Is your company's human resource department prepared to meet the requirements in the massive Patient and Protection Affordable Care Act (the healthcare law), which was upheld by the U.S. Supreme Court in June? One of the first steps you must take is to provide participants in a group health insurance plan with a "summary of benefits and coverage" (SBC).

The new rules for SBCs, which were initially scheduled to take effect for plan years and open enrollment periods beginning on or after March 23, 2012, were postponed for six months until September 23 to give HR departments more time to comply. In addition, the healthcare law requires employers to keep its SBC up to date by giving advance notice of at least 60 days for certain changes in a plan. This includes "material modifications" in plan terms or coverage that aren't reflected in the latest SBC. The 60-day notice requirement also takes effect on September 23, 2012.

The Department of Labor (DOL), in conjunction with the Departments of Health and Human Services and the Treasury Department, recently issued final regulations on the SBC requirements. It also posted and updated a list of Frequently Asked Questions.

Be aware that an SBC isn't meant to replace the summary description for the health insurance plan. It is considered to be a supplementary document that is limited to just four pages. Some of the key components are:

  • Uniform definitions of standard insurance and medical terms;
  • A description of coverage;
  • Information on premiums;
  • Exceptions, reductions, and limits on coverage;
  • Cost-sharing provisions (for example, deductibles, co-insurance and co-payments);
  • Renewability and continuation of coverage provisions;
  • Coverage examples explaining common benefit scenarios;
  • A statement as to whether the plan provides affordable minimum essential coverage (effective Jan. 1, 2014);
  • A statement that the SBC is only a summary and other plan documents should be consulted;
  • Contact information (including a website);
  • Instructions for obtaining a list of network providers (if applicable);
  • Instructions for obtaining information about prescription drugs (if applicable); and
  • An Internet address for accessing the uniform glossary

The government is doing its best to clarify the new rules. Several important issues covered in the new FAQs include the following:

Seven-day rule: The DOL regulations require health insurance issuers to provide the SBC upon application for coverage. Under the FAQs, the SBC must be provided as soon as it is practical, but in no case later than seven business days of receipt of a substantially complete application for health insurance. 

Duplicate SBCs: If an SBC is provided prior to receipt of an application for coverage, the health insurance issuer isn't required to provide a duplicate SBC upon receipt of an application. If there have been changes in the information that must be included in the SBC, a new SBC must be provided as soon as practicable following the receipt of the application, but no later than seven business days of receipt of the application.

Electronic safe-harbor rule: An SBC may be provided electronically to participants and beneficiaries in connection with online enrollment or online renewal of coverage under the plan. Furthermore, it may be provided electronically to participants and beneficiaries who request the SBC online. In either case, the individual may request a paper copy. 

Comparison of options: The SBC, or a part of the SBC, may be displayed in a way that promotes comparison of different benefits package options. However, these documents don't fulfill the obligation to provide an SBC. The entire SBC for all benefit packages included in the comparison documents must be available.

Penalties: The DOL is counting on good-faith compliance with the rules. Therefore, penalties will not be imposed on plans and issuers that are working diligently to meet the SBC requirements.

We certainly have not seen the last word on this topic. You can expect more guidance from the DOL and other branches of the government in the near future. If you want more information in your situation, contact your HR or employee benefits advisers.

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