Proposed SBC Rules Would Apply in Late 2015 | Practical Law

Proposed SBC Rules Would Apply in Late 2015 | Practical Law

The Departments of Labor, Health and Human Services and Treasury have issued proposed regulations that would update existing guidance implementing the summary of benefits and coverage requirement for group health plans and insurers under the Affordable Care Act (ACA). The proposed changes generally would apply in late 2015.

Proposed SBC Rules Would Apply in Late 2015

Practical Law Legal Update 3-593-8445 (Approx. 6 pages)

Proposed SBC Rules Would Apply in Late 2015

by Practical Law Employee Benefits & Executive Compensation
Published on 24 Dec 2014 • USA (National/Federal)
The Departments of Labor, Health and Human Services and Treasury have issued proposed regulations that would update existing guidance implementing the summary of benefits and coverage requirement for group health plans and insurers under the Affordable Care Act (ACA). The proposed changes generally would apply in late 2015.
On December 22, 2014, the DOL, HHS and Treasury Departments (Departments) issued proposed regulations implementing the summary of benefits and coverage (SBC) and uniform glossary requirements applicable to group health plans and insurers under the Affordable Care Act (ACA) (see Practice Note, Summaries of Benefits and Coverage Under the ACA). The proposed regulations would:
Certain of the Departments' previously issued SBC enforcement safe harbors and transition rules would become permanent (some with changes) under the proposed regulations, while other temporary enforcement policies would be discontinued.
Along with the proposed regulations, the Departments proposed changes to documents related to SBC compliance, which include a revised SBC template, instructions, guide for coverage example calculations and uniform glossary. The updated documents, which are available on the DOL's website, reflect:
  • Information from the Departments' FAQs addressing SBC implementation.
  • Changes for requirements that became applicable after the Departments' 2012 final regulations were issued, including information about:

Rules for Providing SBCs

The proposed regulations include clarifications regarding when and how plans and insurers must provide SBCs. For example, regarding SBCs provided (that is, sent) by an insurer to a plan in response to the plan's pre-application request for coverage, the requirement to provide an SBC at application is deemed satisfied if there is no change to the information required to be in the SBC. However, an updated SBC must be provided at application if there was a change to the information required.
Similarly, regarding SBCs provided by a plan or insurer to participants and beneficiaries, if an SBC was provided before an application for coverage, the plan or insurer need not automatically provide another SBC upon application (assuming there is no change to the information required to be in the SBC). If the information did change, an updated SBC must be provided following receipt of the application.

Additional Rules to Prevent Duplication

The 2012 final regulations included rules to avoid duplication in providing SBCs. The proposed regulations would add a new rule under which an insurer that automatically re-enrolls participants and beneficiaries must provide a new SBC for the plan in which the participant or beneficiary will be automatically enrolled (following the same timing rules that apply in the case of renewal or reissuance).

Binding Contract Rule Would Require Monitoring of Performance

Another rule would address situations where an entity required to provide an SBC to an individual (for example, a plan) has entered into a binding contract with another party (for example, a service provider) to provide SBCs on its behalf. The plan would be deemed to have provided the SBC if it monitors performance under the contract (the Departments note in this regard that selecting and monitoring service providers is a fiduciary function).
In addition, if the plan knows that SBCs are not being provided in compliance with the SBC rules and has all the information needed to correct the noncompliance, it must do so as soon as practicable. If the plan does not have all the information needed to correct the noncompliance, it must:
  • Communicate with participants and beneficiaries who are affected by the noncompliance about the situation.
  • Begin taking significant steps as soon as practicable to avoid future violations.

Plans Using More Than One Insurance Product Provided by Separate Insurers

Regarding plans that use two or more insurance products provided by separate insurers, the proposed regulations generally would make the plan administrator responsible for providing complete SBCs for the plan. The Departments note that a plan administrator may contract with one of its insurers (or a service provider) to perform this function, but that (absent a contract) an insurer is not required to provide coverage information for benefits it does not insure.
A related enforcement safe harbor that was extended indefinitely in May 2014 continues to apply, and the Departments requested comments as to whether to incorporate the safe harbor into the regulations (see Legal Updates, FAQs Address Second Year SBC Changes and FAQs Address Updated COBRA Notices, Cost-Sharing Limits, SBCs and More).

SBC Content: Safe Harbor Regarding MEC and MV Discontinued

Under an April 2013 temporary enforcement safe harbor, the Departments indicated that they would not take enforcement action against a plan or insurer that was unable to update its SBCs to reflect newly issued disclosures addressing MEC and MV under the ACA, if the SBCs were accompanied by a cover letter or similar disclosure addressing MEC and MV (see Legal Update, FAQs Address Second Year SBC Changes).
In the proposed regulations, the Departments decline to extend this safe harbor. As a result, the SBC content statements regarding MEC and MV, which have been changed under the proposed regulations, must be included in SBCs as of the proposed regulations' applicability date (see Applicability Date). The cover letter alternative will no longer be available at that time.
The proposed regulations would also clarify that although all plans and insurers must include in the SBC contact information for questions, only insurers must also include an internet address where copies of a group certificate of coverage or individual coverage policy can be reviewed and obtained. Sample group certificates of coverage may be provided in some cases.

A Third Coverage Example Would Be Required

The proposed regulations would require inclusion of a third coverage example (that is, a simple foot fracture with an emergency room visit), to reflect a health problem that most individuals could experience (versus having a baby or Type 2 diabetes, which only certain subsets experience). Documents issued with the proposed regulations include updated claims and pricing data for the original two coverage examples, and a narrative description and claims and pricing data for the new third example.
The Departments' coverage example calculator also would be authorized for continued use.

SBC Appearance: Shorter SBC Template

An updated SBC template issued with the proposed regulations:
  • Eliminates certain information from the SBC that was not required under the ACA.
  • Will, according to the Departments, make it easier for plans to include all the required SBC content while also satisfying the applicable page limit.
Importantly, the sample completed SBC template has been reduced from four double-sided pages to two and a half double-sided pages.

Safe Harbor for Providing SBCs Electronically

The proposed regulations would incorporate a safe harbor related to the electronic delivery of SBCs that the Departments previously adopted in FAQ guidance (see Legal Update, DOL FAQs on SBCs Address Electronic Distribution and Coverage Example Calculator). Under this safe harbor, SBCs may be provided electronically to participants and beneficiaries either as part of their online enrollment or coverage renewal, or who request an SBC online.

SBC Language, Uniform Glossary and Updated Sample Documents

The Departments indicated that translated versions of the updated SBC template, sample language and uniform glossary will be available when the proposed regulations are finalized.
Also, the proposed regulations would revise several definitions in the uniform glossary and add several new terms.

Penalties

The proposed regulations clarify that the DOL will use the same process and procedures for assessing civil fines for failure to provide SBCs as are used for failure to file Form 5500s (29 C.F.R. § 2560.502c-2). Under these procedures, the DOL must provide a plan administrator notice of its intent to assess a penalty that indicates:
  • The amount of the penalty.
  • The period to which the penalty applies.
  • The reason(s) for the penalty.
The plan administrator may then offer a reasonable cause statement explaining why the penalty should be reduced or not assessed.
The IRS proposes to enforce the SBC rules using procedures consistent with Section 4980D of the Internal Revenue Code, which establishes excise taxes for failure to comply with various group health plan requirements. The Section 4980D excise taxes, which are reported on IRS Form 8928, do not apply for a period if it is established that the entity liable for the taxes did not know, and exercising reasonable diligence would not have known, that the failure existed. An exception also exists for failures due to reasonable cause that are corrected within certain periods.

Applicability Date

The proposed regulations' changes would apply for disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re-enrollees and late enrollees) beginning on the first day of the first open enrollment period that begins on or after September 1, 2015.
Regarding disclosures to participants and beneficiaries who enroll in group health coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the proposed regulations would apply beginning on the first day of the first plan year that begins on or after September 1, 2015.
For disclosures to plans, the requirements would apply to health insurers beginning September 1, 2015.

Practical Impact: Expatriate Plans and EAPs

Regarding expatriate health plans, the Departments note that FAQ guidance (May 2012) providing temporary enforcement relief for these plans continues to apply, subject to issuance of regulations implementing the ACA exemption for expatriate health plans under the recently enacted Consolidated and Further Continuing Appropriations Act (see Legal Updates, President Signs Bill Reforming Multiemployer Pension Plan Rules and DOL FAQs on SBCs Address Electronic Distribution and Coverage Example Calculator).
Also, an employee assistance program that qualifies as excepted benefits under October 2014 guidance need not separately satisfy the SBC requirements (see Legal Update, New Guidelines for Employee Assistance Programs).