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PPACA’s summary of benefits and coverage: Are you ready?

September 4, 2012

Article courtesy of SBAM Approved Partner Clark Hill PLC
By Kristi R. Gauthier
One of the many changes under the Patient Protection and Affordable Care Act (“PPACA”) impacting group health plans is the introduction of the Summary of Benefits and Coverage (“SBC”) and Uniform Glossary.  The deadline for this new disclosure requirement is fast approaching.  Group health plans and issuers must first distribute the SBC and Uniform Glossary beginning with the first day of the first open enrollment period/plan year that begins on or after September 23, 2012.  For any group health plans with open enrollment periods this fall, compliance is right around the corner.

What is the Purpose of the SBC and Uniform Glossary?

The SBC is intended to detail, in plain language, simple and consistent information about health plan benefits and coverage allowing consumers to better understand the coverage they have and also allow them to easily compare different coverage options.  It will summarize the key features of the plan or coverage, such as the covered benefits, cost-sharing provisions, and coverage limitations and exceptions. The Uniform Glossary is intended to provide consumers with a list of terms commonly used when describing health care coverage.

Plans Subject to the SBC Requirement

An SBC and Uniform Glossary must be provided for both grandfathered and non-grandfathered group health plans, regardless of whether the plans are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  However, an SBC and Uniform Glossary need not be provided for plans that only provide “excepted benefits” under the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”).  For example, an SBC and Uniform Glossary need not be provided for stand-alone dental or vision plans or for health flexible spending accounts if they qualify as a HIPAA excepted benefit.
Timing Requirements

Group health plans and issuers must distribute SBCs and Uniform Glossaries to individuals at the following times:

  • Upon application for enrollment in the group health plan, if applicable;
  • No later than the first day of coverage if the SBC was not provided during an application for enrollment, or if there were any changes in coverage since the application;
  • Upon special enrollment;
  • Upon renewal during an annual open enrollment period; and 
  • As soon as practicable upon request, but no later than seven business days after the request is made.

The final regulations provide that the SBC and Uniform Glossary can be provided as either a stand-alone document or in combination with other summary documents, such as a Summary Plan Description, provided that the SBC information is intact and prominently displayed at the beginning of the materials, and the timing requirements, discussed above, are met. 

Form Requirements

According to guidance issued by the Department of Labor (“DOL”), group health plans must utilize the form document issued by the DOL and only minor deviations will be permitted.  If the group health plan’s terms cannot be described in a manner consistent with the template, the group health plan issuer or plan administrator is required to use best efforts to accurately describe the plan terms consistent with the template format. 

The SBC and Uniform Glossary must also be provided in a “culturally and linguistically appropriate manner.”  This generally means that participants in the group health plan who are living in counties where 10 percent or more of the population are literate only in the same non-English language, based on U.S. census data, are entitled to an SBC and Uniform Glossary written in that non-English language.  The list of affected counties can be found on the DOL and Department of Health and Human Services websites, and will be updated annually.

Penalties for Noncompliance

PPACA imposes significant penalties for failure to comply with this new disclosure requirement.  Group health plans and issuers who willfully fail to provide the required information will be subject to a fine of up to $1,000 for each individual that did not timely receive the SBC and Uniform Glossary. 

You Need to Act Fast!

Given the effective date is just a few weeks away, group health plans and issuers need to work quickly to prepare and distribute these new documents.  Plan sponsors and employers should work closely with their insurers and third party administrators to ensure compliance with this new requirement. 

For additional information on the SBC and Uniform Glossary, a copy of the template documents, and instructions for completion, visit the DOL website.  

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