Friday, July 20, 2012

Learn the ABCs of SBCs before open enrollment

Now that the U.S. Supreme Court has upheld the Affordable Care Act (ACA), don't forget that the requirement for the provision of Summaries of Benefits and Coverage (SBC) pops up soon, starting with enrollment periods beginning on or after September 23, 2012. According to final regulations issued in February 2012 by the IRS, DOL, and HHS (77 FR 8668), group health plans and health insurance issuers in the group and individual markets must provide participants and beneficiaries with SBCs and a uniform glossary. There's a $1,000 penalty for the failure to comply. Sixty days' advance notice of any changes to the SBCs must also be provided.

Speakers from the law firm of Trucker Huss who presented a webinar on July 11 (Health Care Reform After The Decision - What Should Employers Be Doing NOW?) have pointed out that SBCs must be provided at enrollment for each and every benefit package offered for which participants or beneficiaries are eligible. Therefore, they said, unless all of a company’s employees are eligible for all plans, employers should not be tempted to put the information for all plans on just one SBC for the sake of convenience.

“Under the SBC regulations, as an employee, I am entitled to an SBC for my enrolled plan but I must also be able to view the SBC for any plan I am eligible for. In corporations with multiple plans and many employees, it is an enormous logistical and communications challenge,” said Kim Buckey, principal, Compliance Communications Practice, HighRoads.

Tasks for employers. In the next few weeks HighRoads recommends employers focus on these four key tasks when it comes to SBCs:

1. Evaluate your plan design – evaluate what plans you currently have and where you can consolidate SBCs.

2. Decide who will produce your SBCs – time is of the essence. Figure out who will handle your SBCs and who will provide the data needed to complete them.

3. Create your communication plan – The SCOTUS decision was a landmark case. Employees will have many questions, and clear, informed communication to employees is essential. Be sure to provide some context — explain what the employee should do with the SBC and why it’s important now (and why it will be in the future).

4. Maximize your distribution methods – SBCs follow ERISA electronic distribution regulations – you will need to distribute and track these documents. And, if employees do not regularly have access to a computer as part of their jobs, you must obtain their consent to receive the materials electronically. Using an automated delivery and tracking method is the optimal way to meet compliance regulations and most importantly, ensure your employees are receiving the needed information.

You may have to issue SBCs for your health FSAs. According to the February 2012 final regulations, SBCs do not have to be issued for health plans that constitute excepted benefits. Therefore, you don't have to distribute them for stand-alone dental or vision plans. You also don't have to distribute them for health FSAs that constitute excepted benefits (see IRS Reg. Sec. 54.9831-1(c)(3)(v) for instructions regarding how to calculate this). If your health FSA isn't excepted, though, you have to issue an SBC for that, too.

The same final regulations state that the plan administrator is held responsible for providing the SBCs. However, they also state that, "if either the plan or issuer provides the SBC, both will have satisfied their obligations." Also, they state that the IRS, DOL, and HHS expect plans and issuers to contract together for the responsibility for providing SBCs. The Trucker Huss speakers also recommended that employers take ownership of the ACA’s SBC rules. Do not assume, they said, that your insurance carrier will send out SBCs, although employers are certainly free to contract with carriers to do so.

SPD cannot stand in for elements of SBC. An SBC is not permitted to substitute a reference to the SPD or other document for any content element of the SBC. However, an SBC may include a reference to the SPD in the SBC footer. (For example, "Questions: Call 1-800-[insert] or visit us at www.[insert].com for more information, including a copy of your plan's summary plan description.")

The ACA 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 (Act Sec. 1001(5) of the ACA, adding PHSA Sec. 2715(b)(1)). (See also our June 18, 2012 blog, entitled "SBC coverage example calculator released under ACA").

A Summary of Benefits and Coverage Template and Uniform Glossary are available on the website of The Center for Consumer Information & Insurance Oversight, at

The SBC must be provided on paper, and free of charge, and must include the following 12 elements:

uniform definitions of standard insurance terms and medical terms so that consumers may compare health coverage and understand the terms of (or exceptions to) their coverage, in accordance with guidance as specified by the Secretary;

a description of the coverage, including cost sharing, for each category of benefits identified by the Secretary in guidance;

the exceptions, reductions, and limitations of the coverage;

the cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations;

the renewability and continuation of coverage provisions;

coverage examples;

with respect to coverage beginning on or after January 1, 2014, a statement about whether the plan or coverage provides minimum essential coverage as defined under Code Sec. 5000A(f) and whether the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage meets applicable requirements;

a statement that the SBC is only a summary and that the plan document, policy, certificate, or contract of insurance should be consulted to determine the governing contractual provisions of the coverage;

contact information for questions and obtaining a copy of the plan document or the insurance policy, certificate, or contract of insurance (such as a telephone number for customer service and an Internet address for obtaining a copy of the plan document or the insurance policy, certificate, or contract of insurance);

for plans and issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers;

for plans and issuers that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage;

an Internet address for obtaining the uniform glossary, as well as a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies are available.

For a comprehensive analysis of the ACA, along with additional information on health reform and other developments in employee benefits, just click here.


Post a Comment