SECOND OPINIONS: A Little SBC Relief for Health Plans

We have devoted several columns to the new Summary of Benefits & Coverage (SBC) rules, which require group health plans to issue a summary of health benefit options each year and upon request to enrollees and those eligible to enroll.

The summary must follow the template issued by The Department of Health and Human Services (HHS) and is limited to 4-pages (front and back, so 8 pages total).  The first SBCs are due in connection with annual enrollments that begin on or after 9/23/12.  

Plans have been struggling to determine what plans options must have an SBC, whether these options can be combined into one SBC, how to deliver SBCs, and how to make sure they have the correct information from a number of third party administrators, insurers, and other service providers in order to complete the SBCs. In new Q&As and subsequent guidance, the agencies responsible for enforcement of the SBC rules have issued limited relief in discrete areas, which we highlight below.  See ACA Q&As Part IX, (May 11, 2012).  

  • Penalties – Perhaps most reassuring is the statement that says the agencies will not issue penalties during the first year of applicability for plans that are working “diligently and in good faith to comply” with the requirement.  Rather, the agencies re-stated their enforcement position – to work together with plans and other stakeholders to help them come into compliance.  The agencies did note, however, that they have the authority to fine those who “willfully fail” to provide the required information.  ACA Q&As Part IX Q&A-8.  
  • Electronic DeliveryThe SBC regulations already allow a health plan to distribute SBCs electronically to participants and beneficiaries, as long as the delivery method complies with ERISA, which requires plans adopt procedures that are reasonably calculated to ensure actual receipt.  ERISA also includes a safe harbor for electronic delivery.  Generally, the ERISA safe harbor requires that the plan obtain consent to provide electronic documents, unless employees have work-related electronic access (for example, a desktop computer).  The ERISA safe harbor rules also require that the plan monitor to ensure that its procedures result in receipt.  The Q&As provide a second safe harbor delivery method where a plan provides an electronic SBC in connection with online enrollment.  The Q&A notes that individuals always have the right to request a paper as well.  ACA Q&As Part IX Q&A-1.  
  • Combining Information From Multiple Insurers – Many plans have multiple insurers or vendors that provide benefits under the plan.  For example, separate prescription drug and mental health service providers may administer those benefits under a health plan.  Previously, the agencies have said that a group health plan is required to synthesize this information into one SBC.  The Q&As provide that, for the first year of applicability, a health plan may provide multiple partial SBCs that together provide all required information.  The Q&A says that the plan should take steps, such as a cover letter or note on the SBC, which alerts participants that the plan involves multiple vendors and contact information for questions.  ACA Q&As Part IX Q&A-10. 
  • Expatriates – Employers with expatriate coverage have had a particularly difficult time in completing the SBC, or even in finding the information they need.  The Q&As provide that, in the first year of applicability, the agencies will not take enforcement action against a plan for failure to provide an SBC with respect to expatriate benefits.  ACA Q&As Part IX Q&A-13. 
  • Coverage Examples – Another challenge for plans has been in completing the coverage examples for diabetes and maternity care.  These coverage examples require plans to use a uniform set of facts for a sample set of claims.  Plans must run these facts (which include somewhat complicated codes, time periods, and types of procedures) through their own claims process to create a chart showing a bottom line amount of benefits covered.  To assist plans, the agencies recently issued a coverage example “calculator” where plans can input more generalized data to create the table.  The Q&As provide that during the first year of applicability, using this calculator will be a safe harbor for compliance.  ACA Q&As Part IX Q&A-9.  A link to the calculator can be found at under the Affordable Care Act tab. 

Some plans had hoped for additional relief, such as an extension of time to comply or a complete waiver of the requirements altogether, particularly for some benefits whose terms do not fit as neatly into the SBC structure, such as EAPs and stand-alone HRAs.  It appears that plans that still have questions about applicability or how to complete the SBC should make a good faith effort to comply, at least in the first year, but with the reassurance that, as long as they are working toward compliance, penalties will not be assessed.  These plans can use this time to seek additional guidance about areas of uncertainty and to further refine their SBC drafts and coverage example numbers.  Plans also should continue to watch for additional guidance.   

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Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.  

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.  

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.