Final Regulations on Summary of Benefits and Coverage Requirement

Yesterday, the Departments of Labor, Treasury, and Health and Human Services (the “Agencies”) issued final regulations implementing the new summary of benefits and coverage requirement under the Patient Protection and Affordable Care Act (“PPACA”). As stated in a previous SGR Client Alert, under PPACA, group health plans and insurers are required to provide plan participants and beneficiaries with a summary document that “accurately describes the benefits and coverage under the applicable plan or coverage.”

Late last year, the Agencies released an FAQ delaying this requirement until the Agencies issued final regulations. Although the FAQ stated that the final regulations would give group health plans “sufficient time to comply,” the final regulations will require many group health plan sponsors to provide the summary of benefits and coverage document to most participants and beneficiaries on the first day of the upcoming open enrollment season (the first day of the first open enrollment period that begins on or after September 23, 2012). For disclosures to participants and beneficiaries who enroll in group health coverage other than through open enrollment (e.g., newly-eligible employees and special enrollees), the documents must be provided by the first day of the first plan year that begins on or after September 23, 2012 – January 1, 2013 for calendar year plans.

The Agencies also released a separate document providing additional guidance on the requirement to provide a summary of benefits and coverage document, including a template for the summary, instructions, sample language, a guide for coverage example calculations, and the uniform glossary.

Some highlights of the Agencies’ guidance on the summary of benefits and coverage (“SBC”) requirement include the following:

• An SBC document is not required for plans, policies, or benefit packages that are excepted benefits under HIPAA (e.g., stand-alone dental plans, vision plans or health FSAs);
• An SBC generally is required for Health Reimbursement Arrangements (“HRAs”) (as HRAs are group health plans). However, if the HRA is integrated with other major medical coverage, it does not have to separately satisfy the SBC requirement, provided that the SBC is provided for the major medical coverage;
• Health Savings Accounts (“HSAs”) are not subject to the summary of benefits and coverage requirement;
• Only two coverage examples (relating to having a baby and managing type 2 diabetes), rather than three coverage examples as specified in the proposed regulations, are required to be included in the SBC; and
• Examples included in the SBC do not need to include any specific cost information.

FAQs Addressing Other PPACA Mandates

On February 9, 2012, the Internal Revenue Service (“IRS”) issued FAQs addressing the automatic enrollment, employer shared responsibility, and waiting period requirements under PPACA. Highlights of the FAQs include the following:

• The Agencies’ automatic enrollment guidance – requiring employers with at least 200 employees to automatically enroll employees in their group health plans – will not be ready to take effect by 2014. This requirement will not go into effect until the Agencies issue final regulations;
• For at least the first three months following an employee’s date of hire, a group health plan sponsor will not be subject to the “pay or play” penalty if it fails to offer coverage to the employee under its plan during that three-month period;
• With regard to the employer shared responsibility requirements and the definition of “full-time employee,” the Agencies propose that an employee will be considered a full-time employee if (1) the employee is reasonably expected as of the time of hire to work an average of 30 or more hours per week on an annual basis, and (2) the employee’s first three months of employment are reasonably viewed, as of the end of that period, as representative of the average hours the employee is expected to work on an annual basis; and
• PPACA’s 90-day limitation on waiting periods does not require the employer to offer coverage to part-time employees or to any other particular category of employees (although remember that a penalty may apply if an employer chooses not to offer group health coverage to its full-time employees).

For more information on these requirements, please contact your SGR Executive Compensation and Employee Benefits counsel.