Health care reform has introduced a new disclosure requirement for group health plans – the “Summary of Benefits and Coverage,” or “SBC.” Sometimes misleadingly referred to as the “mini-SPD,” this document is meant to be provided not just to participants in a group health plan but to persons who are considering enrolling in a group health “package” (e.g., a PPO or HMO option under a group health plan). (The SBC rules applicable to individual health insurance policies are not discussed here.) The stated goal of the agencies that developed the SBC rules (the Department of Health and Human Services, the Treasury Department, and the Department of Labor) was to create a document that allows the reader to make “apples to apples” comparisons among different benefit packages, with specific regard to what each option will cost them in out-of-pocket dollars. In order to ensure ease of comparison, the content and format of the SBC are fixed and cannot be customized other than to feed in information as shown in the template instructions.
Employers that sponsor group health plans must provide SBCs to individual applicants and current participants, and insurers must provide them to applicants and enrollees in individual and group health policies (as well as to employers seeking or renewing group coverage). In the case of an insured group health plan, however, the insurer and employer need not both issue SBCs to the same individual. The SBC disclosure requirement takes effect March 23, 2012, and insurers and employers should prepare for that deadline, although it is not out of the question that this deadline will be extended.
The SBC requirements, as currently set forth in proposed regulations released on August 17, 2011, include a template SBC disclosure document (published in separate regulations together with instructions for completing the template), a glossary of insurance and medical terms used on the SBC (published in the template regulations), and “coverage examples” or “CEs” that originally were envisioned along the lines of a “Nutrition Facts” label. The three coverage examples currently proposed (up to 6 may be allowed) will illustrate insured versus out-of-pocket costs for three procedures or conditions – normal delivery of a baby, breast cancer, and diabetes – and allow the reader to compare bottom line employee costs for the benefit packages under consideration. Through these examples readers will have a chance to compare the dollar impact of choosing an HMO versus a PPO, or in-network care versus out-of-network care. This is a meaningful addition to the information currently conveyed in explanation of coverage booklets and SPDs.
The problem, however, is that the SBC disclosure templates are geared towards a single insured benefit option – such as a PPO or HMO. They do not convey information that is crucial to an employer sponsored group health plan – such as an employer’s share of premium costs – and in the common instance of a plan with multiple benefit options – do not allow comparison in one place of different rates for different benefit packages. As such the SBCs will be an inferior premium cost-comparison tool to the schedule of benefits sheets carriers currently prepare for their group clients. This problem is only compounded for employers offering benefit packages from several different carriers.
Benefits brokers are the common point of reference both for insurers and for employers striving to comply with SBC requirements. Below are some issues and areas where employers are especially likely to look to their brokers for guidance:
1) Eligibility: There is no place on the SBC template to describe eligibility rules. Although employees generally must have met eligibility rules to receive an SBC, they will want to know about dependent eligibility rules, and employer-specific conditions under which they could lose eligibility (such as a reduction in hours). Brokers are going to have to assist employers in directing those with eligibility questions to the SPD, Explanation of Coverage or other source outside the SBC template.
2) Employer’s share of premiums: The SBC calls for disclosure of the total premium amount on page 1 but does not allow for any breakdown into employer/employee share. For a meaningful premium cost comparison, applicants and participants will need to consult the broker’s schedule of benefits sheet.
3) Multiple Carriers/Tiered Benefits: The SBC template and glossary published in the proposed regulations were created by a working group of the National Association of Insurance Commissioners (NAIC) and thus reflect information consistent with a insured benefit package (e.g., PPO or HMO) rather than a group health plan. For readers to be able to compare, in one place, the premium costs, co-pays, and deductibles across several different benefit package options, they again will need to consult the broker’s schedule of benefits sheet.
4) Self-funded plans: The SBC template will need to be substantially revised for a self-funded plan. The regulations note this, and ask for public comment on what changes should be made. In the meantime, employers may need to look to a variety of sources for assistance with SBC disclosure, including insurers providing ASO services, and brokers.