The Summary of Benefits and Coverage (SBC) is meant to be “a concise document detailing, in plain language, simple and consistent information about health plan or individual insurance policy benefits and coverage.” According to the Department of Labor (DOL), SBCs will provide employees standardized information on the key features of a health plan, allowing them to make more informed decisions about their coverage.
Starting on September 23, 2012, health insurers and group health plans will be required to provide the SBC, and a uniform glossary of health-coverage and medical terms commonly used in plan documents to consumers. Both grandfathered and non-grandfathered plans are required to comply with the SBC requirement.
Summary of requirements
Enforcement. In the first year of SBC applicability, plans that are working diligently and in good faith to comply with the SBC requirement will not face penalties. Yet once September 23, 2013, rolls around, it appears that full compliance from all covered entities will be expected and enforced.
Penalties for noncompliance. The health care reform law states that if a plan “willfully” fails to appropriately provide the SBC, the plan will be subject to a fine of up to $1,000 for each failure. Plans may see separate fines for each eligible individual (participant or beneficiary) who does not receive an SBC.
- Self-insured plans
- When to provide the SBC: Group health plan sponsors must provide a SBC to enrollees on the first day of open enrollment. For those who enroll outside of an open enrollment period, an SBC must be provided on the first day of the first plan year on or after September 23.Plans (and insurance issuers) are required to provide the SBC when individuals are shopping for health care coverage, when they apply for coverage, at each new plan year, and at any time upon request. After the plan receives a substantially complete application for insurance coverage, it must provide the SBC within seven business days, or sooner if possible.
- If a plan provides the SBC prior to an individual’s application for coverage (when the individual is shopping for coverage, for example), the plan needn’t provide a duplicate SBC at the time of application unless the individual requests one. However, if the information in the SBC changes by the time an application is filed, the plan must provide an updated SBC as soon as practicable (but no later than seven business days) after receiving the application.
- A Consolidated Omnibus Budget Reconciliation Act (COBRA)-qualifying event does not, itself, trigger an SBC. However, during an open enrollment period, plan participants receiving COBRA coverage must be given the same rights to elect different coverage as do similarly situated non-COBRA participants. In this situation, a COBRA-qualified beneficiary who has elected coverage has the same rights to receive an SBC as do non-COBRA plan participants.
- How to format the SBC: In addition to providing the SBC at the proper times to plan participants, self-insured plans (or their plan administrators) must create SBCs that adhere to the proposed requirements on the content, appearance, language, form, and manner of the notice. Prospera offers the federal government-created SBC templates and instructions in its Forms Library. However, the government drafted these documents primarily for use by health insurance issuers, rather than plan sponsors. Self-funded plans may need to make changes to the template and/or instructions in order to provide additional information to participants and beneficiaries, or to accommodate different types of plan and coverage designs.
- Providing the SBC electronically: Plans may provide the SBC electronically to participants and beneficiaries: in connection with their online enrollment or online renewal of coverage, and when participants or beneficiaries request an SBC online. In both cases, plans must offer the option to receive a paper copy, free of charge, upon request.
- Minor adjustments to the SBC are permitted when displaying the information electronically. Scrolling and expansion of columns are allowed; however, deletion of columns or rows is not permitted when displaying a complete SBC.
- Additionally, plans may display the SBC electronically on a single webpage so the viewer can scroll through the information without having to advance through pages, as long as a printed version is available that meets the formatting requirements of the SBC.
- Referencing other documents: An SBC may include reference to the summary plan description (SPD) in the SBC footer. However, a plan may not substitute information required to be included in an SBC with a reference to the SPD or any other document.
- Levels of coverage: If a benefit plan has different levels of coverage, such as single-only and family, the plan does not need a separate SBC for each level. The plan may combine information for the different levels. The examples should reflect the cost sharing for the self-only level, and should indicate this.
- Third-party managers: Some plans include entities such as pharmacy benefits managers who help manage certain benefits. The plan sponsor will not be held responsible where it has entered into a binding contract under which another party has assumed responsibility for:
- Completing the SBC,
- Providing required information to complete a portion of the SBC, or
- Delivering SBCs.
However, employers will not be totally off the hook. They will still need to ensure that the following conditions are satisfied:
- The plan sponsor (or the plan issuer) monitors performance under the contract;
- If the plan sponsor knows of a violation and has information to correct it, it is corrected as soon as practicable; and
- If the plan sponsor knows of a violation and does not have the information to correct it, it should tell the plan participants about the lapse and begin to take steps to avoid future violations.
In the case of fully insured plans, the insurance carrier is responsible for creating the SBC. However, the carrier is required to provide the SBC only to the plan sponsor, not to plan participants. The carrier and plan sponsor may make an agreement that the carrier will distribute the form to participants on the plan sponsor’s behalf, though
- Carve-out arrangements: Employers with insured plans should note that group health plan administrators are responsible for providing complete SBCs with respect to a plan. (Under a carve-out arrangement, a plan or insurance issuer contracts with a service provider to help manage certain benefits under the plan or policy. In another type of carve-out arrangement, a plan sponsor might purchase an insurance product from one issuer and purchase a separate product from another issuer, or self-insure with respect to that coverage.)
- A plan administrator that uses two or more insurance products provided by separate issuers with respect to a single plan may combine the information into a single SBC or may contract with one of the issuers (or another service provider) to perform that function.
- During the first year of applicability (September 23, 2012 to September 22, 2013), the agencies will consider multiple partial SBCs as meeting the SBC requirement, as long as the partial documents together provide all the necessary information. However, plan administrators should take steps, such as a cover letter or notations on the SBCs, to indicate that the plan provides coverage using multiple insurers. Administrators also should provide a way for individuals to contact the plan administrator for more information.