In some years, Sept. 23 represents the Autumn Equinox, but in 2012 for health plan sponsors and administrators, it triggers the compliance date for a key disclosure requirement under health reform: the distribution of summaries of benefits and coverage, beginning with open enrollment periods and/or plan years that begin on or after Sept. 23. Here are five key questions that plan sponsors and administrators have asked about this requirement.
Q1. What is the requirement to provide a summary of benefits and coverage?
A. The SBC rules are intended to create a standardized written description of health insurance policies and coverage so that participants and consumers can better understand their coverage and compare it to other health insurance options on the market. To this end, the SBC must be provided in a consistent four-double-sided-page format with 12-point font.
Q2. What information does the SBC need to explain?
A. At a minimum, an SBC must include the following: (1) coverage descriptions that use uniform definitions of standard insurance and medical terms; (2) a description of the coverage, including cost-sharing information; (3) a description of coverage exceptions, reductions and limitations; (4) a description of renewability and continuation coverage provisions; (5) a coverage facts label that includes examples illustrating common benefits scenarios, based upon recognized clinical practice guidelines; (6) a statement of whether the plan or coverage provides minimum essential coverage and that the plan’s share of the total allowed costs of plan benefits is not less than 60 percent of such costs; (7) a statement that the SBC outlines a summary of the policy or certificate and the coverage document should be consulted to determine the governing contractual provisions; and (8) a contact number for the consumer to call with additional questions and an Internet web address that houses a copy of the coverage policy or group certificate of coverage.
Q3. How must the information be presented?
A. SBCs must present the required information in a uniform format and in a “culturally and linguistically appropriate manner, using terminology understandable by the average plan enrollee,” according to standards established by federal regulations. This standard of understandability is somewhat different from the historical ERISA standard. Under ERISA, generally, notices and summary plan descriptions need to be written so that they are understandable by the average plan participant. It is not clear what other differences in the style of communication are required, or even appropriate, to meet a standard of disclosing information in a “culturally and linguistically appropriate manner.”
Q4. Can I just provide an SPD and comply with the SBC requirements?
A-9. No. However, the SBC for group health plans may be provided as either a stand-alone document in combination with other documents (such as summary of material modifications or the SPD) as long as the SBC is prominently displayed at the beginning of the other documents.
Q5. What penalties apply if an employer does not provide SBCs or NOMs to its employees for whom it provides health coverage?
A. The law imposes a fine of up to $1,000 for each failure on entities that willfully fail to provide SBCs. Each enrollee in a plan is treated as a separate violation. Accordingly, an employer with 10,000 employees is subject to a $10,000-per-day fine.
Complete answers to these and more than 500 other reform questions can be found in Thompson’s HR compliance library, in The New Health Reform Law: What Employers Need to Know (A Q&A Guide), 3rd Edition.