One of the most important insurance reforms imposed by the Affordable Care Act is a requirement that insurers and self-insured group health plans make available to applicants and enrollees a Summary of Benefits and Coverage (SBC) that concisely, uniformly, and accurately describes health plans that applicants are considering or in which enrollees are enrolled. The SBC allows shoppers to compare side-by-side plans that they are considering purchasing, and also helps enrollees understand their coverage once they are enrolled.
The ACA required the Departments of Labor, Treasury, and Health and Human Services, which are charged with implementing the SBC requirements, to consult with a stakeholder group convened by the National Association of Insurance Commissioners in drafting the SBC rule. The original final SBC rule was not published until 2012, after recommendations were received from that body.
When the 2012 SBC rule was published, however, and again in the months following its publication, the departments released a series of frequently asked question which generally provided plans and insurers flexibility in complying with the requirements of the rule. In December of 2014, the departments published a proposed rule (covered here) to modify the original rule. In a number of instances the departments proposed to incorporate guidance offered through the FAQs.
The proposed rule contained provisions governing how insurers and group health plans were to make SBCs available, as well as changes to the content of the SBC itself — the SBC template and instructions and uniform glossary of coverage terms. On March 30, 2015, the departments released an FAQ stating that they intended to bifurcate the proposed rule. They would proceed with finalizing the parts of the rule that deal with the provision of SBCs. They would, however, hold onto the proposed content modifications pending further consideration by the NAIC stakeholder group and consumer testing, with an eye toward releasing a final template by January of 2016.
On June 12, 2015, the departments finalized the parts of the proposed rule dealing with the provision of SBCs. (fact sheet). The final rule essentially adopts the proposed rule unchanged, with a passing nod in the preface to comments the departments received. The NAIC has convened a stakeholder group that meets twice weekly for 90 minutes and is working through the template.
When Must An SBC Be Provided And Who Must Provide It?
There are three general situations in which an SBC must be provided: 1) by a group health insurer to a group health plan, 2) by a group health insurer or self-insured group health plan to an individual participant or beneficiary (a participant is an employee or other group plan member, a beneficiary receives benefits through the plan member), or 3) by a health insurer to individuals or their dependents in the individual insurance market. The final rules address each of these situations.
Group Market Requirements
Under the final rule, a group health insurer must provide an SBC to a group health plan or sponsor upon application by the group health plan for health coverage. If the insurer has provided an SBC upon request before an application for coverage was received, the insurer need not provide another one unless there has been a change in information required to be covered on the SBC, in which case a new SBC must be provided upon application (or within seven days of the application). If there is any change in the information provided on an SBC between the time of application and when coverage actually begins (including when the terms of coverage were under negotiation when an initial SBC was sent), an updated current SBC must be provided no later than the first day of coverage.
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. If an SBC is provided prior to application, a second SBC need not be provided at application unless there is a change in the information required to be on the SBC. Again, if the terms of coverage are under negotiation at the time an application is filed, an updated SBC need not be provided subsequently (unless requested) until the first day of coverage.
If an insurer renews or reissues a policy, certificate, or contract of insurance or automatically re-enrolls a group for a succeeding policy year, the insurer must, if a written renewal application is required, provide a SBC with the application materials. If renewal is automatic, the SBC must be provided at least 30 days prior to the first day of the new plan or policy year unless the policy has not been issued or renewed before such 30-day period, in which case the SBC must be provided no later than seven days after issuance of the new policy or, if earlier, when written confirmation of intent to renew is received. Identical rules apply with respect to provision of an SBC by a group health plan and participants and beneficiaries when their coverage is renewed or they are re-enrolled.
Individuals enrolling in a group plan through a special enrollment period must be provided an SBC, but only under the timeframe provided for the provision of ERISA summary plan descriptions—90 days after enrollment. Special enrollees can request SBCs earlier with respect to any available plan, policy, or benefit package and must upon request be provided the SBC as soon as practicable, no later than seven business days from the request. While several commenters questioned why special enrollees should not receive the SBC upon enrollment like other enrollees, the departments responded that a special enrollee who wants an SBC can always request it. (Of course, this is true for other enrollees as well, and is not a satisfactory answer).
Upon request, health insurers in the group market must provide SBCs to group health plans or sponsors; group health insurers and health plans must provide SBCs to participants or beneficiaries; and individual health insurers must provide SBCs to individuals as soon as practicable, but no later than seven business days after the request. .
Anti-Duplication Provisions
The 2012 rule contains several provisions to prevent unnecessary duplicate provision of SBCs with respect to group coverage. First, the requirement to provide an SBC is usually met for all entities if a single entity (insurer, plan sponsor, plan administrator) provides the SBC. Second, a single SBC can be provided to a plan participant and to all beneficiaries at a single address, although if a beneficiary’s last known address is different from the participant (for example, an adult child living independently), a separate SBC must be sent. Third, a plan or insurer need only provide a plan participant or beneficiary upon plan renewal with the SBC for the plan in which the participant or beneficiary is enrolled, and need not provide SBCs for all other plans that are being offered (unless additional SBCs are requested).
The proposed rule adds two additional anti-duplication provisions. Under the first, an entity required to provide an SBC may enter into a binding contract with another entity to provide the SBC if: 1) the first entity monitors the performance of the contract; 2) the entity corrects any noncompliance with the contract of which it becomes aware; and 3) if the entity becomes aware of noncompliance that it cannot correct, it communicates with individuals affected by the noncompliance and takes significant steps to correct the noncompliance. (The same requirements apply for individual coverage.)
Under the second provision, if a group health plan uses two or more insurance products provided by separate insurers to insure benefits under the plan (or insures part of the plan and self-insures another part), the plan administrator is responsible for providing complete SBCs with respect to the plans or for contracting with one of the insurers to do so. Absent a contractual obligation, none of the insurers is obligated to provide an SBC for a benefit it does not insure. The plan administrator may synthesize the information into a single SBC or provide multiple partial SBCs. If multiple SBCs are used, the administrator must alert participants and beneficiaries as to this fact.
Individual Market Requirements
Rules for providing SBCs to individuals in the individual market largely parallel the group market requirements. SBCs must be provided on application, or no later than seven days after application. If there are any changes before coverage begins, an updated SBC must be provided no later than the first day of coverage. If an SBC is provided before application, it need only be updated if there is a change in the SBC information by the time the application is filed, in which case it must be provided no later than seven days after the filing of an application. An SBC must also be provided to an individual or dependent upon request.
If an insurer renews or reissues an individual policy for a succeeding policy year, the insurer must, if a written renewal application is required, provide a SBC with the application materials. If renewal is automatic, the SBC must be provided at least 30 days prior to the first day of the new plan or policy year unless the policy has not been issued or renewed before such 30-day period, in which case the SBC must be provided no later than seven days after issuance of the new policy or, if earlier, when written confirmation of intent to renew is received.
If an insurer provides an SBC to an individual enrollee it need not provide additional SBCs to any dependents at the same address, although an SBC must be provided to dependents at a different address. Institutions of higher learning that provide student health coverage are not responsible for providing an SBC if the insurer that covers the plan provides an SBC.
What Must An SBC Include?
The SBC must include twelve elements under the statute and the 2012 rule. The final rule does not address most of these elements, although the proposed template did and the final template is likely to do so. The final rule does specifically address a few issues regarding the content of the SBC however.
Minimum Essential Coverage; Minimum Value
Under earlier guidance, plans or insurers were allowed to provide information about whether coverage offered minimum essential coverage (any employer coverage that meets minimal ACA requirements) or minimum value (at least 60 percent actuarial value coverage) through a cover letter or similar disclosure and did not need to put this information on the SBC itself. Under the proposed rule, this information would have had to be in the SBC, and separate provision would have no longer been sufficient. The Departments will, however, allow insurers and plans to still use a separate letter until the template is finalized in 2016.
Abortion Coverage
The ACA explicitly requires qualified health plans to disclose on the SBC whether or not they cover abortions for which public funding is prohibited (i.e. abortions not involving rape or incest and not necessary to protect the life of the mother). The final regulation for the first time implements this requirement. No line is provided on the current template to disclose abortion coverage, however, and until a new template is finalized, individual market qualified health plan insurers can adopt any reasonable wording or placement of the abortion coverage disclosure, or even disclose coverage using a separate letter.
The Four Page Limit And Coverage Documents
The ACA requires that SBCs be presented in a uniform format not exceeding four pages in length, with print not smaller than 12-point font. The Departments interpreted the four-page requirement to mean four double-sided pages, i.e. 8 pages, but plans and insurers have complained that this is not enough room to accurately describe their plans features; for example, the effects of tiered plans, flexible spending accounts, health reimbursement arrangements, or wellness plans. The Departments will address the page length issue upon the publication of the final template.
An SBC must include a contact number for consumers to call for additional information. Insurers must also post individual policies and group certificates of coverage on the internet and provide an internet address for these documents. Because in the group market the actual certificate of coverage is often not available until the final terms of coverage are finally negotiated between the employer and insurer, insurers can comply by posting a sample group certificate of coverage for each of their applicable products, only posting the actual certificate once it is available. The ACA does not require self-insured plans to post plan documents, but other provisions, including ERISA and the Department of Labor’s claims procedures, do require that these documents be available.
Electronic provision of SBCs
Group health plans may normally provide SBCs electronically to participants and beneficiaries who are already covered by health plans, as long as they comply with Department of Labor regulations for providing benefit information electronically. Participants and beneficiaries not already enrolled can be provided information electronically as long as the format is easily accessible and a paper copy is provided on request. If the electronic posting is a form of internet posting, the plan or insurer must advise the individual in paper form (as through a postcard), that the internet posting is available and that a paper copy may be requested instead. SBCs may also be made available electronically as part of an electronic enrollment or renewal process. Any plan participant or beneficiary may request a paper copy.
Insurers in the individual market can meet their obligation to provide pre-application SBCs to shoppers by posting their SBC information on the healthcare.gov website. Insurers can meet their obligations to provide SBCs under other circumstances by 1) hand-delivering a printed copy to the individual or dependent, 2) mailing a copy to the address provided by the individual, 3) providing an SBC by email after having received the individual’s agreement, 4) posting the SBC on the internet and advising the individual that it is available, or 5) providing the SBC through any other means likely to provide actual notice. Additional requirements must be met for electronic provisions.
Non-federal governmental plans may provide SBCs on paper. They may also provide SBCs electronically if they comply with either the provisions applicable to ERISA plans or to individual health insurance coverage.
Provision Of SBCs In Languages Other Than English
The 2012 rule required SBCs to be provided in a language other than English only if 10 percent or more of county in which the SBC is provided is literate in the same language other than English. The SBC must be provided, therefore, in Spanish in 268 counties (78 of which are in Puerto Rico), and in Chinese, Navajo, and Tagalog in a small number of additional counties. (Tagalog is spoken by Filipinos who work in the fish canneries in the Aleutian Islands). A number of commenters urged the departments to expand language access, but the departments decided against doing so. The preface to the rule notes, however, that other federal nondiscrimination laws continue to apply.
Plans and insurers that fail to comply with the SBC requirements are subject to the normal IRS and ERISA enforcement procedures and sanctions, normally a fine of up to $1000 for each violation.
The SBC requirement does not apply to Medicare Advantage plans or to closed blocks of business that are not actively marketed. The requirements of the final rule apply to group insurers and group health plans for the first plan or policy year beginning on or after September 1, 2015, except that they apply with health insurers in the individual market with respect to SBCs issued for coverage that begins on or after January 1, 2016.
Preparing For Open Enrollment Period Three
Although the second open enrollment period ended less than four months ago, CMS is well into planning for open enrollment period three, which will last from November 1, 2015 to January 31, 2016. On April 22, 2015, CMS issued guidance (covered here ) which described the procedures that will be used by the federally facilitated marketplaces (FFMs) for eligibility redeterminations and re-enrollments for the 2016 open enrollment period. On June 12, 2015, CMS issued further guidance on how insurers are supposed to provide enrollees with information as to the advance premium tax credits and cost-sharing reduction payments for which they would be eligible for 2016 through the FFM.
Under existing rules, an insurer that is renewing coverage for an individual in a QHP that the insurer issues through the marketplace (or in a modified plan, or in a different product that the insurer offers through the marketplace where the original product is being discontinued) must notify enrollees, before the first day of the open-enrollment period, of the premium tax credit that the enrollee will receive for the coming year if the enrollee is automatically re-enrolled. This is necessary so that enrollees will know how much they will have to pay for premiums should they not update their application information and make a plan selection during the open enrollment period. The forms insurers are to use for this purpose were published in September of 2014.
During the 2015 open enrollment period, enrollees who were automatically re-enrolled in coverage and who did not update eligibility information received the same dollar amount of premium tax credits that they had received for 2014, so insurers had no trouble telling them how much they would receive. For 2016, however, FFMs will redetermine eligibility for APTC and income-based cost-sharing reduction payments using the most recent income and family size information they have available, together with 2016 benchmark plan prices and updated federal poverty level. Insurers are unlikely to have this information available until FFMs provide it to them.
If insurers do not have this information for 2016 available by the time that they must send out renewal or discontinuance notices, they may list the 2015 premium tax credit amount as an estimated 2016 value, clearly indicating that it is an estimate only and that the actual APTC amount will be provided on the regularly scheduled January 1, 2016 bill or in a supplemental notice. If an insurer receives information from the FFM before it has to send out the notice, it can modify the standard form accordingly to include this information.
Insurers are also required to provide enrollees with an SBC at least 30 days before the first day of a new policy year, as noted above. For 2015, insurers are obligated to provide a specific SBC for each specific cost-sharing reduction plan variation and to provide enrollees with notice of changes in cost-sharing reduction eligibility. Insurers should receive updated cost-sharing reduction plan eligibility information prior to the notice deadline, and should wait to provide an SBC to automatic re-enrollees until this information is received. If they do not receive the application on a timely basis, however, insurers may use current CSR eligibility status to provide information on plan changes.
Assessing IRS Processing Of Premium Tax Credit Claims
On May 11, 2015, the Treasury Inspector General (IG) for Tax Administration released an Assessment of Internal Revenue Service Preparation for Processing Premium Tax Credit Claims. The assessment is very technical and will not be reviewed in detail here. It was quite critical of the IRS’ handling of premium tax credit claims for 2014 and identifies ongoing issues with the timely identification of problems and errors in tax credit processing.
During the 2014 filing season, the IRS did not receive information in a timely fashion with respect to premium tax credit enrollment information. Tax filing season began on January 20, 2015, but CMS indicated that it would not send 40 percent of the enrollment records on federally facilitated exchange enrollees until mid-February. Six of the 15 state exchanges had also not provided enrollment information to the IRS by the time the tax filing season began. The IRS did develop contingency plans to assist the accuracy of tax credit determinations for 2014, but it was not clear to the IG that these measures ensured accurate determinations of claims.
This verification issue seems to be primarily attributable to implementation issues in the first year. However, an ongoing disagreement exists between the IG and the IRS as to whether the IRS should rely on the 1095-A report of coverage from the exchange (as the IG urged) for tax credit reconciliation purposes, or whether the IRS can rely primarily on exchange periodic data (EPD), which the IRS considers to be adequate and more timely, once reporting systems are functioning normally.
The IG also raised concerns that the IRS does not have guidance in place that fully addresses the question of eligibility for and repayment of premium tax credits by individuals who are granted tax credits while eligibility inconsistencies are being resolved. The IG further noted that although ineligibility for affordable and adequate employer coverage is a requirement for premium tax credit eligibility, employers and insurers were not required to report enrollment information at all for 2014 and are not required to report this information for 2015 and later years until as late as March 31, long after tax filing has begun. The IG did note that the IRS developed for 2014, as the IG had recommended, an online tool to assist premium tax credit recipients in identifying the cost of the second-lowest cost silver plan for which they would have been eligible, another essential element in determining tax credit eligibility.
The report noted that the IRS’ current work plan calls for 36,000 premium tax credit audits and 75,000 tax return reviews in the Automated Questionable Credit program for FY 2015. Finally, the IRS has requested authority in its budget request to Congress to disallow tax benefit claims when reliable third-party data indicates a claim is erroneous.
It must be remembered that many other taxpayer claims for tax deductions, exclusions, and credits are not independently verified by the IRS and are rarely audited. As a nation, we largely depend on an honor system to collect taxes. The IG report merely demonstrates that this is also in part true for the ACA premium tax credit program.
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