August 2, 2013
Affordable Care Act’s Summary of Benefits and Coverage Must be Completed for 2014 Plan Year
Plan sponsors must provide participants with a Summary of Benefits and Coverage (SBC)1 for benefits provided for the 2014 plan year with their coming open enrollment period. Those sponsors without an open enrollment period must provide SBCs 30 days prior to the beginning of the plan year. The three federal agencies responsible for implementing the Affordable Care Act2 — the Departments of Labor, Health and Human Services and Treasury (collectively, the “Departments”) have issued a revised form that must be used for the required Summary of Benefits and Coverage (SBC)3 along with some answers to frequently asked questions (FAQs).4 This set of answers to FAQs and the revised form apply to SBCs provided for coverage beginning on or after January 1, 2014 and before January 1, 2015 (i.e., the “second year of applicability”).
This Capital Checkup discusses the changes in the SBC form and the Departments’ continued approach to enforcement of these requirements as discussed in their latest answers to FAQs.
The new form adds two short sections to the SBC. The first column of the table below shows the new sections, each of which poses a question that the plan sponsor must answer by choosing either “does” or “does not” depending on the plan coverage offered. The second column explains the purpose of the new sections.
Exact Text of
the New Sections
(Brackets indicate text that
will vary depending on
Sibson’s Description of the Purpose of the New Sections
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 or policy [does/does not] provide minimum essential coverage.
This is intended to tell employees that their coverage meets the individual mandate to have coverage. Because group health plan coverage that provides more than “excepted” benefits* qualifies as minimum essential coverage, plan sponsors drafting SBCs will always be able to answer that the plan “does” provide minimum essential coverage.
Does this Coverage
The Affordable Care Act establishes a minimum value standard of benefits of a health plan. The minimum value standard is 60 percent (actuarial value). This health coverage [does/does not] meet the minimum value standard for the benefits it provides.
If the coverage meets the minimum value standard, employees and their eligible family members would not qualify for a premium assistance tax credit to buy coverage through the Health Insurance Marketplaces** (if otherwise eligible based on their income and other factors) unless the plan’s required contribution for self-only coverage made the coverage unaffordable.***
No other changes were made to the required form. The Departments did not add an additional coverage example to the two already on the SBC: having a baby and managing type 2 diabetes.
Enforcement Relief Extended
The enforcement relief in place will continue to apply through the second year of applicability. In answers to FAQs released in May 2012, the Departments announced that during the first year of applicability, they would not impose penalties on plan sponsors working diligently and in good faith to comply.5 The Departments are now extending this enforcement relief through the end of the second year of applicability. In addition, the Departments’ flexible approach to completing and distributing the SBC (e.g., guidance on how to handle carve-out arrangements and electronic distribution, as well as the use of the government’s coverage example calculator) has also been extended through the second year.
Implications for Plan Sponsors
Plan sponsors that are preparing their second SBC will generally have the same flexibility in completing it as they had in the first year. However, they must add the two new sections to the SBC. That second SBC must be distributed with open enrollment materials for the next plan year or, if the plan does not conduct open enrollment, 30 days before the start of the plan year (for example, for a calendar year plan, by December 1, 2013). Plan sponsors also have the continuing obligation to provide an SBC to new enrollees, including special enrollees, and to provide an SBC and/or the government’s uniform glossary of terms upon request.
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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the new guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with employers and their attorneys on compliance issues.
- For information about the SBC, see Sibson Consulting’s March 2012 Bulletin, “Final Rule Issued on Summary of Benefits and Coverage Required by the Affordable Care Act.” (Return to the Capital Checkup.)
- The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
- The revised form, which was issued on April 23, 2013, is available on the Department of Labor (DOL) website. (Return to the Capital Checkup.)
- The answers to the FAQs about the SBC are on the DOL website. (Return to the Capital Checkup.)
- For more information on those answers to FAQs, see Sibson’s May 18, 2012 Capital Checkup, “Plan Sponsors Working Diligently and in Good Faith on the Summary of Benefits and Coverage Will Not Face Penalties During the First Year.” (Return to the Capital Checkup.)
Capital Checkup is Sibson Consulting's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.