Health Care Reform: Final Rules for SBC Released

On February 14, 2012, the Departments of Treasury, Labor, and Health and Human Services published final regulations on the new Summary of Benefits and Coverage (SBC) that insurers and group health plan administrators will be required to distribute later this year. Designed to provide clear and consistent information across health plans, the SBC will enable employers and participants to compare and understand the costs and benefits of different health coverage options.

For your reference, here’s a roundup of key points contained in the final rules:

1.When SBCs Are Required:

“The regulations outline three different 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.” (Legal Alert: Final Regulations Issued Regarding Summary of Benefits and Coverage Explanation by Ford & Harrison LLP)

2.Effective Date:

“In general, the final regulations apply for disclosures with respect to participants and their beneficiaries enrolling in a health plan beginning on the first day of the first open enrollment period beginning on or after September 23, 2012. For potential participants and their beneficiaries applying for coverage outside of open enrollment, the final regulations apply beginning on the first day of the first plan year that begins on or after September 23, 2012.” (Agencies Issue Final Rules On Summary of Benefits for Health Plans and Insurance Coverage Under PPACA by Katten Muchin Rosenman LLP)

3.Significant Exceptions:

“The preamble to the final regulations clarifies that an SBC is not required to be provided for plans, policies or benefit packages that are excepted benefits, such as stand-alone dental or vision plans, and certain health flexible spending arrangements.” (Summary of Benefits and Coverage Disclosure Requirements by McDermott Will & Emery)

4.Notice of Plan Modifications:

“The final regulations include rules regarding the notice of modifications, a document that must be provided to participants or policyholders 60 days in advance of the date plan or coverage changes become effective.” (Final Regulations Provide Guidance on Required Summary of Benefits and Coverage for Group Health Plans and Health Insurers by Reed Smith)

5.Rules for Self-Funded Plans:

“Employers sponsoring self-funded plans are subject to the same SBC rules; however, they will not have a carrier to provide the SBC. According to the final rules, the SBC must be provided by either the plan sponsor or the plan administrator. In many cases the employer will be both the plan sponsor and designated plan administrator. While an employer can contract with a third party administrator to provide the SBC and distribute it, the employer is ultimately responsible for the SBC’s content and distribution.” (Final SBC Rules Released by Davis, Brown, Koehn, Shors & Roberts, P.C.)

6.Uniform Glossary:

“Under the statute, the Departments are required to establish a standard list of common terms used in health insurance contracts (such as co-insurance, co-payment and deductible) in order to ease comparison of information for consumers. The final rule implements this requirement, essentially as proposed, along with additions to terms proposed by the NAIC. In response to comments, the Departments note that an SBC may convey ‘more accurate descriptions’ of these defined terms in the context of a particular plan.” (Government Strategies Alert: HHS-DOL-Treasury Summary of Benefits and Coverage and Uniform Glossary Final Rule by Foley Hoag LLP)

7.SBC Template

“The Departments provide detailed instructions and sample language for completing the SBC. (These documents will be updated for periods on or after January 1, 2014.) The SBC must not exceed four double-sided pages in length or use print smaller than 12-point font, and must use terminology understandable by the average plan enrollee. The final rules require the SBC template to be used, but plan administrators have some latitude on how to illustrate the provisions of a benefit package.” (Final Summary of Benefits and Coverage Rules – A Rocky Compliance Road for Employer Plans by Kilpatrick Townsend & Stockton LLP)

8. Penalties for Failure to Comply:

“A group health plan or issuer that willfully fails to provide the information required is subject to a fine of not more than $1,000 for each such failure. The regulations state that a failure with respect to each participant or beneficiary constitutes a separate offense.” (Final Regulations Issued for Summary of Benefit Coverage – Effective Date Delayed by Ropes & Gray LLP)

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