Employee Benefits-Reminder: Second SBCs Are Coming Due- There Are Changes And Instructions To Note

The requirement to provide a “Summary of Benefits and Coverage” or an “SBC” to group health care plan participants and beneficiaries was added to the law by the Affordable Care Act. In general, the insurer prepares the SBC for an insured plan, and the plan prepares the SBC when it is self-insured.

Timing For Providing The SBC. Assuming that the initial SBC has been furnished, an SBC, and an accompanying glossary, generally has to be provided to group health care plan participants and beneficiaries: (1) if renewal of coverage is required, no later than by the date on which written application materials for the renewal are provided, or (2) if renewal is automatic, no later than 30 days prior to the first day of the new plan year. Based on this requirement, it appears that the second round of SBCs are coming due.

Department Models. The government departments responsible for the SBCs-namely, the Departments of Labor, Health and Human Services (“HHS”), and the Treasury (the “Departments”)- have provided model templates, instructions, and related materials that an insurer or plan may use to prepare an SBC. They also have provided a glossary. There has been some updating of these items that requires attention. This updating has been described in the DOL’s FAQs about the Affordable Care Act Implementation Part XIV.

Specifically, an updated SBC template (and sample completed SBC) are now available at www.dol.gov/ebsa/healthreform. These documents are to be used for SBCs provided with respect to health care coverage beginning on or after January 1, 2014, and before January 1, 2015 (that is, generally, for the second SBC to be provided). The only change to the SBC template and sample completed SBC is the addition of statements of: (1) whether the plan provides minimum essential coverage (as defined under section 5000A(f) of the Internal Revenue Code) (“MEC”) and (2) whether the plan meets the minimum value requirements (that is, whether the plan’s share of the total allowed costs of benefits provided is not less than 60 percent of such costs) (the “MV Requirements”).

How To Complete The Model Template. On page 4 of the SBC template (and illustrated on page 6 of the sample completed SBC), the insurer or plan should indicate in the designated space that the plan “does” or “does not” provide MEC and that the plan “does” or “does not” meet the MV Requirements.

Safe Harbor When Revised Model Cannot Be Used. If the insurer or plan is unable to use the revised model template (e.g., the plan is already in the process of preparing SBCs for 2014 and it would be an administrative burden to use the revised template), the initial template may be used, provided that the SBC is furnished along with a cover letter stating whether the plan does or does not provide MEC and meet the MV requirement under the Affordable Care Act. The DOL’s language for these statements is as follows:

Does this Coverage Provide Minimum Essential Coverage?
The Affordable Care Act requires most people to have health care coverage that qualifies as “minimum essential coverage.” This plan [does/does not] provide minimum essential coverage.

Does this Coverage Meet the Minimum Value Standard?
The Affordable Care Act establishes a minimum value standard of benefits of a health plan. The minimum value standard is 60% (actuarial value). This health coverage [does/does not] meet the minimum value standard for the benefits it provides.

What About The Prohibition On Annual And Lifetime Caps On Benefits? There is no change to the model template, et. al. relating to these caps. However, the DOL says that insurers and plans should continue to complete the SBC template consistent with the Instructions for Completing the SBC for the Important Questions chart that appears on page 1 of the SBC:

• In the Answers column, the insurer or plan should respond “No,” where the template asks, “Is there an overall annual limit on what the plan pays?”, as plans are generally prohibited from imposing annual limits on the dollar value of essential health benefits for plan years beginning on or after January 1, 2014.
• In the Why This Matters column, the insurer or plan must show the following language: “The chart starting on page 2 describes any limits on what the plan will pay for specific covered services, such as office visits.”

Additionally, as applicable, the insurer or plan should continue to include information regarding annual or lifetime dollar limits on specific covered benefits as required in the chart starting on page 2 of the SBC (in the Limitations & Exceptions column), as described in the Instructions for Completing the SBC. If the insurer or plan wishes to modify the SBC template for calendar year 2014 to remove this information, they may remove the entire row in the Important Questions chart on page 1 of the SBC (with the question: “Is there an overall annual limit on what the plan pays?”).

Are Additional Coverage Examples Required For The SBC? The DOL say No.

Any More Changes? No. Except as discussed above, the model templates, instructions, and related materials for the SBC are the same as for the initial SBC. Also, the glossary has not been changed. Any questions?