Update: Final Rule Issued on Benefit Summaries
On Feb. 9, 2012, the Obama administration issued a final rule requiring U.S. health insurers and group health plans to provide a concise and comprehensible Summary of Benefits and Coverage document to current and potential health plan participants, for plan years beginning after the fall 2012 open enrollment season. See the SHRM Online article Administration Issues Final Rule on Summary of Benefits and Coverage.
On Aug. 17, 2011, the U.S. departments of Health and Human Services (HHS), Labor, and the Treasury issued a proposed rule and fact sheet under the Patient Protection and Affordable Care Act (PPACA) that would require health insurers and group health plans to provide consumers with "clear, consistent and comparable information" about their health plan benefits and coverage. The proposed rule also was published in the Aug. 22, 2011, edition of the Federal Register.
“Today, many consumers don’t have easy access to information in plain English to help them understand the differences in the coverage and benefits provided by different health plans,” said HHS Secretary Kathleen Sebelius in a statement.
The proposed rule is intended to help consumers make apples-to-apples comparisons of plan options. The proposed rule would ensure that consumers have access to two forms:
● An easy-to-understand Summary of Benefits and Coverage (the agencies released this proposed template for the summary and a draft instruction guide).
● A uniform glossary of terms used commonly in health insurance coverage, such as “deductible” and “co-pay.” (Once finalized, HHS and Labor will post the glossary on their health care reform websites, www.HealthCare.gov and www.dol.gov/ebsa/healthreform.)
The new forms are scheduled to be available in 2012, and the proposed implementation date for the rule is March 23, 2012. [Update: In November 2011, the federal agencies overseeing health care reform announced they will not require group health plan sponsors to create and distribute to employees a uniform Summary of Benefits and Coverage and Uniform Glossary until a final rule is issued, delaying the original March 23, 2012, deadline. See "Agencies Delay Deadline for Health Benefit Summaries."]
After the rule takes effect, all health plans and issuers must provide a Summary of Benefits and Coverage, along with a uniform glossary of terms, to enrollees and potential enrollees on request and before coverage is selected. In addition, health plans and issuers must provide notice at least 60 days before any significant modification is made in the plan or coverage during the plan or policy year.
The Summary of Benefits and Coverage (SBC) will include a new, standardized health plan or policy comparison tool known as “Coverage Examples,” much like the Nutrition Facts label required for packaged foods. The Coverage Examples illustrate what proportion of care expenses a health insurance plan would cover for three common benefits scenarios: having a baby, treating breast cancer and managing diabetes. Additional scenarios might be added. The examples are intended to help consumers understand and compare their share of the costs of care under a particular plan and to see how valuable the health plan will be when coverage is needed.
The proposed rule adopts recommendations submitted by the National Association of Insurance Commissioners (NAIC) and those from a group of consumer advocacy organizations, patient advocates (including those representing individuals with limited English proficiency), health insurers and health care professionals.
Cost Concerns Raised
“Health plans increasingly provide user-friendly online tools and clear materials to make sure that consumers understand the benefits and costs of their health insurance policies. The benefits of providing a new summary of coverage document must be balanced against the increased administrative burden and higher costs to consumers and employers," commented Robert Zirkelbach, a spokesman for America's Health Insurance Plans, an insurance industry group.
"Since most large employers customize the benefit packages they provide to their employees, some health plans could be required to create tens of thousands of different versions of this new document—which would add administrative costs without meaningfully helping employees," he noted.
Kim Buckey, summary plan description (SPD) practice lead at HighRoads, a benefits management and ERISA compliance firm, sees some potential for positive results after the regulations take effect. “These new regulations represent an important step forward in setting the standard for simple, clear communications about health plans,” she noted. “While the SBCs are considered a supplement to SPDs, I see them as an important step in improving the overall quality of SPDs. If the SBC is incorporated into the SPD itself—and I think it should be—the rest of the SPD will need to be rewritten to the same standard of clarity and readability. Since the SBC is so comprehensive, it can replace much of the content typically found in the SPD. And, the uniform definitions proposed by the regulations can either replace any existing “Glossary” section, or be incorporated by reference, further shortening the SPD itself. Anything that encourages employees to pick up their SPD is a good thing,” said Buckey.
Four Pages or Six—or Eight?
The statutory language of the PPACA states that the Summary of Benefits and Coverage should be limited to four pages with a font of no less than 12 point (as Gary Kushner remarks in the "Viewpoint" box below). So why is the model notice six pages long?
"The preamble to the proposed regulation explains the rationale for reading the four-page limit as eight pages (that is, four double-sided pages) at 76 Fed. Reg. 52448, note 21," explained Christy Tinnes, a principal in the health and welfare practice of Groom Law Group in Washington, D.C. "Then the preamble to the supplementary materials (the model notice template) explains that extra space has been reserved over the six pages in the model notice to ensure that a plan or issuer with different benefit designs could provide all the necessary information or coverage examples, at 76 Fed. Reg. 52478 (3rd column)," she pointed out.
The agencies are requesting comments on how the Summary of Benefits and Coverage and the uniform glossary can be provided to individuals while minimizing cost and burden on employers and health insurance issuers. In addition, comments are requested on different methods of providing the uniform glossary and the coverage examples.
Comments on the proposed rule are due on or before Oct. 21, 2011, and may be submitted to the U.S. Department of Labor, identified by RIN 1210-AB52, by one of the following methods:
● Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
● E-mail: E-OHPSCA2715.EBSA@dol.gov.
Viewpoint: Five Months Late and Too Long
The required items for the Summary of Benefits and Coverage were very specific under the PPACA, as were the formatting and layout, according to benefits consultant Gary Kushner, SPHR, president of Kushner and Co. "The summary was to be no more than four pages long, with a font of no less than 12 point and had to contain information that would easily fill 10 or more pages under even the best of circumstances," he recently blogged. He also noted that under that statute the deadline for the federal agencies to provide a model of the new four-page document was March 23, 2011, noting:
Well, on Aug. 17, 2011, almost five months after the law’s own requirement, the agencies did provide a model notice. Surprise—they too couldn’t fit all of the required information onto four pages (it took them six). Even better, they then added one of the items required for this document, a glossary of common plan terms, onto another notice to provide to participants. So by the end there are more than 10 pages of information for employers, insurers, and plans to distribute.
Moreover, Kushner observed that under the proposed rules, as required by the PPACA, in the event there is a material change in the plan benefits or coverages, a new summary must be provided to participants no later than 60 days before the start of the new changes, typically the next plan year. "For large employers, this won’t be onerous as planning for the upcoming benefit year is usually done well in advance, often six to nine months before the start of the new plan year," he noted, adding:
For small and mid-sized employers however, many insurers and stop-loss carriers are not currently providing renewal information and quotes until within 60 days of the new plan year. This will force all employers and carriers to push for an earlier renewal process in preparation for the new plan year. For example, for a calendar year plan, an employer will need to make all plan design decisions, including plan and contribution changes, by early to mid-October in order to communicate with employees by no later than Nov. 1.
Kushner expects there will be requests to delay the implementation date since the federal agencies were almost five months late getting employers and carriers the needed model information, and that there will be requests for a safe harbor for small employers in order to meet the new requirements.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Agencies Delay Deadline for Health Benefit Summaries, SHRM Online Benefits Discipline, November 2011
Analysis: Proposed Rule on Summary of Benefits and Coverage, SHRM Online Benefits Discipline, September 2011
Feds Release New Summary of Benefits and Coverage Rules—Five Months Late, Gary Kushner's Benefit Blog, August 2011
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page