April Compliance Corner: Understanding the Summary of Benefits and Coverage: A Primer for Employers

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The Affordable Care Act (ACA) mandates that all group health plans and insurance companies provide individuals a “summary of benefits and coverage” (SBC) that outlines the key features and coverage under the plan. This month’s Compliance Corner gives an overview of what the SBC is, why it matters, and how employers can ensure compliance with regulations.

Overview of the SBC

The SBC is a standardized document that outlines a health plan’s expenses, benefits, covered services, exclusions, and other key features. It is designed to help individuals evaluate, compare, and select the coverage that best meets their needs. In addition to the SBC, group health plans and health insurance companies are also required to provide a Uniform Glossary that defines common medical and insurance-related terms.

Health plans that are subject to the SBC requirement include: (1) Fully-insured plans, such as traditional group health plans; (2) Self-insured plans, including certain types of health reimbursement arrangements (HRAs); (3) Individual health plans purchased through public or private health exchanges; and (4) Grandfathered plans, which are individual health plans purchased before the ACA was enacted in 2010.

However, under the ACA, plans covering excepted benefits are exempt from this requirement.

Key Features of the SBC

The document is required to be clear and concise, typically using plain language and standardized templates to ensure uniformity across all plans. The Department of Labor offers an SBC template on its website that employers can download and customize with the specific terms of their plan.

Specifically, the SBC must include the following:

1. The Uniform Glossary of standard health insurance and medical terms as it relates to coverage, so that consumers may compare health coverage and understand the terms of (or exceptions to) their coverage;
2. A description of the coverage for each benefit category;
3. Cost-sharing amounts, including deductible, coinsurance, and copayment obligations;
4. Limited and excluded services under the plan;
5. The renewability and continuation of coverage provisions;
6. Common medical situations and how cost-sharing, limitations, and exclusions function in the scenarios under the plan;
7. A statement about whether the plan meets ACA requirements regarding minimum essential coverage (MEC) and minimum value standards;
8. A statement that the SBC is only a summary and that the plan document, policy, certificate, or contract of insurance should be consulted to determine the governing contractual provisions of the coverage;
9. Contact information for questions;
10. The plan participant’s rights regarding how to process to file grievances and appeals;
11. For issuers, an Internet web address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained;
12. For plans and issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers;
13. For plans and issuers that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage; and
14. An Internet address for obtaining the Uniform Glossary, as well as a contact phone number to obtain a paper copy of the Uniform Glossary and a disclosure that paper copies are available.

Additionally, all English copies of the SBC must include a statement with contact information regarding accessing the notices in other languages.

When and How Should Employers Provide the SBC?

Generally, employers must provide the SBC in specific situations:

1. Enrollment: Employees should receive the SBC when they first enroll in a health plan, whether through open enrollment or a special enrollment period.
2. Annually: The SBC must be provided annually to all employees and is usually included as part of the annual notice packet employers provide to all employees.
3. Upon Request: Employees may request an SBC at any time, and employers are required to provide it within a reasonable timeframe.
4. When Coverage Changes: If there are significant changes to the plan (e.g., changes in cost-sharing, covered benefits, etc.), the SBC must be updated and provided to employees.

Additionally, the document must be delivered in a way that employees can easily access and understand it. This can include handing out physical copies, providing it electronically, or offering access through an online benefits portal.

Conclusion

The SBC is an essential tool for both employers and employees. By providing clear, standardized information about health insurance plans, the SBC helps employees make informed decisions and ensures that employers remain compliant with federal regulations. Employers should review their SBC documents regularly, ensure they are distributed properly, and stay updated on any changes to the ACA’s requirements to avoid potential penalties.