The Affordable Care Act requires that a Summary of Benefits and Coverage (SBC) form be completed annually for every health plan. The purpose of the SBC is to allow individuals to easily compare health coverage options when shopping for or enrolling in group or individual health coverage. On April 6, 2016, the Departments of Labor, Treasury, and Health and Human Services (the Departments), which together are responsible for implementing the group health plan standards under the Affordable Care Act, released a final revised template and detailed instructions for completing the SBC.*
Plan sponsors that have an annual open enrollment period are required to use the new SBC template beginning on the first day of the first open enrollment period that begins on or after April 1, 2017 (with respect to coverage beginning on or after that date). For example, if a plan sponsor conducts open enrollment in May 2017 for a July 1 plan year, the plan sponsor would need to distribute the new SBC template with the open enrollment materials prepared for that May 2017 open enrollment period. Calendar-year plans with open enrollment would have to use the new SBC template for open enrollment for coverage beginning on January 1, 2018 (generally in the fall of 2017).
For plans that do not have an annual open enrollment period, the new SBC template must be used beginning on the first day of the first plan year that begins on or after April 1, 2017. Under existing regulations, plan sponsors must generally distribute SBCs 30 days before the start of a plan year. As a result, for a plan year beginning on April 1, the new SBC would have to be provided by March 1, 2017. Calendar year plans without open enrollment would have to distribute the SBC by December 1, 2017.
The new template and instructions include both substantive and formatting changes. Major substantive changes include eliminating questions that were no longer needed or useful, changing the underlying cost data for the existing coverage examples and adding a third coverage example. The current template includes two coverage examples that illustrate cost sharing for routine pregnancy and childbirth, and managing Type 2 diabetes. The new coverage example involves a simple fracture treated in an emergency room. There are also numerous formatting changes, which include space savers that will help plan sponsors comply with the page limit (four double-sided pages), the underlining of more standard plan terms that are defined in a separate glossary also issued by the Departments, eliminating the final page explaining the coverage examples, and adjustments to required language.
The changes to the SBC template are significant. As the cost data for the existing coverage examples has changed, new calculations will be required to complete the entire coverage examples section of the SBC. Plan sponsors should have sufficient time to produce and distribute SBCs using the new template by the required deadline and can continue to use the existing template in the meantime. Plan sponsors with third-party administrators that complete the SBC should ensure that those administrators are familiar with the new template.
Failure to produce the SBC in a timely manner can result in a fine of $1,000 for each such failure.
Sibson works with plan sponsors and their attorneys on compliance issues. We can help plan sponsors ensure that SBC production is assigned to responsible parties who will make sure the timetables are met. In addition, Sibson can prepare SBCs and coverage examples. Our communications professionals can help find a user-friendly way to get SBCs into the hands of plan participants in coordination with other plan material. Finally, for plans that have multiple service providers, Sibson can help plan sponsors reconcile different versions of SBCs.
For more information about the new SBC template, please contact your Sibson consultant or the Sibson office nearest you.
Update is Sibson Consulting’s electronic newsletter summarizing compliance news. Update 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.
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