Under the ACA, all employers that sponsor group health plans (regardless of size or ALE status), must provide a Summary of Benefits and Coverage (SBC) to their employees. This document outlines the key features of the health plan in simple terms, helping individuals compare their options. SBCs must be provided when an employee first becomes eligible for coverage and again during renewal or Open Enrollment.
Issuers, such as insurance carriers, are responsible for creating SBCs for their plans, while employers offering self-funded plans generally need to create their own SBCs. The SBC allows consumers to compare coverage options, as it follows a uniform format across carriers and plans.
In addition to the SBC, employers are required to distribute a Uniform Glossary of Coverage and Medical Terms. This document explains the terms used in the SBC in plain language, helping employees better understand their health coverage. The glossary is available from the U.S. Department of Labor at DOL.gov.
Most employers sponsoring group health plans must also provide a Summary Plan Description (SPD), as required by ERISA. This is a separate document that gives more detailed information about the plan’s coverage, rights, and responsibilities.
Distribution Requirements of SBCs:
For issuers offering individual health insurance coverage, the SBC must be delivered in a way that provides actual notice, either electronically or on paper. This can be done by:
- Hand-delivering a printed copy
- Mailing a printed copy to the individual’s provided address
- Emailing the SBC after receiving the individual’s consent to electronic delivery
- Posting the SBC online and notifying individuals where to find it
- Using any other method that reasonably ensures the individual receives the notice
If the SBC is provided electronically, certain conditions must be met:
- It must be easy to access and download or print.
- The document must meet all formatting rules, including being in a prominent location.
- It must be consistent with the required content and appearance guidelines.
- The individual must be notified that they can request a paper copy free of charge.
What’s Included in the SBC?
The SBC is designed to help individuals understand and compare health plans. It cannot exceed four pages and must be printed in a font size of at least 12 points. The SBC must contain the following key elements:
- Uniform definitions of standard terms and medical terminology.
- A description of the coverage provided, including cost-sharing details for different benefits.
- Exceptions, reductions, or limitations on coverage.
- Cost-sharing provisions, such as deductibles, co-payments, and co-insurance.
- Renewal and continuation of coverage options.
- Coverage examples to show how the plan covers common medical events.
- Information on whether the plan provides minimum essential coverage and meets the required cost-sharing standards.
- A disclaimer that the SBC is only a summary, and the actual plan documents should be consulted for complete details.
- Contact information for questions and to obtain a copy of the full plan document.
- For plans with provider networks, a web address to access the provider list.
- For plans with a prescription drug formulary, a web address to access the drug list.
- A web address for the Uniform Glossary, along with a phone number to request a paper copy.
When does the SBC need to be provided?
Employers and insurers must provide the SBC in several situations:
- During Open Enrollment or COBRA enrollment periods
- When a person becomes newly eligible for coverage
- During Special Enrollment periods
- When there are any material changes to coverage
- Upon request by an individual
In counties where 10% or more of the population speaks a language other than English, the SBC must also include language services and be available in the relevant language.
Additional Compliance Considerations for Self-Funded Groups
- SBC Creation & Accuracy: Self-funded employers are responsible for creating and maintaining the SBCs. They should:
- Collaborate with TPAs or benefit consultants to ensure the document meets ACA guidelines, including a clear description of essential health benefits.
- Regularly update SBCs to reflect plan changes, network adjustments, or any other modifications throughout the plan year.
- Ensure timely delivery of SBCs to participants during open enrollment, plan changes, or when individuals first become eligible for the plan.
- Disclosure of Cost-Sharing Details: Self-funded groups must ensure the SBC includes clear and accurate details regarding:
- Out-of-pocket maximums, deductibles, copayments, and coinsurance.
- Any tiered benefits that apply differently depending on provider networks or other plan features.
- Plan Customization and Flexibility: Self-funded plans often have more flexibility in designing benefits. Compliance with ACA regulations requires that:
- Any custom plan design must be clearly outlined in the SBC.
- The SBC accurately reflects differences from standard fully insured plans, particularly around preventive services, drug formularies, and cost-sharing structures.
- ERISA Compliance: Self-funded plans are subject to ERISA regulations, which require the plan sponsor to:
- Provide a comprehensive SPD. The SPD should outline how the plan works, the claims process, participants’ rights, and any applicable stop-loss insurance provisions.
- Ensure the SPD is distributed within 90 days of participant enrollment and updated whenever there is a significant change to the plan. The SPD must be easily understandable and compliant with ERISA’s disclosure requirements.
- Stop-Loss Insurance: For self-funded employers with stop-loss insurance, ensure:
- The stop-loss arrangement is fully described in the SPD, outlining the specific protections against catastrophic claims.
- Participants understand their coverage limits, and the role of stop-loss insurance is clarified to avoid confusion about employer vs. participant liability in the case of large claims.
- Employer’s Fiduciary Responsibility: Under ERISA, self-funded plan sponsors are considered fiduciaries, which comes with legal responsibilities:
- They must act in the best interest of plan participants and beneficiaries.
- There is an obligation to prudently select and monitor service providers, such as TPAs, and ensure that plan assets are used exclusively to benefit participants.
- Non-Discrimination Rules: Self-funded plans must comply with non-discrimination requirements under the ACA and Section 105(h) of the Internal Revenue Code, which prohibits self-funded plans from discriminating in favor of highly compensated employees:
- The plan must not disproportionately benefit key employees, executives, or owners.
- Any violation of these rules can result in significant penalties.
- Form 5500 Filing: Employers with self-funded plans generally need to file Form 5500 with the Department of Labor:
- This form must be filed annually if the employer has 100 or more participants in the plan.
- The form provides information on the plan’s financial condition, investments, and operations.
- Self-funded plans with fewer than 100 participants may be exempt, but this should be confirmed with legal counsel or the plan’s TPA.
- Plan Document Requirements: Self-funded plans must have a formal written plan document (separate from the SPD):
- This document should detail the structure of the plan, the responsibilities of fiduciaries, and the allocation of risk and liability among the employer, the stop-loss carrier, and plan participants.
- The written plan must comply with both ACA and ERISA requirements.
- Claims and Appeals Process: Self-funded plans must:
- Provide a detailed claims and appeals process that meets ERISA requirements.
- Ensure the process is clearly explained in the SPD and SBC, including deadlines for filing claims, procedures for reviewing denied claims, and participants’ rights to external review.