The Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury have released additional guidance in the form of Frequently Asked Questions (FAQs) regarding the Affordable Care Act’s requirement that group health plans and health insurance issuers provide consumers with a summary of benefits and coverage (SBC) that “accurately describes the benefits and coverage under the applicable plan or coverage” to enable enrollees and participants to better compare plan terms and benefits. The agencies issued a final rule on the SBC obligations last month. This eighth set of FAQs provides responses to 24 new questions about when, in what format, and to whom the SBC should be distributed; describes certain required content; and includes SBC model language and links to additional guidance materials.

As a preliminary matter, the first FAQ explains when the SBC must be issued. According to the guidance:

• For disclosures with respect to participants and beneficiaries who enroll or re-enroll through an open enrollment period (including late enrollees and re-enrollees), the SBC must be provided beginning on the first day of the first open enrollment period that begins on or after September 23, 2012;
• For disclosures with respect to participants and beneficiaries who enroll in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012;
• For disclosures from issuers to group health plans, and with respect to individual market coverage, the SBC must be provided beginning September 23, 2012.

The rule sets forth other events that would trigger the obligation to issue an SBC within 7 days. The guidance explains that the SBC will be considered timely so long as it is sent within 7 business days, even if it is actually received after that 7-day window.

An SBC must also be provided to a participant or beneficiary in a group health plan: upon application; by first day of coverage (if there are any changes); to special enrollees; upon plan renewal; and upon request. The FAQs clarify each of these circumstances, including how “upon application” and “upon renewal” apply to self-insured plans, as well as when it is permissible to provide the SBC electronically. For example, the guidance states that the SBC must be provided as part of the materials included with other written application materials. If the plan (including self-insured plans) or issuer does not provide written application materials (in either paper or electronic form) for enrollment, the SBC must be provided by the first date on which the participant is eligible to enroll in coverage.

As for renewal of coverage, if the participant is permitted to actively maintain or change coverage during an open season, the SBC must be distributed at the same time the open season materials are distributed. If renewal is automatic, an SBC must be provided no later than 30 days prior to the first day of the new plan policy year.

Moreover, the guidance notes “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.” Therefore, an SBC must be provided to a COBRA-qualified beneficiary who has elected coverage. The guidance document explains further that under certain circumstances a COBRA qualified beneficiary “may need to be offered different coverage at the time of the qualifying event than the coverage he or she was receiving before the qualifying event and this may trigger the right to an SBC.”

As for the degree of specificity included in the SBC, the FAQs explain that plans and issuers may combine certain information into one SBC provided that the appearance of the document is understandable and the coverage examples in the SBC note the assumptions used in creating them. Specifically, plans and issuers may use one SBC for different coverage tiers (e.g., self-only coverage, employee-plus-one coverage, family coverage); different cost-sharing selections (e.g., levels of deductibles, copayments, and co-insurance); and various add-ons to major medical coverage that could affect cost-sharing (e.g., health flexible spending arrangement (health FSA), health reimbursement arraignment (HRA), health savings account (HSA), or wellness programs).

In addition, the guidance explains that plan issuers are not required to tailor the coverage period for each individual’s enrollment. Therefore, the plan SBC may reflect the coverage period for group health plans as a whole.

With respect to the requirement that the SBC be provided in a culturally and linguistically appropriate manner, the FAQs explain that

plans and issuers must include, in the English versions of SBCs sent to an address in a county in which ten percent or more of the population is literate only in a non-English language, a statement prominently displayed in the applicable non-English language clearly indicating how to access the language services provided by the plan or issuer. In this circumstance, the plan or issuer should include this statement on the page of the SBC with the “Your Rights to Continue Coverage” and “Your Grievance and Appeals Rights” sections.

In response to a question about who is responsible for sending the SBC when a group health plan uses a “carve-out arrangement,” the FAQ states:

until further guidance is issued, where a group health plan or group health insurance issuer has entered into a binding contractual arrangement under which another party has assumed responsibility (1) to complete the SBC, (2) to provide required information to complete a portion of the SBC, or (3) to deliver an SBC with respect to certain individuals in accordance with the final regulations, the plan or issuer generally will not be subject to any enforcement action by the Departments for failing to provide a timely or complete SBC, provided the following conditions are satisfied:

• The plan or issuer monitors performance under the contract,
• If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer has the information to correct it, it is corrected as soon as practicable, and
• If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer does not have the information to correct it, the plan or issuer communicates with participants and beneficiaries regarding the lapse and begins taking significant steps as soon as practicable to avoid future violations.

Issuers may make minor adjustments to the SBC format, as well as use generic terms such as “standard option” and “high option”, and add barcodes or control numbers for quality control purposes.

An SBC may not, however, substitute a reference to the summary plan description (SPD) or other document for any content element of the SBC, although the SBC may provide a cross-reference to the SPD in a footnote. If premium information is added to the SBC, it must be included at the end.

Notably, the FAQs emphasize that agencies will provide more guidance than enforcement during the first year of the SBC requirement’s applicability. Specifically, during this first year the agencies “will not impose penalties on plans and issuers that are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations.”

Finally, the agencies note that no significant changes to the SBC format are anticipated, so issuers may proceed with implementation of their SBC templates.

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