July 24, 2012 – SBC Compliance Part II
This is the second of a two-part alert regarding Summaries of Benefits and Coverage (“SBCs”) required of certain group health plans as part of Health Care Reform. 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. SBC Compliance Part II will address additional issues including:
What must it include?
What must it look like?
How can it be provided?
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SUMMARY OF BENEFITS AND COVERAGE
~ PART II ~
SBC Content
Compliance with the SBC requirements differs significantly from compliance with other requirements, including the summary plan description (“SPD”) requirement under the Employee Retirement Income Security Act of 1974 (“ERISA”). The regulations addressing SPDs include a list of items that should be described but leave the actual description (e.g., word choice, description length, etc.) to the drafter. However, with the SBC, the regulations specifically define the required content through the use of a template SBC form. As noted in the accompanying instructions regarding how to complete the SBC, in almost all cases, the template content cannot be changed, even when the particular content element does not relate to the group health plan being described!! In addition, based upon the characteristics of the particular group health plan the instructions provide the precise responsive language to be used.
The SBC template also requires somewhat detailed information regarding how two situations are addressed under the plan: birth (normal delivery) and routine maintenance of diabetes. As with the features discussed above, the language is specific. It cannot be varied or changed. In some situations, the treatment under the plan must be forced into the template language.
Through subsequent guidance, the regulators provided a little wiggle room. The preamble (prefatory remarks) to the regulations provides that where the descriptions do not fit the template, best efforts must be used to accurately describe the relevant terms in “a manner that is still consistent with the instructions and template format as reasonably possible.”
Note: Because of the very strict requirements regarding pages, columns, etc., discussed below in more detail, the actual ability to adjust language to fit the plan is extremely limited.
To further aid in the proper description and calculation of benefits, the regulatory agencies have provided a list of potential resource materials: http://cciio.cms.gov/resources/other/index.html#sbcug
To Do Items:
- Work through the template and identify which features in the template are also features of the particular group health plan.
- Consult the instructions with respect to each feature in the template regarding the specific language to use.
- If necessary, use the reference tools identified by the regulatory agencies for further description.
SBC Appearance
As already touched upon above, the regulations are very strict with respect to content. Equally challenging are the statutory requirements regarding appearance. SBCs, by statute, can be no longer than four pages. Through regulatory “interpretation,” the four pages can be two-sided.
Caution: Although the 4 page statutory requirement has been interpreted to mean 4 two sided pages, when asked, the regulators informally responded that does not mean 8 one-sided pages!! Keep this in mind when providing the SBC.
The statute also imposes other requirements including requirements that the font may not be smaller than 12 pt. and the terminology must be understandable by the average participant. The template establishes an order of information and uses various communication tools such as call out boxes, charts, and columns. In general, unless specifically permitted in the instructions, none of these aspects of the template SBC can be changed.
Comment: Originally, the template required the use of certain colors. Based upon the cost of preparing a color SBC, color is not required and the template can appear in a gray scale format.
To Do Items:
- Work through the template adding the required language and retaining the required appearance.
- Consult the instructions regarding on which page of the SBC various items must begin.
“Culturally and Linguistically Appropriate”
As an overriding theme, the SBC must be “culturally and linguistically appropriate.” Because so much of the language is pre-drafted, with no choice or alternatives available to the drafter, the culturally and linguistically appropriate requirement appears to focus on the inclusion of a statement in one of four languages and the availability of additional services in that language(s). The template includes a statement in each of the four required languages for inclusion. It is up to the drafter to determine which, if any, of the alternative language statements must be included in the SBC.
Note: The rules regarding “other languages” for SPDs are very different from the culturally and linguistically appropriate rules for SBCs. Just because there is no alternative language statement required in the SPD does not mean there is no alternative language statement (and associated oral language/interpretive services) required in the SBC.
An alternative language statement must be included for counties in which at least 10% of the population residing in the county is literate in the same non-English language on the list. The list currently consists of only four categories: Spanish, Chinese, Tagalog, and Navajo. Written translations of the SBC must be provided upon request. And, oral language/interpretive services must be made available. County data for 2012 is available at www.cciio.cms.gov/resources/factsheets/clas-data.html.
Note: This requirement is not without its issues. At a recent seminar presentation, the question was asked about dialects within the four languages. There are more than one dialect in at least some of the four languages listed. Presumably, persons who speak any of the dialects could all read the alternative language statement. But, with respect to oral language/interpretive services, they may not be able to understand because of the different dialects.
To Do Items:
- Based upon where the recipients of the SBC reside, consult the US Census Bureau to determine whether, and if so which, alternative language statement(s) need to be included.
- Based upon the statements included in distributed SBCs, be prepared to handle the corresponding requirement that oral language/interpretive services also be available in that language.
- Establish a tracking or monitoring system to incorporate changes in addresses and identification of whether the changes in addresses trigger the inclusion of a statement and the provision of corollary oral language/interpretive services.
Method of SBC Delivery
Note: Part I addressed to whom the SBC must be provided. That question is revisited in this description because who must receive the SBC impacts how the SBC can be provided.
For purposes of distributing the SBC, the regulations provide that if the plan has no knowledge of separate addresses, the SBC may be provided to the participant on behalf of the beneficiary. And where the SBC is requested, it must be provided no later than 7 business days after the request. In general, the SBC must be capable of being provided in paper or electronic form. With respect to electronic delivery, the regulations recognize three rules:
- Electronic Safe Harbor. For plans that use online enrollment or renewal, the SBC may be provided electronically as part of the online process. In addition, persons who request a copy of the SBC online may be provided with the SBC online. In all situations, a person must be able to request a paper copy.
- Participants Covered Under Plan. For participants and beneficiaries entitled to the SBC and currently covered under the plan, the DOL electronic distribution rules (or their equivalent) must be followed. In general, employees with work-related computer access can be provided the SBC electronically. Employees without work-related computer access may be provided the SBC electronically upon consent (and completion of a number of systems hoops). And for those who are not employees, do not have work related computer access, and do not consent, or those that just do not want the SBC electronically, the SBC must be provided in paper form.
- Persons Eligible for (but not covered) the Plan. For persons that are eligible for coverage but not enrolled, the SBC can be distributed through an internet posting if adequate notification of availability is provided (e.g., post card, email, etc.). If requested, the SBC must be provided in paper form.
Observation: Where a person is already covered under the plan, the electronic rules are likely more onerous than if the person is merely eligible!!
To Do Items:
- Identify the populations that must receive the SBC.
- Identify the primary method of delivery for each population.
- Establish/enhance systems to better track populations.
Consequences and Good Faith Compliance
The consequences of not providing the SBC correctly (e.g., timing, audience, content, format, etc.) are quite severe. If the SBC requirement is not satisfied, a penalty of to $1,000 per failure can be assessed for willful noncompliance. For plans subject to ERISA, failure to provide the SBC may also trigger breach of fiduciary duty claims. In addition, for plans (other than governmental and church plans), the Code authorizes an excise tax of up to $100 per day with respect to each individual impacted by the failure. This particular category of penalty may also trigger the self-reporting requirement under IRS Form 8928 and a potential additional penalty.
Comment: The magnitude of penalties for noncompliance emphasize the need for understanding the requirements, careful identification of who is responsible for what, and ongoing monitoring to assure responsible parties are actually performing. To the extent a third party provides some of the SBC related services, the administrative services agreement should be clear.
Thankfully, in part because of the many questions that remain, etc., there is a good faith compliance rule in place. Beyond stating the rule, the regulators have not elaborated on what constitutes good faith compliance. Presumably, it is a facts and circumstances determination.
Very Important: Deciding not to comply (e.g., because of the uncertainty, the cost, the time, the difficulty, etc.) is not “good faith compliance.”
To Do Items:
- Document decisions made regarding unclear compliance requirements, including a description of the requirement, the issues related to compliance, and the conclusion reached regarding compliance for this first year.
- Consider submitting comments to the regulators about questionable compliance requirements as an individual, through a third party, or through an organization to which you belong.
If you have any questions or would like assistance with compliance (e.g., identifying which group health plans are subject; preparing appropriate SBCs, determining delivery populations and methods, etc.), please contact us.
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The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.