Agencies Propose Revised SBC Template and Uniform Glossary

Original post

The federal agencies overseeing the Affordable Care Act announced a 30-day comment period ending on March 28, 2016, regarding proposed revisions to the Summary of Benefits and Coverage (SBC) and related documents that employers must provide to eligible employees for each of their health plans, following the Feb. 26 publication of an official notice in the Federal Register.

The revisions could be effective for employer-provided plan years beginning with the second quarter of 2017.

On Feb. 25, the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) released the proposed revised SBC template and revised uniform glossary, along with revised instructions for group plans. Under the Affordable Care Act, SBCs and the uniform glossary must be given to new hires and to employees during open enrollment.

The agencies had issued a final rule regarding SBCs and related documents in June 2015. However, revisions to the SBC template and the uniform glossary were delayed to allow the agencies to complete consumer testing and receive additional input from the public and stakeholders.

Providing Plan Details

In an analysis posted at the Health Affairs Blog, Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, VA., noted that among the proposed changes the revised documents would:

Better identify services covered before the deductible applies.

Disclose whether the plan has “embedded” deductibles and out-of-pocket limits (under which enrollees in family coverage can meet individual deductibles or out-of-pocket limits before the family limits are met).

Disclose more information on tiered networks in relation to coverage of common medical events.

Though it may not provide the clarity employers and employees are looking for, "on the whole, the proposed revised SBC is a distinct improvement over the current SBC,” commented Jost.

Final Rule Issued on Summary of Benefits and Coverage

Originally posted by Stephen Miller on June 16, 2015 on

The departments of Health and Human Services, Labor, and the Treasury issued a final rule regarding the health care Summary of Benefits and Coverage (SBC) and uniform glossary that must be provided to employees under the Affordable Care Act (ACA). The new rule was published in the Federal Register on June 16, 2015.

However, revisions to the SBC template and the uniform glossary included with the SBC, along with new coverage examples, are not anticipated to be finalized until January 2016, after the departments complete consumer testing and receive additional input from the public, including the National Association of Insurance Commissioners. The revisions will apply to SBCs for coverage beginning on or after Jan. 1, 2017.

The final regulation make few changes to the rule proposed in December 2014, which itself was a revision to an earlier final rule published in February 2012. However the new rule does include streamlined processes to help health insurance issuers and group health plans provide the required information to employees. For instance, it allows for avoiding unnecessary duplication when a group health plan uses a binding contractual arrangement in which another party assumes responsibility to provide the SBC. The rule also adopts the safe harbor for electronic delivery set forth in earlier FAQs.

“These clarifications will also make it easier for issuers and group health plans to provide the most accurate health coverage information to consumers,” according to a statement from the federal Centers for Medicare and Medicaid Studies, which also posted a fact sheet about the final rule.

SBC Requirements

In commentary on the final rule posted on the Health Affairs blog, Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, Va., noted that:

• A group health plan or group health insurer must offer participants and beneficiaries an SBC for each benefit package offered by the plan or insurer for which the participant or beneficiary is eligible.

• If the plan or insurer distributes application materials for plan enrollment, the SBC must be provided with the application materials.

• If the plan or insurer does not distribute application materials, the SBC must be provided no later than the first date on which a participant or beneficiary is eligible to enroll.

Under the new rule, health insurance issuers must also provide online access to a copy of the individual coverage policy for each plan or group certificate of coverage. And these documents must be made publicly available to all potential enrollees so that these individuals are clearly informed about what a plan will and will not offer.

“The SBC must include 12 elements under the statute and the 2012 rule,” Jost said. “The final rule does not address most of these elements, although the proposed template did and the final template is likely to do so.”

Also, the ACA requires that SBCs be presented in a uniform format not exceeding four pages in length, with a font size not smaller than 12 points. The federal departments interpreted the four-page requirement to mean four double-sided pages, or eight pages. “The departments indicated they will address the page length issue upon the publication of the final template,” Jost noted.

PPACA’s 2013 provisions near implementation


By: Katie Kelley

Apart from the latest debates on political opinions over health care changes, it’s important to know what necessary steps are required to get HR and their employees on the right track for 2013.

The Patient Protection and Affordable Care Act outlines changes set to kick in over several years. Benefits managers and human resource advisors are nearing the implementation of the 2013 provisions, and while these changes might not be as newsworthy as the 2014 provisions that are dominating headlines, they do hold credence to employees and their health plans.

According to Troy Filipek, a principal and consulting actuary for Milliman, the best way to prepare for compliance next year is to employ contingency planning as well as develop open lines of communication with employees.

Filipek says employers need to be proactive for 2013 while thinking ahead for 2014.

“There are a lot of changes that are occurring, and there are things employers can benefit from just by considering these options. Talk to your advisors and obviously if you do decide to make a change, talk to your employees or your retirees because with anything you make changes to, it’s important that your people are well advised on it, why you’re doing it and how it’s going to impact them.”

Sharon Cohen, a principal at Buck Consultants and an expert in pretax benefits and health care, shared a similar viewpoint, but also noted that it’s imperative for employers and benefits managers continue with what’s required by law right now—despite any changes that may still occur. “The provisions will start taking effect and the government is moving forward. I wouldn’t count on this all going away before I would take action.”

Medicare subsidy taxation

The major PPACA provision impacting Medicare Part D closes the ‘donut hole’ or gap between coverage limits and out-of-pocket spending on the cost of prescription care, but the law also changes the retiree drug subsidy program.

“The big change for 2013 with the RDS program is that in the past, from 2006 forward, the allowance that these employers receive from the government for the subsidies used to be non-taxable income,” Filipek says. “That has changed since the enactment of the [PPACA].”

Now, Filipek explains, the money that employers receive from the government for these subsidies is subject to taxation.

“It’s a pretty big change,” he says. “A lot of employers have already felt the impact of it because once the law passed, based on the accounting standards, you had to recognize the future impact of that in your financial statements.”

Options include continuing coverage and working with the newly taxed subsidies or dropping coverage and allowing retirees to enroll in individual part D plans. Additionally, Filipek says, employers can maintain group coverage and work with a pharmaceutical benefit manager or health plan in the Part D program to develop a custom benefits package through a Part D Employer Group Waiver Plan plus secondary wrap plan design, which are plan options gaining traction in the marketplace.

Regardless of what decision is made, it’s imperative that both brokers and HR professionals “make sure it’s seamless for the retiree and easy for them to understand,” Filipek says.

“It’s important to communicate with the retirees because these are not people who are coming into the workplace every day where it’s easier to communicate with them. You have to find ways for outreach to them and their spouses.”

The RDS program is designed for employers to continue offering prescription drug coverage to retirees since Part D went into effect six years ago. The government provides a subsidy to employers who maintained a benefit rather than dropping coverage and having their retirees sign up for Medicare Part D individually.

“That program has been what a lot of employers have done since 2006 when Part D started. They had to make a decision to continue offering pharmacy coverage or end their coverage and have retirees sign up for Part D,” Filipek says. “Most opted to continue coverage and get the Retiree Drug Subsidy but that is starting to change with some of the PPACA provisions taking effect.”

FSA caps

HR advisors will need to prepare and communicate newly implemented salary reduction contributions regarding flexible spending accounts that go into effect next year, which impose a cap of $2,500 on these accounts.

“Any employer that has a calendar year beginning Jan. 1, will have to have implemented that provision,” Cohen says. “The salary reduction dollars are capped at $2,500 though, right now, with open enrollment periods typically starting in October and in November—that is a communication that employers who previously had a higher maximum on their FSAs now need to communicate to their employees.”

It’s important to note that only a small percentage of individuals who have FSAs made available to them actually use them. Regardless, employers must inform employees of the change and how it could affect their health coverage long term.

“This is a change that now needs to be communicated to employees,” Cohen says.

But there will be a grace period on contributions that go unused and HR directors will have the opportunity to amend plans through the end of 2014, the limit will be necessary beginning Jan. 1.

“For benefits managers, it would have been last year or the beginning of this year that they would have needed to make design changes to accommodate this,” Cohen says. For those who run on a different plan year other than January, the design considerations must be determined now in order to offer concrete options for open enrollments, she says.

W-2 insurance reporting

The PPACA requires that beginning in 2013, W-2 reporting will need to list employer-sponsored health coverage for the calendar year of 2012. Although this is not a 2013 provision, employees will notice the changes beginning in January of next year, and it’s necessary for HR to convey this to individuals.

“Employees have concern that their tax-free health coverage will be taxable, which will not be the case,” Cohen says. “The communications challenge for employers is to now let employees know that this is just information reporting and is not going to be taxed.”

This provision affects employers of larger companies with 250 or more employees, but those who receive life insurance as a retiree are also required to report their expenses as well.

SBC notification and exchanges

Beginning Sept. 23, during open enrollment periods, and continuing through next year, employers were required to offer employees a four-page summary benefits coverage of the packages made available to an employee for a company’s group health plan.

“[This is] a four page document that tells individuals what benefits are offered under the plan, how much they cost and it has to be in a uniform format that the government has put out,” Cohen says. “The idea is that it makes it easier for individuals who are purchasing coverage to compare the different coverages.”

In order to become compliant with this, it’s important for employers and HR to work with their benefits managers and access the guidance that has been introduced by government agencies including the Internal Revenue Service the Department of Labor, and the U.S. Department of Health and Human Services.

“They have provided templates and instructions,” Cohen says. “This requirement is for health plans large or small.” Cohen also notes this will be the same format of the state insurance exchanges, when they are up and running in 2014.

The state insurance exchanges also require contingency planning for the following year of 2014, when they are established within each state. Beginning next year it’ll be necessary to offer employees notice of these state insurance exchanges, by March 1, in compliance with the DOL guidance that takes precedent in this notification.

“States are still considering if they will adopt the exchange or if the federal government will run the exchange for them,” she says. “They will very soon have to put out some guidance, but right now we don’t have specifics around the exchanges.”

Cohen notes there’s no preparation necessary on behalf of HR or brokers for this provision; it’s simply wait-and-see.

Medicare wage expense

The Federal Insurance Contribution Act Medicare tax rate will increase among individuals with earnings greater than $200,000 and $250,000 for couples filing joint returns. This provision was set in place as a revenue-raising activity. It’s dependent on the employer to collect the tax of 0.9 percent, but this “will not increase the employer’s share of Medicare tax,” according to Sam Hoffman, a partner at Foley and Lardner, who specializes in health care.

“What employers really have to focus on is to set up the payroll system to increase the tax for employees who meet these limits,” Hoffman says. “Most people have thought it through.”

Hoffman doesn’t believe there’s a great need for strong communications campaigns because the 0.9 percent increase will be noted on pay stubs for individuals affected by this. However, employers should have prepared their payroll systems if they haven’t done so already to ensure this provision is met beginning next year. HR also should prepare themselves for questions that could arise in this arena.

“It is the responsibility of the employer to increase the withholdings of individuals earning more than $200,000 a year,” Cohen says. “Typically, the employer’s payroll system will need to be programed for that increase. It’s not so much the responsibility of HR as it is payroll, but there is a communications issue.”

For preparation purposes, Cohen echoes a strong necessity for both HR and brokers to be completing preparation as soon as possible.

“Most of these things, if they haven’t been implemented, they should be hurrying now,” she says.

Tax deduction limits

The income-tax deductions for health expenses sit at 7.5 percent of the adjusted gross income, but as of next year this will be raised to 10 percent of the AGI. Although, during a four year period of 2013 to 2016, those turning 65 (and their spouses) won’t be subject to this provision.

While this scarcely affects employers and HR, it will largely affect individuals and their taxes, which can require benefits managers to step in and work with individuals on a better understanding of this provision.

“This is more for individuals who file on an individual basis,” Cohen says. “It doesn’t normally affect an employer’s group health plan.”
Substantial adjustments have been taken in the form of reflections of these soon-to-be taxed subsidies. “Starting in 2013, it will be a practical effect that these moneys are going to be taxed,” Filipek says.Hoffman also paralleled a related sentiment that if you’re an employee under a group health plan, this is irrelevant, however, “if you buy your own health insurance then you’ll need to notate the cost to yourself and how to itemize those deductions.”

He notes that a lot of brokers, advisors and even employers are currently in the process of reevaluating their options for offering retirees prescription drug coverage. As far as what steps are necessary to take in order to be prepared for the coming year’s changes, Filipek feels it’s important for employers and their advisors to simply understand that there are a variety of choices available.


Summary of Benefits and Coverage could wreak communication havoc

by Ed Bray

In a meeting talking about the upcoming healthcare reform requirements and it was time to present the Summary of Benefits and Coverage document, which will need to be distributed in the next few months. As part of my show-and-tell, I passed around the sample SBC that the Department of Labor posted on its website. The first reaction was, “This looks like the information you receive with a credit card approval letter [that no one reads].” As the ever-professional, I simply said, “yes, it’s pretty detailed” but on the inside I was saying something more like, “wasn’t the intent of this to make the communication of medical insurance coverage easier?”

Have you seen your SBC yet?  Here is the sample provided by the Department of Labor:

I’ll leave the judging to you but just a few comments about the SBC (or what the federal government refers to as the “easy-to-understand summary about a health plan’s benefits and coverage.”)

  • The SBC may not exceed four pages in length. Convincing employees to read four pages wouldn’t be so bad, right? But the regulations from February 12, 2012 contain two extra words that make a huge difference: “cannot exceed four double-sided pages.” (emphasis my own.) Eight pages of medical benefits stuff! Call in the employee engagement police! And just for kicks, the word count in the sample SBC is 2,671 words.
  • If you provide an annual health & welfare insurance benefits guide to employees (typically around open enrollment), you will most likely have your work cut out for you. Here’s why. There’s a good chance you include information about the company’s medical insurance plan options in that guide. So, will you continue to create that guide as is and offer the SBC along with it (causing employees to wonder why they are receiving two different sources of medical insurance information) or will you remove the medical insurance information from the guide and provide the SBC along with it (causing employees to wonder where the medical insurance information went and then why the medical insurance information in the SBC looks different than the rest of the health insurance information in the benefits guide) or something else? Any way you look at it, there is a good chance for some level of confusion when distributing the SBC in a population used to receiving a comprehensive health & welfare insurance benefits guide.
  • If you haven’t checked the list on this website published by The Center for Insurance Information & Insurance Oversight —  — you may want to, especially if you are developing your own SBCs. Section 2719 of the Public Health Service Act requires group health plans and health insurance issuers offering health insurance coverage to provide the SBC in a “culturally and linguistically appropriate manner.” Thus, if you operate in a county in which 10% or more of the population is literate in only the same non-English language, English versions of the SBCs must include a prominently displayed statement in the applicable non-English language indicating how to access the language services provided by the plan or issuer. Upon request, a written translation in the non-English language of applicable notices must be provided. The list on the website includes all of the counties which currently meet or exceed the 10% threshold. This list will be updated annually.

Summary of Benefits and Coverage and the Uniform Glossary

The Health Care Reform law requires plan sponsors to provide two new government-developed documents to plan participants. The "Summary of Benefits and Coverage" (SBC) and the "Uniform Glossary" are intended to provide high-level descriptions of a plan (and definitions of standard terms) and are in addition to the ERISA requirement to provide a Summary Plan Description (SPD). An SBC need not be provided for plans, policies, or benefits packages that constitute excepted benefits. If a plan sponsor intends to make any material modifications in coverage, such as increases in cost-sharing or benefit reductions, the law requires the sponsor to notify participants at least 60 days before the modifications become effective. Penalties for non-compliance are significant.

The federal agencies published final regulations and template versions of the SBC and Uniform Glossary on February 9, 2012. The final regulations are very similar to the proposed regulations. The templates were developed by the National Association of Insurance commissioners for insurance policies and the final regulations relaxed the requirement about completing the template "as is". If the plan's terms cannot reasonably be described "in a manner consistent with the template and instructions, the plan or issuer must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still consistent with the instructions and template format as reasonably possible.". Plan sponsors (or their health insurance carriers) must begin distributing the SBC to participants and beneficiaries eligible to enroll in group health coverage through an open enrollment period beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period, the requirements begin on the first day of the first plan year that begins on or after September 23, 2012. Distribution is required with enrollment materials, by the first day of coverage if there are changes since the enrollment, upon renewal, and upon request. An SBC may be distributed in paper or electronic form. The Uniform Glossary may also be distributed in paper or electronic form, but distribution is required only upon request. Click here to see a completed SBC template.

Employers Prep for New Moves under PPACA

As the 2013 enrollment time draws near, employers are preparing to jump through a few extra hoops thanks to the recently reaffirmed health care reform law.

In addition to the usual notices and benefit communications that employers must prepare and distribute to their employees, the Patient Protection and Affordable Care Act has added a summary of benefits and coverage (SBC) to the enrollment pile for plans that begin on or after Sept. 23, 2012.

The SBC is a four-page document that provides information about a plan's health care coverage and out-of-pocket costs for employees, according to a recent online post by law firm Warner Norcross & Judd LLP. Employers with fully insured plans can expect their insurers to provide the bulk of the content for their SBCs. Self-insured companies, on the other hand, will have to craft the SBCs themselves, the law firm notes.

The rules allow for a few actions that can simplify the process for employers, Warner's post notes. For example:

  • Separate tiers of coverage can be covered in a single SBC.
  • The SBC can be a stand-alone document or it can be included in an enrollment booklet, provided that it isn't buried and hard to find.
  • A single SBC can be used for multiple plans, assuming that the only differences are deductibles and copay/coinsurance amounts, and that the document clearly defines these differences between the plans.
  • The same distribution rules apply to SBCs as to summary plan descriptions (SPDs) under ERISA.

Employers with calendar-year health flexible spending accounts also will want to inform workers about the new $2,500 annual contribution cap created by PPACA, according to Linda Rowings, compliance director for United Benefit Advisors. Prior to enrollment, companies should double-check to ensure that their FSA administrator is prepared for this change, Rowings added.

Unfortunately for employers, these changes represent only the tip of the iceberg for new PPACA notices and enrollment duties. Once the health care exchanges, "pay or play" penalties and other major provisions of the law come into effect in 2014, employers can expect even more work around enrollment time.

One thing PPACA likely won't change, though: Quality employer-sponsored health benefits, which can strengthen recruiting/retention efforts and improve a workforce's health and productivity, remain highly valued by employees.

That's the result of a new survey that shows employees' satisfaction with their employer-provided benefits either rose or remained stable in 2012 compared with 2009, despite increased cost-sharing. The poll by the National Business Group on Health found that nearly two-thirds of workers are very satisfied with their health coverage through their employer or union, according to aPLANSPONSOR report.

While the increasing compliance hassles and climbing costs may prompt some employers to dump health coverage in the future and send their employees into the health care exchanges, a separate study suggests that move won't save employers money in the short or long term.

The study by Truven Health Analytics, as reported by the Employee Benefits Counsel, found that employers that choose to drop coverage in 2014 and pay penalties under PPACA likely will feel pressure to "make employees whole" by increasing compensation (which lacks the tax shelters of providing health benefits). This, combined with the penalties, will make dropping coverage a losing proposition financially, researchers said.

In light of those facts, most employers likely will be better off suffering through the extra enrollment and compliance work and continuing to provide health benefits, the report suggests.

"Employers must provide market value -- in benefits and compensation -- to retain skilled workers and will not be able to unilaterally cut benefits and expect employees to absorb the projected inefficiency of exchange-based coverage," the Counsel study notes.