Healthcare.jpgThis blog entry was authored by Heather DeBlanc

With open enrollment fast approaching, employers should be sure that the participants and beneficiaries in their employer-sponsored group health plans receive a completed standardized “Summary of Benefits and Coverage” (“SBC”) form containing information required by the Affordable Care Act (“ACA”).  ACA requires health plans to provide consumers with information to help them understand their coverage options. 

The New SBC Form:  The Departments of Labor, Health and Human Services, and the Treasury updated the SBC template that must be used regarding coverage that will begin January 1, 2014.  The updated template states whether the plan provides minimum essential coverage and whether the plan meets minimum value requirements.  Employers should ensure that the SBC’s they distribute are compliant with this new template. 

What Responsibility Does The Employer Have Regarding the SBC?  Different rules apply, depending upon whether the employer offers fully insured or self-insured plans.  Many insurers will provide the SBC directly to employees, but employers have responsibilities too. 

  • Fully insured plans: The obligation to timely provide an SBC lies with both the “plan administrator” (i.e. third party administrator or the employer) and the insurer.  Employers and insurers are jointly responsible for making sure participants receive the SBC.  Employers with fully insured plans should coordinate with their insurance carriers to determine whether the insurer will provide SBCs directly to participants, or whether the employer needs to do so. 
  • Self-insured plans: Self-insured plans are legally responsible under the regulations for preparing the SBC, but can generally agree to have their plans’ third-party administrators prepare the documents.  The “plan administrator” (usually the employer) is solely responsible for providing the SBC.  An employer with a self-insured plan is generally considered to be the plan administrator unless another entity is designated by the plan documents. 
  • ACA protects an employer from an enforcement action for failure to timely provide or complete a SBC if certain contractual conditions are satisfied.  Employers should carefully review their contractual arrangements to ensure protection regarding preparation and provision of SBCs.

When Must Employees & Beneficiaries be Given the SBC?  Plan administrators are required to provide the SBC to eligible employees and beneficiaries at the following times:

  • When an employee first becomes eligible for coverage.
  • At renewal or during open enrollment.
  • When the SBC has changed from the version provided during open enrollment.
  • At special enrollment.
  • Within seven (7) business days upon request by any employee.

Is Electronic Distribution Permitted?  Where online enrollment applies, a plan administrator may provide an SBC electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage, or to those participants and beneficiaries who request an SBC online.  The plan administrator must provide the option for the participant or beneficiary to receive a paper copy upon request.  If online enrollment does not apply, the following rules apply:

  • Private group health plans: 
    • If the employee and beneficiary are already covered under a plan, the SBC may be distributed electronically if: (1) the employee has the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform duties as an employee; and (2) access to the employer’s electronic information system is an integral part of those duties.
    • If the employee and beneficiary are eligible but not enrolled in coverage, the plan may distribute the SBC electronically if:  (1) the format is readily accessible, (2) the SBC is provided in paper form free of charge upon request; and (3) if the SBC is provided via an Internet posting (including on the HHS web portal), the plan administrator timely advises the participants and beneficiaries in paper form (such as a postcard) or email that the SBC is available on the Internet and provides the Internet address.
  • Local public agency plans:  The plan administrator may provide the SBC in electronic format to eligible participants and beneficiaries if:
    • it meets the requirements applicable to private group health plans (above) or
    • it meets the following requirements:  (1) the format is readily accessible, (2) the SBC is provided via an Internet posting in a prominent and readily accessible location, (3) the SBC is provided in a form which can be retained and printed; and (4) the SBC is available free of charge in paper form upon request.

How to Prevent Penalties:  Employers should designate a point of contact with Human Resources or Employee Relations who can facilitate requests from employees and/or beneficiaries and ensure they receive the SBC within seven (7) business days of the request.  Plan administrators who “willfully fail” to timely provide the SBC can be subject to a penalty of up to $1,000 per violation.  This means $1,000 for each participant and each beneficiary who fails to receive an SBC.  Further, for non-federal government plans, the Secretary of HHS may also impose civil penalties of up to $100 per day for each individual affected by the violation regardless of whether the failure to provide the SBC was “willful.” 

Who Must Receive the SBC?  Both participants and beneficiaries must receive a SBC.  A single SBC can be provided to a family living at the same address.  However, if beneficiaries are known to reside elsewhere, they must receive their own copies.       

Where Can Employers Obtain More Information?  The Departments of Labor and Health and Human Services have provided an SBC template, a sample completed SBC, instructions for  completing the SBC, language for inclusion in the SBC, coverage examples and a glossary of terms at http://www.dol.gov/ebsa/pdf/CorrectedSampleCompletedSBC2.pdf and http://www.cms.gov/cciio/programs-and-initiatives/consumer-support-and-information/summary-of-benefits-and-coverage-and-uniform-glossary.html

On September 10, 2013, Liebert Cassidy Whitmore attorneys will present a webinar that will provide a general overview of the portions of the Affordable Care Act relevant to all employers. For more information and to register for this webinar, please visit our website: www.lcwlegal.com/ACA-Penalties.