• The Benefits Game The Health Care Reform Playbook:  The SBC
  • July 19, 2012 | Authors: Sarah Lockwood Church; Paul A. Kasicky; Joni L. Landy; Kevin A. Wiggins
  • Law Firms: Thorp Reed & Armstrong, LLP - Philadelphia Office ; Thorp Reed & Armstrong, LLP - Pittsburgh Office
  • Now that the Supreme Court has issued its opinion, it is time for plan sponsors to focus on new compliance obligations under the Affordable Care Act1 (ACA) that impact the upcoming open enrollment season.  One of those biggest compliance obligations will be providing eligible employees with the "Summary of Benefits and Coverage" or "SBC," especially for self-insured group health care plans.  Some plan sponsors may find this especially challenging if they were waiting for the Supreme Court ruling to move forward in planning for this requirement.

    So, what is an "SBC?"

    A Summary of Benefits and Coverage or SBC is a document written in plain language that contains specific information about the group health care coverage available to your employees.2  There are prescribed formats that must be used, specific content requirements and the SBC must be printed in 12-point font.  This disclosure document must be no longer than four pages (front and back).  The SBC can be its own stand-alone document or can be combined with your plan's Summary Plan Description or SPD so long as it is prominently displayed at the beginning of the SPD.  In addition to the actual SBC, access must be provided to a Glossary of Health Insurance and Medical Terms (Glossary).  Just as with the actual SBC, the agencies3 have also provided the specific language and format for the standardized glossary.

    What is the purpose behind the SBC distribution requirement?

    According to the preambles in regulatory guidance, issuance of the SBC "...will enable consumers, both individuals and employers, to better understand the [group health care] coverage they have and make better coverage decisions, based on their preferences with respect to benefit design, level of financial protection, and cost."4

    When do we have to comply with the requirement to provide eligible employees with an SBC?

    The SBC requirement applies to your group health plans the first open enrollment period beginning on or after September 23, 2012.  For calendar-year plans, this means the SBCs must be provided this fall (unless, of course, your open enrollment season begins before September 23, 2012).  Distribution of SBCs is an ongoing obligation that must be satisfied when an employee is first eligible for coverage, during open enrollment for a new plan year, upon request and when there is a change that affects a previously distributed SBC.

    If we have several group health plan options available, do we have to provide an SBC for each option during open enrollment?

    If you have multiple health coverage options, an employee must automatically receive an SBC for the health plan option in which he or she is enrolled immediately prior to the open enrollment period.  SBCs for coverage options for which the employee is eligible, but not enrolled, must only be provided on request within 7 business days.  However, employees who are newly eligible at the time of open enrollment, and presumably employees who have been eligible but not enrolled at the time of open enrollment, will need to be provided with SBCs for each health coverage option for which they are eligible.

    Is it possible for us to combine certain group health plan options together into one SBC?

    It is possible in some instances to combine the required SBC content into one document.  For example, where the only difference in the benefit package is the participant's ability to elect a level of deductible, copayments and/or co-insurance.  In addition, if your group health plan has certain "carve out arrangements" or "add-ons" to coverage, it may be possible to combine these or reflect these arrangements in the SBC for the basic health plan option.5  However, because of the size and formatting limitations, as well as a requirement that the SBC be understandable to the average person, it may be easier to just prepare a separate SBC for each option.

    How do we distribute the SBC?

    In general, the SBCs will need to be provided by paper unless the Department of Labor rules for electronic distribution (including online posting) are first satisfied.  The good news is that the rules for providing SBCs electronically (including posting them online) are more relaxed than the rules for providing SPDs electronically.  More specific guidance about acceptable methods of delivery appear in the final regulatory guidance as well as in the FAQs noted in footnote 5.

    How do we make the Glossary available?

    The requirement to provide the uniform glossary can be satisfied by including in each SBC an Internet address where an individual may review and obtain the uniform glossary, a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies are available upon request.  The Internet address may be a place where the document can be found on the plan's or issuer's web site, or the web site of either the Department of Labor or Health and Human Services. However, a plan or issuer must make a paper copy of the glossary available within seven (7) business days upon request.

    Who is responsible for preparing and providing the SBCs?

    If your group health plan is fully-insured, then your insurance carrier is required to prepare SBCs.  If you have a self-insured plan, you must determine if your third-party administrator or TPA will prepare or assist in preparing the SBCs.  Complications may arise if you maintain any separate program that is not administered by your TPA that is subject to the SBC requirement.  In some cases those types of programs may be integrated within the SBC prepared by your TPA.  In any case, you will need to ensure that the SBCs are properly prepared and timely distributed.  The responsibility for providing the SBC is on both the plan and insurance carrier, even if the plan is fully-insured; and on the plan sponsor or designated plan administrator if the plan is self-insured.

    What are the penalties for non-compliance with the SBC distribution requirement?

    Penalties of up to $1,000 day per employee apply for failures, but government regulators say they don't intend impose penalties for this first compliance year if there is a good faith effort to comply with the SBC distribution rules.

    [1] The Patient Protection and Affordable Care Act (P.L. 111-149, or the PPACA, as amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), or the Reconciliation Act.  The PPACA and Reconciliation Act are collectively referred to as Health Care Reform or the Affordable Care Act. (ACA).

    [2] Note that you will not need to provide an SBC with respect to "excepted" benefits under the Health Insurance Portability and Accountability Act (HIPAA), such as dental and vision care benefits that are offered under separate contracts.  While a separate SBC may not be necessary, the impact of a medical flexible spending account or health reimbursement plan that is integrated with a group health care plan must be reflected in some of the SBC scenarios.

    [3] There are three agencies responsible for issuing regulations and other guidance with respect to the SBC:  Treasury, the Department of Labor and Health and Human Services.

    [4] See:  Preamble to Final Regulations issued on February 14, 2012. 

    [5] See:  Parts VIII and IX of the FAQs About Affordable Care Act Implementation, issued jointly by the Departments of Labor, Health and Human Services and Treasury.