Monday, October 8, 2012

FOCUS ON BENEFITS: Open Enrollment Season is Upon Us. How’s Your Summary of Benefits and Coverage?



The kids are back in school, the crispness of fall is in the air, and thoughts of HR professionals are turning to… what else?  Open enrollment!  One of this year’s fun challenges is the “Summary of Benefits and Coverage,” or SBC.  
Does every health plan have to have an SBC?  All group health plans that aren’t “excepted benefits” under HIPAA have to provide it. Vision plans, dental plans, HSAs, and health flexible spending accounts are often excepted benefits. High-deductible health plans are not. 
·        TIP:  Here’s the part where you need to sit up and pay attention: even plans that are grandfathered under health care reform are required to provide an SBC.
Won’t the insurance provider take care of this?  If a plan is insured, the insurer and the plan administrator (usually the employer) share responsibility for this disclosure. Both don’t need to provide it, though, so you should coordinate with your insurer. Don’t assume your insurer is handling it—ask! If your plan is self-insured, the SBC is your responsibility, although you should get help from your TPA.
Who should receive the SBC?  All participants and beneficiaries, including COBRA qualified beneficiaries.
·        TIP: Unless the plan administrator or the insurer knows that a beneficiary has a separate address from the employee-participant, the employee may receive the SBC on the beneficiary’s behalf.
What is the SBC?   This is NOT the same thing as your old friend the Summary Plan Description, known as the SPD. (Really, what would we do without acronyms?)  This is a new disclosure, in addition to the SPD. There are strict requirements about the appearance of the document, the length of the document, and the content. The regulations include a template, which you can find here http://www.dol.gov/ebsa/pdf/correctedsbctemplate.pdf, and a sample SBC here http://www.dol.gov/ebsa/pdf/CorrectedSampleCompletedSBC.pdf.
·        TIP:  Don’t just refer to the SPD to explain one of the key points that the SBC has to include.  The required content must be in the SBC itself.
·        TIP:  Use the template in the regulations, either to draft your own SBC, or to make sure the one your insurer drafted does what it’s supposed to do.
When is the SBC due?  During the first open enrollment period that begins on or after September 23, 2012… that means your next open enrollment season.
·        TIP:  For people who don’t enroll through open enrollment, the SBC requirement applies beginning on the first day of the first plan year that begins on or after September 23rd.
Why this new requirement?  Good question.  Didn’t it seem like the SPD was enough?  The idea is that the SBC should give some really concrete information that can be used to make an “apples-to-apples” comparison among plans.
·        TIP:  Much of the language from the template must be used verbatim.  Be careful about making changes.
How should the SBC be provided?  It can be provided in paper format, of course. You can also give the SBC out electronically, in accordance with Department of Labor guidance.
·        TIP:  The SBC can be provided electronically in connection with online enrollment or renewal. Participants and beneficiaries who enroll online can get the electronic SBC.
·        TIP:  For employees who are eligible but not enrolled, the SBC can be provided electronically. You can even do an internet posting, if the employees are notified by email or postcard that the SBC can be found on the internet.
·        TIP:  In all cases, you must tell the people receiving notice of an electronic SBC that a paper copy will be provided upon request.
What happens if you don’t comply?  The penalty for a willful failure to provide the SBC is a maximum of $1,000 per failure—and each participant or beneficiary who doesn’t get the SBC counts as a separate failure. You cannot pay the penalty out of plan assets. An Internal Revenue Code excise tax of up to $100 per day may also apply.
·        TIP:  This first year, a good faith standard applies, so it’s a good time to put forth your best effort to comply.
What if we need to make mid-year changes to the SBC?  You can do that, but notice must be provided at least 60 days before the change is effective, if it’s a material modification to the plan. If you make changes at renewal time, that will be reflected in the SBC provided at open enrollment.
Have more questions?  You can consult the Department of Labor’s guidance on health care reform here: http://www.dol.gov/ebsa/healthreform/.  Take a look at Parts VII and IX of the FAQs.

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