Updated SBC Rules Reflect Full ACA Implementation

As 2014 came to a close, the federal agencies charged with ACA implementation (the Treasury, Labor & Health and Human Services Departments) published proposed regulations governing the contents and delivery of Summaries of Benefits and Coverage or “SBCs,” and made corresponding changes to the SBC template, and related glossary of medical and insurance terms.   The proposed regulations, if finalized, would apply to SBCs required to be provided for open enrollment periods beginning on or after September 1, 2015, and as of the first day of the plan year beginning on or after September 1, 2015 (January 1, 2016 for calendar year plans) for other SBD disclosures (such as for special enrollments).   With the proposed regulations the agencies also released updated SBC templates (blank, and completed), and an updated uniform of key medical and insurance terms.  If finalized, the proposed regulations would amend final SBC regulations published on February 14, 2012.

SBC Update:  Contents

In essence, the proposed regulations refresh SBC contents and terminology to reflect full ACA implementation, in particular its group market reforms and the rollout, over 2014 – 2016, of both individual and employer shared responsibility regimes.   Prior to the proposed regulations, these upgrades occurred piecemeal, in the form of Frequently Asked Questions, no fewer than six of which addressed SBC issues since the final regulations were published.  (See ACA Implementation FAQs Parts VII, VIII, IX, X, XIV and XIV, located here.)  The proposed regulations helpfully consolidate all that earlier guidance and make additional changes consistent with the post-ACA coverage landscape.  With particular regard to SBCs provided to participants and beneficiaries for group health coverage (insured, or self-insured) they include the following:

• The mandated contents of the SBC template are reduced from 4 double-sided pages to only 2 ½ double-sided pages, freeing up 1 ½ pages for voluntary disclosures such as premium costs, if practical for the coverage arrangement, or additional “coverage examples,” as described below.   There is no requirement that the extra space be filled so long as all required template disclosures are made.
• The extra space is gained in part by removing references to annual limits on essential health benefits and pre-existing condition exclusions, which are now obsolete.
• Added to the SBC template is a third “coverage example” which is a hypothetical walk-through of likely covered and out-of-pocket expenses an individual would experience under the benefit package or plan for specific health issues. The new coverage example is a simple foot fracture with emergency room visit.
• The SBC template also updates pricing data for the other two coverage examples, which are normal delivery of a baby, and well-regulated Type 2 diabetes. As mentioned, carriers and self-insured plan sponsors could add additional coverage examples so long as they remain within the maximum length of 4 double-sided pages (with at least a 12 point font).
• Added to the uniform glossary are definitions for the following medical terms: “claim,” “screening,” “referral,” “specialty drug” as well as ACA terms such as “individual responsibility requirement,” “minimum value,” and “cost-sharing reductions.” These additions increase glossary page length from 4 to 6.
• For insured or HMO coverage, the SBC must provide a web address at which individuals can view actual insurance policies, certificates, or HMO contracts related to the SBCs. (A sample certificate for group coverage may be posted while the terms of the actual certificate are under negotiation.) Existing regulations require web addresses for lists of in-network medical providers and drug formularies as well as the uniform glossary of insurance and medical terms.
• The proposed regulations require that the SBC state whether or not the benefit package qualifies as “minimum essential coverage” or “MEC,” or whether or not it provided at least “minimum value”; these were not required by the 2012 final regulations, but were later added for coverage effective on or after January 1, 2014.
  • Note: Although this information was somewhat esoteric in 2012 and 2013, it has now become essential for most employees to complete their income tax returns for 2014. The MEC disclosure is needed to demonstrate they met individual mandate duties first in effect last year, and the minimum value disclosure is needed in relation to advance payment of premium tax credits. This tax season is the first time that individuals who received tax credits must reconcile them against actual household income, through use of the very complicated IRS Form 8962.  Compliance with the individual mandate is also required to be demonstrated on Form 1040, at line 61, or through reporting of an exemption from the mandate via Form 8965.

SBC Update:  Delivery

The proposed regulations are intended to streamline SBC delivery rules and prevent duplicate delivery of SBCs in certain situations:

• When an insurer/HMO (“issuer”) or self-funded plan provides an SBC upon request to someone before they have applied for coverage, it need not re-supply one upon actual application for coverage unless the SBC contents have changed in the meantime (or if the person applies for a different benefit package).
• When a plan sponsor provides an SBC to an applicant during negotiation of terms of coverage, and the terms of coverage change, the sponsor need not provide an updated SBC until the first day of coverage (unless separately requested).
• A group health plan that uses two or more benefit packages, such as major medical coverage and a health flexible spending account, may synthesize the information into a single SBC, or provide multiple SBCs.
• The rule permitting a plan sponsor or issuer, upon renewal or reissuance, to provide a new SBC only with respect to the benefit package that is being renewed or reissued is extended to apply to cases in which a plan or issuer automatically reenrolls participants and beneficiaries.
• Where a plan sponsor or carrier required to provide an SBC with respect to an individual (“original provider”) enters into a binding contract with a third party (“contracted provider”) to provide the SBC to the individual, the original provider will be considered to have met their SBC delivery duties if all of the following requirements are met:
  • The original provider monitors the contracted provider’s performance under the contract;
  • The original provider corrects noncompliance by the contract provider under the SBC delivery contract as soon as practicable, if it has knowledge of the noncompliance and has all information necessary to correct the noncompliance; and
  • The original provider communicates with participants and beneficiaries about noncompliance of which it becomes aware, but which it is unable to correct, and takes significant steps as soon as practicable to avoid future violations.
• In instances where an insured group health plan uses two or more insurance products provided by separate issuers to insure benefits under the plan, the plan administrator will be responsible for providing complete SBCs but may contract with one of the carriers or another service provider to provide the SBC; absent such an agreement one carrier has no obligation to provide SBCs describing benefits provided by the other carrier. (It remains permissible under prior FAQ guidance to also provide several separate partial SBCs under cover of a letter or notation on the partial SBCs explaining their interrelation.)
• The proposed rules also incorporate prior FAQ guidance that “providing” an SBC means “sending” an SBC, and an SBC is timely provided if it is sent within seven business days of request, even if it is not received within that time period. This same timing rule applies to requests to receive copies of the uniform glossary. Provisions in the final regulations on electronic delivery of the SBCs continue to apply.