Summary of Benefit Coverage Rules – The Devil is in the Details

During the February 28, 2012 ALI-ABA Video Broadcast program on Health Plans some representatives from the government provided us with their personal insights on how the Summary of Benefits and Coverage (“SBC”) rules and templates should operate. Earlier this week the DoL posted FAQ VIII on its ACA website regarding the SBC that provided additional flexibility for employers. This is just a highlight of some of the important information learned during such program and from FAQ VIII.

SBC Delivery Requirements

The program provided some very important insights on how the SBC rules apply in the real world of health plan enrollment and annual open enrollment.  SBC must be delivered to the employee and beneficiaries at initial application or enrollment, upon a change after enrollment and before the plan year, at renewal, at a special enrollment and upon request.  FAQVIII clarified that the “upon application” delivery requirement applies whenever a person completes materials to enroll if no application is required. For the initial year, the DoL has indicated it wants to work with plans to get to compliance and it is not focusing on imposing the penalties.

First, if your open enrollment period commences prior to September 23, 2012, you will not have to comply with the SBC rules for such open enrollment and the rules will not apply to your plan until January 1, 2013.  If your open enrollment period starts on or after September 23, 2012, you must comply with all of the new SBC rules for content (including the glossary) and delivery beginning with such open enrollment period. The requirements generally apply on January 1, 2013 for calendar year plans, if they do not apply to your open enrollment period. 

The rules for delivery of the SBC are seemingly simple, but differ from ERISA’s general disclosure requirements which generally only require distribution to the participant because the SBC must be delivered to the participant and to the beneficiaries and there are penalties for failure to distribute to the beneficiaries (more like COBRA but not limited to COBRA’s qualified beneficiaries).  The penalty for failure to delivery a SBC applies if you fail to deliver to the participant or to the beneficiary at $100 per day per person with a cap of $200 per day per family.

 Delivery at Initial Enrollment - A plan must deliver a copy of all of the potentially applicable  the Summary of Benefits and Coverage ("SBC")  when a person first enrolls to the participant and beneficiaries. That seems simple, until you look at open enrollment where some persons who have not previously enrolled may be first considering enrolling, this means for open enrollment if you want to take advantage of any automatic renewal limitation on what must be provided, you must separate out the persons who are eligible but not enrolled and deliver them all of the SBCs for all of the applicable options and then for persons whose enrollment is automatically renewed, you can deliver to those persons just the SBC for the option in which they are enrolled.  If enrollment is not automatically renewed, then all of the applicable SBCs must be provided to all of the eligible employees and to their beneficiaries. If an employee is enrolled but his beneficiaries are not, you could end up with different SBCs delivered to the beneficiaries than to the employee. FAQ  VIII included a  potential change that may help employers to save costs in distributing the SBC, the SBC may be provided electronically by a plan to participants and beneficiaries who are eligible but not enrolled if the format is readily accessible (such as html, MS Word or pdf format), the SBC is provided in paper form free of charge upon request; and if the SBC is provided via an Internet posting, the plan timely advises the participants and beneficiaries that the SBC is available on the Internet and provides the Internet address. Plans may disclose the availability of the SBC via either an e-card, postcard or via email. A plan can also use the Department of Labor's existing regulations for electronic delivery of plan documents as an alternative. This would permit electronic delivery of all SBCs to the participant and to the beneficiaries to save mailing costs and delivery of all SBCs electronically avoids dividing your participants and beneficiaries into separate groups to limit the number of SBCs sent. This change should save more than a few trees. 

FAQ VIII also included model language for an e-card or postcard for use with an evergreen website posting.   FAQ VIII also addressed the requirement that the SBC must be culturally and linguistically appropriate. If the SBC is being sent to one of the counties designated in the prior ACA guidance on claims as requiring the culturally and linguistically appropriate disclosure in a non-English language then the SBCs sent to an address in those same counties must also comply. This means non-English versions of the SBC must be available (several templates are available on the DoL website as starting points), and there must be a notice of the availability of and how to access language services. 

 The SBC must be sent to persons who are COBRA qualified beneficiaries and who are on COBRA continuation coverage.

For plans who want to include the SBC in the summary plan description, it can be done as long as they are prominently presented right after the table of contents. 

Finally, the SBC must be sent to a participant or beneficiary within 7 business days of a request.  It will be important for self-insured plans to establish a mechanism to receive and process these requests within the limited time period in order to avoid the penalty.  Plans also must provide the contact information for the person to contact to request an SBC on the SBC, so these details need to be worked out in advance.  If you have an insured option, you may want to contract with the carrier regarding who will field and fulfill these requests because in an insured group health plan both the carrier and the plan are responsible and the violation can be avoided if either one complies.

 Preparing the SBC

The template for the SBC seems simple, but it should be completed considering all of the plan's terms and there are details in the instructions that are critical to understand. 

FAQ  VIII clarified that different tiers of coverage (e.g., employee only, employee plus spouse, employee plus children and family) may be shown on one SBC as long as the appearance is understandable. If such information is combined on one SBC, then the coverage examples (the projected cost of having a baby or diabetes) are to be prepared using the self -only coverage numbers. This clarification that there can be one SBC showing different tiers and not automatically requiring one SBC per tier of coverage is good news.

If there are carve-out arrangements for certain plan benefits such as pharmacy and contractually bound that separate provider to provide the SBC for the carve-out benefit, then if the contract meets certain requirements, the plan may rely on the other party to provide the SBC and the government will not generally seek enforcement against the employer's group health plan. 

If your plan includes "add-ons" such as a health reimbursement account or health FSA, the employer's plan may combine information on the add-on in with the other information on the SBC and the coverage examples should note the assumptions used in creating them .

The SBC is not to cross-reference the summary plan description other than in a footer.   The SBC is not required to state whether the coverage option is grandfathered under the ACA. 

These are just highlights.  There are many details that will make the SBC a challenge for its first year of application.

Looking at how your plan will satisfy the SBC requirements now may save headaches and non-compliance later.