Under health reform law, group health plans and insurance carriers that offer group (or individual) health insurance coverage are required to use disclosure standards that accurately describe the benefits and coverage under the applicable plan or coverage. These standards are embodied in a document known as the Summary of Benefits and Coverage (SBC, sometimes also called the "mini-SPD"). You may recognize it as the food-label style grid that offers an explanation about covered benefits. 

The SBC is used to ensure that health coverage information is presented in a clear and uniform format that helps plans and individuals better understand their health coverage and compare coverage options across different types of plans and insurance products. The SBC is generally prepared by the insurance carrier or third party administrator. 

Late last December, the federal agencies released new SBC regulations. Here are some highlights of the generally minor changes:

  • Document size: The new Summary template is significantly shorter, roughly 2 1/2 double-sided pages. Employers, carriers, and others cited the statute which limited the size of the summary to four pages, while the agencies had struggled with fitting the required content into that format.
  • Reporting Coverage Value: The new summary format provides for reporting of the minimum essential coverage and minimum value standards. Requiring these items on the template should ease employer concerns regarding a carrier offering certification that the plan option will be compliant. 
  • Abortion services: The new regulations propose a change on disclosing abortion coverage. It should not affect employer plans; however, some carriers for insured programs may address abortion coverage in group health plan SBCs.
  • Premium cost option: Premium information, if desired, can be added to the end of the template. Proving premium details is entirely optional, but if provided, it must reflect the total premium for all covered benefits and services. (Few employers will want to include the premium cost because doing so will potentially subject the organization to the 60- day advance notice rule. The advance notice rule could be triggered if the plan sponsor found it necessary to change contributions mid-year.)
  • Required Example: A new example is provided for the summary, regarding a foot fracture. Many had complained the examples relating to birth and diabetes were not typical for most employees.
  • Electronic disclosure (Insured plans): Carriers are permitted to post their standard plan certificates of coverage to their websites (rather than provide the brief summaries) to allow employers to select among available options. The federal agencies are now asking for input on whether self-funded employers should be required to post their underlying plan documents on the Internet. 
    • Comment: Many organizations will likely prefer not doing so, since some employers do not use a website at all -- typically because of local workforce demographics and/or issues of computer access. However, if all disclosures can be delivered on-line for all employees, (regardless of use of computers for work as currently required by ERISA disclosure rules), such an option would represent a welcome change that facilitates a compromise on this issue.
  • Electronic disclosures (Self-funded): Although the agency is considering requiring a posting for self-funded employers, the agencies now reiterate that an employer can satisfy disclosure requirements with on-line postings under the ERISA standard of computer use in an employee's daily job. The regulations note this also includes self-funded, non-federal governmental plans that are not subject to ERISA (for example, states, state agencies, public education entities, cities and counties). 
  • Requests inside waiting period: An employee in his waiting period is allowed to request a mini-summary, just like a current participant.
  • Restriction to using "linked information": The regulations will not permit cross-references to websites or comparison charts for plan option differences.  Instead, the regulations still require the information to appear in the mini-summary. Many industry experts believe that is an inferior approach for such comparisons and will continue to provide separate items or postings. 
  • On-line enrollment systems: Providing the summary through an on-line enrollment system remains acceptable, and the rule is now formalized in regulations.
  • Benefit enhancements trigger advance notice: Of concern is a statement in the preamble stating that even enhancements in the benefits package, such as newly covered services, are subject to the 60-day advance notice requirement for changes to the mini-summary. This is contrary to the position the agency has taken informally, which is that an employer should not be made to delay off-anniversary benefit improvements in order to provide the advance notice. Commentators on these regulations are likely to explain the detrimental effect on participants and request an exemption when proposed rules are finalized.
  • Penalties: The agencies clarify the process for imposing penalties for failure to provide the mini-summary.
  • Effective date: The new SBC rules are effective for Plan Years starting on or after September 1, 2015. This means that the rules do NOT require any immediate re-issue of SBC documents to participants. The guidance merely indicates that going forward, for Plan Years Beginning on or after September 1, 2015, the new SBC template will be used in place of the old design under the currently required schedule for production of SBC materials.

Conclusion 

The new, shorter template is a particularly welcome development as the reduced size can help an employer more easily monitor content.  Less appealing is the clarification about a 60-day advance notice being required for off anniversary benefit enhancements. Such a rule would seem to operate against plan participants as it may cause some employers to delay or reject opportunities to enhance benefits midyear. Hopefully the agencies will revisit that question with a more favorable outcome after considering incoming public comments.

Employers are invited to comment on the proposed rules by March 2, 2015. Comments should be submitted in the manner listed in the proposed regulations, using the link shown below.

Helpful links 

Federal Register: Proposed Regulation

Portal for Public Comments