Short, Fast and to the Point – Proposed PPACA Benefit Summary Rules Set Tight Standards

Starting in March 2012, employers would have to provide much more succinct summaries of their health plan benefits (no more than four double-sided pages), much more quickly (often within seven days) and in a much more standardized form than they do now under proposed regulations issued this week by the three agencies responsible for implementing the benefit summary requirements of the 2010 health care reform law.

In a major break with prior notice requirements for health plans, employers would have to see to it that updated summaries reflecting “material” changes in health plans would be distributed at least 60 days prior to any change taking effect, under the proposed rules implementing Section 2715 of the Patient Protection and Affordable Care Act (PPACA). This would not apply to changes made at renewal. Prior to the PPACA, even a material reduction in health benefits only required notice within 60 days following the date a change was adopted. These proposed rules also would apply to group health insurers.

These notices would take the form of an approximately eight-page summary of benefits and coverage (SBC) that would be required to include a glossary of insurance and medical terms – featuring generic definitions, not the plan-specific ones that would appear in a summary plan description (SPD) – as well as illustrations of how the particular plan would generally provide benefits for people in standard medical situations, such as the birth of a child, cancer treatment and managing diabetes.

The proposed regulations, along with templates of proposed formats for these SBCs and related materials, are scheduled to be published in the Federal Register on August 22, 2011, by the Departments of Labor, Treasury and Health and Human Services. The templates were developed by the National Association of Insurance Commissioners and are expected to be revised, at least in part to make these forms designed for individual and group health insurers more useable by employer-sponsored plans.

Background

The PPACA requires plans and insurers to distribute these summaries no later than March 23, 2012 (two years after the enactment of the Act), though the proposed rules indicate that the regulatory agencies realize that this sort of mid-plan year change could cause problems for employer plans. The agencies are seeking comments on a potential phase-in approach, on the inclusion of these summaries in the SPDs that plans already provide, and a range of other issues by October 21, 2011 (see below).

An employer health plan or group health insurer that willfully fails to provide a proper SBC is subject to a fine of not more than $1,000 per failure, and each enrollee who does not receive a timely and proper SBC counts as a separate failure. The benefit summary requirements and potential penalties apply to group health plans (but not excepted benefits such as certain dental, vision, and health FSA arrangements) whether or not they are grandfathered.

Summaries of Benefits and Coverage

The proposed regulations do cover the SBCs that health insurers are required to provide plan sponsors to help sponsors better understand their benefit programs, but this Benefits eAuthority focuses on the SBCs that plans are required to provide to individuals. There are a number of standards that employers would have to meet under the proposed regulations, including:

• A plan or insurer (not both) would be required to provide an SBC to participants or beneficiaries upon request as soon as practicable but in no event later than seven days following a request.
• A plan or insurer (not both) would have to provide an SBC for each “benefit package” for which a participant or beneficiary is eligible. However, upon renewal, an SBC need only be provided for the specific benefit package in which a participant is enrolled, unless a participant or beneficiary requests SBCs for other options.
• The SBC would have to be distributed as part of any written open enrollment materials that are distributed, and if there is any change to the SBC after the open enrollment period an updated version would have to be provided by the start of the plan year. If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first day an individual can enroll.
• Individuals who enter the plan under a HIPAA special enrollment right – such as children and a spouse following a marriage – must be provided with an SBC within seven days of when they request special enrollment.
• SBCs could be provided in paper or electronically, provided it satisfied the ERISA rules for electronic disclosure. ERISA generally requires plan administrators to take appropriate and necessary means to ensure that the system for furnishing documents results in actual receipt of the transmitted information. A DOL electronic delivery safe harbor that applies to SPDs and other documents also may be relied on in providing the SBCs.
• SBCs would have to be provided as stand-alone documents in the form authorized by the regulatory agencies and completed according to the instructions written by the agencies. For example, the SBC could not exceed four double-sided pages in length and could not include print smaller than 12 points.
• SBCs would have to be provided in a “culturally and linguistically appropriate manner.” The proposed rules refer to separate standards recently issued under another PPACA provision that would require certain support and translation services be made available if notices are being sent to a participant or beneficiary in a county where the U.S. Census Bureau has determined that 10 percent or more of the population is literate only in one of the following languages: Chinese, Spanish, Tagalog or Navaho. The proposed rules do not specify how these standards should be applied to SBCs that are not being sent to a residence.

The agencies do take some additional steps to reduce duplication. For example, if a participant and any beneficiaries are known to reside at the same address, the proposed rules indicate that the standards could be met by providing a single SBC to that address. If a beneficiary’s last known address is different than a participant’s, a separate SBC would be required to the beneficiary.

Drawing primarily upon the text of the PPACA itself, the proposed regulations set numerous content requirements for the SBCs, including:

• Uniform definitions of standard insurance and medical terms to enable consumers to compare the terms of coverages as well as exceptions. The proposed rules include a list of 44 terms (from “allowed amount” through “urgent care”) and provide for additional terms to be added by the regulators.
• The cost of coverage and a description of the coverage, including cost-sharing, for each category of benefits.
• Exceptions, reductions, and limitations of the coverage, along with cost-sharing provisions including deductibles, co-payments and coinsurance.
• “Coverage examples,” which are hypothetical summaries of how the plan would pay benefits in certain common medical situations such as the birth of a child, treatment for cancer, and managing diabetes.
• A statement that the SBC is only a summary and that the plan document, policy or certificate of insurance should be consulted to determine the governing provisions. Note that the proposed rules would not require an SBC to explain its relationship to the SPD or how to resolve any conflicts or ambiguities between the two summaries.
• Internet addresses for obtaining the uniform glossary and for obtaining any formulary or provider network that a plan uses.

Comments Requested

The regulatory agencies are requesting comments by October 21, 2011, on both the proposed template SBC and on a number of specific provisions of interest to employers. Specifically, the proposed rules request comments on:

• How the SBC requirements should coordinate with existing ERISA-required SPDs, and other communications used by employer health plans, such as open enrollment materials.
• The appropriate safeguards when providing SBCs electronically.
• Exactly what type of cost information should be provided in an employer plan where there may be employer subsidies for different coverage options.
• The coverage examples in the proposed rules (birth of a child, cancer treatment and managing diabetes) and others that might be desirable to include. Also, on whether to phase-in the requirements to provide coverage examples.
• Whether and how to provide written translations of SBCs in the non-English languages noted above (Spanish, Chinese, Tagalog and Navajo).