Benefits Law Update
        Practical advice from Verrill attorneys

        Summary of Benefits and Coverage Must be Provided Soon

        by Eric D. Altholz on August 21, 2012

        As employers prepare for their fall 2012 open enrollment efforts, we wanted to offer a reminder that a Summary of Benefits and Coverage (or “SBC”) will now have to be provided to group health plan participants and beneficiaries. For group health plans having open enrollment periods, this new requirement – created as part of the Affordable Care Act – takes effect on the first day of the first open enrollment period that begins on or after September 23, 2012. For group health plans that do not have an open enrollment period, the requirements take effect on the first day of the first plan year that begins on or after September 23, 2012.

        The SBC is intended to be a concise and accurate summary that describes the benefits and coverage under a health plan, but is more user friendly than the traditional summary plan description (“SPD”) that has historically been provided under ERISA to plan participants and beneficiaries. The SBC must include information regarding the benefits and coverage options provided by the plan, the cost-sharing provisions of each coverage option, exceptions and limitations on coverage, and other material information regarding the plan. In order to be more user friendly, an SBC must also provide examples that illustrate the benefits provided under the plan for common benefits scenarios.

        In addition to the content requirements, the final rules issued jointly by the Departments of Labor, Health and Human Services, and Treasury (collectively, the “Departments”) regulate the appearance of the SBC. These rules are meant to make it easier for participants to undertake an “apples to apples” comparison of different coverage options and choose the one that will best suit their needs. The Departments have created a template SBC to help group health insurance issuers and employers meet both the content and format requirements.

        The Departments have also created a uniform glossary of the terms commonly used in connection with health insurance, using language that is intended to be understandable by the average plan participant or beneficiary. Insurance issuers and employers are not required to provide the glossary along with the SBC, but if the glossary is included it must not be altered in any way. (It really is intended to be uniform!) In addition, the SBC must contain the Internet address where an individual may review and obtain the uniform glossary, a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies are available upon request. If requested, the paper copy of the glossary must be furnished within seven business days.

        The SBC can be provided either as a stand-alone document or as part of other materials, such as an SPD. If the SBC is combined with other documents, the SBC information must be intact and prominently displayed at the beginning of the materials (i.e., following the Table of Contents to the SPD). The SBC may also be provided electronically. For participants and beneficiaries who are covered by the plan, the electronic format must comply with DOL’s disclosure regulations. For participants and beneficiaries who are eligible but not yet enrolled for coverage, an SBC issued in electronic form must meet three criteria:

        1. The format is readily accessible (such as in an html, MS Word, or pdf format);
        2. The SBC is provided in paper form free of charge upon request; and
        3. If the SBC is to be provided via Internet posting, the participants and beneficiaries must be so advised and the Internet address must be provided.

        Consistent with the basic approach to ACA implementation developed by the Departments, penalties will not be imposed during the first year of applicability on plans and issuers that are working diligently and in good faith to provide the required SBC content in a form that is consistent with the final regulations. Finally, the DOL has developed helpful FAQs explaining the SBC requirements. We commend the FAQs to you for further reference.

        Many thanks to Joanna Taatjes, a summer Associate at Verrill Dana, for her efforts in producing this post. Joanna begins her third year of law school in the fall and enjoyed her summer in Portland.

        Benefits Law Update

        Verrill’s Benefits Law Update blog delivers timely insights and practical guidance on the ever-evolving landscape of employee benefits and executive compensation. Our blog provides up-to-date analysis and commentary on a wide range of topics, including timely updates on developments in law affecting employee benefit plans and executive compensation arrangements.

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