July 16, 2012 – SBC Compliance Part I
Now that we know Health Care Reform has survived Constitutional challenge, one of the compliance priorities is the Summary of Benefits and Coverage (“SBC”). For many group health plans, compliance is required as early as open enrollment for the 2013 plan year.
SBC Compliance Part I. There are many issues related to SBC compliance. This Alert, SBC Compliance Part I, addresses these basic questions:
What is it?
Which plans?
Who must provide it?
Who must it be provided to?
By when?
SBC Compliance Part II. In an upcoming Alert, SBC Compliance Part II will address additional issues including:
What must it include?
What must it look like?
How can it be provided?
*******
SUMMARY OF BENEFITS AND COVERAGE
~PART I~
One of the many requirements imposed by Health Care Reform is that certain group health plans prepare and provide a Summary of Benefits and Coverage (“SBC”). The primary purpose of the requirement appears to be the provision of uniform and consistent information regarding plan coverage to facilitate comparison and evaluation of different coverage options, and enable persons eligible for more than one type of coverage to make the best choice. Many of the compliance specifics (e.g., required content, required format, timing of distribution, etc.) can be traced back to this basic purpose.
Very Important: The SBC is not provided instead of the summary plan description (“SPD”) requirement under the Employee Retirement Income Security Act of 1974 (“ERISA”). It is separate and distinct.
Applies to Most (but not all) Group Health Plans
As with other parts of Health Care Reform, the SBC requirements apply to certain group health plans. Group health plans that are excepted from HIPAA Portability requirements (e.g., stand alone dental, stand alone vision, most health flexible spending accounts (health FSAs), individual supplemental coverage, retiree only group health plans, etc.) are not subject to the SBC requirements. The list of group health plans covered by HIPAA Portability and, therefore, subject to the SBC requirements, includes:
- Major medical plans (fully insured, self-funded, combination)
- Most Health Reimbursement Arrangements (HRAs)
- Wellness programs that are, or relate to, group health plans
- Employee Assistance Programs (EAPs) that provide medical services and qualify as group health plans
- State and governmental group health plans for employees
- Most church group health plans
Important: There is no special treatment for grandfathered health plans. Grandfathered health plans must comply with the SBC requirements.
To Do Items:
- Identify the group health plans
- Identify which group health plans are subject to the SBC requirement (i.e., subject to HIPAA Portability) [Note: There may be more than one group health plan subject to the requirement.]
- Identify the plan years of the group health plans
Statutory Responsibility to Provide
The statutory responsibility to prepare and provide the SBC depends in part on how the benefits under the group health plan are provided.
Self-funded Benefits. Where benefits under a group health plan are provided on a self-funded (sometimes referred to as self-insured) basis, the SBC responsibility falls squarely on the plan administrator of the group health plan. In most cases, the plan administrator is also the employer that sponsors the program for its employees.
Very Important: SBC compliance typically is not the responsibility of a third party (e.g., third party claims administrator) unless the third party agrees to provide the service.
Insured Benefits. Where benefits under a group health plan are provided on an insured basis, the SBC responsibility falls upon the insurance carrier and the plan administrator (typically the employer that sponsors the plan). However, if the insurance carrier actually and timely provides the SBC, the plan administrator “is relieved” of the responsibility.
Observation: A plan administrator should confirm that the carrier is going to prepare and timely provide the SBC to the required audience.
Related Benefits. Many employers sponsor multiple group health plans that operate side-by-side. For example, a high deductible insured plan often has a self-funded health reimbursement arrangement (HRA) operating side by side; expenses reimbursed under the HRA consist of deductibles, co-pays and coinsurance. Both of these plans are subject to the SBC requirement. They are related to each other. Describing just the high deductible insured plan does not give the person an accurate description of the “total” coverage. In some circumstances, the SBC for the high deductible insured plan can also address the HRA features. However, if the SBC for the high deductible insured plan is prepared by the insurance carrier, the insurance carrier may not want to take responsibility for changing its standard SBC to include the HRA information. In this case, the HRA would need to have its own SBC prepared and distributed. And, because it is a self-funded group health plan, the plan administrator (which in most cases is the sponsoring employer) is responsible.
Note: Nothing precludes an entity that is statutorily responsible for SBC compliance from contracting with a third party to assist with the SBC compliance. The statutory responsibility, however, remains with the original party.
To Do Items:
- Identify the means of providing the benefits
- Identify who is required to provide the SBC
- Identify who is actually going to provide the SBC
- Review services contract language (e.g., description of services, indemnification and hold harmless provisions, etc.)
Who Needs to Receive It
The SBC must be provided to “participants” and “beneficiaries.” These terms are defined by referencing the ERISA definitions. ERISA broadly defines “participant” to include any employee or former employee who is or may become eligible to receive a benefit or whose beneficiaries may become eligible to receive such a benefit. “Beneficiary” is defined as a person designated by a participant or by the terms of the plan who is or may become eligible for a benefit.
As with other notification requirements, special rules exist where multiple persons entitled to receive the notification reside at the same address (e.g., spouse, dependents, etc.). A special rule also applies with respect to persons who are actually enrolled in a coverage versus persons who are not enrolled but merely eligible.
Observation: The SBC must be provided without charge to the participant or beneficiary. Nothing precludes a third party assisting with the SBC services to charge the plan administrator.
To Do Items:
- Identify the populations (i.e., participants, spouses, dependents) associated with each group health plan
- Establish a system to track over time
Compliance Deadline Fast Approaching
With respect to initial compliance, plans that distribute open enrollment materials on or after September 23, 2012 must distribute SBCs to participants and beneficiaries along with the open enrollment materials. This compliance date covers most calendar year plans. For plans not covered under this initial compliance requirement, SBCs must generally be provided by the first day of the plan year beginning on or after September 23, 2012.
Special rules apply with respect to ongoing obligations to provide SBCs to participants and beneficiaries, including the responsibility to (1) provide enrollees and special enrollees with SBCs, (2) provide SBCs upon request within seven business days, and (3) update and redistribute SBCs in advance of material changes that occur during the plan year. The ongoing notification responsibilities should be incorporated into the already lengthy list of notification responsibilities related to group health plans (e.g. COBRA, SPD, denial notices, etc.).
To Do Items:
- Identify the plan year for each group health plan
- Confirm with carrier and/or third party service provider regarding SBC responsibilities
- Be ready to comply beginning with the open enrollment materials for January 1, 2013 plan years.
If you have any questions or would like assistance identifying which group health plans have to do what, please contact us.
Stay tuned for SBC Compliance Part II.
___________________________________________
The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.