Category Archives: Summaries of Benefits and Coverage

Death, Taxes, and DOL Audits Persist

What this means for benefit plan sponsors and the professionals who advise them is that compliance with plan reporting and disclosure rules, and with the plan documentation duties that underpin them, must remain a priority. This is particularly the case with regard to health and welfare plans offering group medical, dental, vision, life, disability and similar forms of coverage, as opposed to 401(k) and other retirement plans.

That is because retirement plan service providers supply plan documentation to employers who engage their services, whereas insurance companies only provide benefit summaries designed to comply with state insurance laws rather than with the disclosure duties mandated under ERISA.

It is often left to benefit brokers and other third parties to the insurance (or self-funding) relationship, to bridge the gap, by drafting Summary Plan Descriptions and/or “wrap” documentations containing required ERISA disclosures, and by ensuring that they are properly delivered to plan participants and beneficiaries under Department of Labor protocols for hard copy and electronic distribution.

If you or your clients have any questions on what ERISA requires around plan documents and their delivery to the folks that they cover, please don’t hesitate to give me a call.

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Filed under 401(k) Plans, DOL Audit, ERISA, Fiduciary Issues, Plan Reporting and Disclosure Duties, Self-Insured Group Health Plans, Summaries of Benefits and Coverage, Wrap Documents

Updated SBC Rules Reflect Full ACA Implementation

As 2014 came to a close, the federal agencies charged with ACA implementation (the Treasury, Labor & Health and Human Services Departments) published proposed regulations governing the contents and delivery of Summaries of Benefits and Coverage or “SBCs,” and made corresponding changes to the SBC template, and related glossary of medical and insurance terms.   The proposed regulations, if finalized, would apply to SBCs required to be provided for open enrollment periods beginning on or after September 1, 2015, and as of the first day of the plan year beginning on or after September 1, 2015 (January 1, 2016 for calendar year plans) for other SBD disclosures (such as for special enrollments).   With the proposed regulations the agencies also released updated SBC templates (blank, and completed), and an updated uniform of key medical and insurance terms.  If finalized, the proposed regulations would amend final SBC regulations published on February 14, 2012.

SBC Update:  Contents

In essence, the proposed regulations refresh SBC contents and terminology to reflect full ACA implementation, in particular its group market reforms and the rollout, over 2014 – 2016, of both individual and employer shared responsibility regimes.   Prior to the proposed regulations, these upgrades occurred piecemeal, in the form of Frequently Asked Questions, no fewer than six of which addressed SBC issues since the final regulations were published.  (See ACA Implementation FAQs Parts VII, VIII, IX, X, XIV and XIV, located here.)  The proposed regulations helpfully consolidate all that earlier guidance and make additional changes consistent with the post-ACA coverage landscape.  With particular regard to SBCs provided to participants and beneficiaries for group health coverage (insured, or self-insured) they include the following:

  • The mandated contents of the SBC template are reduced from 4 double-sided pages to only 2 ½ double-sided pages, freeing up 1 ½ pages for voluntary disclosures such as premium costs, if practical for the coverage arrangement, or additional “coverage examples,” as described below.   There is no requirement that the extra space be filled so long as all required template disclosures are made.
  • The extra space is gained in part by removing references to annual limits on essential health benefits and pre-existing condition exclusions, which are now obsolete.
  • Added to the SBC template is a third “coverage example” which is a hypothetical walk-through of likely covered and out-of-pocket expenses an individual would experience under the benefit package or plan for specific health issues. The new coverage example is a simple foot fracture with emergency room visit.
  • The SBC template also updates pricing data for the other two coverage examples, which are normal delivery of a baby, and well-regulated Type 2 diabetes. As mentioned, carriers and self-insured plan sponsors could add additional coverage examples so long as they remain within the maximum length of 4 double-sided pages (with at least a 12 point font).
  • Added to the uniform glossary are definitions for the following medical terms: “claim,” “screening,” “referral,” “specialty drug” as well as ACA terms such as “individual responsibility requirement,” “minimum value,” and “cost-sharing reductions.” These additions increase glossary page length from 4 to 6.
  • For insured or HMO coverage, the SBC must provide a web address at which individuals can view actual insurance policies, certificates, or HMO contracts related to the SBCs. (A sample certificate for group coverage may be posted while the terms of the actual certificate are under negotiation.) Existing regulations require web addresses for lists of in-network medical providers and drug formularies as well as the uniform glossary of insurance and medical terms.
  • The proposed regulations require that the SBC state whether or not the benefit package qualifies as “minimum essential coverage” or “MEC,” or whether or not it provided at least “minimum value”; these were not required by the 2012 final regulations, but were later added for coverage effective on or after January 1, 2014.
    • Note: Although this information was somewhat esoteric in 2012 and 2013, it has now become essential for most employees to complete their income tax returns for 2014. The MEC disclosure is needed to demonstrate they met individual mandate duties first in effect last year, and the minimum value disclosure is needed in relation to advance payment of premium tax credits. This tax season is the first time that individuals who received tax credits must reconcile them against actual household income, through use of the very complicated IRS Form 8962.  Compliance with the individual mandate is also required to be demonstrated on Form 1040, at line 61, or through reporting of an exemption from the mandate via Form 8965.

SBC Update:  Delivery

The proposed regulations are intended to streamline SBC delivery rules and prevent duplicate delivery of SBCs in certain situations:

  • When an insurer/HMO (“issuer”) or self-funded plan provides an SBC upon request to someone before they have applied for coverage, it need not re-supply one upon actual application for coverage unless the SBC contents have changed in the meantime (or if the person applies for a different benefit package).
  • When a plan sponsor provides an SBC to an applicant during negotiation of terms of coverage, and the terms of coverage change, the sponsor need not provide an updated SBC until the first day of coverage (unless separately requested).
  • A group health plan that uses two or more benefit packages, such as major medical coverage and a health flexible spending account, may synthesize the information into a single SBC, or provide multiple SBCs.
  • The rule permitting a plan sponsor or issuer, upon renewal or reissuance, to provide a new SBC only with respect to the benefit package that is being renewed or reissued is extended to apply to cases in which a plan or issuer automatically reenrolls participants and beneficiaries.
  • Where a plan sponsor or carrier required to provide an SBC with respect to an individual (“original provider”) enters into a binding contract with a third party (“contracted provider”) to provide the SBC to the individual, the original provider will be considered to have met their SBC delivery duties if all of the following requirements are met:
    • The original provider monitors the contracted provider’s performance under the contract;
    • The original provider corrects noncompliance by the contract provider under the SBC delivery contract as soon as practicable, if it has knowledge of the noncompliance and has all information necessary to correct the noncompliance; and
    • The original provider communicates with participants and beneficiaries about noncompliance of which it becomes aware, but which it is unable to correct, and takes significant steps as soon as practicable to avoid future violations.
  • In instances where an insured group health plan uses two or more insurance products provided by separate issuers to insure benefits under the plan, the plan administrator will be responsible for providing complete SBCs but may contract with one of the carriers or another service provider to provide the SBC; absent such an agreement one carrier has no obligation to provide SBCs describing benefits provided by the other carrier. (It remains permissible under prior FAQ guidance to also provide several separate partial SBCs under cover of a letter or notation on the partial SBCs explaining their interrelation.)
  • The proposed rules also incorporate prior FAQ guidance that “providing” an SBC means “sending” an SBC, and an SBC is timely provided if it is sent within seven business days of request, even if it is not received within that time period. This same timing rule applies to requests to receive copies of the uniform glossary. Provisions in the final regulations on electronic delivery of the SBCs continue to apply.

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Filed under Affordable Care Act, Employer Shared Responsibility, Federally Facilitated Exchange, Health Care Reform, Health Insurance Marketplace, Individual Shared Responsibility, Plan Reporting and Disclosure Duties, PPACA, State Exchange, Summaries of Benefits and Coverage

Summaries of Benefits and Coverage: Another Year of Eased Enforcement

In ACA Frequently Asked Questions Part XIX, issued on May 2, 2014, the Departments of Labor, Treasury and Health and Human Services (Departments) have extended transition relief with regard to Summaries of Benefits and Coverage (SBCs) for another year.  Specifically, relief that the Departments first issued in April 2013 (and which is summarized in this prior post) will continue to apply for plan years starting on or after January 1, 2015, and until such time as the Department of Labor issues further guidance.

Plan sponsors (which include insurers and employers with self-funded group health plans) have been required to provide SBCs during open enrollments beginning on or after September 23, 2012, (and at other specified intervals) making 2013 the “first year of applicability” for SBC duties.  For 2015, the third such year, and until further notice, plan sponsors may continue to use the SBC and glossary templates published in April 2013 (with minor changes including deletion of a now obsolete reference to annual limits on essential health benefits (EHB)).

In addition, the Departments will maintain an overall emphasis on cooperation with plan sponsors over SBC duties, rather than penalty enforcement, provided that the plan sponsor has worked “diligently and in good faith” to fulfill SBC duties on its own.  (Penalties would apply only in the case of “willful” failure to provide required SBC information, in any event.)

Lastly the Departments will continue to apply previously issued enforcement and transition relief , including the following (not an exhaustive list):

  • Not requiring SBCs with regard to Medicare Advantage plans;
  • Not requiring SBCs with regard to expatriate health plans;
  • Not requiring SBCs for “carve out” benefit arrangements (such as through pharmacy benefit managers and behavioral health organizations) where the outside vendor has contracted to provide the SBCs, and where the sponsor or insurer monitors for vendor compliance and is either unaware of any noncompliance or identifies and corrects noncompliance);
  • Safe harbors for providing SBCs to participants and beneficiaries electronically, including in connection with online enrollment or online renewal of coverage, or in response to requests for copies made online.  Specifically:
    • SBCs may be provided electronically as part of online enrollment or online renewal of coverage under a group health plan, and in response to an online request for an SBC, provided that the individual has the option to receive a paper copy of the SBC upon request.  Similar rules apply to carriers in the individual market.

 

Transition relief of this type continues to be a welcome relief to employers and other plan sponsors.

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Agencies Release Exchange-Related COBRA Guidance

Recent weeks have seen the publication of several pieces of agency guidance that reflect the increasing prominence of individual coverage on the health exchanges as an alternative to continuation of group coverage under COBRA. The new guidance consists of:

  • updated model COBRA notices from the Department of Labor (both the initial or “general” notice, and the qualifying event notice) which describe exchange coverage as a COBRA alternative and mention the possible availability of exchange subsidies (both notices are available here);
  • DOL proposed regulations that streamline issuance of future model COBRA notices;
  • an announcement of, and links to, the new model COBRA notices and proposed regulations, in Affordable Care Act FAQ XIX, together with guidance on other ACA issues; and
  • announcement, in a Department of Health and Human Services bulletin, of a limited special enrollment period permitting those who elected COBRA coverage under outdated election forms to drop it, between now and July 1, 2014, and enroll in coverage on a federally facilitated exchange (FFE); and
  • an FAQ published by the Centers for Medicare and Medicaid Services (CMS) Centers clarifying the circumstances under which COBRA qualified beneficiaries may switch to exchange coverage.

Each development is discussed in turn, below.

Updated COBRA Notices

On May 2, 2014, the Department of Labor, the agency responsible for COBRA notice and disclosure duties, published online updated versions of both the “general” notice (given upon initial plan eligibility), and the “election” notice (triggered by a qualifying event). The election notice now expressly identifies the availability of exchange coverage, including access to premium tax credits for those eligible, as an alternative to COBRA coverage. The model notices currently are posted online at the DOL website in English, and Spanish language versions will soon follow.

Proposed DOL Regulations re: COBRA Notices 

Also on May 2, 2014, the Department of Labor issued an advance copy of proposed regulations (technically, a “Notice of Proposed Rulemaking”) pursuant to which future model COBRA notices may appear in written agency guidance, including through online posting, rather than as “appendices” to proposed and final regulations published in the Federal Register. One of the stated reasons for this approach is to “eliminate confusion that may result from multiple versions of the model notices being available at different locations.” And in fact, if view the online version of DOL Technical Release 2013-02, which in May of last year announced earlier exchange-related revisions to the model COBRA election notice, the link to the model notice link now clicks through to the most recent update posted last week, rather than to the version that originally was issued with the Technical Release.

 Summary of COBRA Developments in ACA FAQ Part XIX

May 2, 2014 also saw publication online of Affordable Care Act FAQs Part XIX, of which Q&A 1 summarizes the above developments and directs readers to the new model COBRA notices and the proposed regulation.

FAQ Part XIX contains additional guidance on a number of ACA issues including cost-sharing limitations, coverage of preventive services, and Summaries of Benefits and Coverage. I will cover this new guidance soon in a separate post.

Special Enrollment Period to Transfer from COBRA to FFE Coverage

Generally, an individual may enroll him or herself in exchange coverage upon first becoming eligible for COBRA, during an exchange open enrollment period, or upon exhausting COBRA coverage. However, persons currently enrolled in COBRA may have elected to do on the basis of COBRA notices that did not identify exchange coverage as a COBRA alternative in these situations. Accordingly, on May 2, 2014 the Department of Health and Human Services issued a bulletin announcing a limited special enrollment period, lasting until July 1, 2014, during which COBRA qualified beneficiaries in states that use the Federally Facilitated Exchange or Marketplace may drop COBRA coverage and enroll on the FFE. The guidance does not mandate that state-run exchanges extend the same special enrollment period.

CMS FAQ re: Transition from COBRA to Exchange Coverage

Lastly, on April 21, 2014 the Centers for Medicare and Medicaid Services (CMS) posted an online FAQ https://www.regtap.info/faq_printe.php?id=1496 asking whether someone who voluntarily drops COBRA coverage during an exchange open enrollment period may enroll in the exchange (and, if eligible, qualify for premium tax credits). CMS made clear that this transition is possible even for someone whose COBRA has not expired, and that enrollment on the exchange is permitted any time during the year for someone whose COBRA coverage has expired. The FAQ made it clear that a qualified beneficiary whose COBRA coverage had not yet expired could not enroll in exchange coverage outside the annual exchange open enrollment period. (The next exchange open enrollment period is from November 14, 2014 to February 15, 2015.)

 Speculation as to COBRA’s Future

Against that background, some speculation as to COBRA’s future is warranted. COBRA continuation coverage, enacted in 1985, was in essence a legislative response to pricing and underwriting barriers to individual coverage that the Affordable Care Act has either eliminated (for instance, by banning pre-existing condition exclusions) or made less burdensome (for instance, through access to premium tax credits and cost sharing on the exchanges).   Without question, the health exchanges are a “disruptive technology” to the COBRA model, but COBRA continuation coverage likely will remain in some demand until such time as individual exchange coverage is comparable, in terms of provider networks and in other respects, to current group coverage.  That tipping point may not occur for some years, or even at all.      What is likely in the short term is that COBRA’s already steep adverse selection rate will continue to climb, as continuation of group coverage becomes more and more about retaining access to a broad network of healthcare providers.

 

 

 

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Filed under Affordable Care Act, COBRA, Federally Facilitated Exchange, Health Care Reform, Health Insurance Marketplace, Plan Reporting and Disclosure Duties, PPACA, Pre-Existing Condition Exclusion, State Exchange, Summaries of Benefits and Coverage

Notice of Exchange Penalties: There Aren’t Any, But Timely Compliance is Key

The Department of Labor (DOL) has clarified in a Frequently Asked Question that no fine or penalty will apply to an employer who fails timely to provide a Notice of Exchange to employees.  The Affordable Care Act amended the Fair Labor Standards Act (FLSA) to require provision of the Notice of Exchange.  The FLSA imposes corrective measures on employers that violate its other mandates, including federal minimum wage rules, but does not contain an express penalty provision for failing timely to provide the Notice of Exchange.   I earlier outlined Notice of Exchange distribution duties, which require action on or before October 1, 2013, here, and here.

This information, at this late date, is more confusing than it is helpful to employers who have already invested significant resources in preparing to deliver the Notice of Exchange.  The wording of the FAQ says that employers “should” rather than “must” provide the Notice, which is misleading, because Section 18B of the FLSA (29 U.S.C. Sec. 218B) clearly states that employers “shall” provide the Notice within the time period specified, and all prior DOL communications have used consistent wording.   The FAQ did not change this nor did it modify any prior guidance on exchange notice duties in DOL Technical Release 2013-02, including instructions on how the Notice should be delivered.   Noting the lack of express Notice-related penalties in an online article that predated the FAQ, Boston ERISA attorney Alden Bianchi identified the still-remaining risk to employers:

 “This does not mean, of course, that noncompliance is a good idea or even a viable option. The lack of penalties does not translate into a lack of consequences.  Plan sponsors still have a fiduciary obligation to be forthcoming with plan participants and beneficiaries.”

Particularly for employers with pre-existing group health plans, the Notice of Exchange potentially could be viewed by the DOL as within the scope of the employer’s required disclosures to participants and thus within the scope of an ERISA audit, or separate penalties could be imposed through amendment to the FLSA or the ACA.  (I discussed some of the existing ACA penalties in this earlier post.)

Accordingly, even in the absence of any current, known monetary penalty or fine, employers must take all measure necessary timely to provide the Notices of Exchange on or before the October 1, 2013 deadline, and to each new employee upon hire thereafter (the DOL has clarified that in 2014, providing the Notice within 14 days of hire will constitute timely delivery).

Finally the FAQ directs readers to Spanish-language versions of the DOL model Notices of Exchange.  As with the English versions there is one model notice for use by employers that do not offer group health coverage and one version for employers that do offer coverage.

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Filed under Affordable Care Act, Health Care Reform, Health Insurance Marketplace, Plan Reporting and Disclosure Duties, PPACA, Summaries of Benefits and Coverage

Agencies Update SBC Language for 2014; Extend Enforcement Relief

The Departments of Labor, Health and Human Services (HHS) and the Treasury (collectively, the “Departments”) on April 23, 2013 issued the fourteenth in a series of Frequently Asked Questions on the Affordable Care Act.

The new FAQ updates Summary of Benefits and Coverage (SBC) model language for plans or policies beginning on or after January 1, 2014, but before January 1, 2015.[1]  It also extends, for an additional year, certain safe harbors and enforcement relief set forth in earlier FAQs.  A summary of the new guidance is set forth below.

  • An updated SBC template, and sample completed SBC are now available online.  
  • The only change made to the new templates is the addition of:
    • a statement as to whether the plan or policy provides minimum essential coverage; and
    • a statement as to whether the plan or policy meets the minimum value requirements (no lower than 60% actuarial value).  These statements appear on page 4 of the blank template and page 6 of the completed template. 
  • Self-funded plans and insurers that have already committed to SBC templates that do not contain the new information – and for whom it would be an administrative burden to include it – may provide that information in a separate cover letter or similar disclosure accompanying their SBCs for 2014, without incurring liability for penalties.
  • No additional changes to the SBC or the Glossary of health insurance coverage terms are required.  Nor does the SBC need to contain any examples of coverage costs other than the existing examples, for childbirth (normal delivery) and managing Type 2 diabetes (routine maintenance of a well-controlled condition).
  • Although annual dollar limits on coverage of “essential health benefits” (“EHB”) are disallowed for plan years starting on or after January 1, 2014, the SBC does not need to contain a specific statement to this effect.  Instead, in completing the first page of the SBC, plans should answer “no” in responding to the question “Is there an overall annual limit on what the plan pays?”  If the plan imposes any permissible limits on specific covered services, such as office visits, the SBC must direct readers, in the corresponding “Why this Matters” column on page one, to the chart on page 2 of the SBC that includes explanations of limitations and exceptions.
  • Alternatively, where applicable, plan sponsors or issuers may delete the entire corresponding row from this “Important Questions” section of SBC.  
  • Failure to comply with SBC requirements can trigger excise taxes under Internal Revenue Code § 4980D and financial penalties enforced by the Department of Labor (the terms of which have yet to be defined in proposed regulations).  However, the Departments will continue through 2014 specific compliance safe harbors and an overall emphasis on cooperation rather than enforcement, as announced in prior FAQs.  Some of the specific relief that has been extended includes the following (not an exhaustive list):
    • Cooperating with, rather than penalizing, employers that are shown to be working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations.
    • Nonenforcement with regard to Medicare Advantage plans;
    • Nonenforcement with regard to expatriate health plans;
    • Nonenforcement against plan sponsors or insurers with regard to SBCs for “carve out” benefit arrangements such as through pharmacy benefit managers and behavioral health organizations (where the vendor has contracted to provide the SBCs, and where the sponsor or insurer monitors for vendor compliance and is either unaware of any noncompliance or identifies and corrects noncompliance);
    • Safe harbors for providing SBCs to participants and beneficiaries electronically, including in connection with online enrollment or online renewal of coverage, or in response to requests for copies made online.

In all, FAQ XIV offers plan sponsors and insurers terms for a smooth transition through the ACA “watershed” year of 2014, at least with regard to SBC requirements.


[1] The FAQ refers to 2014 as the “second year of applicability” for SBC rules.  2013 was the “first year of applicability.”

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