Beginning March 23, 2012, Health Care Reform requires group health plans and health insurance carriers to provide all participants and beneficiaries a Summary of Benefits and Coverage (“SBC”). The Departments of Labor, Health and Human Services, and Treasury issued proposed regulations and related guidance defining the content, format and timing of the issuance of the SBC. The Departments also provided a proposed SBC template.
Who must provide and receive the SBC?
All group health plans (including self-insured, fully-insured and grandfathered health plans) are responsible for providing the SBC. If the group health plan is fully insured, the insurer is also responsible for providing the SBC. Either party may rely on the other responsible party or a third party to send the SBC, but may not avoid liability if the SBC does not meet the requirements or is not timely provided.
Generally, if the group health plan is fully-insured, the insurer must provide the SBC to the group health plan, which in turn must be provided (by either the insurer or the group health plan) to all individuals eligible for the group health plan. If the group health plan is self-insured, the group health plan must provide the SBC to all individuals eligible for the group health plan.
When must they receive the SBC?
The insurer in a fully-insured group health plan must provide the SBC to the group health plan upon the following events:
- Upon Application and Renewal. The SBC must be provided with the plan’s initial application and with any renewal information. If the renewal is automatic, then it must be provided no later than 30 days prior to the first day of the new policy year.
- Upon Request. The SBC must be provided as soon as practical upon a specific request for the SBC or a general request for information about health coverage, but no later than seven days after the request.
The group health plan must provide (or if the group health plan is fully insured, the insurer may also provide) the SBC to all eligible individuals of the group health plan upon the following events:
- During Initial Enrollment. As part of any written application materials that are distributed by the plan or insurer for enrollment, the SBC for each benefit package option must be provided. If no written application materials are provided, (for example, when using online enrollment) the SBC must be distributed no later than the first date the individual is eligible to enroll in coverage.
- During Annual Enrollment. As part of any written annual enrollment materials that are distributed by the plan or insurer for renewal of enrollment, the SBC for the benefit package in which the individual is currently enrolled must be provided. If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of the renewal coverage.
- Mid-Year Material Modifications. At least 60 days prior to the effective date of any mid-year material modification to the group health plan, an updated SBC or notice of the modification must be provided.
- Upon Request. The SBC must be provided as soon as practical upon request, but no later than seven days after the request.
- Special Enrollment. The SBC must be provided within seven days of a request for enrollment pursuant to a special enrollment right, for example, when a spouse loses through the spouse’s employer.
What are the format and content requirements?
The SBC is a stand-alone document and is in addition to summary plan descriptions, summary of material modifications, and any certificate of coverage.
The SBC format must be as follows:
- maximum of four double-sided pages; and
- no less than 12-point Times New Roman Font.
The SBC content must include the following:
- uniform glossary of terms (the Departments issued a sample uniform glossary);
- description of coverage, including cost sharing, for each category of benefits;
- exceptions, reductions and limitations on coverage;
- cost sharing provisions of the coverage, including deductibles, coinsurance, and co-payment obligations;
- renewability and continuation of coverage provisions;
- illustrations of common coverage scenarios including cost sharing;
- statement that SBC is only a summary and that plan or policy will govern;
- contact information; and
- internet addresses where a list of network providers may be obtained, information regarding prescription drug coverage may be obtained, and an individual may review the uniform glossary of terms and premiums.
For coverage beginning on or after January 1, 2014, the SBC must also include a statement regarding whether coverage qualifies as minimum essential coverage.
How must the SBC be delivered?
The SBC must be provided in paper or electronic format without charge. If providing electronically, the Department of Labor’s electronic disclosure safe-harbor rules must be met. These are the same rules that must be met for the electronic disclosure of summary plan descriptions.
What are the penalties for failure to comply?
The penalties for failure to comply with the SBC requirements include $1,000 fine for each failure under the Internal Revenue Code and separate enforcement actions by the Department of Labor.
This information provided above about a new development of the law is intended for general informational purposes only. It should not be construed as legal advice or legal opinion on any specific facts or circumstances and you are urged to consult a Lindquist & Vennum LLP attorney or one of your own choosing concerning your situation and specific legal questions you have.