Final SBC Rules Apply Beginning in Fall 2015 | Practical Law

Final SBC Rules Apply Beginning in Fall 2015 | Practical Law

The Departments of Labor, Health and Human Services and Treasury have issued final regulations that update existing guidance implementing the summary of benefits and coverage (SBC) and uniform glossary requirements for group health plans and insurers under the Affordable Care Act (ACA). The regulations, which finalize proposed rules issued in December 2014, will apply starting this fall.

Final SBC Rules Apply Beginning in Fall 2015

Practical Law Legal Update 4-616-4644 (Approx. 7 pages)

Final SBC Rules Apply Beginning in Fall 2015

by Practical Law Employee Benefits & Executive Compensation
Published on 15 Jun 2015 • USA (National/Federal)
The Departments of Labor, Health and Human Services and Treasury have issued final regulations that update existing guidance implementing the summary of benefits and coverage (SBC) and uniform glossary requirements for group health plans and insurers under the Affordable Care Act (ACA). The regulations, which finalize proposed rules issued in December 2014, will apply starting this fall.
On June 12, 2015, the Departments of Labor, Health and Human Services and Treasury (Departments) issued final regulations that include additional rules for implementing the summary of benefits and coverage (SBC) and uniform glossary requirements for group health plans and insurers under the Affordable Care Act (ACA) (see Practice Note, Summaries of Benefits and Coverage under the ACA). The June 2015 regulations finalize proposed rules issued in December 2014 (see Legal Update, Proposed SBC Rules Would Apply in Late 2015), which were accompanied by a new proposed SBC template, instructions, an updated uniform glossary and supplementary materials.

Applicability Date

The 2015 final regulations apply for disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re-enrollees and late enrollees) beginning on the first day of the first open enrollment period that begins on or after September 1, 2015. Regarding disclosures to participants and beneficiaries who enroll in group health coverage other than through an open enrollment period (including newly eligible individuals and special enrollees), the 2015 final regulations apply beginning on the first day of the first plan year that begins on or after September 1, 2015.
For disclosures to plans, the 2015 final regulations apply to health insurers beginning September 1, 2015.
Under a change from the December 2014 proposed regulations, regarding disclosures to individuals and dependents in the individual market, the 2015 final regulations apply to health insurers regarding SBCs issued for coverage that begins on or after January 1, 2016.
Until the 2015 final regulations become applicable (under the above timeframes), plans and insurers must continue to comply with the 2012 final regulations, as applicable (see Legal Update, Final Summary of Benefits and Coverage Rules Include Six-Month Compliance Delay).

An Exemption and Enforcement Relief Regarding Applicability

Formalizing a rule that was previously the topic of a temporary nonenforcement policy, the 2015 final regulations exempt group health plan benefit packages that provide Medicare Advantage benefits from the SBC requirements. The 2015 final regulations also include enforcement relief for insurance products that are no longer being offered for purchase (referred to as "closed blocks of business"), provided that certain requirements are met.

Delayed Applicability of Updated SBC Template, Uniform Glossary and Related Materials

In the preamble to the 2015 final regulations, the Departments indicated that the updated SBC template and related materials (instructions, uniform glossary and supplementary information) will:
  • Be finalized by January 2016.
  • Apply to coverage that would renew or begin on the first day of the plan year beginning on or after January 1, 2017, including open enrollment periods occurring in the fall of 2016 for coverage beginning on or after January 1, 2017.
The 2017 applicability timetable is intended to give the Departments additional time to:
  • Carry out consumer testing on these materials.
  • Receive feedback on the materials from the public, including the National Association of Insurance Commissioners (NAIC), which was instrumental in establishing the initial SBC standards.
As a result, the June 2015 regulations and preamble do not address most issues specific to the updated SBC template and related materials.

Issues Regarding How to Complete the SBC Template

In finalizing the updated SBC template and related documents, which will occur separate from the 2015 final regulations, the Departments will address:
  • Specific issues regarding completing the four-page updated SBC template.
  • Concerns that plans and insurers have raised about the template.
For example, the Departments may address plans' and insurers' concerns about the tension between including all SBC-required content and satisfying the SBC page limit (that is, four double-sided pages).

SBCs Provided By Insurers to Plans

The final regulations adopt clarifications from the proposed regulations regarding when and how health insurers must provide SBCs to plans (or plan sponsors) upon the plan's application for coverage.
The 2015 final regulations clarify that if an insurer has provided an SBC to a plan before its application for coverage and the information required to be in the SBC is unchanged then:
  • The requirement to provide an SBC upon application is deemed satisfied.
  • The insurer need not automatically provide another SBC upon the plan's application.
However, if there has been a change in the information required to be included in the SBC, a new SBC reflecting the changed information must be provided upon application. In this case, the SBC must be provided:
  • As soon as practicable following receipt of the application.
  • Not later than seven business days following receipt of the application.
An additional rule addresses the situation where:
  • A plan sponsor is negotiating coverage terms after an application has been filed.
  • The information required to be in the SBC changes.
In this situation, an updated SBC generally need not be provided to the plan or its sponsor, unless an updated SBC is requested, until the first day of coverage. The updated SBC provided at that time must reflect the final coverage terms under the policy, certificate or insurance contract that was purchased.

SBCs Provided By Plans or Insurers to Participants and Beneficiaries

Regarding SBCs provided by a plan or insurer to participants and beneficiaries, if an SBC was provided on request before an application for coverage, the plan or insurer need not automatically provide another SBC upon application (assuming there is no change to the information required to be in the SBC). If the information does change, an updated SBC must be provided:
  • As soon as practicable following receipt of the application.
  • In no event later than seven business days following receipt of the application.

Rule for When Coverage Terms Are Not Yet Finalized

In some cases, a plan sponsor may be negotiating coverage terms after an application for coverage has been filed, and the information required to be in the SBC therefore changes. In this situation, the plan or insurer need not provide an updated SBC (unless an updated SBC is requested) until the first day of coverage. The updated SBC must reflect the final coverage terms under the policy, certificate or insurance contract that was purchased.

Additional Rules to Avoid Duplication

The 2015 final regulations add to a series of rules in the 2012 final regulations intended to avoid duplication in providing SBCs.

Binding Contract Rule Requires Monitoring of Performance

One rule addresses situations where a plan or other entity required to provide an SBC to an individual has entered into a binding contract with another party (for example, a service provider) to provide SBCs on its behalf to the individual. Under this rule, the plan or other entity is deemed to have provided the SBC if it monitors the service provider's performance under the contract. (The Departments note in this regard that selecting and monitoring service providers for a group health plan is a fiduciary function.)
In addition, if the plan or other entity knows that SBCs are not being provided in compliance with the SBC rules and has all the information needed to correct the noncompliance, it must do so as soon as practicable. If the plan or other entity does not have all the information needed to correct the noncompliance, it must:
  • Communicate with participants and beneficiaries affected by the noncompliance about the situation.
  • Begin taking significant steps as soon as practicable to avoid future violations.

Plans Using More Than One Insurance Product Provided by Separate Insurers

Regarding plans that use two or more insurance products provided by separate insurers, the 2015 final regulations generally would make the plan administrator responsible for providing complete SBCs for the plan. The Departments note that a plan administrator may contract with one of its insurers (or a service provider) to perform this function, but that absent a contract an insurer need not provide coverage information for benefits it does not insure.
A related enforcement safe harbor that was extended indefinitely in May 2014 also was incorporated in the 2015 final regulations (see Legal Updates, FAQs Address Second Year SBC Changes and FAQs Address Updated COBRA Notices, Cost-Sharing Limits, SBCs and More). Under this safe harbor, a plan administrator may either:
  • Synthesize information into a single SBC.
  • Provide multiple partial SBCs that, together, provide all the relevant information needed to satisfy the SBC content requirements.

SBC Content, Including Safe Harbor for MEC and MV

Under an April 2013 temporary enforcement safe harbor, the Departments did not take enforcement action against a plan or insurer that was unable to update its SBCs to reflect newly issued disclosures addressing minimum essential coverage (MEC) and minimum value (MV) under the ACA, if the SBCs were accompanied by a cover letter or similar disclosure containing required MEC and MV statements (see Legal Update, FAQs Address Second Year SBC Changes).
The Departments expect to finalize an updated SBC template (and related documents) by January 2016 (see Delayed Applicability of Updated SBC Template, Uniform Glossary and Related Materials). Until the updated SBC template and related documents are finalized and applicable, plans and insurers may continue to rely on the April 2013 temporary enforcement safe harbor.
Also, the 2015 final regulations clarify that:
  • All plans and insurers must include contact information for questions in the SBC.
  • Insurers also must include an internet address where copies of a group certificate of coverage or individual coverage policy can be reviewed and obtained. Sample group certificates of coverage for each applicable insurance product may be provided in some cases.

Safe Harbor for Providing SBCs Electronically

The 2015 final regulations incorporate a safe harbor for electronic delivery of SBCs, which the Departments previously adopted in FAQ guidance (see Legal Update, DOL FAQs on SBCs Address Electronic Distribution and Coverage Example Calculator). Under the safe harbor, SBCs may be provided electronically either as part of these individuals' online enrollment or online renewal of coverage. These participants or beneficiaries must have the option to receive a paper copy on request. SBCs also may be provided electronically to participants and beneficiaries who request an SBC online.

Penalties

A group health plan (including its administrator) or insurer that willfully fails to provide information required under the SBC rules is subject to penalties.
Under the 2015 final regulations, the DOL will use the same process and procedures for assessing civil fines for failure to provide SBCs as are used for failure to file Form 5500s (29 C.F.R. § 2560.502c-2). Under these procedures, the DOL must provide a plan administrator notice of its intent to assess a penalty that indicates:
  • The amount of the penalty.
  • The period to which the penalty applies.
  • The reason(s) for the penalty.
The plan administrator may then offer a reasonable cause statement explaining why the penalty should be reduced or not assessed.
The IRS will enforce the SBC rules using procedures consistent with Section 4980D of the Internal Revenue Code, which establishes excise taxes for failure to comply with various group health plan requirements. The Section 4980D excise taxes, which are reported on IRS Form 8928, do not apply for a period if it is established that the entity liable for the taxes did not know, and exercising reasonable diligence would not have known, that the failure existed. An exception also exists for failures due to reasonable cause that are corrected within certain periods.

Practical Impact, Including Possible Changes Affecting Electronic Disclosure of SBCs

For plans, insurers and service providers that are familiar with the Departments' December 2014 proposed regulations, these 2015 final regulations contain few surprises. It's possible, however, that the updated SBC template, glossary and related materials, which won't be finalized until early 2016, may contain more extensive changes to address commenters' concerns regarding SBC compliance.
Regarding electronic disclosure of SBCs, the DOL notes that:
Other issues addressed in the 2015 final regulations include:
  • SBCs provided by insurers offering individual market coverage and anti-duplication rules specific to the individual market.
  • Individual health coverage and self-insured non-federal governmental plans.
  • Qualified health plans (QHPs) and abortion services.