Summary of Benefits and Coverage and the Uniform Glossary
The Health Care Reform law requires plan sponsors to provide two new government-developed documents to plan participants. The "Summary of Benefits and Coverage" (SBC) and the "Uniform Glossary" are intended to provide high-level descriptions of group health coverage (and definitions of standard terms) and are in addition to the ERISA requirement to provide a Summary Plan Description (SPD). An SBC need not be provided for plans, policies, or benefits packages that constitute excepted benefits. If a plan sponsor intends to make any mid-year material modifications in coverage, such as increases in cost-sharing or benefit reductions, the law requires the sponsor to notify participants at least 60 days before the modifications become effective. Penalties for non-compliance are significant.
The federal agencies published final regulations and template versions of the SBC and Uniform Glossary on February 9, 2012. If the plan's terms cannot reasonably be described "in a manner consistent with the template and instructions, the plan or issuer must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still consistent with the instructions and template format as reasonably possible." Plan sponsors (or their health insurance carriers) must begin distributing the SBC to participants and beneficiaries eligible to enroll in group health coverage through an open enrollment period beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period, the requirements begin on the first day of the first plan year that begins on or after September 23, 2012. Distribution is required with all enrollment materials (including initial, annual, and special enrollments), following a special enrollment event (such as having a baby or getting married) and upon request. An SBC may be distributed in paper or electronic form. The Uniform Glossary may also be distributed in paper or electronic form, but distribution is required only upon request. View a completed SBC template.
Summary of Benefits and Coverage Hot Topics & FAQs
- Agencies Issue New FAQ on Summary of Benefits and Coverage Requirements
The Agencies that oversee implementation of Health Care Reform recently issued FAQ XIV relating to the Summary of Benefits and Coverage (SBC). SBCs are meant to provide participants a high level description of benefits and coverage under the plan. Plan sponsors and issuers were required to provide SBCs starting with the the first open enrollment on and after September 23, 2012 and for new participants for the first plan year beginning on and after January 1, 2013.
In the recent guidance, the Agencies modified the SBC instructions and template to require that a plan indicate whether it provides minimum essential coverage and has at least a 60 percent actuarial value. If it is too administratively burdensome to change the current SBC, a plan may instead include a cover letter with the SBC that contains this information (sample language was included in the FAQ).
The FAQ also clarified that in completing the annual limit section of the SBC, the plan should respond "No" to the question whether the plan has an overall annual limit. However, if the plan imposes other limits on benefits that are not essential health benefits, those limits should be listed in the limitations and exceptions column.
The changes and clarifications are for SBCs provided for coverage that begins on or after January 1, 2014, and before January 1, 2015.
- Agencies Issue Additional FAQs
The agencies issued additional FAQs related to the Summary of Benefits and Coverage on May 11, 2012. Some of the highlights are:
- Electronic delivery – an additional safe harbor is available for electronic delivery of SBCs.
- Relief from penalties – no penalties will be imposed for the first year of applicability as long as the plan sponsor is working “diligently and in good faith” to comply with the SBC requirements.
- Language assistance - written translations of the SBC templates are available in Spanish, Chinese and Tagalog. A Navajo translation will be available shortly.
- Corrected templates – corrected blank and completed SBC templates are now available. (See below)
- Coverage examples - a new coverage example calculator is “under construction” and will be available soon. Plan sponsors will be able to use the calculator to complete the SBC coverage examples for the first year of applicability.
- Is there a penalty for failing to provide the Summary of Benefits and Coverage?
Significant penalties apply to a group health plan or health insurance issuer that willfully fails to provide the SBC. The fine can be up to $1,000 per person. A failure to provide to a participant and a beneficiary are separate offenses.
An NAIC-developed template
An NAIC-developed draft of common health plan definitions
- Sample Completed SBC Template
- Yes Answers for completing the template
- No Answers for completing the template
Information for employers to complete their SBCs
American Fidelity Assurance Company does not provide tax or legal advice.