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More FAQs for the SBC Requirement

April 3, 2012  

The Departments have issued another set of FAQs regarding health care reform’s Summary of Benefits and Coverage (SBC) requirement. The agencies explain that the aim of the FAQs is to answer some of the questions that have been raised over the past few months.

As we have anticipated, there is no further delay on the effective date for this disclosure requirement, but the Good Faith Standard will apply. SBCs must be provided beginning with the first open enrollment period that begins on or after September 23, 2012. The SBC must be provided to those enrolling outside open enrollment starting on the first plan year that begins on or after September 23, 2012 as well. According to Q/A-2, no penalties will apply during the first plan year of applicability to those issuers and plan sponsors who are working diligently and in good faith to provide the required SBC.

The recently released FAQs also provide clarification on when to provide the SBC. Q/A-9 addresses the terminology “written application”, “upon application” and “upon renewal” for both fully-insured and self-insured plans.

Upon Application with application materials

If an insurer or plan, including a self-insured plan, distributes “written application” materials that must be completed for enrollment, the SBC must be provided as part of the materials. For this purpose, written application materials include any form or request for enrollment information, regardless of whether the information is on paper, website or email form.

Upon Application with no written application materials

Insurers or plans that do not distribute application materials for enrollment must provide the SBC no later than the first date on which the participant is eligible to enroll in coverage.

Plan Changes

If changes are made to the plan that modify the content in the SBC that was already provided, the revised SBC must be updated and released no later than the first day of coverage.

Special Enrollees

The SBC must be provided to special enrollees no later than 90 days from enrollment.

Upon Renewal with application materials

If a plan or insurer requires participants and beneficiaries to actively elect to maintain coverage during an open enrollment season, or provides them with the opportunity to change coverage options during this time, the plan or issuer must provide the SBC at the same time it distributes open enrollment materials.

Upon Renewal with no written application materials

If there is no requirement to renew, often referred to as an “evergreen” election AND there is no opportunity to change coverage options, the renewal is considered automatic, so the SBC must be provided no later than 30 days prior to the first day of the new plan or policy year.

Upon Request

The SBC must be provided upon request as soon as practicable, but in no event later than seven (7) business days following receipt of the request.

Q/A-10 summarizes the circumstances in which an SBC may be provided electronically. The SBC may be provided electronically by an issuer to the plan sponsor, or by a plan or issuer to participants and beneficiaries who are eligible but not enrolled, if

1. The format is readily accessible;
2. The SBC is provided in paper form free of charge upon request; and
3. If the SBC is provided via an Internet posting, the issuer or plan sponsor informs participants and beneficiaries that the SBC is available on the Internet and provides them with the Internet address. This disclosure can be made via an “e-card” or “postcard” by email.

An SBC may also be provided electronically by a plan or issuer to a participant or beneficiary who is covered under a plan in accordance with the DOL’s disclosure regulations at 29 CFR 2520.104b-1. These regulations include a safe harbor for disclosure through electronic media to participants who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform duties as an employee and with respect to whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties. Under the safe harbor, other individuals may also opt into electronic disclosure. Your HBI consultant will help you to design a compliant electronic disclosure process so that your distribution of the SBC qualifies for the DOL safe harbor.

The FAQs also clarify that separate SBCs are not required for each coverage tier. This means that plans and issuers can combine information for different coverage tiers into one SBC, assuming that the appearance of the information is understandable. One SBC can be provided to all participants and beneficiaries regardless of whether they are self-only coverage, employee + 1, family, etc. Additionally, information about FSAs, HRAs, HSAs, and wellness programs can be combined into one SBC, again, providing that the appearance is easy for the reader to understand.

Under question Q/A-5, clarification is provided regarding “carve-out arrangements” such as when a plan involves a pharmacy benefit manager or managed behavioral health organization.  If a group health plan or group health issuer has entered into a binding contractual arrangement under which another party has assumed responsibility (1) to complete the SBC, (2) to provide required information to complete a portion of the SBC, or (3) to deliver an SBC with respect to certain individuals in accordance with the final regulations, the plan or issuer will not be subject to any enforcement action by the Departments for failing to provide a timely or complete SBC, providing that the following conditions are met:

1. The plan or issuer monitors performance under the contract,
2. If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer has the information to correct it, it is corrected as soon as practicable, and
3. If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer does not have the information to correct it, the plan or issuer communicates with participants and beneficiaries regarding the lapse and begins taking significant steps as soon as practicable to avoid future violations.

Although not overly relevant for most employers, Q/A-13 clarifies when the SBC must include a statement in the applicable non-English language how to access the language services provided by the plan or insurer. This requirement applies to SBCs that are addressed to a participant or beneficiary in a county where 10% or more of the population is literate only in Spanish, Tagalog, Chinese or Navajo.

Please refer to the DOL website for FAQs About Affordable Care Act Implementation VIII at http://www.dol.gov/ebsa/faqs/faq-aca8.html

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• More FAQs for the SBC Requirement