Summary of Benefits and Coverage - Final Regulations Issued

Action needs to be taken now! Some of you may well remember mention of a document called a Summary of Benefits and Coverage from our seminars and bulletins on Health Care Reform in 2010. At that time it had the following requirements:


* Must be furnished to participants initially and at time of re-enrollment.
* A separate document.
* Cannot be more than 4 pages in length.
* No print smaller than 12 point font.
* Timeline-within 2 years of enactment: March 23, 2012.

On February 9, 2012, the Agencies (IRS, DOL, and HSS) issued final regulations to be effective April 12, 2012. The good news is that the original effective date of March 23, 2012 has been postponed for 6 months to September 23, 2012. There are no significant changes in the regulations but a minor disappointment in that the regulations provide no relief for large self-insured plans as some thought might happen. However, the regulations do clarify the applicability of the SBC requirement as follows.

These SBC rules apply to both insured and self-funded plans. The plan administrator (typically, the sponsoring employer) is responsible for providing the SBC. In the case of an insured plan, however, the insurer is equally responsible. Moreover, if an insurer provides a timely and accurate SBC, the plan administrator is not required to do so. This is another health care reform requirement to which even "grandfathered" plans are subject. The same is true for even stand-alone health reimbursement arrangements (HRAs), as well as "mini-med" plans that have received a waiver from the prohibition on annual benefit limitations. Most "linked" HRAs will also need to comply.

Certain employer plans are exempt from this SBC requirement. These include HIPAA "excepted benefits", such as stand-alone dental and vision plans and most flexible spending arrangements. Health savings accounts are also exempt. However, the agencies mention that even plans that are exempt may need to be referenced in the SBC for a comprehensive medical plan, as a way of explaining all of the plan benefits and features.

Some Changes:

These changes will make it easier to comply with the SBC requirement.

* An SBC now does not have to disclose information concerning premiums.
* An SBC need not be a stand-alone document but can be combined with a summary plan description.
* There are published templates to be used on the DOL website at:
http://www.dol.gov/ebsa/healthreform/index.html; although the agencies emphasize the use of the templates, they also now allow for certain modifications that are permissible.
* The electronic distribution of the SBC has been made somewhat easier.

Effective Dates:

Group Health Plan Participants during Open Enrollment: have to be offered to participants on the first day of open enrollment if the first day is on or after September 23, 2012. For most calendar year plans open enrollment starts November 1st.

Group Health Plan Participants other than Open Enrollment: for group health plan participants that do not enroll in the open enrollment SBCs will have to be provided the first day of the plan year after September 23, 2012. This effectively means that plans with an early open enrollment period will still have to have SBCs available by January 1, 2013.

Mid-Year Plan Changes: This one is the most problematic; gone are the days when changes can be made in insured and self-insured plans (Medical FSAs, HRAs and MERPSs) and notification be given to the participants after the fact. Now, the plan or issuer must provide notice of the modification to enrollees no later than 60 days prior to the date on which the modification will become effective.

Finally, the regulations create an exception from the requirement that an SBC be provided no later than 30 days prior to the first day of a new plan or policy year upon automatic renewal if the SBC cannot be provided in such a time frame. This may happen, if for example, the issuer and purchaser have not finalized the terms of coverage for the new policy year. In such a situation, the SBC would have to be provided within 7 days of issuance of the policy. While current regulations already provide for a $100 per day penalty; new regulations stiffen this by adding an additional $1,000 per day for each affected individual for willful violations. Needless to say this is something where steps should be taken early and decisions made as to formatting and who will provide this document.

In closing, it is amusing to note that while the initial regulations require a limit of 4 pages for the SBC, the template on the DOL website is 6 pages. The agencies have been somewhat embarrassed by this and now will allow 4 pages double sided.

If you have any questions, please feel free to contact us at any time at (916) 363-2101.