ACA News & Publications

Summary of Benefits and Coverage (SBC) Questions and Answers

January 2013

The Summary of Benefits and Coverage (SBC) provision of the Patient Protection and Affordable Care Act is one of the health care reform mandates taking effect in 2013. Here, Burnham Benefits answers critical questions about the provision and gives guidance on SBC compliance, including specific information for California employers. For more information, contact your Burnham Benefits representative.

1) Do all fully-insured carriers in California have to produce both the SBC and benefit summaries for each client?

A: The carriers must comply with all California state requirements (certificates of insurance, EOCs, etc.) in addition to the federal SBC requirements. The carriers, who make additional material beyondstate requirements available, did not have to do so in the past, and could choose to discontinue in the future.

2) Who is responsible for distributing the SBC to the employee?

A: For fully-insured plans, the carrier is obligated to provide the SBC to the employer (plan). The employer should be read as the ERISA plan administrator. The plan is obligated to then distribute the SBC to participants and dependents. All self-funded plans are required to create and distribute SBCs for their employees.

3) Is there any written guidance on how employers can electronically distribute the SBC?

A: If an employee is already participating in a plan, the department of labor electronic distribution rules must be met (just like for electronic distribution of SPDs). The plan administrator shall use measures reasonably calculated to ensure actual receipt. The following rules must be met: 1) the administrator must take appropriate and necessary measures reasonably calculated to ensure the system furnishes the document; 2) that it results in actual receipt (using return receipt or notice of undelivered electronic mail, etc.) by conducting periodic reviews or surveys to confirm receipt; 3) it protects the confidentiality of personal information; 4) the electronically delivered document meets the style, format, and content requirements of the particular document; 5) notice is provided to each participant, dependent, or other individual in electronic or non-electronic form, at the time a document is furnished electronically, that apprises the individual of the significance of the document when it is not otherwise reasonably evident as transmitted; 6) proper notice is given to the individual of the right to request and obtain a paper version of the document; 7) upon request, the individual is furnished a paper version of the document; 8) the participant must have the ability to effectively access the document in electronic form at any location the participant is reasonably expected to perform the duties of an employee and with respect to whom access to the employer's electronic information system is an integral part of those duties; 9) the individual has affirmatively consented, in electronic or non-electronic form, to receive the document through electronic media and has not withdrawn consent; 10) if furnished through the internet or other electronic communication network, has affirmatively consented to or confirmed consent electronically, in a manner that reasonably demonstrates the individual's ability to access information in the electronic form used to provide the document and has provided an address for the receipt of electronically furnished documents; 11) prior to consenting, is provided, in electronic or non-electronic form, a clear and conspicuous statement indicating: the type of documents to which the consent applies, that consent can be withdrawn at any time without charge, the procedures for withdrawing the consent and for updating the individual's address for receipt of electronically furnished documents, the right to request and obtain a paper version of an electronically distributed document, including whether the paper version will be free of charge, and any hardware and software requirements needed to access or retain electronically furnished documents.

Following consent: if a change in hardware or software requirements needed to access or retain an electronic document creates a material risk that the individual is unable to access or retain electronically furnished documents: 1) the individual is provided with a statement of the revised hardware or software requirements; 2) the individual is given the right to withdraw consent without charge and without the imposition of any condition or consequence that was not disclosed at the time of the initial consent; and 3) again consents to the electronic distribution following the initial consent rules.

If merely eligible for a plan but not currently enrolled in a plan: 1) there must be reasonable assurance of availability in a format readily accessible; 2) provided in a free paper format upon request; and 3) (if provided over the internet) a timely paper form notice or e-mail that the SBC is available on the internet, provide the internet address, and notify the individual that a free paper form is available on request.

4) Are employers required to distribute SBCs to dependents, and how it that accomplished?

A: Yes, they are required to distribute to all dependents regardless of location.

5) Will the SBCs be distributed through the employee if the dependents live together?

A: Yes, subject to the location of the dependent, and the non-duplication rule (only one SBC per address).

6) Are employers required to distribute previous plan year SBCs to employees?

A: No, only new plan needs to be distributed. Older plan SBCs do not need to be distributed. Only coverage up for enrollment (or re-enrollment) on or after 9-23-12.

7) Often when an employer switches from one fully-insured carrier to another, only a summary is provided for the benefit that most closely matches their current election.  Within that, would the employer have to provide all available SBCs to their employees?

A: No, the employer is only required to provide an SBC for the current carrier's plan. However, the employee has the right to receive all available SBCs relating to plans for which they are currently eligible.

8) Are employers required to provide new hires with SBCs as they become eligible for the plan (outside of open enrollment)?

A: The effective date for re-enrollment is when open enrollment material is first sent out for the first plan year beginning on or after 9-23-12. New hires hired before that date would be included with this original distribution. For new hires after this date, the SBC must be distributed to newly eligible participants by their first day of coverage. "Special enrollees" under HIPAA must be provided a SBC within 90 days or enrollment.

9) What happens if the carrier does not make the SBC available?

A: The carrier is obligated to distribute SBCs to the employer for fully-insured plans (carriers and employers are jointly obligated) to distribute to individual employees. Penalties will apply to carriers if they do not release SBCs within the allotted timeframe. Willful disregard of distribution of SBCs by a carrier can result in a fine of $1,000 per employee. A non-willful disregard of distribution of SBCs by a carrier can result in a fine of $100 per employee. The federal government will assess penalties if individual states are negligent. Penalties apply to carriers for fully-insured plans and employers only for self-insured plans.

10) Are there different requirements based on the size of the employer group?
A: There is no size distinction. The only distinction is between the employer group and the individual insurance market.

11) In what format are the SBCs required to be? For example, can they be posted in a lunchroom or on an online enrollment system/intranet?

A: SBC formats include paper or electronic. Yes, they can be posted on the internet or on an intranet site. Office or lunchroom boards are not acceptable. The actual SBC should use the template provided by HHS on its web site.

12) By what date do SBCs need to be distributed to employees?

A: First day of open enrollment on or after 9-23-12.

13) During the year, what is the requirement for new hires to receive SBCs?

A: An employee's request for an SBC must be satisfied within 7 days; otherwise an employer has 90 days to distribute an SBC for a special enrollee.

14) What language do the SBCs have to be in?

A: English and another language if that language is spoken by more than 10% of the total population in that county based on the center for consumer information & insurance oversight agency (part of HHS) annual "culturally and linguistically appropriate services county data" posted on its web site. For example, in 2012, Orange County is listed as having 13% literacy in Spanish only. The SBC must be provided in the foreign language to anyone within a county entitled to receive an SBC in that language listed by HHS that in which they are only literate.

15) Whose responsibility does it fall under to provide the actual SBC?

A: The carrier is required to distribute SBCs for fully-insured plans to the employer. Additionally, the employer is responsible for delivery to their employees. For a self-insured plan, the employer is solely responsible for the distribution of SBCs to their employees.

16) Does each COBRA participant and/or eligible need to receive hard copies of the SBCs?

A: Yes, either in hard copy form, or in electronic form, if applicable.

a) If so, do they need to be mailed certified mail?

A: No.
b) What is the timeframe?

A: The timeframe is the same as an active employee.

17) What is the consequence if a fully-insured carrier provides a sample SBC in lieu of an actual SBC?

A: The carrier would be subject to potential penalties mentioned above in question 9. 

18) What is the consequence for not providing a correct SBC in this first year?

A: The federal government is making the assumption that employers will make an effort to comply. Therefore, consequences for not providing a correct SBC have not been established.

19) What if there is a mistake within an SBC?

A: Again, the federal government is making the assumption that employers will make an effort to comply with the SBC requirements.

Are there requirements that require the employer to re-send corrected SBCs?  If they do not comply, what is the penalty?

A: If an employer willfully disregards errors with an SBC, then a penalty will apply. If they do not realize the error and later correct the SBC, the employer is then subject to a reduced civil penalty.

20) Also, for COBRA participants, do they need an SBC for each plan they are offered or just the plan they are enrolled in?

A: COBRA participants are treated the same as active employees.

21) For plan years that renew in 2013, is an SBC required at any time before their renewal?  For example, if they have a new hire that wants an SBC in January, and they have not had their renewal, are they obligated to provide?

A: The 9-23-12 rules mentioned in question 8 would apply.

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

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This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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