HRS Insight Administration issues final rules on PPACA summary of benefits and coverage

www.pwc.com
HRS Insight
Human Resource Services
Insight 12/06
February 14, 2012
Administration issues final rules
on PPACA summary of benefits
and coverage
Final regulations and
other guidance have
been issued concerning
the PPACA requirement
that health insurance
issuers and plan
sponsors provide a
summary of benefits and
coverage to health plan
participants. The
proposed rules were
issued last August. The
final rules eliminate the
requirement to provide
premium information,
reduce the number of
coverage examples from
three to two and include
a "best efforts" standard
to address plan designs
that are difficult to
describe on four pages,
but the Departments did
not adopt the 12- to 24month delay requested
by various industry
groups and others.
Authored by: Tracey Giddings and Birgit Anne Waidmann
The Departments of Treasury, Labor
and Health and Human Services (the
"Departments") have released final
rules regarding the summary of benefits
and coverage ("SBC") required to be
provided by health insurance issuers
and group health plans under the
Patient Protection and Affordable Care
Act ("PPACA"). The guidance includes
final regulations, revised SBC templates
and instructions, a revised uniform
glossary of terms and revised coverage
examples and related materials.
In August 2011, the Departments issued
proposed SBC regulations, recognizing
that the PPACA effective date for these
required summaries was March 23,
2012. On November 17, 2011, the
Departments issued FAQs providing
that SBCs would not be required until a
date specified in final regulations which
would give "group health plans and
health insurance issuers sufficient time
to comply." Many insurance
companies, plan sponsors, plan
administrators and industry groups
urged the Departments to give issuers
and plans up to 24 months following
issuance of the final regulations to
comply with the new disclosure
requirements. Under the final
regulations released late last week,
however, issuers have been given only
until September 23, 2012 to comply and
group plan administrators must comply
for the first open enrollment period
beginning on or after September 23,
2012 (the first plan year beginning on
or after September 23, 2012 for
enrollees who enroll other than through
an open enrollment period). The
Departments believe the concessions
given on SBC content issues make these
compliance deadlines reasonable.
Background
PPACA amended the Public Health
Service Act (PHSA) to require group
health plans and health insurance
issuers to provide a summary of
benefits and coverage to applicants and
enrollees.
PPACA required the Departments to
consult with the National Association of
Insurance Commissioners (the
„„NAIC‟‟), a working group composed of
representatives of health insurancerelated consumer advocacy
organizations, health insurance issuers,
health care professionals, patient
advocates including those representing
individuals with limited English
language proficiency, and other
qualified individuals in developing the
standards for the uniform summary of
benefits. The NAIC convened the
required working group and developed
such standards, including a
recommended template for the SBC
and a uniform glossary, which were
incorporated generally into the
proposed regulations and have been
retained, with some changes, in the
final regulations. Many of the changes
in the final regulations are intended to
satisfy the concerns of larger, selffunded plans.
Changes in Final Rules
In addition to the final regulations, the
Departments finalized a companion
document, which provides guidance for
compliance with the SBC regulations
and includes templates, instructions
and related materials. Changes in the
final regulations and in the companion
documents include:
PwC
HRS Insight
SBCs do not have to include plan
premiums or cost of coverage.
If plans cannot reasonably describe
plan terms in accordance with the
SBC template and instructions, they
must use "best efforts" to be as
consistent with the template and
instructions as reasonably possible.
The Departments require that SBCs
initially include only two coverage
examples (having a baby and
managing type 2 diabetes) rather
than three coverage examples. For
now, the Departments have
eliminated breast cancer as a
required coverage example.
Modifications were made to both the
pregnancy and the diabetes
scenarios based on comments
received.
In situations where an SBC or a
paper copy of the Uniform Glossary
is required to be provided within
seven days of a request, issuers and
plans have seven business days
(rather than seven calendar days) to
respond.
In the final rules, the circumstances
under which the SBC may be
provided electronically to an
enrollee differ depending on
whether the individual is already
covered under the plan or is merely
eligible for coverage.
The Departments have provided
updated guidance documents and
templates to assist plans in filling in
information on SBCs. However,
plans can rely on these materials
only for the first year of SBC
compliance. The Departments
intend to issue updated materials for
subsequent years.
The SBC template and instructions
now include terminology
2
appropriate for self-insured plans
(i.e. "coverage" instead of "policy"
and "plan" instead of "issuer").
Plans do not need to provide
separate SBCs for health flexible
spending accounts ("FSAs") and
health reimbursement accounts
("HRAs") that are integrated with
major medical coverage, or for
health savings accounts ("HSAs")
integrated with a high-deductible
health plan ("HDHP"). Instead,
plans will prepare SBCs for the
major medical coverage or HDHP
and can denote the effects of the
account-based plans in the
appropriate spaces on the SBC for
deductibles, copayments,
coinsurance, and benefits otherwise
not covered by the major medical
coverage.
Plans do not need to provide SBCs
for “excepted benefits,” as defined
under HIPAA, such as stand-alone
dental or vision coverage or HSAs
that satisfy the “excepted benefits”
definition.
SBC Rules as Updated
by the Final Rules
Providing the SBC
A health insurance issuer must
automatically provide the SBC to a
group health plan or its sponsor upon
application by the plan for health
coverage. The SBC must be provided as
soon as practicable following such a
request, but in no event later than
seven business days following receipt of
the application. An updated SBC must
be provided if there is any change
before the first day of coverage. A new
SBC must be provided when a policy is
renewed or reissued. If written
application is required upon renewal,
the SBC must be provided at the time
the issuer distributes the application
PwC
materials. If renewal is automatic, the
SBC must be provided no later than 30
days before the beginning of the new
policy year unless special circumstances
apply.
Group health plans and health
insurance issuers are required to
provide an SBC to a participant or
beneficiary with respect to each benefit
package offered for which the
participant or beneficiary is eligible. It
must be provided with any written
application materials that are
distributed for enrollment or, if no
written materials are distributed, no
later than the first date the participant
is eligible to enroll. Special enrollees
must receive the SBC no later than the
date by which the summary plan
description is required to be provided
to the special enrollee under ERISA
(within 90 days of enrollment).
Upon renewal of the coverage, the SBC
is to be provided to the participant or
beneficiary with any written or
electronic enrollment materials, or, if
renewal is automatic, no later than 30
days prior to the first day of coverage
(unless special circumstances apply
with respect to an insured plan).
The regulations also require that a
health insurance issuer must provide
an SBC to a plan, and an issuer or plan
administrator must provide an SBC to a
participant or beneficiary, upon
request, no later than seven business
days following the request.
The regulations provide that only one
entity is required to provide the SBC, so
that if the health insurance issuer
provides it in a timely and complete
manner, the plan's requirement to
provide the SBC will be satisfied. A
single SBC may be provided to one
address for all participants and
beneficiaries residing at that address.
HRS Insight
3
Upon renewal, SBCs are required to be
provided automatically only with
respect to the benefit package in which
the participant or beneficiary is
enrolled. If there is a request for
another SBC with respect to a benefit
package for which the participant or
beneficiary is eligible, it must be
provided within seven business days.
Observation: When renewal is
automatic, a new SBC must be
provided by a health insurance issuer
to the plan and by the plan to
participants at the same time, i.e., no
later than 30 days before the
beginning of the new plan or policy
year. The provision of the regulations
stating that the plan's obligation to
provide the SBC will be satisfied if the
insurance issuer provides it to
participants and beneficiaries in a
timely and complete manner will be
helpful in many instances. However, if
the plan is not going to rely on the
issuer to provide the renewal SBC to
participants, the plan will need to
make arrangements to obtain it from
the issuer prior to the 30-day deadline.
Standards are also provided in the
regulations for the provision of SBCs by
issuers in the individual insurance
market, which are parallel to the
provisions applicable to group health
plans.
Content of the SBC
PPACA specifies the items that must be
included in the SBC. The items
specified in the law are:
Uniform definitions of standard
insurance and medical terms;
A description of the coverage and
cost sharing for each category of
benefits;
Exceptions, reductions and
limitations on coverage;
PwC
Cost-sharing provisions, including
deductible, coinsurance and
copayments;
Renewability and continuation of
coverage provisions;
Examples to illustrate common
benefits scenarios and related cost
sharing;
With respect to coverage beginning
on or after January 1, 2014, a
statement as to whether the plan
provides minimum essential
coverage and whether it meets the
applicable minimum value
requirements;
A statement that the SBC is only a
summary and not the official plan
document; and
A contact number to call with
questions and an Internet address
where a copy of the actual group
certificate of coverage or individual
policy can be reviewed and
obtained.
The regulations and the template for
the SBC generally parallel these
statutorily required elements. Some
additional elements recommended by
the NAIC are also included in the SBC
template, such as information about the
plan's network of providers and drug
formulary and internet addresses for
additional information. The final rules
do not require the SBC to include
premium and cost information, as had
been proposed. In addition, the final
rules note that the minimum essential
coverage and minimum value
requirements are not yet in effect; for
this reason, the templates and
instructions provided in connection
with the final rules do not include this
information and may only be used for
2013 plan years.
HRS Insight
4
The regulations provide that the
Departments may identify up to six
coverage examples that may be
required in an SBC so that consumers
may easily read, understand and
compare how benefits are provided for
common medical conditions. The two
coverage examples currently required
are having a baby (normal delivery) and
managing diabetes. For purposes of
these examples, the Departments have
provided the specific information
necessary to simulate benefits covered
under the plan or policy for the
coverage example portion of the SBC
and to make the necessary calculations
for these examples. These benefit
scenarios were modified slightly to
reflect current accepted standards of
practice. This information may be used
only during the first year of
applicability; future guidance will make
changes for later years.
In lieu of summarizing coverage for
items and services provided outside the
United States, the plan or issuer may
provide an Internet address (or similar
contact information) where
participants can obtain information
about such coverage.
The Departments have provided a
template in conjunction with the final
rules. Generally speaking, the words to
be used in completing the template
must be those specified by the
guidance. Plans and issuers have little
discretion as to how to describe their
provisions. The guidance provides,
however, that if plans or issuers cannot
reasonably describe relevant plan terms
in accordance with the SBC template
and instructions, they must accurately
describe the relevant plan terms and
use "best efforts" to be consistent with
the template and instructions. This
situation may occur if the SBC template
and instructions do not capture a plan‟s
unique structure (such as provider
network tiers, drug tiers, hospital vs.
non-hospital inpatient, health FSA,
HRA, cost-sharing based on wellness
program participation, etc).
The companion document published in
conjunction with the final regulations
provides that the SBC and glossary may
be provided either in color or in
grayscale.
Form and Manner
Appearance
PPACA specifies that the SBC is to be
presented in a uniform format, not
exceeding four pages in length, utilizing
12 point or larger font. The
Departments have interpreted the law
as referring to four double-sided pages.
The proposed regulations would have
required that the SBC be provided as a
stand-alone document. The final rules
have eliminated this requirement with
respect to group health plan coverage,
so that it may be provided in
combination with other summary
materials, such as the summary plan
description, as long as it is intact and
PwC
prominently displayed at the beginning
of such materials.
For group health plans, the regulations
include rules to facilitate electronic
transmittal of the SBC when
appropriate. For participants and
beneficiaries who are already covered
by a group health plan, plans may
distribute SBCs electronically if they
comply with existing Department of
Labor requirements for electronic
disclosures.
For participants and beneficiaries who
are eligible but not enrolled in plans
(such as new enrollees), the final
regulations allow more flexibility for
electronic disclosure. For these
individuals, plans may distribute SBCs
HRS Insight
5
electronically provided the format is
readily accessible and they provide
paper copies free of charge upon
request. If the electronic form is an
Internet posting, plans must (1) timely
advise individuals in paper form (such
as by postcard) or e-mail that the
documents are available on the
Internet, (2) provide the Internet
address or addresses, and (3) notify
individuals that they can receive the
documents in paper form upon request.
Language
The regulations incorporate other
PHSA rules regarding providing notices
in a culturally and linguistically
appropriate manner for purposes of the
SBC rules. In counties in the United
States in which at least ten percent of
the population is literate only in the
same non-English language, written
translations of the SBC must be
provided in those languages.
To assist plans in complying, the
Department of Health and Human
Services will provide written
translations of the SBC template and
Uniform Glossary in Spanish, Tagalog,
Chinese, and Navajo.
Glossary of Terms
PPACA directed the Departments to
develop standard definitions for certain
insurance-related and medical terms,
as well as other terms that will help
consumers understand their coverage;
the statute requires that the SBC
include uniform definitions of these
terms. The NAIC developed a glossary
which the Departments have modified
to reflect terms more appropriate for
self-insured as well as insured plans,
and adopted. This document must be
provided without change.
The Uniform Glossary is a separate
document from the SBC. SBCs must
include an Internet address where an
PwC
individual can review the Uniform
Glossary, a contact phone number to
obtain a paper copy, and a statement
that paper copies are available.
Notice of Modifications
Under PPACA, a group health plan or
health insurance issuer must provide a
notice of material modification in the
terms of the plan or coverage to
enrollees or policyholders no later than
60 days prior to the effective date of the
change, if it occurs other than in
connection with a renewal or
reissuance of coverage.
The final regulations provide that a
notice of modification is required if
there is a material modification in the
terms of the plan or coverage that
would affect the content of the SBC,
that is not reflected in the most recently
provided SBC and occurs other than in
connection with a renewal or
reissuance of coverage. A material
modification includes an enhancement
in covered benefits or services or other
more generous plan or policy terms. It
also includes any material reduction in
covered services or benefits or more
stringent requirements for receipt of
benefits, such as changes or
modifications that reduce or eliminate
benefits, increase cost-sharing or
impose a new referral requirement.
Penalties and
Preemption
PPACA does not preempt State laws
that impose requirements on health
insurance issuers that are stricter than
those imposed by the Act. However,
PPACA does preempt any State law that
requires less information to be
provided than is required by these
provisions. Accordingly, the final rules
do not prevent States from imposing
separate, additional disclosure
HRS Insight
6
requirements on health insurance
issuers.
PPACA provides that a group health
plan and a health insurance issuer that
wilfully fails to provide the SBC shall be
subject to a fine of no more than $1,000
for each such failure. A separate fine
may be imposed for each individual or
entity for whom there is a failure to
provide an SBC. In addition, if a group
health plan fails to comply with the
requirements of chapter 100 of the
Internal Revenue Code, into which the
requirements of the PHSA (including
the SBC requirements) are
incorporated, an excise tax of $100 per
day per individual is imposed.
PwC
The regulations implement
mechanisms for imposing these
penalties that vary slightly depending
on the Department that is enforcing the
provision and the entity against which
it is enforced. The States will have
primary enforcement authority over
health insurance issuers. HHS may
also enforce penalties on issuers, and
has direct enforcement authority for
violations by non-Federal
governmental plans. The Treasury
Department has authority for excise
taxes imposed on group health plans
under chapter 100 of the Code.
Violations of chapter 100 are selfreported on IRS Form 8928.
HRS Insight
7
For more information, please do not hesitate to contact your local
PwC professional:
Charlie Yovino
Matthew Cowell
Pat Meyer
Jack Abraham
Paul Perry
Terry Richardson
(678) 419-1330
(704) 344-7739
(617) 530-4722
(646) 471-8855
(617) 530-5694
(312) 298-6229
(312) 298-2164
(312) 298-3157
(312) 298-3717
Cindy Fraterrigo
Brandon Yerre
Theresa Gee
Todd Hoffman
Carrie Duarte
John Caplan
Scott Olsen
Bruce Clouser
Bill Dunn
Amy Lynn Flood
Sandra Hunt
Julie Rumberger
(312) 298-4320
(214) 999-1406
(312) 298-4700
(713) 356-8440
(213) 356-6396
(646) 471-3646
(646) 471-0651
(267) 330-3194
(267) 330-6105
(267) 330-6274
(415) 498-5365
(408) 817-4460
Scott Pollak
Jeff Davis
Nik Shah
(408) 817-7446
(202) 414-1857
(703) 918-1208
Ed Donovan
Atlanta, GA
Charlotte, NC
Boston, MA
New York Metro
Boston, MA
Chicago, IL
Chicago, IL
Chicago, IL
Chicago, IL
Kansas City, MO
St. Louis, MO
Chicago, IL
Dallas, TX
Detroit, MI
Houston, TX
Los Angeles, CA
New York Metro
New York Metro
Philadelphia, PA
Philadelphia, PA
Philadelphia, PA
San Francisco, CA
San Francisco, CA
San Jose, CA
San Jose, CA
Washington, DC
Washington, DC
For more information or to access past issues of HRS Insights, please visit our
website: www.pwc.com/us/hrs
This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
SOLICITATION
© 2012 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP, a Delaware
limited liabiity partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a
separate legal entity.
PwC
HRS Insight
8