Distributing the SBC

On February 14, 2012, the Federal Departments of Labor, Health and Human Services and Treasury (the “three agencies”) released final rules implementing a provision in the federal health care reform law that requires health plans to provide covered persons with a uniform summary of benefits and coverage (SBC).

Background

The Affordable Care Act (ACA) requires health plans to distribute an SBC document to all members who are insured under the plan. The SBC must “accurately describe the benefits and coverage under the applicable plan or coverage.” Included in that summary must be “uniform definitions of standard insurance terms.” The ACA tasks the three agencies with developing the regulations for compiling and providing the SBC. Initial regulations and guidance were proposed in August of 2011, with final regulations and guidance issued on February 14, 2012.

Summary

The SBC requirement in the ACA applies to group health plans but does not apply to HIPAA-excepted benefits. This means that it applies to medical coverage, mental health carve-out plans and stand-alone Health Reimbursement Accounts (HRAs), but not stand-alone dental and vision plans, Health Savings Accounts (HSAs) or most health Flexible Spending Accounts (FSAs). The SBC requirement applies equally to grandfathered and non-grandfathered, fully insured and self-funded plans.
 
The ACA requires that an SBC be provided to applicants, enrollees and policyholders or certificate holders. This includes the group plan sponsor, as well as any beneficiaries under the plan. The responsibility to provide the SBC is with both the health insurance issuer and the group health plan sponsor, but the requirement will be satisfied as long as one of those entities provides the SBC. Therefore, a plan sponsor with a fully insured plan will want to check with the issuer to see how the issuer intends to comply with the law. In the case of a self-funded group health plan, the plan sponsor or designated administrator of the plan will be responsible for providing the SBC to all insureds.

About the SBC

The ACA requires that the SBC include:

      • Uniform definitions of standard insurance and medical terms.
      • A description of coverage, including cost sharing, for each category of benefits.
      • The exceptions, reductions and limitations on coverage.
      • The cost-sharing provisions of the coverage, including deductible, coinsurance and copayment.
      • The renewability and continuation of coverage provisions.
      • A “coverage facts label” that sets forth examples to illustrate common benefits scenarios. The coverage facts label must include pregnancy and serious or chronic medical conditions.
      • A statement about whether the plan provides minimal essential coverage.
      • Contact information for questions and to obtain a copy of the actual policy.

        • The final regulations also require the inclusion of contact information for obtaining a list of network providers and for finding more information about prescription drug coverage. The final regulations have also delayed the requirement to provide information about minimal essential coverage until plan years beginning on or after January 1, 2014.

The initial proposed regulations separated the required disclosure into two documents, the SBC template and a glossary of insurance terms. Those two documents have remained in the final guidance with some modifications.
 
The SBC template and glossary can be accessed at the following websites:
 
Template: http://cciio.cms.gov/resources/files/Files2/02102012/blank-sbc-template-finalpdf.pdf
 
Glossary: http://cciio.cms.gov/resources/files/Files2/02102012/uniform-glossary-final.pdf
 
Additionally, a sample completed SBC, instructions for completing the SBC, and specific language for the “why this matters” section of the template can be found on the Department of Labor’s website at: http://www.dol.gov/ebsa/healthreform/.
 
If the plan’s terms cannot be described in the form of the template, then the plan must accurately describe its terms using its best efforts to do so in a manner that is as consistent with the format of the template as reasonably possible. The preamble to the regulations gives the example of a plan providing a different structure for provider network tiers or drug tiers than is contemplated by the template, or if the plan provides different benefits based on facility type, or if a plan provides different cost sharing based on participation in a wellness program.
 
Generally, the SBC must be sent upon application or enrollment and upon request. The table below outlines the specific timing applicable for each event.

Table: SBC Distribution Timing

SENDER RECIPIENT EVENT TIMING
Group health insurer Group health plan Application for coverage No later than seven (7) business days following receipt of the application. If there is any change to the information contained in the SBC before the first day of coverage, the issuer must update and provide a current SBC no later than the first day of coverage.
Group health plan and group health insurer Each participant and beneficiary Open Enrollment Must be provided along with written
application materials for enrollment. If the plan does not distribute written materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage. If there is any change to the information in the SBC between enrollment and the first day of coverage, an updated SBC must be provided by the first day of coverage.
Group health plan and group health insurer Special enrollees Enrollment outside open enrollment period Within 90 days of enrollment
Group health plan and group health insurer Group health plan, participants, beneficiaries Request for SBC Within seven (7) business days
Group health plan and group health insurer Each participant and beneficiary Renewal 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.1


1For a fully insured plan, if the contract of insurance has not yet been renewed within that 30-day period, the SBC must be provided within seven (7) business days of the issuance of the new contract or the receipt of written confirmation of the intent to renew, whichever is earlier.
 
The SBC must be provided only as part of the initial enrollment package. For renewals, the plan sponsor or issuer is only obligated to provide the SBC for the benefit package in which the participant or beneficiary is enrolled. Of course, SBCs must be provided upon request for whatever benefit package is requested. If a participant and multiple beneficiaries reside at the same mailing address, a single SBC will suffice as compliance with this requirement.

Electronic Distribution of the SBC

An issuer may provide the SBC to a plan sponsor via electronic format, if the format is readily accessible by the plan sponsor and the SBC can be provided in paper form free of charge upon request. If the electronic form is an internet posting, the issuer must also advise, in a timely manner, the plan sponsor in paper form or email that the documents are available on the internet and provide the internet address. The requirements for electronically providing the SBC to participants or beneficiaries are more burdensome. The SBC can be provided by email after obtaining the individual’s agreement to receive the SBC or other electronic disclosures by email. It can be provided by an internet posting if the entity providing it advises the individual in paper or email form (after obtaining agreement to receive disclosures by email) that the SBC is available at the applicable internet address.
 
SBCs cannot be provided electronically unless:

      • The format is readily accessible to the participant.
      • The SBC is placed in a location that is prominent and readily accessible to the participant.
      • The SBC is provided in an electronic form that can be electronically retained and printed by the participant.
      • The SBC is consistent in appearance, content and language with the requirements in the regulations.
      • The entity providing the SBC notifies the individual that the SBC is available in paper form without charge upon request.

When Do SBC Distribution Requirements Go Into Effect?

The requirement to provide the SBC had been scheduled to go into effect on March 23, 2012. However, the final regulations delayed the requirement. Consequently, plans are now required to provide the SBC as follows:

      • For any open enrollment for plan years beginning on or after September 23, 2012.
      • For new hires, special enrollees and upon request, beginning as of the first day of the plan year beginning on or after September 23, 2012.

The preamble to the regulations has also made it clear that while this regulatory guidance is “final” we can expect further tinkering with the SBC template in future years. Employers and insurers can rely on this guidance until further guidance supersedes it.

Glocal Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.