• Summary of Benefits and Coverage Updates
  • August 21, 2012 | Authors: Jeanne E. Floyd; Evelyn Small Traub
  • Law Firm: Troutman Sanders LLP - Richmond Office
  • SBCs are Required for Plan Participants, Beneficiaries and Qualified Beneficiaries under COBRA

    Health insurance issuers and group health plans are required to provide a Summary of Benefits and Coverage (SBC), which is intended to provide consumers with consistent and comparable information regarding health plan benefits and coverage. The SBC must be distributed to plan participants and beneficiaries. In addition to plan participants and beneficiaries, group health plans and health insurance issuers are required to provide SBCs to individuals who are COBRA-qualified individuals.

    According to “FAQs About Affordable Care Act Implementation Part VIII,” released by the Departments of Labor, Health and Human Services, and Treasury, a COBRA qualifying event does not itself trigger an SBC, but during an open enrollment period, any COBRA qualified beneficiary who is receiving COBRA coverage must be given the same rights to elect different coverage as are provided to similarly situated non-COBRA beneficiaries. This means that a COBRA qualified beneficiary who has elected coverage has the same rights to receive an SBC as a similarly situated non-COBRA beneficiary. If a COBRA qualified beneficiary must be offered different coverage at the time of the qualifying event than the coverage he or she was receiving before the qualifying event, this may trigger the right to an SBC. For example, if a qualified beneficiary who is relocating participates in a region-specific benefit package (such as an HMO or an on-site clinic) that does not provide services in the area to which she or he is relocating, the qualified beneficiary must be given an opportunity to elect alternative coverage that the employer makes available to active employees. SBCs for the alternative coverage must be provided at this time

    When are SBCs Required to be Distributed?

    Beginning September 23, 2012, health insurers and self-insured group health plans will be required to provide SBCs to all individuals enrolling in health coverage. The purpose of the SBC is to provide individuals with standard information so they can compare medical plans as they make decisions about which plan to choose.

    Initial SBC Distribution. Effective for plan years, policy years and open enrollment periods beginning on or after September 23, 2012, plan and health insurance issuers must distribute the initial SBCs:

    on the first day of the first open enrollment period that begins on or after September 23, 2012. This requirement means that if a participant or beneficiary must enroll to continue coverage, the SBC must be provided when open enrollment materials are distributed; and

    on the first day of the first plan year that begins on or after September 23, 2012, to participants and beneficiaries who enroll in coverage other than through an open enrollment period (such as special enrollees or individuals who are newly eligible for coverage).

    Ongoing Distribution Requirements. After the initial SBCs are distributed, the SBC final regulations require that SBCs be distributed:

    Upon application. If a plan (including a self-insured plan) or an issuer distributes written application materials for enrollment, the SBC must be provided as part of those materials. If the plan or issuer does not distribute written application materials for enrollment (in either paper or electronic form), the SBC must be provided no later than the first date on which the participant is eligible to enroll in coverage.

    By first day of coverage (if there are any changes). If there is any change in the information required to be in the SBC that was provided during the open enrollment period (or application for coverage) before the first day of coverage, a current SBC must be provided no later than the first day of coverage.

    Special Enrollees. The SBC must be provided to special enrollees within 90 days of enrollment.

    Upon renewal. If a plan or issuer 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 in an open season, the plan or issuer must provide the SBC at the same time it distributes open season materials. If there is no requirement to renew (sometimes referred to as an “evergreen” election), and there is no opportunity to change coverage options, renewal is considered to be automatic and the SBC must be provided no later than 30 days prior to the first day of the new plan or policy year. However, if the policy or certificate is not issued before that time, the SBC must be issued within seven business days after the earlier of: (1) the date the policy or certificate is issued; or (2) receipt of written confirmation of intent to renew.

    Upon request. The SBC must be provided upon request for an SBC or summary information about the health coverage as soon as practicable but no later than seven business days following receipt of request.

    Advance Notice Requirement. Also beginning September 23, 2012, if a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved that is not reflected in the most recently provided SBC, the plan or issuer must provide notice of the modification to enrollees not later than 60 days prior to the date on which such modification becomes effective. This means that a revised SBC must be issued if a there are mid-year material changes to the terms of a plan or coverage. Material changes that are effective in a new plan year must be described in the SBCs issued during open enrollment.