The U.S. Department of Labor, Health and Human Services, and the Treasury have released a new set of healthcare reform FAQs posted to the Department of Labor’s website. This new set of FAQs addresses the Summary of Benefits and Coverage (SBC) requirement in the second year of applicability. Group health plans are required to distribute SBCs to participants for open enrollments starting on or after September 23, 2012. A number of group health plans, particularly those that run on a calendar year basis, have already been through the first round of SBC distribution while some non-calendar year plans have yet to distribute SBCs for the first time. The FAQs are accompanied by new templates of the SBC and the Uniform Glossary to be used in the second year of applicability, generally beginning this fall.
There are a few important changes and updates to prior Agency guidance on the SBC requirement. First and foremost, SBCs will now be required to contain a statement as to whether the plan to which the SBC relates meets the minimum essential coverage and minimum value requirements set forth by PPACA. These statements may be found on page 6 of the SBC template. No other changes have been made to the content of the SBC or the Uniform Glossary. No changes have been made to the content to reflect the elimination of annual limits for essential health benefits. However, the Agencies will allow an employer plan sponsor and/or insurance carrier to modify the SBC template to remove the row on page 1 of the SBC in the Important Questions chart which contains the question: “Is there an overall annual limit on what the plan pays?”
Second, the enforcement relief regarding compliance with the SBC requirement during the first year of applicability, provided in a previous FAQ, has been extended through the second year of applicability. This means that the Department of Labor will work with employer groups to promote compliance with the requirement and will refrain from assessing penalties on employer groups who are working in good faith to comply during the second year.
Employers who have been planning for the implementation of the Patient Protection and Affordable Care Act know that offering minimum essential coverage that is affordable and provides minimum value is of utmost importance in avoiding Employer Shared Responsibility payments under Code Section 4980H(a) and (b). For employers, minimum essential coverage generally means any employer sponsored health plan that does not consist only of HIPAA excepted benefits. Minimum value refers to the plan’s total share of the cost of benefits – a 60% actuarial value. This does not refer to the amount of the premium paid by the employer. Rather, this refers to the percentage of the cost of claims paid by the plan versus the cost that participants pay out of pocket.
It appears that this new content requirement for SBCs will essentially require fully insured carriers and plan sponsors of self-insured group health plans to use HHS calculators to calculate the minimum value of the health plan to determine whether or not it meets the minimum 60% standard set by the law. Although the FAQs and the new SBC template do not require the exact numerical minimum value percentage of the plan, it does require a yes or no statement as to whether the plan meets minimum value. This determination and subsequent statement on the SBC may remove some uncertainty for employers concerned about the minimum value percentage of their plans. However, for those employers with plans that do not meet this requirement, plan design changes must be made to avoid penalties under Code Section 4980H(b).
