The Departments of Labor, Health and Human Services (HHS) and the Treasury (collectively, the “Departments”) on April 23, 2013 issued the fourteenth in a series of Frequently Asked Questions on the Affordable Care Act.
The new FAQ updates Summary of Benefits and Coverage (SBC) model language for plans or policies beginning on or after January 1, 2014, but before January 1, 2015. It also extends, for an additional year, certain safe harbors and enforcement relief set forth in earlier FAQs. A summary of the new guidance is set forth below.
- An updated SBC template, and sample completed SBC are now available online.
- The only change made to the new templates is the addition of:
- a statement as to whether the plan or policy provides minimum essential coverage; and
- a statement as to whether the plan or policy meets the minimum value requirements (no lower than 60% actuarial value). These statements appear on page 4 of the blank template and page 6 of the completed template.
- Self-funded plans and insurers that have already committed to SBC templates that do not contain the new information – and for whom it would be an administrative burden to include it – may provide that information in a separate cover letter or similar disclosure accompanying their SBCs for 2014, without incurring liability for penalties.
- No additional changes to the SBC or the Glossary of health insurance coverage terms are required. Nor does the SBC need to contain any examples of coverage costs other than the existing examples, for childbirth (normal delivery) and managing Type 2 diabetes (routine maintenance of a well-controlled condition).
- Although annual dollar limits on coverage of “essential health benefits” (“EHB”) are disallowed for plan years starting on or after January 1, 2014, the SBC does not need to contain a specific statement to this effect. Instead, in completing the first page of the SBC, plans should answer “no” in responding to the question “Is there an overall annual limit on what the plan pays?” If the plan imposes any permissible limits on specific covered services, such as office visits, the SBC must direct readers, in the corresponding “Why this Matters” column on page one, to the chart on page 2 of the SBC that includes explanations of limitations and exceptions.
- Alternatively, where applicable, plan sponsors or issuers may delete the entire corresponding row from this “Important Questions” section of SBC.
- Failure to comply with SBC requirements can trigger excise taxes under Internal Revenue Code § 4980D and financial penalties enforced by the Department of Labor (the terms of which have yet to be defined in proposed regulations). However, the Departments will continue through 2014 specific compliance safe harbors and an overall emphasis on cooperation rather than enforcement, as announced in prior FAQs. Some of the specific relief that has been extended includes the following (not an exhaustive list):
- Cooperating with, rather than penalizing, employers that are shown to be working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations.
- Nonenforcement with regard to Medicare Advantage plans;
- Nonenforcement with regard to expatriate health plans;
- Nonenforcement against plan sponsors or insurers with regard to SBCs for “carve out” benefit arrangements such as through pharmacy benefit managers and behavioral health organizations (where the vendor has contracted to provide the SBCs, and where the sponsor or insurer monitors for vendor compliance and is either unaware of any noncompliance or identifies and corrects noncompliance);
- Safe harbors for providing SBCs to participants and beneficiaries electronically, including in connection with online enrollment or online renewal of coverage, or in response to requests for copies made online.
In all, FAQ XIV offers plan sponsors and insurers terms for a smooth transition through the ACA “watershed” year of 2014, at least with regard to SBC requirements.
 The FAQ refers to 2014 as the “second year of applicability” for SBC rules. 2013 was the “first year of applicability.”