By Lara Cartwright-Smith

Background

The Affordable Care Act (ACA)^[1] included a new requirement that health plans in the group and individual markets disclose plan information to consumers in a standardized, accessible format in order to facilitate comparison of plans and improve understanding of plan terms. On August 22, 2011, several federal agencies jointly issued a notice of proposed rulemaking (NPRM) setting forth proposed disclosure requirements, including templates for the disclosures. Comments are due on October 21, 2011.

Changes Made by the ACA

The ACA requires group health plans and health insurance issuers in the group and individual markets to provide applicants, enrollees, and policyholders with a summary of benefits and coverage (SBC).^[2] The SBC must be provided at the time of application, enrollment or reenrollment, and policy issuance, and the plan must give notice of any material modification.^[3] The SBC must also be provided to a health plan by the plan issuer. In order to be certified as a qualified health plan by an exchange, a plan must use the standard summary format.^[4] An insurer or plan sponsor who willfully fails to provide the summary of benefits is subject to a fine of $1,000 per failure.^[5]

The ACA specifically directed the Secretary of the Department of Health and Human Services (HHS) to work with the National Association of Insurance Commissioners (NAIC) to develop standards for an accurate summary of benefits and coverage explanation.^[6] The basic requirements for these standards are prescribed in some detail by the statute. The SBC must be no longer than four pages, printed in 12-point font, and culturally and linguistically appropriate and understandable. It must include: 1) uniform definitions of standard terms; 2) a description of coverage; 3) limitations on coverage; 4) cost-sharing provisions; 5) renewability and continuation of coverage provisions; 6) illustrations of common benefits scenarios; 7) a statement of whether the plan provides minimum essential benefits; and 8) contact information (phone and website) for questions and plan documents.^[7]

Overview of the Proposed SBC Regulations

The ACA directed the HHS Secretary to develop standards for the SBC. In conjunction with the Departments of Labor and the Treasury, the Secretary released both proposed regulations (the NPRM) regarding disclosure of the summary of benefits and coverage and the uniform glossary^[8] and a set of templates and instructions to be used in making these disclosures.^[9]

In general, the SBC must be provided when a plan or individual is comparing health coverage options and must be updated if the information changes before the policy is issued. It must also be automatically provided by a plan issuer to the group heath plan and by a plan or issuer to each participant or beneficiary at the time of enrollment, and at other times must be provided upon request.^[10] Plans that make the SBC available through the federal government’s health insurance comparison website (currently www.healthcare.gov)^[11] will be deemed to have complied with the disclosure requirements for individuals requesting information prior to applying for coverage.^[12] HHS has indicated that it may make the requirements for posting on the federal site parallel to the SBC requirements.

The summary of benefits and coverage must include:

a. Uniform definitions of standard insurance terms and medical terms;

b. A description of the coverage, including cost sharing, for each category of benefits;

c. Exceptions, reductions, and limitations on coverage;

d. Cost-sharing provisions, including deductible, coinsurance, and copayment obligations;

e. Renewability and continuation of coverage provisions;

f. A coverage facts label with examples to illustrate common benefits scenarios (including pregnancy and serious or chronic medical conditions) and related cost sharing;

g. A statement about whether the plan provides minimum essential coverage and whether the plan’s share of the total allowed costs meets applicable requirements;

h. A statement that the SBC is only a summary and that the plan document, policy, or certificate of insurance should be consulted; and

i. A contact number and web address where the actual individual coverage policy or group certificate of coverage can be reviewed and obtained.

The uniform glossary must include definitions of certain medical terms (durable medical equipment, emergency medical transportation, emergency room care, home health care, hospice services, hospital outpatient care, hospitalization, physician services, prescription drug coverage, rehabilitation services, and skilled nursing care) and certain other terms (allowed amount, balance billing, complications of pregnancy, emergency medical condition, emergency services, habilitation services, health insurance, in-network co-insurance, in-network copayment, medically necessary, network, out-of-network co-insurance, plan, preauthorization, prescription drugs, primary care physician, primary care provider, provider, reconstructive surgery, specialist, and urgent care). The NPRM solicits comments on whether additional terms should be defined in the glossary, suggesting the following possible additional terms: claim, external review, maternity care, preexisting condition, preexisting condition exclusion period, and specialty drug.^[13]

The SBC must be provided in a “culturally and linguistically appropriate manner,”^[14] which the regulations indicate will be satisfied if the plan or issuer provides interpretive services and provides written translations of the SBC on request in certain non-English languages. These conditions apply in counties where more than ten percent of the population is literate only language other than English.^[15] This is the case in only 255 counties in the United States (including 78 in Puerto Rico) where Spanish is spoken by more than ten percent of the population, and only six counties where a third language meets this threshold.^[16]

Agency

The ACA primarily directed the Secretary of HHS to develop and implement standards for the SBC, in consultation with NAIC. However, HHS, DOL, and Treasury are responsible for administering different provisions of the relevant laws, as amended by the ACA: the Public Health Service Act (PHS Act); the Employment Retirement Income Security Act (ERISA), and the Internal Revenue Code. Therefore, the three agencies collaborated on the proposed regulations. In particular, the Departments’ have separate enforcement jurisdiction over health plans, plan sponsors, and insurers who fail to comply with federal rules, including the new SBC requirements.^[17]

Key Dates

Comments on NPRM, templates, and instructions: Due to HHS or DOL by October 21, 2011.

SBC requirement: The statutory requirement that health insurers and health plan sponsors provide an SBC to all applicants, enrollees, and policyholder takes effect on March 23, 2012.^[18]

Statement regarding minimum essential coverage: Because the requirement to provide minimum essential coverage and minimum value takes effect on January 1, 2014, the SBC will not have to include a statement regarding minimum essential coverage until the next required SBC for coverage beginning after January 1, 2014.

Process

The Departments will receive comments until October 21, 2011, and a final regulation will follow.

Key Issues

Will the Departments finalize the regulation regarding the SBC and related materials in time for plans to comply with the ACA’s deadline? Under the statute, group health plans and insurance issuers must provide the SBC beginning March 23, 2012.

Minimum essential coverage and minimum value requirements have yet to be proposed. These pieces of information are important elements of meaningful disclosure for consumers, but they are not required to be included in the SBC until January 1, 2014.

Will states impose additional disclosure requirements on insurers, since the ACA does not preempt stricter state standards?^[19]

Will the definitions of terms in the uniform glossary operate to improperly limit coverage? The glossary is supposed to provide common definitions in a standard format to inform and empower consumers. However, the definitions necessarily address specific areas of coverage and services, and therefore may operate in practice as contract terms rather than general information. In particular, the definition of medical necessity in the proposed template has been highlighted as overly restrictive and opening the door to cherry-picking by insurers.^[20]

Related to the above, what is the legal effect of the SBC? Under the statute, it seems to be subordinate to the policy itself, but if the SBC conflicts with the underlying policy, does it have any legal effect?

Under the NPRM, plans will be deemed to have met the requirement to provide the SBC to individuals who are shopping for insurance coverage (requesting information prior to applying for coverage, not yet applying) if the SBC is made available through the federal web portal (currently www.healthcare.gov) beginning March 23, 2012. Is that single disclosure sufficient for effective comparison shopping by individuals seeking health insurance coverage, especially before the Exchanges begin to provide this information in 2014?

Is the statutory requirement that plans make SBCs in a “culturally and linguistically appropriate manner” met if plans only make information available in English and Spanish (in some counties), as provided by the NPRM?

Agency Action

As discussed above, the Departments of Health and Human Services, Labor, and the Treasury jointly issued the NPRM on the SBC and the Uniform Glossary on August 22, 2011.^[21] At the same time, HHS released a set of templates and instructions for the SBC, requesting comments on these additional materials as well as on the NPRM.^[22] Comments on both the NPRM and the templates and information are due on October 21, 2011. Additional regulations defining key elements of the disclosure, such as minimum essential coverage and minimum value requirements, will be necessary before the disclosure requirements can be imposed on health plans and insurance issuers.^[23]

The Department of Labor plans to issue separate regulations describing procedures for assessment of a civil fine for failure to comply.^[24] Treasury will coordinate with HHS and Labor to determine appropriate cases for imposition of a fine for group health plans that do not make the required disclosures.

Authorized Funding Levels

No particular funding is attached to the SBC requirement. The SBC and related disclosure requirements will be administered and enforced along with other health plan requirements under the ACA by the Departments.