Agencies Issue Final Rule Regarding Summary of Benefits and Coverage

The Departments of Health and Human Services, Labor, and the Treasury have issued final regulations (pdf) under the Affordable Care Act to implement the requirement that group health plans and health insurance issuers provide consumers with a summary of benefits and coverage (SBC) that “accurately describes the benefits and coverage under the applicable plan or coverage” to enable enrollees and participants to better compare plan terms and benefits. The rule also includes details about the notice of modifications that must be sent to enrollees and policyholders informing them of any significant changes in coverage that will occur in the middle of the plan year at least 60 days before such changes take effect. Finally, the rule provides requirements for the uniform glossary – which includes common medical terms such as “deductible” and “co-pay” – that must also be provided to consumers at various points in the enrollment process. In conjunction with the final rule, the agencies have issued a template for the SBC instructions, sample language, a guide for coverage example calculations, the uniform glossary, and other related guidance materials. (pdf)

Generally, the SBCs will be required to summarize, in plain language, key features of the plan or coverage, including covered benefits, cost-sharing provisions, and coverage limitations and exceptions. The SBC must be provided when potential enrollees are shopping for coverage, when they actually apply for coverage, at each plan year, and upon request. In most instances, participants and beneficiaries who are already covered under the group health plan may receive an SBC electronically if certain regulatory requirements are met. Those who are eligible for but not enrolled in coverage may receive the SBC electronically so long as the format is readily accessible and a paper copy is provided free of charge upon request.

The final rule details the standards regarding who is required to provide an SBC, to whom, and when. The rule summary explains that “there are three general scenarios under which an SBC will be provided: (1) by a group health insurance issuer to a group health plan; (2) by a group health insurance issuer and a group health plan to participants and beneficiaries; and (3) by a health insurance issuer to individuals and dependents in the individual market.” The final rule sets forth the list of 12 SBC required elements, including uniform standard definitions of medical and health coverage terms, a description of the coverage including the cost sharing requirements such as deductibles, coinsurance, co-payments; information regarding any exceptions, reductions, or limitations under the coverage; renewability and continuation of coverage provisions; a contact number to call with questions and an Internet address (or other contact information) for obtaining a list of the network providers; and an Internet address (or similar contact information) where an individual may find more information about the prescription drug coverage under the plan or coverage. The final rule does not require the SBC to include premium or cost of coverage information.

One highlighted feature in the SBC is a new standardized comparison tool – akin to nutrition labeling – called “coverage examples.” The coverage examples will set forth the degree of coverage and costs associated with having a baby (normal delivery) and managing Type II diabetes, in order to facilitate health plan comparisons. Future SBCs will include additional coverage examples detailing other common medical scenarios.

Regarding expatriate plans, the final rule includes a special provision that provides that in lieu of summarizing coverage for items and services provided outside the United States, a plan or issuer may provide an Internet address (or similar contact information) to allow participants to obtain information about benefits and coverage provided outside of the U.S. To the extent the plan or policy provides coverage available within the United States, however, the plan or issuer is required to provide an SBC for coverage offered within the U.S.

To the extent a plan or policy implements a mid-year change that is a material modification that affects the content of the SBC, and that occurs other than in connection with a renewal or reissuance of coverage, the final regulations require a notice of modification to be provided 60 days in advance of the effective date of the change.

Unlike in the proposed regulations, the final rule does not mandate that the SBC for a group health plan be a standalone document. Although plans or issuers may provide the SBC as a separate document, they are permitted under the rule to provide it in combination with other summary materials, such as a summary plan description (SPD), so long as the SBC information is “intact and prominently displayed at the beginning of the materials,” such as after the Table of Contents in a SPD. SBCs issued pursuant to a plan in the individual market, however, must be provided as a standalone document. Details about the form, content, sample language, uniform glossary, and related items are set forth in the guidance document published along with the final rule.

The materials and information in the guidance document are to be used for the first year of applicability only. For example, the guidance does not provide language regarding whether the plan provides minimal essential coverage or meets minimum value requirements, as this information is not yet required. The agencies state that they will issue updated materials next year.

Willful failure to provide the required disclosures subjects plans or issuers to fines up to $1,000 for each such failure.

In addition to the guidance materials to be published in the February 14, 2012 edition of the Federal Register, the agencies are making available “the specific information necessary to simulate benefits covered under the plan or policy for the coverage example portion of the SBC (including relevant medical items and services, dates of service, billing codes, and allowed charges).” While the final rule becomes effective 60 days after it is published in the Federal Register, the requirements to provide an SBC, notice of modification, and uniform glossary apply for disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re-enrollees and late enrollees) beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For disclosures to participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), these requirements apply beginning on the first day of the first plan year that begins on or after September 23, 2012. For disclosures to plans, and to individuals and dependents in the individual market, these requirements are applicable to health insurance issuers beginning on September 23, 2012.

In a press release, HHS Secretary Kathleen Sebelius claimed: “All consumers, for the first time, will really be able to clearly comprehend the sometimes confusing language insurance plans often use in marketing,” adding, “This will give them a new edge in deciding which plan will best suit their needs and those of their families or employees.”

For more information on this rule, see Littler's ASAP: Agencies Issue Final Rule Regarding Summary of Benefits and Coverage.

Photo credit: geotrac

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.