(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post.)
So what’s included in Sec. 10101(b) of the Patient Protection and Affordable Care Act, concerning new reporting standards for health plans?
Within 12 months after enactment of the Patient Protection and Affordable Care Act, the Secretary of Health and Human Services has been ordered to develop standards that can be used by group health plans and health insurance issuers offering group or individual coverage in providing benefits summaries and coverage explanations that accurately explain the benefits and coverage provided under the plan. These summaries and explanations are to be provided to plan applicants and enrollees, as well as to policy or certificate holders.
Though the new standards would need to be developed within 12 months after the date of enactment, plans would have to start using these new standards within 24 months after the date of enactment.
Under the Act, the HHS Secretary must consult with the National Association of Insurance Commissioners (NAIC) and with a working group including consumer advocacy organizations, patient advocates, and others, as well as other qualified individuals, in developing the standards.
Language And Appearance. The Act imposes a 4-page length limit on the new summary of benefits and coverage. Also, the new document is to be presented in a “uniform format” that does not include print smaller than 12-point fonts.
According to Edward Fensholt, , and Mark Holloway, , senior vice presidents and directors of compliance services at Lockton Benefit Group, the four-page limit of the new summaries might be problematic. It has become common for ERISA plan administrators to simply issue the plan document itself to participants, and allow the document to double as the summary plan description (SPD), because it is difficult to summarize detailed information about covered services, eligibility, payment rates, exclusions and other matters. Also, courts have sometimes resolved perceived variations, between a summary and the actual plan document, in favor of the insured, even where the summary expressly says the actual plan document controls.
ERISA does not contain rules governing the length of SPDs.
In terms of language, the new summary of benefits and coverage is to be presented in a “culturally and linguistically appropriate manner.” The document must use terminology that is understandable by the average plan enrollee.
Presumably, all of these details will be clarified in regulations or other guidance.
Contents of new summaries. The summary of benefits and coverage must include the following:
- uniform definitions of standard insurance and medical terms (consistent with definitions to be developed by the HHS Secretary) so that health plan consumers can compare coverage and understand the coverage terms and any exceptions to the coverage terms;
- a coverage description, including cost sharing for (1) each of the categories of essential health benefits and (2) other benefits identified by the HHS Secretary;
- coverage exceptions, reductions, and limitations;
- cost-sharing provisions, including descriptions of deductibles, coinsurance, and co-pays;
- renewability and coverage continuation provisions;
- a “coverage facts label” that includes examples illustrating common benefit scenarios, such as pregnancy or chronic medical conditions, as well as any related cost-sharing (all based on recognized clinical practice guidelines);
- a statement as to whether the plan (1) provides minimum essential coverage and (2) ensures that its share of the total allowed benefit cost under the plan is no less than 60% of those costs;
- a statement that the outline is a policy summary and that consumers should consult the plan’s coverage document to determine the plan’s governing contractual provisions; and
- a contact number for additional questions and an Internet website where actual plan policies and certificates can be reviewed and obtained by consumers.
Timing and compliance issues. Within 24 months after the date of enactment, entities covered by the standards, such as group health plans, must provide, before any enrollment restrictions, a summary of benefits and coverage explanation under these new rules. The summary must be provided to the following:
(1) an applicant at the time of application;
(2) an enrollee before enrollment or re-enrollment; and
(3) a policyholder or certificate holder at the time of policy issuance or certificate delivery.
Entities required to provide the new summary of benefits and coverage can use either paper or provide the information inelectronic form
Covered entities. The entities required to provide the new summary of benefits and coverage include the following:
- health insurance issuers, including group health plans that are not self-insured, offering coverage within the
- for self-insured group health plans, the plan sponsor or designated plan administrator (as defined in ERISA Sec. 3(16)).
Modification notices. Whenever a group health plan or health insurance issuer makes any material modification to plan terms or coverage under ERISA Sec. 102 that is not reflected in the most recent summary of benefits and coverage, the plan or issuer must provide notice of the modification to enrollees. This notice must be provided at least 60 days before the effective date of the modification.
Preemption issues. According to the Act, the new standards for the summary of benefits and coverage preempt any state-provided standards regarding benefit and coverage summaries that provide less information to consumers than what is required to be provided by this section.
According to Messrs. Fensholt and Holloway, one potentially disturbing aspect of the Act, for insurers, is a statement that state laws governing the content of summaries might still apply, to the extent they require more information than does the Act. It is unclear how the “four-page maximum” requirement would continue to apply where a state law requires substantially more information be included in a summary. Perhaps, as appears to be the case with SPDs, the new summary will be provided in addition to the state-required document.
Penalties for failure to provide summary. A group health plan or health insurance issuer covered by the summary of benefits and coverage rules faces penalties for willfully failing to provide required information. Under the Act, a fine of up to $1,000 can be imposed for each failure. Note that a failure to provide a summary of benefits and coverage is considered a separate offense for each enrollee, subject to an additional fine.
Standard definitions. Via regulations, standards for the definitions of terms used in health insurance coverage will be developed, including insurance-related terms and medical terms. Insurance-related terms that are to be defined include such terms as premium, deductible, co-insurance, and co-payments, among others. Medical terms that will need to be defined include such terms as hospitalization, prescription drug coverage, and durable medical equipment.
For both insurance-related terms and medical terms, the HHS Secretary has the authority to define other terms considered important to consumers for purposes of plan comparison and understanding.
Periodic review and updates. Standards developed by the HHS must be reviewed and updated periodically by the HHS. The Act does not specify what “periodically” means.
Application to grandfathered health plans. This provision is applicable to grandfathered health plan.
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