Archived Insight | June 15, 2020

Revised SBC Template Requires New Health Plan Calculations

The ACA requires plan sponsors to complete and distribute to participants a Summary of Benefits and Coverage (SBC). Late last fall, the Departments of Labor, Treasury and Health and Human Services (HHS) changed the SBC template and HHS released new data that must be used to calculate the coverage examples page of the SBC. These changes apply to plan years beginning on or after January 1, 2021.

While the changes to the template itself are minor, the new data means that plan sponsors will have to redo the coverage examples portion of every SBC, even if the plan’s cost-sharing requirements have not changed.

In light of the additional calculations required, now is the time to get started on preparing 2021 SBCs so your organization will be ready to distribute them during the fall of 2020.

Failure to provide the SBC can result in a fine of $1,176 (indexed annually) for each participant who did not receive the SBC.

Have questions about the new SBC template?

We have answers.

Changes affecting the coverage examples

The coverage examples page of the SBC simulates how much a participant would have to pay “out of pocket” based on the plan’s actual cost-sharing requirements under three hypothetical treatment scenarios: having a baby, managing type 2 diabetes and foot fracture with a trip to the emergency room. Although these treatment scenarios are not new, HHS has updated the underlying cost data that must be used to run the simulations. As a result, even without any change in the plan’s design, every SBC will need new calculations for the coverage examples section.

Act now to meet the approaching deadline

Plan sponsors with calendar-year plans that have a fall open enrollment period are required to distribute the new SBC template with open enrollment materials.

For plans that do not have an annual open enrollment period, plan sponsors must generally distribute SBCs 30 days before the start of the plan year. As a result, for a plan year beginning January 1, 2021, the new SBC would have to be provided by December 1, 2020.

Given the new required calculations for the coverage examples, it is not too early to get started on SBC for 2021. Acting soon is especially important if your organization relies on outside professionals to update your SBCs.

If your organization uses third-party administrators to complete your SBCs, now is a good time to ensure that those administrators are familiar with the new template and the need to update all calculations on the coverage examples page.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.