SECOND OPINIONS: New Summary of Benefits Rule – Part II

We previously wrote about one of PPACA's new requirements – that group health plans provide eligible individuals with a "summary of benefits and coverage (SBC).
By PS

The SBC template can be found at www.dol.gov/ebsa.  Plans must provide the SBC at enrollment, by the first day of coverage if information has changed, upon renewal, and within 7 business days upon request.  The requirement applies to open enrollments that begin on or after September 23, 2012 (and no later than January 1, 2013 for other types of delivery).  

Below we continue to answer some of the most frequently asked questions we have received.  

Which plans must provide an SBC?  

The SBC requirements apply to “group health plans” as defined under the HIPAA portability rules.  The SBC rules generally would apply to insured and self-funded (group and individual) medical plan options, including HMO coverage.  The rules also would apply to EAPs, wellness programs, and health reimbursement arrangements (HRAs) unless these benefits are integrated into the medical plan.    

The SBC rules would not apply to HIPAA excepted benefits, such as stand-alone dental and vision plans, flexible spending accounts (FSAs) that only include employee contributions, and on-site clinics.  The SBC rules also would not apply to Health Savings Accounts (HSAs), but would apply to the underlying high deductible health plan option.    

How many different SBCs must a plan provide?  

This depends on how many plan options the plan offers.  Plans likely will need a separate SBC for each option.  For example, if a plan has a high deductible health plan option (that pairs with an HSA), a lower deductible PPO option, and HMO option, the plan likely will need three different SBCs.  Some plans have different HMO options in different states, which all will probably need their own SBCs.  Add to that any stand-alone EAP, HRA, or wellness programs.  Plans will need to take inventory of all of their plan options to determine how many different SBCs to provide.  

Plans also may need separate SBCs for each coverage tier – such as individual, spouse, and family coverage.  Sometimes plan options can differ significantly based on this type of coverage tier (e.g., different deductibles, maximums, or other limits based on single or family coverage).  Agency FAQs indicate that separate SBCs are not required for each coverage tier as long as the information for the various tiers can be combined and the SBC is still “understandable.”  For example, the plan may combine individual and family coverage tiers into a single SBC by adding to the fill-in-the-blank box for deductible information: “Individual – $500, Family – $1,000.”  However, if there are too many differences, it may be difficult to combine all of this information in the space provided in the template (and plans are required to use 12-point font).  Plans will need to experiment with sample language to determine how many SBC actually will be needed for their particular plan options and coverage tiers.

Who Drafts the SBC?  Can the Plan delegate this responsibility to their Insurer/TPA?  

For insured plans, the requirement to issue an SBC falls on both the insurer and the group health plan.  For self-funded plans, the requirement falls on the group health plan.  The rules provide that duplicate SBCs are not required (so the parties can decide which one will draft or deliver the SBC).    

However, it will be important for the parties to coordinate.  While the insurer or TPA may complete many of the "blanks," the plan will have to be involved as well.  For example, the insurer or TPA  may not know details about prescription drug coverage, so the plan may need to provide that information (or arrange for its PBM to provide).  The plan also will need to coordinate with the insurer or TPA about delivering the SBC in connection with enrollment, particularly for those individuals who are eligible but not enrolled in the plan (since the insurer/TPA likely will not have information about this group).  

There is a steep penalty for failure to provide the required information of $1,000 per affected enrollee .  So plans, insurers, and TPAs will want to make sure they coordinate to ensure that all of the required information is included and each has a good understanding about how SBCs will be delivered, the deadlines for delivery, and which party is providing SBCs upon request. 

 

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions    

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html     

Contributors:  

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. 

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