On June 16 the Internal Revenue Service, the U.S. Department of Labor, and Health and Human Services (the “Agencies”) will release final regulations (“Regulations”) for the Affordable Care Act’s (“ACA’s”) Summary of Benefits and Coverage (“SBC”) requirements.  HHS also released a “Fact Sheet” to accompany the release of the Regulations.  The Regulations largely follow and consolidate prior SBC guidance and break very little new ground.

This summary is based on a pre-June 16 advance publication of the Regulations.  The Regulations are to be released in the Federal Register on June 16.

Background

The ACA requires health insurance issuers and plan sponsors (e.g., employers) to provide participants and beneficiaries with an SBC that accurately describes the benefits available.  Since the passage of the ACA, the Agencies have released guidance outlining the rules for SBC content and delivery and related matters.  Proposed regulations were released in August 2011.  On February 14, 2012 those proposed regulations were finalized and released along with templates for SBCs.  Subsequent to those final regulations, the Agencies released explanations, further guidance and “safe harbors” through a series of seven FAQs (VII, VIII, IX, X, XIV and XIX).  On December 30, 2014 the Agencies released a proposed regulation which was followed by FAQ XXIV released on March 30, 2015.

These Regulations finalize the proposed regulations and consolidate some of the prior sub-regulatory guidance released in the form of FAQs.  Importantly, the Regulations do not include new sample language for the SBCs.  The December 2014 proposed rules included proposed revisions to the SBC template, instruction guides, uniform glossary, and other supporting materials.  However, in the Regulations the Agencies reiterate the statement from the FAQ issued on March 30, 2015 that they anticipate the new SBC templates and associated documents will be finalized by January 2016 and will apply to plan years beginning on or after January 1, 2017 (including open enrollment periods that occur in the Fall of 2016 for coverage beginning on or after January 1, 2017).

The Final Regulations

As noted above, not much new ground is broken in these Regulations.  Key provisions include:

• Online Access to Individual Underlying Policy or Group Certificate. The Regulations clarify that all insurance issuers must include an Internet web address where a copy of the actual policy or group certificate of coverage can be reviewed and obtained before someone signs up for coverage. For fully insured employer-sponsored plans, because the actual “certificate of coverage” is not available until after the plan sponsor has negotiated the terms of coverage with the insurer, the insurer may post a sample group certificate of coverage for each applicable product.  After the actual certificate of coverage is executed, it must then be posted and made available to the plan sponsor, participants and beneficiaries on the Internet.
• Safe Harbor for Sponsors That Use Vendors. The Agencies confirmed that a prior proposed safe harbor for plan sponsors that contract with others to deliver the SBCs will still be available if:

1. The plan sponsor monitors performance by the vendor under the contract;
2. If the plan sponsor has knowledge that the SBC is not being provided in a manner that satisfies the requirements and the plan sponsor has all information necessary to correct the noncompliance, the plan sponsor corrects the noncompliance as soon as practicable; and
3. If the plan sponsor has knowledge the SBC is not being provided in a satisfactory manner and the plan sponsor does not have all information necessary to correct noncompliance, the plan sponsor communicates with the affected participants and beneficiaries regarding the noncompliance and begins taking steps as soon as practicable to avoid future violations.

•  Timing and Delivery of SBCs Remains the Same. The Agencies continue to attempt to take a common sense approach to the timing and the delivery of SBCs, including:
  • Not requiring a new SBC be provided to participants who were provided an SBC prior to the start of a plan year but before the insurance contract is finalized (as long as there have been no changes to the required information);
  • Allowing participants whose coverage is automatically renewed to be provided with an SBC for that coverage option by the start of the plan year (although they may request and must receive SBCs for other coverage options within seven days of the request); and
  • Permitting electronic posting of SBCs for those enrolling online.

What Employers Should Do

The Regulations apply to plan years commencing on or after September 1, 2015.  Employers and other plan sponsors should review the complete SBC guidance with their ERISA counsel and broker and other vendors to ensure compliance.  The penalty for noncompliance with the SBC rules is $1,000 per person per day—so compliance is extremely important.

About The Author.  This alert was prepared for [THE INSURANCE GROUP] by Peter Marathas and Stacy Barrow.  Mr. Marathas and Mr. Barrow are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at pmarathas@marbarlaw.com or sbarrow@marbarlaw.com.