The future of the Patient Protection and Affordable Care Act (the "Act") is in the hands of the Supreme Court, which is expected to issue an opinion in June. Whether the Court upholds the individual mandate component of the Act or not, group health plans will continue to be regulated by the Departments of Health and Human Services, Labor, and the Treasury (the "Departments").

Prior to the recent oral argument, the Departments issued a final set of regulations pertaining to a summary of benefits and coverage ("SBC") and a uniform glossary of health coverage related terms which apply to group health plans and health insurance issuers in the group and individual markets. These regulations are likely to remain in effect (in some fashion) regardless the outcome of the High Court's ruling.

Despite protests lodged during the comment period, large and self-insured plans -- which must continue to provide summary plan descriptions and open season materials that accurately describe the plan and any coverage options -- are not exempt from these regulations. Following is a summary of these new final regulations as applicable to self-funded group health plans or administrators, and group health plan insurance issuers.

What is required?

Generally speaking, the SBC must be provided without charge upon application, by the first date of any change in coverage, upon renewal, or upon request (within seven business days). An SBC must be provided to each participant or beneficiary with respect to each benefit package for which the participant or beneficiary is eligible. However, upon renewal, the plan or issuer is required to provide a new SBC only with respect to the benefit package in which the participant or beneficiary is enrolled.

In the case of an insured group health plan, the regulations do not require duplication of efforts. That is, either the plan administrator or the insurance issuer must provide the SBC, but not both. The SBC must be provided to both the participant's and the beneficiary's last known address, if different.

An SBC is not required for stand-alone dental or vision plans or a health FSA if that coverage constitutes excepted benefits. However, plans and issuers should be careful to coordinate with administrative service providers for carve-out arrangements, such as pharmacy benefit managers or managed behavioral health organizations, to ensure that SBCs are accurate.

What content is necessary?

In general, the SBC must contain the following content:

  1. Uniform definitions of standard insurance and medical terms;
  2. Description of coverage;
  3. Exceptions, reductions and limitations of coverage;
  4. Cost sharing, including deductible, coinsurance and copayment obligations;
  5. Renewability and continuation of coverage;
  6. Coverage examples (to be described more fully in future regulations to be issued by the Departments, but anticipated examples include common benefit scenarios such as pregnancy or chronic medical conditions);
  7. Statement that the SBC is only a summary and that the plan document or insurance contract must be consulted for full coverage terms and provisions;
  8. Separate contact information for questions about the plan, network providers, prescription drug coverage and the uniform glossary (including how to obtain a copy).

Notably absent is a requirement to include premium information. This allows an insurance issuer to provide an SBC to a group health plan upon application, and obviates the need to provide a second SBC upon effective coverage, so long as the SBC remains otherwise unchanged.

What format is required?

The SBC must be presented in a uniform format, use terminology understandable by the average enrollee, not exceed four double sided pages in length and not include print smaller than 12-point font. The SBC may be provided in hard copy or electronically so long as certain conditions are met, including providing information regarding how to access the electronic copy, and issuing a paper copy upon request. Further, the SBC must contain culturally and linguistically appropriate language.

The SBC may be provided as a stand-alone document or in combination with other plan summary materials, such as a summary plan description, so long as the other requirements of an SBC are satisfied.

What is the purpose?

These regulations were designed to promote accurate descriptions of benefits and coverage, to develop standards for the definitions of terms used in health insurance coverage and to ensure that information is presented in clear language and in a uniform format. The anticipated benefits of these regulations include: (1) employees will have better information regarding the value of their health benefits as part of their total compensation; (2) employers and health insurance issuers will be more competitive regarding price, benefits and quality which is intended to improve the overall efficiency of health insurance and labor markets; and (3) consumers can make informed decisions when shopping for coverage.

According to the Departments, these goals justify the anticipated $73 million annual cost to group health plans and health insurance issuers to compile and provide a SBC and a uniform glossary of terms.

When do these regulations apply?

These regulations, which are effective as of April 16, 2012, apply to disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For those participants and beneficiaries who enroll otherwise, such as new or special enrollees, the new requirements apply beginning on the first day of the first plan year that begins on or after September 23, 2012. For group and individual health insurance coverage, the new requirements apply to health insurance issuers beginning on September 23, 2012.

What if a plan or issuer fails to comply?

If a self-funded group health plan, its administrator, or a group health plan insurance issuer "willfully fails to provide the information required" by these new regulations, the non-compliant party shall be subject to a fine of not more than $1,000 per such failure.

Related links:

For the full set of final regulations, click here: http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25818

Further guidance on compliance, including information on how to obtain a SBC template and the uniform glossary is available at www.dol.gov/ebsa/healthreform and www.cciio.cms.gov.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.