SBC changes: What employers need to know

The Affordable Care Act’s Summary of Benefits and Coverage is intended to provide group health plan members with an easy-to understand summary of a health plan’s benefits and coverage. New rules governing the SBC, proposed by the Departments of Labor, Health and Human Services and the Treasury in late December, could take effect as early as Sept. 1, 2015.

Also see: Proposed changes to SBC concern large employers

Michelle Capezza, a member of law firm Epstein Becker Green, highlights the new changes and what steps plan sponsors should be taking to prepare.

How do the proposed SBC rules differ from what’s being done now?

Under the proposal, the Departments are suggesting shortening the SBC template to two-and-a-half double-sided pages, from four. So hopefully that will be a little less cumbersome and straight to the point.

You can also delete references to annual limits for essential benefits and pre-existing conditions because, with the health reform law, those are no longer applicable.

The SBC also has to have a statement whether the coverage is minimum essential coverage and provides minimum value. Before, it was an optional statement.

There’s also a new coverage example. In addition to the current examples of a routine birth and delivery and management of type 2 diabetes, the SBC would have to include an emergency room visit for a simple foot fracture.

The coverage example calculator, which was only available during certain transition times, is now going to be allowed for continued use. It will be updated and authorized for continued use.

The uniform glossary is expanded to six pages from four. And there will be some new definitions for claims, screening, referrals, specialty drugs, individual responsibility requirement, minimum value and cost-sharing reductions. It’s giving a little more information to help the health plan consumer and participant understand the terminology.

And there also must be an issuer website. So the insurance company that’s providing coverage must have a site with information about where someone can go to get a copy of a group certificate of coverage, where it can be reviewed or obtained. The Departments are still seeking comments on how to address that for a self-insured plan. So we will need further clarification as to what a self-insured employer will need to do in that regard.

It doesn’t sound like a lot of changes; it’s more trying to consolidate all the guidance that came out in FAQs and making some tweaks here and there to make the SBC more concise and straightforward. Hopefully, final guidance will be issued shortly as the new template and glossary should be used for enrollments and plan years on or after September 1, 2015.

Is there anything employers should be doing in light of these proposed changes?

Plan administrators are ultimately responsible to ensure the SBCs are delivered to the plan beneficiaries. So if a third-party is contracted to provide that, there is a duty on the plan administrator to make sure that’s being done, to monitor their performance, to ensure that if there’s any noncompliance issue that it’s corrected as soon as possible, that communications are immediately made to plan participants and beneficiaries if there’s any noncompliance and that they take steps to ensure it doesn’t happen again.

So even if you have a fully insured plan and you’re relying on the insurance company, I think you definitely want to stay on top of that and make sure they’re distributing it to your participants.

Also, the proposed guidance says if you have different insurance providers for one plan and have two SBCs, you can consolidate them into one or you can provide two different ones.

You can also provide them electronically in connection with online enrollment. If someone requests an SBC online, they have to be able to get a paper copy.

So I think plan administrators should think through their procedures, whether their procedure is compliant with any ERISA rules for electronic disclosure and delivery, and make sure they’re doing that properly.

Are there penalties for noncompliance?

There is a penalty up to $1,000 per failure per participant for willful failures to timely provide the SBC and that’s enforced similar to the Form 5500 failures.

There’s also a potential excise tax under the Code of $100 per day per participant to whom the failure relates.

So there are penalties in play for failure to provide this information and I’m sure this will be something that is audited. I know health plans are getting more scrutiny for health reform compliance. This would definitely be an item the Department of Labor would look at.

Also see: How to avoid an EBSA investigation

Is there anything else employers should be aware of?

I think it’s another example, overall, of the government’s focus on increased transparency and disclosure, especially with respect to employee benefit plans.

There’s always that question of whether participants really read all the information that’s given to them, especially when they have retirement plans and a whole series of retirement disclosures, and now similarly for health plans. Hopefully this particular disclosure, now that they’ve shortened the pages and provided more defined terms and a glossary, will actually be very useful to people and help them understand the benefits they are getting.

I think that’s the ultimate goal, to make sure participants do understand their benefits and are making the most of them.

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