The Affordable Care Act introduced a requirement for a 4-page summary of benefits and coverage to be distributed by group health plans and health insurers to let individuals compare health coverage options.  On August 17, 2011, three federal agencies jointly issued proposed regulations under which the 4-page summary has grown to 6 pages (and a maximum of 8 pages) and is referred to as the SBC (summary of benefits and coverage), with a separate 4-page glossary and 34 pages of instructions for completing the summary.  Comments on the proposed regulations are due on or before October 21, 2011. 

By statute, the implementing regulations were to be issued within a year of the March 23, 2010 enactment of the Affordable Care Act.  These proposed regulations are 5 months late.  By statute the SBC provisions are to be effective March 23, 2012.   The first question will be whether the regulations will be effective as of March 23, 2012 or postponed or some form of transition period will be provided. 

The SBC is in addition to and not a replacement of the SPD (summary plan description) for ERISA health plans.  The DOL is considering whether the SBC can be included in the SPD.

Who prepares the SBC?  For insured health plans, the insurer must automatically provide SBCs to plans upon policy renewal or issuance and within 7 days of a request.  For self-funded plans, the plan is responsible for preparing the SBC but most self-funded plans will want the third party administrator (TPA) to prepare the form.  Employers should ask their TPA whether that service will be provided and the cost, with the TPA agreement amended accordingly.

Who receives the SBC?  A plan or the insurer must provide participants and beneficiaries the SBC: 

• No later than the first day the individual is eligible to enroll in the plan
• Within 7 days of a request for special enrollment in the plan
• When renewal application materials are distributed
• 30 days before the beginning of coverage/plan year for automatic renewals
• Within 7 days of a request
• 60 days in advance of a mid-year material modification

Most controversial is the 60-day advance notice for mid-year changes.  In contrast, under the SPD rules, a summary of material modifications is due not later than 210 days after the end of the plan year in which the change occurred or, if the change is a material reduction, not later than 60 days after the change.  In soliciting comments, the agencies have asked when the advance notice would be difficult. 

There are separate rules for provision of SBCs for individual policies of individual coverage. 

What is the SBC content?  Working with the NAIC (National Association of Insurance Commissioners) recommended form, the chart resembles a summary of benefits often used in connection with open enrollment materials to list covered services, cost by participating and non-participating providers and limitations and exceptions.  At the end are 3 coverage examples which are intended to be expanded up to 6 examples in the future.  For now, the examples are: 

• having a baby (normal delivery),
• treating breast cancer
• managing diabetes

In the examples, the costs are assumed; plans would fill in the amounts that would be paid, such as deductibles, co-pays and co-insurance.  This would then allow individuals to compare plans and benefit packages.

What is provided with the SBC?  The proposed regulations contain a glossary of 44 health insurance and medical terms (e.g. co-insurance, deductible) that are to be read together with the SBC.  These are intended to help individuals understand the SBC.  These definitions may not be the same as the definitions used in the plan's SPD.  Employers will want to consider any differences and any possible explanations appropriate for SPDs. 

How can the SBC be provided?  While a paper copy is compliant, most insurers and plans will want to provide the SBC electronically.  The proposed regulations acknowledge that and refer to the ERISA regulations for electronic delivery.  The DOL has announced that it is considering changes to its electronic delivery rules but it is not clear when changes would happen. 

In addition, the proposed regulations require that the SBC be presented in a "culturally and linguistically appropriate manner".  To determine if the SBC must advise that translation services and non-English versions are available, we look to the recently updated ERISA rules for notices in the appeals of claims.  The claims appeal rules include a list of counties in which 10% or more of the population is literate only in the same non-English language which is the basis for the non-English services.

What should employers do now?  The first step is to review the proposed form of SBC and glossary and consider how many benefit packages and thus how many SBCs will be distributed.  Early consultation with the group health plan's insurer or TPA will help with planning.  To find the proposed forms, go to the Department of Labor website at http://www.dol.gov/ebsa/healthreform/.  If the employer wishes, submit comments by October 21, 2011.