Deadline Approaches for Summaries of Benefits and Coverage (“SBCs”) for Group Health Plans

August 23, 2012

Employers who sponsor group health plans with open enrollment periods (for the 2013 plan year) starting on or after September 23, 2012 must provide summaries of benefits and coverage (“SBCs”) to participants and beneficiaries as required by the Patient Protection and Affordable Care Act (“PPACA”).  For employees entering a group health plan other than through open enrollment (e.g., new hires or special enrollees), the SBC rules will generally apply January 1, 2013.  Self-insured health plans and insured group health plans (both grandfathered and non-grandfathered) must comply with the SBC requirement.

  • The plan sponsor or designated plan administrator of a self-insured group health plan must provide the SBC.
  • For insured plans, the insurer and the plan are jointly responsible for providing the SBC.  If either entity provides the SBC, the requirement will be satisfied for both, provided the timing and content requirements are otherwise met.

The regulations contain strict formatting and distribution requirements, including a length limitation of four double-sided pages and a 12-point type requirement.  The U.S. Department of Labor has issued a model SBC which employers are encouraged to follow in preparing their own SBCs.

SBCs do not replace summary plan descriptions (“SPDs”); a plan administrator must also provide the usual SPD.  The SBC can either be a stand-alone document or be combined with the SPD.  If combined with the SPD, the SBC must remain intact and be featured prominently at the beginning of the SPD (i.e., immediately following any table of contents).

Generally speaking, the SBC may be distributed in paper format or electronically.  If it is electronically delivered, the current ERISA rules on electronic disclosure apply.

Penalties of up to $1,000 can be imposed against a plan administrator or insurer that willfully fails to provide an SBC.  Each failure to provide an SBC to an individual or entity is a separate violation.  Plan sponsors will also generally be subject to an excise tax under Internal Revenue Code section 4980D of up to $100 per day, per affected individual, unless certain exceptions apply.

Regardless of whether a plan is self-insured or fully insured, grandfathered or non-grandfathered, employers should either be preparing to comply with the PPACA SBC requirement starting after September 23, 2012 or ensuring that contractual arrangements have been made with insurance carriers or third-party administrators to prepare and distribute the SBC.

This summary is unable to capture all of the details involved in complying with the PPACA SBC requirement.  If you need assistance in preparing your group health plan’s SBC or have questions, please contact a member of the Montgomery McCracken Employee Benefits Practice Group.