FAQs Address Second Year SBC Changes | Practical Law

FAQs Address Second Year SBC Changes | Practical Law

The Departments of Labor (DOL), Health & Human Services (HHS) and Treasury issued FAQs addressing the updated summary of benefits and coverage (SBC) templates and instructions for the second year of applicability.

FAQs Address Second Year SBC Changes

Practical Law Legal Update 8-526-4586 (Approx. 5 pages)

FAQs Address Second Year SBC Changes

by PLC Employee Benefits & Executive Compensation
Published on 25 Apr 2013 • USA (National/Federal)
The Departments of Labor (DOL), Health & Human Services (HHS) and Treasury issued FAQs addressing the updated summary of benefits and coverage (SBC) templates and instructions for the second year of applicability.
On April 23, 2013, the DOL issued FAQs addressing the summary of benefits and coverage (SBC) disclosure requirement under the Affordable Care Act (ACA) (see Practice Note, Summaries of Benefits and Coverage under the ACA). The FAQs, which were jointly prepared by the Departments of Labor, Health and Human Services and Treasury (the Departments), reflect changes to SBCs distributed for coverage that begins on or after January 1, 2014, and before January 1, 2015 (referred to as the "second year of applicability"). In conjunction with the FAQs, DOL provided an updated SBC template and sample completed SBC, both for the second year of applicability.
As background, the ACA required the Departments to develop standards for use by group health plans and insurers in compiling and distributing SBCs that accurately describe plan benefits and coverage. In February 2012, the Departments published:
  • Final regulations regarding the SBC requirement.
  • A notice announcing the availability of SBC templates, instructions and related materials for the first year that the SBC requirement applied (that is, SBCs provided with respect to coverage beginning before January 1, 2014).
The documents authorized for the first year of SBC applicability did not include language for the SBC statement (required under the final regulations to be included in SBCs for coverage beginning on or after January 1, 2014) regarding whether:
  • A plan or coverage provides minimum essential coverage (MEC), as defined under IRC Section 5000A(f).
  • The plan's or coverage's share of the total allowed costs of benefits provided under the plan or coverage meets applicable minimum value (MV) requirements. In general, an employer-sponsored health plan fails to provide minimum value if the plan's share of total allowed costs of benefits is less than 60% of the costs.
The FAQs address issues related to providing SBCs in the second year of applicability:
  • Templates authorized for second year of applicability. The updated SBC template and sample completed SBC, for use in the second year of applicability, are now available on the EBSA and CCIIO websites. The documents make no changes to the uniform glossary, the SBC's "Why This Matters" language, coverage examples, or related "Instructions for Completing the SBC." The only change to the SBC template and completed SBC is the addition of statements addressing whether the plan or coverage provides MEC and meets the MV requirements.
  • Plan or insurer can provide information about MEC and MV without changing SBC template. The FAQs offer enforcement relief for plans or insurers:
    • that were already preparing SBCs to be issued in the second year of applicability; and
    • for whom it would be an administrative burden to include the additional MEC and MV information.
    Under this relief, the Departments will not take enforcement action against a plan or insurer for using the template authorized for the first year of applicability, if the SBC is furnished with a cover letter or similar disclosure stating whether:
    • the plan provides MEC; and
    • the plan's share of total allowed costs of benefits provided under the plan meets the MV standards.
    The FAQs include model language for the cover letter or disclosure, which is reflected in the updated SBC template and sample completed SBC.
  • Requirement to eliminate annual limits on essential health benefits. The updated SBC template and sample completed SBC do not contain changes reflecting the ACA's restrictions on annual limits for essential health benefits. The FAQs provide specific instructions on how to complete portions of the SBC template involving the annual limit prohibition. Also, plans and insurers should continue to include information about lifetime and annual dollar limits for specific covered benefits.
    The Departments will not take enforcement action against a plan or insurer that modifies the SBC template (for the second year of applicability) to remove the entire row in the "Important Questions" chart on the SBC template's first page (containing the question: "Is there an overall annual limit on what the plan pays?").
  • No additional coverage examples for 2014. In prior FAQ guidance, the Departments indicated that additional coverage examples would be added for 2014. However, in light of market changes to occur in 2014, the FAQs do not require additional coverage examples in SBCs. As a result, the SBC template continues to reflect coverage examples for:
    • having a baby (normal delivery); and
    • managing type 2 diabetes (routine maintenance of a well-controlled condition).
  • Extension of safe harbors and other enforcement relief. In an FAQ, the Departments extend certain existing SBC safe harbors and other enforcement relief (applicable for first-year SBCs) through the end the second year of applicability. This list includes:
    • the Departments' basic approach to SBC implementation during the first year of applicability (Affordable Care Act (ACA) Implementation FAQs Part VIII, Q2) (see Legal Update, FAQs on SBCs Include One-year Good Faith Compliance Period);
    • the circumstances in which SBCs can be provided electronically (ACA Implementation FAQs Part IX, Q1) (see Legal Update, FAQs on SBCs Address Electronic Distribution and Coverage Example Calculator);
    • penalties for failing to provide SBCs or uniform glossaries (ACA Implementation FAQs Part IX, Q8);
    • the coverage examples calculator (ACA Implementation FAQs Part IX, Q9), and information about how to use the calculator;
    • an insurer's obligation to provide SBC for benefits it does not insure (ACA Implementation FAQs Part IX, Q10);
    • expatriate coverage (ACA Implementation FAQs Part IX, Q13); and
    • Medicare Advantage (ACA Implementation FAQs Part X, Q1).
    The FAQs also extend a special rule contained in the instruction guides for group (and individual) coverage. Under this rule, if a plan's terms that are required to be described in an SBC cannot reasonably be described in a manner consistent with the template and instructions, the plan or insurer must accurately describe the relevant plan terms in a way that is reasonably consistent with the instructions and template format. Also, ACA Implementation FAQs Part VIII, Q5 (regarding the use of carve-out arrangements) will apply at least through the end of 2014, until further guidance is issued (see Legal Update, FAQs on SBCs Include One-year Good Faith Compliance Period).
    According to the Departments, the FAQs' enforcement relief extensions expressly supersede statements in prior subregulatory guidance (including FAQs) indicating that the SBC enforcement relief was limited to the first year of applicability.
  • Anti-duplication rule for student health insurance coverage. The SBC final regulations include an "anti-duplication" rule under which entities required to provide SBCs were considered to have satisfied this requirement for an individual if another party provided the individual a timely and complete SBC. The FAQs extend this anti-duplication rule to include student health insurance coverage. Therefore, the SBC requirement is considered satisfied for an entity (for example, a higher education institution) if another party (for example, a health insurer) provides the individual a timely and complete SBC.