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A Better Partnership


May 2012
May 31, 2012

More Clarification on the Summary of Benefits and Coverage

Updated sample documents, a calculator for completing coverage examples, and no penalties for good faith attempts to comply with the Summary of Benefits and Coverage requirements are among the topics addressed in new FAQs recently posted by the DOL, HHS and IRS.
Under Health Care Reform, participants in employer-sponsored group health plans must receive a Summary of Benefits and Coverage in connection with open enrollment periods beginning on or after September 23, 2012.  The Summary of Benefits and Coverage (SBC) must be no longer than four double-sided pages in length and must provide basic information about the benefits and out-of-pocket costs associated with a health plan option.  For more detailed information about the SBC, listen to our webinar on preparing the SBC.

In their new FAQs, the federal departments responsible for Health Care Reform have clarified some important issues:
  • The federal departments have updated the SBC templates to correct a typographical error in the diabetes treatment scenario.  Make sure that you are using the updated template (labeled “corrected on May 11, 2012” in the lower right-hand corner of the first page) when developing your SBC.
  • The federal departments are working on a calculator that employers can use for the first year to prepare the coverage examples.  When completed, the calculator will be available here.
  • One of the challenges in preparing SBCs are “carve-out arrangements” where a plan utilizes different insurers and/or service providers for different components of a benefit package option (for example, one insurer for medical coverage, a pharmacy benefits manager for prescription drug benefits and perhaps even a third-party administrator for a health reimbursement account).  The new FAQs clarify that a plan sponsor with carve-out arrangements will either have to synthesize information from multiple sources into one SBC or contract with the insurer, a TPA or other service provider to synthesize the information.  For the first year only, employers with carve-out arrangements may provide multiple partial SBCs so long as, taken together, the SBCs provide complete information and the employer provides additional assistance to make sure individuals understand how the different products work together (such as a cover letter or notation on the SBC that provides contact information where someone can obtain more information).
  • For employers who have participants or beneficiaries living in counties where more than 10% of the population is literate only in Spanish, Chinese, Tagalog or Navajo, written translations of the SBC template are available or will soon be available.  To obtain the translated documents, start here.
  • Expatriate coverage gets a pass for the first year.  According to the FAQs, the federal agencies will not take any enforcement action during the first year against a group health plan for failing to provide an SBC for expatriate coverage.
  • While the SBC must use the template created by the federal departments, electronic versions of the SBC can make minor adjustments when displaying the SBC—such as expanding certain columns and allowing the viewer to scroll through the SBC without having to advance pages.
  • Although you generally need to provide notice (and sometimes obtain consent) in order to distribute the SBC electronically, the FAQs establish a safe harbor for employers who use an on-line enrollment system.  Under this safe harbor, the SBC can be provided electronically to employees who use the on-line enrollment system, or to any participant or beneficiary who requests an SBC online, as long as the individual is given the option to receive a paper copy.  This safe harbor does not impose any additional conditions to these on-line requests.
  • You may combine SBCs or SBC elements to provide side-by-side comparisons of different benefit package options.  For example, you could have an on-line feature that allows employees to compare specific columns or rows of information between multiple options.  However, you must still provide a complete SBC for each medical benefit package that you offer.
  • Because plans and insurers face challenges and uncertainties in preparing and distributing the SBC, during the first year, the federal departments will not impose penalties on plans and insures that are working diligently and in good faith to comply with the new requirements.
If you have any questions about the Summary of Benefits and Coverage, or about Health Care Reform generally, please contact Norbert F. Kugele ( or 616.752.186), April Goff ( or 616.752.2154), or any other member of the Warner Norcross & Judd Healthcare Reform Task Force.

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