Mar 23, 2012

Agencies Issue FAQs on Summary of Benefits and Coverage Requirement and Update on Supreme Court Hearings

Summary of Benefits and Coverage Requirement FAQs Released

On Monday, the Departments of Labor, Treasury, and Health and Human Services (the “Agencies”) issued FAQs addressing the new summary of benefits and coverage (“SBC”) 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.” In February, the Agencies issued final regulations implementing the SBC requirement.

Good Faith Compliance Efforts Will Not Result in Penalties

Importantly, the FAQs state that during the first year of applicability, the Agencies will not impose penalties on group health plans and insurers that are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations.

Combining Multiple Tiers of Coverage and Optional Coverage is Permitted

The FAQs clarify that group health plans and insurers may combine information regarding multiple tiers of coverage (e.g., self-only, employee-plus-one, and family coverage) and information for different cost-sharing selections (e.g., levels of deductibles, copayments, and co-insurance) in one SBC, provided that the appearance is understandable. Multiple optional coverages (e.g., health flexible spending arrangements (health FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and wellness programs) may also be combined into a single SBC, provided that the SBC remains understandable.

FAQs Specify When SBCs Must be Provided

Generally, the final regulations require group health plans to provide an SBC to a participant or beneficiary “upon application” and “upon renewal.” The FAQs clarify that if a group health plan (including a self-insured plan) distributes written application materials for enrollment – including any forms or requests for information, in paper form or through a website, that must be completed for enrollment – an SBC must be provided as part of those materials. If the group health plan does not distribute written application materials, the SBC must be provided by the first date on which the participant is eligible to enroll in coverage. With regard to “renewals,” the FAQs clarify that if a group health plan requires participants and beneficiaries to actively renew coverage (e.g., during open enrollment), then the plan must provide the SBC in connection with open enrollment materials. If renewals are automatic, the SBC must be provided no later than 30 days before the first day of the new plan year.

The FAQs on the SBC requirement can be accessed by clicking here.

Update on Supreme Court Hearings on PPACA

As a reminder, on Monday, March 26, 2012 the Supreme Court will begin hearing the oral arguments regarding PPACA. The oral arguments will focus on the constitutional challenges to PPACA’s individual mandate requirement and the issue of whether PPACA must be invalidated if certain aspects of the law are unconstitutional (i.e., “severability” issues). The oral arguments will conclude on Wednesday, March 28, 2012.

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

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