Resources

Public Health Service Act Section 2715

Summary of Benefits and Coverage Proposed Regulations, Templates, and Other Guidance Issued

October 6, 2011

Introduction

On August 22, 2011, proposed regulations were published in the Federal Register regarding the standards and requirements for the new summary of benefits and coverage (SBC) under Public Health Service Act (PHS Act) Section 2715, along with a proposed SBC template (including instructions, samples, and related materials) and proposed uniform glossary. The SBC is a new disclosure document required under the Affordable Care Act that a group health plan (GHP) and a health insurance issuer (Issuer) offering group or individual insurance coverage are required to provide for each benefit package without charge that “accurately describes the benefits and coverage under the applicable plan or coverage.” The intent behind the implementation of this new SBC is not to replace the Summary Plan Description required under ERISA or other participant communications but, instead, to provide a brief summary of plan or policy benefits and coverage in a uniform format so that an individual can more easily compare different health insurance products and better understand the terms of their coverage (or exceptions to the coverage). The SBC extends to both "grandfathered” (as described in the Affordable Care Act) and non-grandfathered GHPs. GHPs and Issuers are required to begin delivering these SBCs beginning on and after March 23, 2012.

This article will focus on GHPs and Issuers offering group health insurance coverage and will not cover provisions in the SBC proposed regulations that deal specifically with the individual health insurance market.

The proposed regulations would make the plan administrator of a GHP responsible for providing an SBC to participants and beneficiaries. Because most fully insured GHPs will rely on Issuers to develop and update the SBC on behalf of the GHP and because the SBC for fully insured plans can be distributed by either the Issuer or the GHP, the SBC is not the plan administrator’s sole responsibility. Additionally, most self-insured GHPs that have third-party administrators will rely on them to provide and maintain the SBC on behalf of the self-insured GHP. Plan administrators of self-insured GHPs should discuss what roles and responsibilities the third-party administrator will take on with respect to the provision and maintenance of the SBC.

The proposed regulations for the SBC propose standards for GHPs and Issuers offering group or individual coverage that will govern who provides an SBC, who receives the SBC, when the SBC will be provided, and how it will be provided.

Who Provides the SBC and When?

1.  From Issuer to GHP (Automatic)

An Issuer offering group health insurance coverage is required to provide the SBC to the GHP (including the plan sponsor) upon an application or request for information by the GHP about the health coverage as soon as practicable, but in no event later than seven (7) days following the request. If an SBC is provided upon request for information and the GHP subsequently applies for coverage, a second SBC must be provided only if the information required to be in the SBC has changed. Additionally, if there is any change in the required information in the SBC before the coverage is offered or before the first day of coverage,the Issuer must update and provide a current SBC to the GHP (or the plan sponsor) no later than the date of the offer (or no later than the first day of coverage, as applicable). A new SBC needs to be provided when the policy, certificate, or contract is renewed or reissued, no later than the date the materials are distributed (or, if renewal or reissuance is automatic, the SBC must be provided no later than 30 days prior to the first day of the new policy year).

 2.  From GHP/Issuer to Participant or Beneficiary (Automatic)

The GHP (including the plan administrator) and Issuer offering group health insurance coverage must provide an SBC to a participant or beneficiary with respect to each benefit package offered for which the participant or beneficiary is eligible. The SBC must be first distributed at enrollment as part of any written materials that are distributed by the GHP in connection with enrollment (if no written applicable materials are distributed for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll). If there is any change to the information required to be in the SBC before the first day of coverage, the GHP or Issuer must update and provide a current SBC to a participant or beneficiary no later than the first day of coverage. The GHP or Issuer must also provide the SBC to HIPAA special enrollees within seven (7) days of a request for enrollment pursuant to a special enrollment right. If the GHP or Issuer requires participants or beneficiaries to renew in order to maintain coverage and written application is required for renewal, the SBC must be provided no later than the date the materials are distributed (if renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of coverage in the new plan year).

3. Upon Request

The GHP or Issuer must provide the SBC to participant or beneficiary and an Issuer must provide the SBC to the GHP (or its sponsor), as soon as practicable, but in no event later than seven (7) days following the request.

4. Additional Provisions to Streamline SBC Distribution Requirements

To prevent duplication of the provision of the SBC, the proposed regulations include three rules to streamline the SBC distribution requirements:

  • The requirement to provide the SBC will be considered satisfied by all entities if the SBC is provided by any entity, so long as all timing and content requirements are satisfied. For example, if the Issuer offering group health coverage provides a complete and timely SBC to the GHP’s participants and beneficiaries, the GHP’s obligation to provide the SBC will be satisfied.
  • If a participant and any beneficiaries are known to reside at the same address, providing a single SBC to that address will satisfy the obligation to provide the SBC for all individuals residing at that address. If a beneficiary’s last known address is different from the participant’s last known address, a separate SBC must be provided to the beneficiary at the beneficiary’s last known address.
  • If a GHP offers multiple benefit packages, the GHP or Issuer need only to automatically provide a new SBC with respect to the benefit package in which a participant or beneficiary is enrolled in connection with a renewal of coverage. If a participant or beneficiary requests an SBC with respect to another benefit package for which the participant or beneficiary is eligible, the SBC must be provided as soon as practicable, but in no event later than seven (7) days following the request.

How Is the SBC to Be Provided?

1. Appearance

PHS Act Section 2715 requires that the SBC be presented in a uniform format, utilizing terminology understandable by the average plan enrollee, that does not exceed four (4) pages in length, and does not include print smaller than 12-point font. The proposed regulations interpret the four-page requirement as four doublesided pages. The SBC must be provided as a stand-alone document in the form authorized by the Agencies and completed in accordance with the instructions and guidance for completing the SBC that are authorized by the Department of Health and Human Services (HHS), Department of Labor (DOL), and Internal Revenue Service (IRS) (collectively referred to as the “Agencies”).

2. Content

The SBC must include the following:

  • Uniform definitions of standard insurance terms and medical terms so that applicants, policyholders, and enrollees can compare health insurance coverage and understand the terms of coverage (or exceptions to such coverage); 
  • Description of the coverage, including cost sharing for each category of benefits that are identified by the Agencies; 
  • Exceptions, reductions, and limitations of the coverage;
  • Cost-sharing provisions, including deductible, co-insurance, and copayment obligations; 
  • Renewability and continuation of coverage provisions;
  • Coverage examples illustrating benefits provided under the plan or coverage for common benefits scenarios (including pregnancy and serious or chronic medical conditions);1 
  • With respect to coverage beginning on or after January 1, 2014, a statement about whether the plan or coverage provides minimum essential coverage (as defined under Section 5000A(f) of the Internal Revenue Code) and whether the plan’s or coverage’s share of the total allowed cost of benefits provided under the plan or coverage meets applicable requirements;2
  • A statement that the SBC is only a summary and that the plan, policy, or certificate of insurance itself should be consulted to determine the governing contractual provisions of the coverage;
  • Contact information for questions and obtaining a copy of the plan document or the insurance policy, certificate, or contract of insurance (such as a telephone number for customer service and an Internet address for obtaining a copy of the plan document or the insurance policy, certificate, or cont act of insurance);
  • For plans and Issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers;
  • For plans and Issuers that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription
    drug coverage;
  • An Internet address for obtaining the uniform glossary; and 
  • Information regarding premiums (or, in the case of a self-insured GHP, cost of coverage).

To satisfy the SBC content and appearance requirements of PHS Act 2715, the Agencies published an SBC template and instructions that are identical to the documents transmitted by the NAIC Consumer Information (B) Subgroup.3

3. Form and Manner

For GHPs and Issuers subject to ERISA or the Code, the SBC may be provided to participants or beneficiaries in paper form or, alternatively, in electronic form if the requirements of the DOL’s electronic disclosure safe harbor at 29 CFR Section 2520.104b-1(c) are met. For non-federal governmental plans, the regulations provide that the SBC may be provided electronically to participants and beneficiaries if either the substance of the provisions in the DOL’s electronic disclosure rule are met or if the provisions governing electronic disclosure in the individual health insurance market are met.4 With respect to an SBC provided by an Issuer to a GHP, the SBC may be provided in paper form. Alternatively, the Issuer may provide the SBC to the GHP electronically (such as e-mail transmittal or an Internet posting) if the following conditions are met: the format must be readily accessible by GHPs (or its sponsor); the SBC must be provided free of charge in paper form upon request; and, if the electronic form is an Internet posting, the plan must be notified by paper or e-mail that the documents are available on the Internet and given the web address.

4. Language

PHS Act Section 2715(b)(2) requires that the SBC be presented in a culturally and linguistically appropriate manner. To satisfy this requirement, the proposed regulations provide that the GHP or Issuer follow the rules for providing appeals notices in a culturally and linguistically appropriate manner under PHS Act 2719, and paragraph (e) of its implementing regulations. Generally, those rules provide that, inspecified counties of the United States, GHPs and Issuers must provide interpretive services and must provide written translation of the SBC upon request in certain non-English languages. In addition, in such counties, English versions of the SBC must disclose the availability of language services in the relevant language. The counties in which this must be done are those in which at least 10 percent of the population residing in the county is literate only in the same non-English language, as determined in the proposed guidance for health care claims.

Modifications to the SBC

If a GHP or Issuer makes a material modification (as defined under Section 102 of ERISA) to any of the terms of the plan or coverage that is not reflected in the most recently provided SBC, would affect the content of the SBC, and occurs other than in connection with a renewal or reissuance of coverage, the GHP or Issuer must provide a  notice of material modification (or an updated SBC) no later than 60 days prior to the date on which such change will becomeeffective.

Uniform Glossary

PHS Act Section 2715(g)(2) directed the Agencies to develop uniform definitions for a list of certain medical and insurancerelated terms.5 The proposed regulations direct a GHP or Issuer to make the uniform glossary available upon request within seven (7) days of the request in either paper or electronic form. GHPs and Issuers must provide the uniform glossary in the appearance authorized by the Agencies, so that the glossary is presented in a uniform format and uses terminology understandable by the average plan enrollee.

Because the terms in the uniform glossary are not intended to be plan or policy specific, the proposed regulations also adopted the NAIC’s “Why This Matters” column for the SBC template (along with instructions) to provide plan- or policyspecific terms that would assist in understanding what the terms actually mean in the context of a specific contract. The proposed “Why This Matters” column was also posted to the Federal Register along with the SBC template and other guidance.

Preemption

PHS Act Section 2715 is incorporated into ERISA and the Code, and is subject to the preemption provisions of ERISA and the PHS Act. Thus, State laws that require an Issuer to provide an SBC that supplies less information than required under PHS Act Section 2715 are preempted. The proposed regulations, however, would not prevent States from imposing additional disclosure requirements or other requirements that are stricter on Issuers than those provided by the Affordable Care Act (noting that self-funded plans are not subject to State insurance laws so this would only impact fully insured plans).

Penalties for Failing to Provide SBC

PHS Act Section 2715(f) provides that a GHP (including the plan administrator) or an Issuer that “willfully fails to provide the information required under this section shall be subject to a fine of not more than $1,000 for each such failure.” In addition, a separate fine may be imposed for each individual or entity for whom there is a failure to provide an SBC. Due to the different enforcement jurisdictions and enforcement structures of each Agency, imposition of this new penalty may vary and is discussed in more detail in the preambles to the proposed regulations. The Agencies are seeking comments on the standards for the SBC, instructions, and other guidance published in the Federal Register and detail specific items that they would like additional input on. Comments on these items are due on or before October 21, 2011.

Please contact Gabe Marinaro at 313-568-6874, Amy Christen at 248-203-0760, authors of this alert, or your Dykema attorney if you have questions regarding the SBC proposed regulations, the SBC template (and its instructions), or other general questions about the Affordable Care Act.


1The idea would be that consumers could use this information to compare their share of the costs of care under different plan or coverage options in order to make an informed decision on what type of coverage they need. HHS may identify up to six coverage examples that may be required in the SBC. The proposed regulations adopted a phase-in approach to these coverage examples, and uses three coverage examples recommended by the National Association of Insurance Commissioners (“NAIC”) for inclusion firsthaving a baby (normal delivery), treating breast cancer, and managing diabetes. A benefits scenario is a hypothetical situation consisting of a sample treatment plan for a specified medical condition during a specific period of time,based on recognized clinical practice guidelines available though the National Guideline Clearinghouse, Agency for Healthcare Research and Quality. A benefits scenario would include information needed to simulate how claims would be processed under the scenario to generate an estimate of cost sharing a consumer could expect to pay under the benefit package. Along with the SBC template and related documentation, HHS is providing (at http://cciio.cms.gov) the specific information necessary to simulate benefits covered under the plan or policy for specified benefit scenarios. HHS will update the information on its website annually, and the regulations propose that a GHP and Issuer would not be required to update their coverage examples for SBCs provided before the date that is 90 days after the date HHS provides this updated information. Note that these updates alone will not be considered a material modification that would trigger the new notification provisions described in Section 5 of this Article.

2Because this content is not relevant until other elements of the Affordable Care Act are implemented, the proposed regulations provide that the minimum essential coverage statement is not required to be in the SBC until the plan or coverage is required to provide an SBC with respect to coverage beginning on or after January 1, 2014.

3PHS Act Section 2715 directed the agencies, in developing standards for the SBC, to confer with the NAIC and a “working group composed of representatives of the health insurance-related consumer advocacy organizations, health insurance issuers, health care professionals, patient advocates including those representing individuals with limited English proficiency and other qualified individuals.” Based on this mandate, the NAIC convened a working group, the NAIC Consumer Information (B) Subgroup, to develop recommendations for the SBC. The NAIC recommendations, which were mostly adopted as-is, were designed for fully insured arrangements, so additional changes may be needed with respect to self-insured plans.

4An Issuer of individual health insurance may provide an SBC in electronic form (such as through an internet posting or via e-mail) if an individual requests information or requests an application of coverage electronically or if an individual submits an application for coverage electronically. An Issuer that provides the SBC electronically must: (1) request that the individual acknowledge receipt of the SBC; (2) make the SBC available in an electronic form that is readily usable by the general public; (3) if the SBC is posted on the Internet, display the SBC in a location that is prominent and readily accessible to the individual and provide timely notice, in electronic or non-electronic form, to each individual who requests information about, or an application for, coverage that apprises the individual that the SBC is available on the Internet and includes the applicable Internet address; (4) promptly provide a paper copy of the SBC upon request without charge, penalty, or the imposition of any other condition or consequence and provide the individual with the ability to request a paper copy of the SBC both by using the Issuer’s website (such as by clicking on a clearly identified box to make the request) and by calling a telephone number (the number for which is prominently displayed on the issuer’s web site, policy documents, and other marketing materials related to the policy and clearly identified as to the purpose); (5) ensure that a SBC provided in electronic form is provided in accordance with the required appearance, content, and language.

5The uniform glossary must provide uniform definitions (specified in guidance issued by the Agencies) for the following health-coverage-related terms and medical terms identified in the proposed regulations: co-insurance, co-payment, deductible, excluded services, grievance and appeals, non-preferred provider, out-of-network copayments, out-of-pocket limit, preferred provider, premium, UCR (usual, customary, and reasonable), durable medical equipment, emergency medical transportation, emergency room care, home health care, hospice services, hospital outpatient care, hospitalization, physician service, prescription drug coverage, rehabilitation services, skilled nursing care, allowed amount, balance billing, complications of pregnancy, emergency medical condition, emergency services, habilitation services, health insurance, in-network co-insurance, in-network co-payment, medically necessary, network, out-of-network coinsurance, plan, preauthorization, prescription drugs, primary care physician, primary care provider, provider, reconstructive surgery, specialist, urgent care, and such other terms the Agencies determine are important to identify.


As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2011 Dykema Gossett PLLC. 

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2017 Dykema Gossett PLLC.