers to coordinate the preparation of the required SBC, all well in advance of the required deadline later this year. In the meantime, should you have any questions about these requirements, please contact your account manager.