August 31, 2011

Comments Requested on Draft Template for the Uniform Summary of Health Benefits

The Departments of Labor, Treasury and Health and Human Services (HHS) recently released a long-awaited draft template of a new uniform Summary of Benefits and Coverage (SBC) required by the Affordable Care Act.¹ Once the SBC is released in final form, group health plans and health insurers will be required to use it to provide participants with a summary of the plan’s benefits, exclusions and cost-sharing requirements.

The draft SBC template was developed by the National Association of Insurance Commissioners (NAIC) and was released by the Departments along with a proposed rule detailing what these summaries must include, to whom they must be provided, and when.² The Departments propose that this template be used beginning March 23, 2012, but request comments on the feasibility of this time frame.

The purpose of the new SBC is to allow individuals to easily compare health insurance options when shopping for or enrolling in group and individual health coverage. Each SBC would describe only one plan or policy, and group health plans with multiple benefit options would prepare one SBC for each option. The new information is meant to enable consumers to better understand their coverage, easily compare options presented in different SBCs and make better coverage decisions. This is designed to lead to a more efficient, competitive health insurance market.

The relevance of the SBC with respect to employment-based plans is less clear. In fact, the Departments have requested comments on ways that the SBC might be coordinated with other group health plan disclosure materials (e.g., summary plan descriptions and open-enrollment materials) to communicate effectively with participants and dependents about their coverage and make it easy for them to compare coverage options, while also avoiding undue cost or burden on plan sponsors.

Comments on the proposed rule and the template are due by October 21, 2011. While the template does not need to be used for the 2012 open-enrollment season conducted this fall, plan sponsors should review it now to determine whether they wish to comment on the proposal.

Responsibility for Providing the SBC

The proposed rule requires group health plans and health insurance issuers to provide an SBC for each “benefit package” for which a participant or beneficiary is eligible, without charge. In the case of a self-insured group health plan, the SBC must be provided by the plan sponsor or plan administrator. Similar to existing rules applicable to providing certificates of creditable coverage under the Health Insurance Portability and Accountability Act (HIPAA), the regulations permit plan sponsors, administrators and insurers to allocate the responsibility for providing the SBC among the responsible entities, as long as the SBC is timely and otherwise compliant. Consequently, for plans with insured benefits, an insurer’s timely provision of a compliant SBC to participants and beneficiaries would satisfy the plan’s obligation to provide one.

The SBC must be provided to both participants and beneficiaries. However, if both are known to reside at the same address, providing one SBC to that address will be sufficient. In addition, health insurance issuers must provide a SBC to a group health plan or plan sponsor upon application or request for information about health coverage.

Plans that provide HIPAA “excepted benefits” (such as limited-scope dental or vision benefits³) are not required to provide the SBC with respect to those benefits.

Form and Content of the SBC

Under the proposed rule, the SBC would be a stand-alone document, which may be as long as four double-sided pages (for a total of eight pages). The template developed by NAIC is six pages, but once completed, it will likely come closer to filling the allowed pages. For plans with multiple benefit packages, each SBC would describe just one benefit package.

Generally, the SBC must be provided on paper. Plan sponsors could instead provide the SBC to participants electronically if they follow the Department of Labor’s existing rules on electronic disclosures. Those rules generally require that participants have the ability to access electronic documents at their workplace when access to an electronic information system is an integral part of their duties, or give prior consent to electronic distribution.

The text box below lists what information SBCs would have to include. Comments are requested on these elements, particularly whether premium information should be included, and if so, to what extent it should reflect individual costs or include employer contributions, and how different tiers of coverage would be included.

What the Summary of Benefits and Coverage Must Include
The SBC must include all of the following: Uniform definitions of standard insurance terms and medical terms, A description of the coverage, including cost sharing, for each category of benefits shown in the template, The exceptions, reductions and limitations on coverage, The cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations, The renewability and continuation of coverage provisions, Coverage examples that illustrate common benefits scenarios (including pregnancy and serious or chronic medical conditions) and related cost sharing based on recognized clinical practice guidelines,* For coverage beginning January 1, 2014 or later, a statement about whether the plan provides minimum essential coverage as defined under the Affordable Care Act, A statement that the SBC is only a summary and that the plan document, policy, or certificate of insurance should be consulted to determine the governing contractual provisions of the coverage, A contact number to call with questions and an Internet web address where a copy of the plan document or certificate of coverage can be reviewed and obtained, An Internet address to obtain a standard four-page Glossary of Health Insurance and Medical Terms, also developed by NAIC,* For plans with networks, an Internet address for obtaining a list of providers, For plans with prescription drug coverage, an Internet address for obtaining information on that coverage, Premiums (or in the case of a self-insured plan, the cost of coverage), and For plans in counties where at least 10 percent of the population is literate in only the same non-English language, a statement that the plan will provide a written translation upon request.
* The proposed template requires information about having a baby, treating breast cancer, and managing diabetes, but the Departments may require up to six examples in the future. Based on the template, it appears that HHS will supply cost information using national averages, and the plan must simulate how claims would be processed by determining the cost sharing and limits or exclusions that would apply under each scenario. This information will be relevant to whether the individual satisfies the mandate to have coverage in place and to whether the individual might be eligible for federal subsidies to purchase coverage through a state Exchange. * The glossary is available on the Department of Labor's website.

Although intended as a stand-alone document, the Departments request comments on whether they should allow plan sponsors to incorporate the SBC into a plan’s summary plan description (SPD) provided the SBC is intact and prominently displayed at the beginning.

Timing of Distribution

It is not clear when plan sponsors must distribute the first of these annual forms because the proposed rule specifies that it applies beginning March 23, 2012, rather than the plan year beginning on or after March 23, 2012. If the Departments retain the March 23, 2012 date, then it appears that the SBC would have to be prepared with enrollment materials for plan years beginning after that date. The SBC must be distributed at various times, as noted below:

At Open Enrollment The SBC would have to be provided as part of any written application materials that are distributed in connection with enrollment, for example, an annual open-enrollment guide. For plan sponsors that do not distribute enrollment materials, the SBC would have to be distributed no later than the first date the participant is eligible to enroll.

30 Days Before the Start of Each Plan Year For plan sponsors that do not require annual enrollment, the SBC would have to be provided annually no later than 30 days prior to the start of the plan year.

At Special Enrollment For special enrollees under HIPAA (e.g., when a participant seeks to add a new spouse) the SBC would have to be provided within seven days of a request for special enrollment.

Upon Request The plan sponsor would also provide the SBC upon request, as soon as practicable, but in no event later than seven days following the request.

For plans that offer multiple benefit packages at open enrollment, it is sufficient to provide the SBC for the benefit package in which the participant is enrolled. SBCs for other benefit packages would have to be provided if requested.

Adaptability of the Template

While the Departments acknowledge that the template was drafted for use by insurers and may need to be adapted to accommodate other types of plans (e.g., plans with multiple, tiered provider networks), in general, the Departments propose that the templates be used as is. For example, while the Affordable Care Act merely specifies the use of 12-point font, the instructions require a specific font (Times New Roman) and require plans to replicate the formatting, bolding and colors (or shading) exactly.⁴ The instructions dictate what must be on the first page and at the start of the second page and do not allow plan sponsors to change the order of the rows. In addition, there are specific answers that must be provided in the “Why This Matters” column, the column that explains, for example, what it means if a plan has a deductible. As a result, other than changing some of the terminology (“plan year” instead of “policy period” and “plan” instead of “insurer”) and allowing plan sponsors to use grayscale instead of colors, it appears that plan sponsors would need to use the form as is. The Glossary would have to be distributed using the terminology and format specified by the Departments and could not be changed by a plan sponsor.⁵

Advance Notice of Changes

The Affordable Care Act requires plan sponsors to provide participants with 60 days’ advance written notice of any material modification to the information provided in the SBC. The proposed rule would limit the requirement to provide 60 days’ advance notice of material modifications to mid-year changes that affect the content of the SBC. A material modification could include an enhancement of coverage, a reduction in coverage, or more stringent requirements for receipt of benefits. Changes that would take effect at the start of a plan year would be reflected in that plan year’s SBC, which, as noted above, would be provided with open enrollment materials or, if the plan does not conduct open enrollment, 30 days before the start of the plan year.

Penalties

The regulation provides that a plan sponsor or health insurance issuer that willfully fails to provide the SBC is subject to a fine of not more than $1,000 for each failure. The penalty could be assessed separately for each individual who does not receive a compliant SBC. The Departments of Labor and Treasury expect to issue future guidance about potential additional penalties of up to $100 per day.

Implications for Plan Sponsors

Plan sponsors should begin to familiarize themselves with the proposed template as significant changes to the NAIC-recommended documents are unlikely. Plan sponsors should do the following:

Determine which plans must provide a SBC, and for which benefit packages.

Review the SBC template and instructions, as well as the model glossary and coverage examples.

Compare the SBC template to existing plan documents, summary plan descriptions, and enrollment materials to determine whether the SBC template could be used with existing documents and whether any conflict in language, definitions, or message to participants would arise.

If fully insured, discuss with the insurer who will provide the SBC to plan participants and beneficiaries, and when.

If the plan holds open enrollment, determine whether the SBC can be incorporated into existing enrollment materials, or should be provided separately.

As noted at the beginning of this Capital Checkup, plan sponsors that wish to submit comments on the proposed template and process need to do so by October 21, 2011.

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As with all issues involving the interpretation or application of laws and regulations, sponsors of group health plans should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related regulations. The Segal Company can be retained to work with plan sponsors and their attorneys on compliance issues and participant communications.

1: The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
2: This proposed rule was published in the August 22, 2011 Federal Register. A companion document, called a Solicitation of Comments, also published on August 22, includes the actual draft template and instructions. The draft template and detailed instructions for completing it are also posted in full-page format on the Department of Labor’s website under “NAIC Documents." A fact sheet discussing the new template is on the healthcare.gov website. (Return to the Capital Checkup.)
3: For more information about these excepted benefits, see the December 2010 issue of The Segal Company’s Health Care Reform Insights, “Impact of the Affordable Care Act on Dental and Vision Benefits.” (Return to the Capital Checkup.)
4: The template is available on the DOL’s website. (Return to the Capital Checkup.)
5: The Glossary is available on the DOL’s website. (Return to the Capital Checkup.)

Capital Checkup is The Segal Company's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.

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