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Final Rule on Summary of Benefits and Coverage
Key Requirement: Insurers must disclose key information about plans and provide a glossary of terms.
Effective Date: Requirements are effective for plan years beginning on or after Sept. 23.
By Sara Hansard
Health insurers must provide a standardized, easy-to-understand summary of benefits and coverage (SBC) for plans as well as a uniform glossary of coverage terms for plan years beginning on or after Sept. 23, under a final rule published Feb. 14 by three agencies implementing the health care reform law (77 Fed. Reg. 8706, 8668).
The final rule was issued by the Department of Health and Human Services' Centers for Medicare & Medicaid Services, the Department of Labor's Employee Benefits Security Administration, and the Treasury Department's Internal Revenue Service. It implements a requirement in the Patient Protection and Affordable Care Act that group and individual health plans provide the approximately 150 million enrollees in private health insurance plans, as well as potential enrollees, with the disclosure documents, which have been compared to nutrition labels on packaged foods.
“For too many Americans today choosing a health plan means reading through a human resources booklet, usually the size of a small phone book,” Marilyn Tavenner, acting administrator of CMS, told reporters in a telephone briefing. Important information about eligibility and benefits is “often buried in the fine print,” and it can be confusing to compare plans, especially for consumers who purchase their own health insurance, she said.
“These documents will allow consumers to compare plans on an apples-to-apples basis.”
—Marilyn Tavenner, CMS acting administrator
The eight-page SBC and the four-page glossary of terms commonly used in health insurance coverage, which closely resemble recommendations made by the National Association of Insurance Commissioners, will make it easier for consumers to find plans that are best for them, she said. In the SBC, insurers must outline information about plans' deductibles, out-of-pocket expenses, and services and providers that are covered, as well as what is not covered, she said.
The SBC also will include a “coverage facts label” that shows how much patients typically would pay for two common medical scenarios—having a baby and managing type 2 diabetes, Tavenner said.
The glossary of health coverage and medical terms will explain in plain English the meaning of insurance plan features, such as copayments, coinsurance, deductibles, networks, and out-of-pocket limits, Tavenner said.
“These documents will allow consumers to compare plans on an apples-to-apples basis,” Tavenner said. “They'll bring much-needed sunlight to the health insurance market. If an insurer's plan offers subpar coverage in some area, they won't be able to hide it in dozens of pages of text.”
The estimated annual cost of implementing the rule “may be around $73 million” for insurers, according to the final rule. But it said the cost is lower than what would have been the case under the proposed rule because of additional flexibility given for completing the SBC, the omission of premium information, the reduction in the number of coverage fact label examples required from three to two, and greater flexibility for electronic disclosures.
Health plans must provide the documents before consumers buy coverage, at least 60 days before significant changes take effect, upon renewal of coverage, and within seven business days of request.
The current lack of transparency and comparability in health insurance plan disclosure information discourages competition, said Steve Larsen, deputy administrator of CMS and director of the Center for Consumer Information and Insurance Oversight. Recent studies “make clear that forms like the ones that we're announcing today really help consumers better understand their insurance coverage, and the value that they're getting,” he said. The SBC and the glossary underwent two rounds of consumer testing by consumer and industry groups, he said.
Health plans must provide the documents before consumers buy coverage, at least 60 days before significant changes take effect, upon renewal of coverage, and within seven business days of request, Larsen said.
The glossary will be displayed on the Department of Labor's website as well as HHS's website, Larsen said.
SBCs for individual plans also will be on the HHS website, he said.
The administration did not agree to requests from large employer groups for a “safe harbor” that would have allowed large group plans to meet the SBC requirement through disclosures that employers currently use to inform employees about benefits under the Employee Retirement Income Security Act. Following issuance of the proposed SBC rule in August 2011 (20 HLR 1292, 8/25/11), employer groups made the request in comments they filed.
PPACA does not include waivers for large group plans, Larsen said. Moving away from the common SBC format would make it more difficult for consumers to compare plans, he said.
So-called mini-med plans that have received temporary waivers from annual limit prohibitions in PPACA must meet the new disclosure requirements, Larsen said.
A requirement in the proposed rule, recommended by the NAIC, that would have added disclosure information about premiums was dropped, Larsen said. Comments indicated that it would be very complex to provide enrollee- and participant-specific premium information in SBCs, he said. “There are going to be other vehicles for premium information,”and premiums were not included as a statutory requirement for the SBCs in PPACA, he said.
In their comments on the proposed rule, insurers complained that it does not give them enough flexibility to explain features of plans, such as tiered networks, and that the coverage facts labels could be misleading if consumers have complications. They had asked for more time to comply.
The form states it is for “comparison purposes. It's not intended to convey the actual amount of money that you might spend in your circumstances,” Larsen said. Issuers were also given flexibility to reflect tiers of networks or covered drugs, he said.
The final rule states that issuers are expected to use their best efforts to comply with the format, but they would be allowed to make modifications to accommodate particular circumstances, he said.
Regulators “reserve the ability to come back later” and require a total of six coverage facts labels, including coverage of more expensive medical conditions.”
—CCIIO's Steve Larsen
The rule provides underlying data that insurers must use to estimate their consumer payment calculations, Larsen said.
The proposed rule would have required insurers to begin complying by March 23. The compliance date was moved back six months in the final rule, in time for the open enrollment season that will begin this fall for 2013 plan years, Larsen said.
More coverage fact scenarios may be added in the future, Larsen said. The final rule dropped a coverage facts label for breast cancer that had been included in the proposed rule.
Commenters expressed concern that breast cancer treatments are more complicated, and treatments are not always consistent among issuers and for different types of breast cancer, Larsen said. Regulators “reserve the ability to come back later” and require a total of six coverage facts labels, including coverage of more expensive medical conditions, he said. Officials likely will look for coverage facts label examples for conditions that are more prevalent in the population, he said.
HHS expects states to conduct oversight of the disclosure requirement, and if they do not, the federal agency would, Larsen said.
Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, which represents about 1,300 insurers covering some 200 million people, issued a statement saying that the final rule “makes some important improvements over the preliminary rule” but that more flexibility is needed “to avoid imposing costs that outweigh the benefits to consumers.”
The final rule “requires an almost complete overhaul and redesign of how information must be provided to consumers,” and the short time for implementation creates “significant administrative challenges,” Ignagni said. Many plans already are developing material for employers whose policies take effect Oct. 1, leading to duplication of work, she said.
The final rule requires a separate document be made available for each potential family size and for every benefit design option, including different cost-sharing levels, prescription drug formularies, and network designs, Ignagni said. In addition to significantly increasing administrative costs, the rule could “potentially result in consumers having to sort through scores of pages of coverage information,”she said.
Blue Cross and Blue Shield Association spokeswoman Kelly Miller told Bloomberg BNA in an e-mail that the seven-month time frame to comply with the final rule “is simply too short,” since plans will need to make major, costly systems changes. A single Blue Cross Blue Shield plan “could have thousands of different benefit options for employers, as well as [for] individuals, that will need to be customized,” she said.
The new requirements are in addition to many other government mandates plans are currently implementing, such as the costly conversion to the International Classification of Diseases, 10th Revision (ICD-10) system for coding claims, Miller said.
Consumers Union, which has conducted research finding that consumers using the new form better understood coverage options, issued a statement commending the rule for establishing a “standard format that consumers can use [to] decipher health insurance offerings.”
The rule is “a big step in helping consumers better understand and evaluate their insurance options,” Lynn Quincy, senior policy analyst for CU, said in the statement. CU will continue to work with HHS to identify ways to include premium information in future versions of the form, the release said.
Families USA Executive Director Ron Pollack said in a statement that he was “pleased” with the disclosure rule. However, the rule does not require insurers to provide paper copies of the forms, allowing them to provide electronic copies. Pollack said he would like to see insurers provide paper copies with marketing materials and enrollment applications.
Sen. John D. Rockefeller IV (D-W.Va.) said in a statement that the rule “will better protect consumers” and will increase “transparency and accountability in the health insurance industry.” The provision brings “much-needed simplicity and key facts on health coverage to consumers,” said Rockefeller, chairman of the Senate Commerce, Science and Transportation Committee.
Rockefeller cited a Kaiser poll from November 2011 that found the PPACA requirement on disclosures “is the most popular piece in the Affordable Care Act,” viewed favorably by 84 percent of respondents.
By Sara Hansard
The final rule for the Summary of Benefits and Coverage and Uniform Glossary (CMS-9982-F) is available at http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3228.pdf. The related guidance document is available at http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3230.pdf.
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