EBSA Loosens Health Reform Rules for SBC Delivery, Stays Enforcement

A set of safe harbors related to the enforcement of summaries of benefits and coverage (SBCs), which insurers and plan sponsors must distribute as part of health care reform, was issued May 11 by the U.S. Department of Labor and the Employee Benefits Security Administration.

The DOL/EBSA guidance creates regulatory exceptions for situations where insurers and plans distributed an SBC after getting an application for coverage, but coverage terms are still being negotiated. Another correction allows plans to distribute several partial SBCs in situations where plan sponsors “carve out” benefits (such as prescription drugs) and have more than one insurer.

SBC Requirement Has Teeth

Beginning on the first day of the first plan year that begins on or after Sept. 23, 2012, insurers must provide SBCs within seven business days after an individual, plan or plan sponsor submits enrollment forms. SBCs need to contain definitions, information on cost-sharing and two coverage examples — all while remaining on four double-sided pages. The guidance comes three months after final rules (77 Fed. Reg. 8668) were issued on Feb. 14, 2012, to respond to plan sponsors and insurers’ implementation difficulties and enforcement fears.

For example, concerns stemmed from the fact that SBCs must be provided soon after enrollment, but coverage terms are often still being negotiated. That means the SBC might not accurately reflect coverage terms, generating violations and possibly fines.

Temporary Enforcement Stay

Failing to provide an SBC can result in penalties of up to $1,000 per enrollee. See 29 C.F.R. §2590.715-2715(e). The safe harbors provided in the May 11 guidance attempt to address concerns that SBC implementation would clash with insurance contracting, and that it posed an undue source of regulatory risk. Accordingly, there is a one-year enforcement stay. EBSA’s enforcement approach would be one of education and compliance assistance rather than penalties. For the first year, it will not impose penalties on plans that are working diligently and in good faith to comply, EBSA said.

Safe Harbors for e-Distribution 

SBCs can be provided in writing or electronically.  Special electronic disclosure rules apply separately to new enrollees and existing enrollees. These rules were spelled out FAQs About Affordable Care Act Implementation Part VIII,” published on March 19. These rules allow SBCs to be provided on the web if the individual is provided the website address and the ability to obtain a printed copy free of charge.

In the May 2012 FAQs, the agencies adopted an additional safe harbor. This safe harbor allows SBCs to be posted to the online enrollment website for those individuals who perform online enrollment. SBCs may also be provided electronically to those who request an SBC online. However, an individual must always have the option to receive a paper copy upon request.

Importantly also, insurers will be allowed to provide a final SBC on the first day of coverage, instead of on the day it receives an application, if the insurer and plan sponsor are still negotiating after the application has been turned in. Here’s an overview of the May 11 guidance:

1)      Employers and plan sponsors may provide electronic copies SBCs during online enrollment or online renewal of coverage. But paper copies must be available on request.

2)      When using electronic SBCs, insurers, plans and sponsors may use enhancements, such as scrolling and expansion of columns.

3)      It is permissible to combine information from different plans and policies to let shoppers to do side-by-side comparisons; either electronically or on paper. (An example is a sheet comparing just deductible, out-of-pocket limits and other cost sharing for several benefit packages.) But a full SBC for each benefit package must be available on request.

4)      If a plan sponsor decides to “carve-out” a benefit (such as prescription drug coverage), it may synthesize the coverage from the two companies into a single SBC. But during the first year, plans may distribute two or more partial SBCs with a cover letter that ties them together, indicates that the coverage comes from different insurers and describes how the several kinds of coverage work together. After the first year, the plan administrator must synthesize the information into a single SBC or contract with a third-party to provide a single SBC.

5)      If an insurer provides an SBC immediately after receiving an employer’s application for group coverage, but negotiations over coverage terms continue, an updated SBC is not required until the first day of coverage.

6)      If an insurer provides an SBC before receiving an application, it does not have to provide another one upon application, if terms did not change enough to invalidate the original SBC.

7)      Insurers, plans and plan sponsors must provide SBCs to help prospective plan members shop around for coverage but have not submitted an application. This covers situations when an SBC is asked for by name, but also when a prospective member wants “summary information about a health insurance product.”

8)      DOL will not enforce rules requiring insurers to provide SBCs for insurance products that are “closed books of business”; that is, are no longer being offered for purchase.

9)      The agency issued a new revised model SBC form (completed) to correct a pricing mishap that understated the price of insulin ten-fold.