[Federal Register Volume 77, Number 30 (Tuesday, February 14, 2012)]
[Rules and Regulations]
[Pages 8668-8706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3228]
[[Page 8667]]
Vol. 77
Tuesday,
No. 30
February 14, 2012
Part VII
Department of the Treasury
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Internal Revenue Service
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26 Parts 54 and 602
Department of Labor
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Employee Benefits Security Administration
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29 CFR Part 2590
Department of Health and Human Services
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45 CFR Part 147
Summary of Benefits and Coverage and Uniform Glossary; Final Rule
Federal Register / Vol. 77 , No. 30 / Tuesday, February 14, 2012 /
Rules and Regulations
[[Page 8668]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
[TD 9575]
RIN 1545-BJ94
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB52
DEPARTMENT OF HEALTH AND HUMAN SERVICES
[CMS-9982-F]
45 CFR Part 147
RIN 0938-AQ73
Summary of Benefits and Coverage and Uniform Glossary
AGENCIES: Internal Revenue Service, Department of the Treasury;
Employee Benefits Security Administration, Department of Labor; Centers
for Medicare & Medicaid Services, Department of Health and Human
Services.
ACTION: Final rule.
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SUMMARY: This document contains final regulations regarding the summary
of benefits and coverage and the uniform glossary for group health
plans and health insurance coverage in the group and individual markets
under the Patient Protection and Affordable Care Act. This document
implements the disclosure requirements under section 2715 of the Public
Health Service Act to help plans and individuals better understand
their health coverage, as well as other coverage options. A guidance
document published elsewhere in this issue of the Federal Register
provides further guidance regarding compliance.
DATES: Effective date. These final regulations are effective April 16,
2012.
Applicability date. The requirements to provide an SBC, notice of
modification, and uniform glossary under PHS Act section 2715 and these
final regulations apply for disclosures to participants and
beneficiaries who enroll or re-enroll in group health coverage through
an open enrollment period (including re-enrollees and late enrollees)
beginning on the first day of the first open enrollment period that
begins on or after September 23, 2012. For disclosures to participants
and beneficiaries who enroll in group health plan coverage other than
through an open enrollment period (including individuals who are newly
eligible for coverage and special enrollees), the requirements under
PHS Act section 2715 and these final regulations apply beginning on the
first day of the first plan year that begins on or after September 23,
2012. For disclosures to plans, and to individuals and dependents in
the individual market, these requirements are applicable to health
insurance issuers beginning on September 23, 2012.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Heather Raeburn,
Employee Benefits Security Administration, Department of Labor, at
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of
the Treasury, at (202) 622-6080; Jennifer Libster or Padma Shah,
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, at (301) 492-4222.
SUPPLEMENTARY INFORMATION:
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS) Web site (http://www.cms.hhs.gov/HealthInsReformforConsume/01_Overview.asp) and information on health
reform can be found at http://www.healthcare.gov.
I. Executive Summary
A. Purpose of the Regulatory Action
1. Need for Regulatory Action
Under section 2715 of the Public Health Service Act (PHS Act), as
added by the Patient Protection and Affordable Care Act (Affordable
Care Act), the Departments of Health and Human Services, Labor, and the
Treasury (the Departments) are to develop standards for use by group
health plans and health insurance issuers offering group or individual
health insurance coverage in compiling and providing a summary of
benefits and coverage (SBC) that ``accurately describes the benefits
and coverage under the applicable plan or coverage.'' PHS Act section
2715 also calls for the ``development of standards for the definitions
of terms used in health insurance coverage.''
This regulation establishes the standards required to be met under
PHS Act section 2715. Among other things, these standards ensure this
information is presented in clear language and in a uniform format that
helps consumers to better understand their coverage and better compare
coverage options. The current patchwork of non-uniform consumer
disclosure requirements makes shopping for coverage inefficient,
difficult, and time-consuming, particularly in the individual and small
group market, but also in some large employer plans in which workers
may be confused about the value of their health benefits as part of
their total compensation. As a result of this confusion, health
insurance issuers and employers may face less pressure to compete on
price, benefits, and quality, contributing to inefficiency in the
health insurance and labor markets.
The statute is detailed but not self-implementing, contains
ambiguities, and specifically requires the Departments to develop
standards, consult with the National Association of Insurance
Commissioners, and issue regulations. Therefore these consumer
protections cannot be established without this regulation.
2. Legal Authority
The substantive authority for this regulation is generally PHS Act
section 2715, which is incorporated by reference into Employee
Retirement Income Security Act (ERISA) section 715 and the Internal
Revenue Code (Code) section 9815. PHS Act section 2792, ERISA section
734, and Code section 9833 also provide rulemaking authority. (For a
fuller discussion of the Departments' legal authority, see section V.
of this preamble.)
B. Summary of the Major Provisions of This Regulatory Action
Paragraph (a) of the final regulations implements the general
disclosure requirement and sets forth the standards for who provides an
SBC, to whom, and when. The regulations outline three different
scenarios under which an SBC will be provided: (1) By a group health
insurance issuer to a group health plan; (2) by a group health
insurance issuer and a group health plan to participants and
beneficiaries; and (3) by a health insurance issuer to individuals and
dependents in the individual market. For each scenario, an SBC must be
provided in several different circumstances, such as upon application
for coverage, by the first day of coverage (if information in the SBC
has changed), upon renewal or reissuance, and upon request. The final
regulations also
[[Page 8669]]
include special rules to prevent unnecessary duplication in the
provision of an SBC with respect to group health coverage and
individual health insurance coverage.
The final regulations set forth a list of requirements for the SBC
that generally mirror those set forth in the statute. There are a total
of 12 required content elements under the regulations, including
uniform standard definitions of medical and health coverage terms,
which will help consumers better understand their coverage; a
description of the coverage including the cost sharing requirements
such as deductibles, coinsurance, and co-payments; and information
regarding any exceptions, reductions, or limitations under the
coverage. The final regulations also require inclusion of coverage
examples, which illustrate benefits provided under the plan or coverage
for common benefits scenarios. In addition, the regulations specify
requirements related to the appearance of the SBC, which generally must
be presented in a uniform format, cannot exceed four double-sided pages
in length, and must not include print smaller than 12-point font. These
requirements are detailed further in a Notice published elsewhere in
today's Federal Register providing additional guidance related to PHS
Act section 2715 and these final regulations.
PHS Act section 2715 and the final regulations also require that
plans and issuers provide notice of modification in any of the terms of
the plan or coverage involved that would affect the content of the SBC,
that is not reflected in the most recently provided SBC, and that
occurs other than in connection with a renewal or reissuance of
coverage.
Finally, the statute directs the Departments to develop standards
for definitions for certain insurance-related and medical terms, as
well as other terms that will help consumers understand and compare the
terms of coverage and the extent of medical benefits (including any
exceptions and limitations). Group health plans and health insurance
issuers must provide the uniform glossary in the appearance specified
by the Departments, so that the glossary is presented in a uniform
format and uses terminology understandable by the average plan enrollee
or individual covered under an individual policy. A guidance document
published elsewhere in today's Federal Register provides further
guidance with respect to the uniform glossary.
The requirements to provide an SBC, notice of modification, and
uniform glossary under PHS Act section 2715 and these final regulations
apply for disclosures with respect to participants and beneficiaries
who enroll or re-enroll in group health coverage through an open
enrollment period (including re-enrollees and late enrollees),
beginning on the first day of the first open enrollment period that
begins on or after September 23, 2012. For disclosures to participants
and beneficiaries who enroll in group health plan coverage other than
through an open enrollment period (including individuals who are newly
eligible for coverage and special enrollees), the requirements under
PHS Act section 2715 and these final regulations apply beginning on the
first day of the first plan year that begins on or after September 23,
2012. For disclosures to plans, and to individuals and dependents in
the individual market, these requirements apply to health insurance
issuers beginning on September 23, 2012.
C. Costs and Benefits
The direct benefits of these final regulations come from improved
information, which will enable consumers, both individuals and
employers, to better understand the coverage they have and make better
coverage decisions, based on their preferences with respect to benefit
design, level of financial protection, and cost. The Departments
believe that such improvements will result in a more efficient,
competitive market. These final regulations will also benefit consumers
by reducing the time they spend searching for and compiling health plan
and coverage information.
Under the final regulations, group health plans and health
insurance issuers will incur costs to compile and provide the summary
of benefits and coverage and uniform glossary of health coverage and
medical terms. The Departments estimate that the annualized cost may be
around $73 million. As is common with regulations implementing new
policies, there is considerable uncertainty arising from general data
limitations and the degree to which economies of scale exist for
disclosing this information. Nonetheless, the Departments believe that
these final regulations lower overall administrative costs from the
proposed regulations because of several policy changes, notably
flexibility in the instructions for completing the SBC, the omission of
premium (or cost of coverage) information from the SBC, the reduction
in the number of coverage examples required from three to two, and
provisions allowing greater flexibility for electronic disclosure.
In accordance with Executive Orders 12866 and 13563, the
Departments believe that the benefits of this regulatory action justify
the costs.
II. Background
The Patient Protection and Affordable Care Act, Pub. L. 111-148,
was enacted on March 23, 2010; the Health Care and Education
Reconciliation Act, Pub. L. 111-152, was enacted on March 30, 2010
(these are collectively known as the ``Affordable Care Act''). The
Affordable Care Act reorganizes, amends, and adds to the provisions of
part A of title XXVII of the Public Health Service Act (PHS Act)
relating to group health plans and health insurance issuers in the
group and individual markets. The term ``group health plan'' includes
both insured and self-insured group health plans.\1\ The Affordable
Care Act adds section 715(a)(1) to the Employee Retirement Income
Security Act (ERISA) and section 9815(a)(1) to the Internal Revenue
Code (the Code) to incorporate the provisions of part A of title XXVII
of the PHS Act into ERISA and the Code, and make them applicable to
group health plans, and health insurance issuers providing health
insurance coverage in connection with group health plans. The PHS Act
sections incorporated by this reference are sections 2701 through 2728.
PHS Act sections 2701 through 2719A are substantially new, though they
incorporate some provisions of prior law. PHS Act sections 2722 through
2728 are sections of prior law renumbered, with some, mostly minor,
changes.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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Subtitles A and C of title I of the Affordable Care Act amend the
requirements of title XXVII of the PHS Act (changes to which are
incorporated into ERISA by section 715). The preemption provisions of
ERISA section 731 and PHS Act section 2724 \2\ (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements of
part 7 of ERISA and title XXVII of the PHS Act, as amended by the
Affordable Care Act, are not to be ``construed to supersede any
provision of State law which establishes, implements, or continues in
effect any standard or requirement solely relating to health insurance
issuers in connection with group or individual health insurance
coverage except to the extent that such standard or
[[Page 8670]]
requirement prevents the application of a requirement'' of provisions
added to the PHS Act by the Affordable Care Act. Accordingly, State
laws with stricter health insurance issuer requirements than those
imposed by the PHS Act will not be superseded by those provisions.
(Preemption and State flexibility under PHS Act section 2715 are
discussed more fully below under section III.D.)
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\2\ Code section 9815 incorporates the preemption provisions of
PHS Act section 2724. Prior to the Affordable Care Act, there were
no express preemption provisions in chapter 100 of the Code.
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The Departments of Health and Human Services (HHS), Labor, and the
Treasury (the Departments) are taking a phased approach to issuing
regulations implementing the revised PHS Act sections 2701 through
2719A and related provisions of the Affordable Care Act. These final
regulations are being published to implement the disclosure
requirements under PHS Act section 2715. As discussed more fully below,
a document containing further guidance for compliance is published
elsewhere in this issue of the Federal Register.
III. Overview of the Final Regulations
A. Summary of Benefits and Coverage
1. In General
Section 2715 of the PHS Act, added by the Affordable Care Act,
directs the Departments to develop standards for use by a group health
plan and a health insurance issuer offering group or individual health
insurance coverage in compiling and providing a summary of benefits and
coverage (SBC) that ``accurately describes the benefits and coverage
under the applicable plan or coverage.'' PHS Act section 2715 also
calls for the ``development of standards for the definitions of terms
used in health insurance coverage.''
The statute directs the Departments, in developing such standards,
to ``consult with the National Association of Insurance Commissioners''
(referred to in this document as the ``NAIC''), ``a working group
composed of representatives of health insurance-related consumer
advocacy organizations, health insurance issuers, health care
professionals, patient advocates including those representing
individuals with limited English proficiency, and other qualified
individuals.'' \3\ On July 29, 2011, the NAIC provided its final
recommendations to the Departments regarding the SBC. On August 22,
2011, the Departments published in the Federal Register proposed
regulations (76 FR 52442) and an accompanying document with templates,
instructions, and related materials (76 FR 52475) for implementing the
disclosure provisions under PHS Act section 2715. The proposed
regulations and accompanying document adhered to the recommendations of
the NAIC. After consideration of all the comments received on the
proposed regulations and accompanying document, the Departments are
publishing these final regulations. In conjunction with these final
regulations, the Departments are also publishing a guidance document
elsewhere in this issue of the Federal Register that contains further
guidance for compliance, including information on how to obtain the SBC
template (with instructions and sample language for completing the
template) and the uniform glossary. All of these items are displayed at
www.dol.gov/ebsa/healthreform and www.cciio.cms.gov.
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\3\ The NAIC convened a working group (NAIC working group)
comprised of a diverse group of stakeholders. This working group met
frequently each month for over one year while developing its
recommendations. In developing its recommendations, the NAIC
considered the results of various consumer testing sponsored by both
insurance industry and consumer associations. Throughout the
process, NAIC working group draft documents and meeting notes were
displayed on the NAIC's Web site for public review, and several
interested parties filed formal comments. In addition to
participation from the NAIC working group members, conference calls
and in-person meetings were open to other interested parties and
individuals and provided an opportunity for non-member feedback. See
www.naic.org/committees_b_consumer_information.htm.
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2. Providing the SBC
Paragraph (a) of the final regulations implements the general
disclosure requirement and sets forth the standards for who provides an
SBC, to whom, and when. PHS Act section 2715 generally requires that an
SBC be provided to applicants, enrollees, and policyholders or
certificate holders. PHS Act section 2715(d)(3) places the
responsibility to provide an SBC on ``(A) a health insurance issuer
(including a group health plan that is not a self-insured plan)
offering health insurance coverage within the United States; or (B) in
the case of a self-insured group health plan, the plan sponsor or
designated administrator of the plan (as such terms are defined in
section 3(16) of ERISA).'' \4\ Accordingly, the final regulations
interpret PHS Act section 2715 to apply to both group health plans and
health insurance issuers offering group or individual health insurance
coverage. In addition, consistent with the statute, the final
regulations hold the plan administrator of a group health plan
responsible for providing an SBC. Under the final regulations, the SBC
must be provided in writing and free of charge.
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\4\ ERISA section 3(16) defines an administrator as: (i) The
person specifically designated by the terms of the instrument under
which the plan is operated; (ii) if an administrator is not so
designated, the plan sponsor; or (iii) in the case of a plan for
which an administrator is not designated and plan sponsor cannot be
identified, such other person as the Secretary of Labor may by
regulation prescribe.
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Several commenters argued that large group health plans or self-
insured group health plans should be exempt from the requirement to
provide the SBC. Many of these commenters noted that such plans already
provide a wealth of useful information, including a summary plan
description and open season materials that accurately describe the plan
and any coverage options. However, the statute includes no such
exemption for large or self-insured plans. Moreover, the Departments
believe that the SBC's uniform format and appearance requirements will
allow individuals to easily compare coverage options across different
types of plans and insurance products, including those offered through
Affordable Insurance Exchanges (Exchanges) beginning in 2014.
Several commenters asked whether the SBC is required to be provided
with respect to all group health plans, including certain account-type
arrangements such as health flexible spending arrangements (health
FSAs) \5\, health reimbursement arrangements (HRAs) \6\, and health
savings accounts (HSAs) \7\. An SBC need not be provided for plans,
policies, or benefit packages that constitute excepted benefits. Thus,
for example, an SBC need not be provided for stand-alone dental or
vision plans or health FSAs if they constitute excepted benefits under
the Departments' regulations.\8\ If benefits under a health FSA do not
constitute excepted benefits, the health FSA is a group health plan
generally subject to the SBC requirements. For a health FSA that does
not meet the criteria for excepted benefits and that is integrated with
other major medical coverage, the SBC is prepared for the other major
medical coverage, and the effects of the health FSA can be denoted in
the appropriate spaces on the SBC for deductibles, copayments,
coinsurance, and benefits otherwise not covered by the major medical
coverage. A stand-alone health FSA must satisfy the SBC requirements
independently.
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\5\ See Code section 106(c)(2).
\6\ See IRS Notice 2002-45, 2002-2 C.B. 93.
\7\ See Code section 223.
\8\ See 26 CFR 54.9831-1(c), 29 CFR 2590.732(c), 45 CFR
146.145(c).
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An HRA is a group health plan. Benefits under an HRA generally do
not constitute excepted benefits, and thus HRAs are generally subject
to the SBC requirements. A stand-alone HRA generally must satisfy the
SBC requirements (though many of the
[[Page 8671]]
limitations that apply under traditional fee-for-service or network
plans do not apply under stand-alone HRAs). An HRA integrated with
other major medical coverage need not separately satisfy the SBC
requirements; the SBC is prepared for the other major medical coverage,
and the effects of employer allocations to an account under the HRA can
be denoted in the appropriate spaces on the SBC for deductibles,
copayments, coinsurance, and benefits otherwise not covered by the
other major medical coverage.
HSAs generally are not group health plans and thus generally are
not subject to the SBC requirements. Nevertheless, an SBC prepared for
a high deductible health plan associated with an HSA can mention the
effects of employer contributions to HSAs in the appropriate spaces on
the SBC for deductibles, copayments, coinsurance, and benefits
otherwise not covered by the high deductible health plan.
There are three general scenarios under which an SBC will be
provided: (1) By a group health insurance issuer to a group health
plan; (2) by a group health insurance issuer and a group health plan to
participants and beneficiaries; and (3) by a health insurance issuer to
individuals and dependents in the individual market. In general, the
proposed regulations directed that, in each of these scenarios, the SBC
be provided when an employer or individual is comparing health coverage
options, including prior to purchasing or enrolling in a particular
plan or policy.
Some commenters asserted that certain timing requirements in the
proposed regulations could be administratively difficult for plans and
issuers to meet under certain conditions, such as when negotiations of
policy terms are ongoing less than 30 days before renewal, making the
proposed timeframe for providing the SBC difficult or impossible to
achieve. In response to public comments, the final regulations
streamline and harmonize the rules for providing the SBC, while
ensuring that individuals and employers have timely and complete
information under all three scenarios in which an SBC might be
provided. Moreover, in certain circumstances, the final regulations
provide plans and issuers with additional time to provide the SBC. For
example, under the proposed regulations, an SBC would have been
required to be provided as soon as practicable following an application
for health coverage or a request for an SBC, but in no event later than
seven days following the application or request. For all three
scenarios under which an SBC might be provided, the final regulations
substitute a seven business day period for the seven calendar day
period in the proposed regulations in each place it appeared.
The Departments also received comments regarding issuance of an SBC
at renewal or reissuance of coverage. The proposed regulations would
have required that, if written application materials are required for
renewal, the SBC must be provided no later than the date on which the
materials are distributed. This requirement has been retained without
change in the final regulations. In addition, upon an automatic renewal
of coverage (that is, when written application materials are not
required for renewal), the proposed regulations would have required a
new SBC to be provided no later than 30 days prior to the first day of
coverage under the new plan or policy year. The final regulations
require that, in general, if renewal or reissuance of coverage is
automatic, the SBC must be provided no later than 30 days prior to the
first day of the new plan or policy year. However, with respect to
insured coverage, in situations in which the SBC cannot be provided
within this timeframe because, for instance, the issuer and the
purchaser have not yet finalized the terms of coverage for the new
policy year, the final regulations provide an exception. Under that
circumstance, the SBC must be provided as soon as practicable, but in
no event later than seven business days after the issuance of the
policy, certificate, or contract of insurance (for simplicity, referred
to collectively as a ``policy'' in the remainder of this preamble), or
the receipt of written confirmation of intent to renew, whichever is
earlier. The regulations provide this flexibility only when the terms
of coverage are finalized in fewer than 30 days in advance of the new
policy year; otherwise, the SBC must be provided upon automatic renewal
no later than 30 days prior to the first day of coverage under the new
plan or policy year.
a. Provision of the SBC by an Issuer to a Plan
Paragraph (a)(1)(i) of the final regulations requires a health
insurance issuer offering group health insurance coverage to provide an
SBC to a group health plan (including, for this purpose, its sponsor)
upon an application by the plan for health coverage. The SBC must be
provided as soon as practicable following receipt of the application,
but in no event later than seven business days following receipt of the
application. If there is any change to the information required to be
in the SBC before the first day of coverage, the issuer must update and
provide a current SBC to the plan no later than the first day of
coverage. If the information is unchanged, the SBC does not need to be
provided again in connection with coverage for that plan year, except
upon request. As noted later in this preamble, the final regulations,
in contrast to the proposed regulations, do not include premium or cost
of coverage information as a required element of the SBC. In many
cases, the only change to the information the proposed regulations
required to be in the SBC between application for coverage and the
first day of coverage is the premium or cost of coverage information.
Because these final regulations eliminate the requirement to include
premium or cost of coverage information in the SBC, the Departments
anticipate that the number of circumstances in which issuers will have
to provide a second SBC will be significantly fewer under the final
regulations than they would have been under the proposed regulations.
b. Provision of the SBC by a Plan or Issuer to Participants and
Beneficiaries
Under paragraph (a)(1)(ii) of the final regulations, a group health
plan (including the plan administrator), and a health insurance issuer
offering group health insurance coverage, must provide an SBC to a
participant or beneficiary \9\ with respect to each benefit package
offered by the plan or issuer for which the participant or beneficiary
is eligible.\10\ Some commenters stated that SBCs should only be
provided to participants, not beneficiaries, or that the SBC should
only be provided to beneficiaries upon request. The
[[Page 8672]]
statutory language, which refers to ``applicants'' and ``enrollees,''
could be interpreted to support either interpretation. These final
regulations retain the requirement that the SBC be provided to both
participants and beneficiaries. However, as described below, the final
regulations include an anti-duplication rule under which a single SBC
may be provided to a family unless any beneficiaries are known to
reside at a different address. Accordingly, separate SBCs need to be
provided to beneficiaries only in limited circumstances.
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\9\ ERISA section 3(7) defines a participant as: Any employee or
former employee of an employer, or any member or former member of an
employee organization, who is or may become eligible to receive a
benefit of any type from an employee benefit plan which covers
employees of such employers or members of such organization, or
whose beneficiaries may be eligible to receive any such benefit.
ERISA section 3(8) defines a beneficiary as: A person designated by
a participant, or by the terms of an employee benefit plan, who is
or may become entitled to a benefit thereunder.
\10\ With respect to insured group health plan coverage, PHS Act
section 2715 generally places the obligation to provide an SBC on
both a plan and issuer. As discussed below, under section
III.A.2.d., ``Special Rules to Prevent Unnecessary Duplication With
Respect to Group Health Coverage'', if either the issuer or the plan
provides the SBC, both will have satisfied their obligations. As
they do with other notices required of both plans and issuers under
Part 7 of ERISA, Title XXVII of the PHS Act, and Chapter 100 of the
Code, the Departments expect plans and issuers to make contractual
arrangements for sending SBCs. Accordingly, the remainder of this
preamble generally refers to requirements for plans or issuers.
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The SBC must be provided as part of any written application
materials that are distributed by the plan or issuer for enrollment. If
the plan does not distribute written application materials for
enrollment, the SBC must be distributed no later than the first date
the participant is eligible to enroll in coverage for the participant
or any beneficiaries. If there is any change to the information
required to be in the SBC between the application for coverage and the
first day of coverage, the plan or issuer must update and provide a
current SBC to a participant or beneficiary no later than the first day
of coverage.
Under the final regulations, the plan or issuer must also provide
the SBC to special enrollees.\11\ The proposed regulations would have
required that the SBC be provided within seven calendar days of a
request for special enrollment. One commenter stated that special
enrollees should not be distinguished from other enrollees with such
expedited disclosure, particularly since they have already enrolled in
coverage and are no longer comparing coverage options. The final rule
provides that special enrollees must be provided the SBC no later than
when a summary plan description is required to be provided under the
timeframe set forth in ERISA section 104(b)(1)(A) and its implementing
regulations, which is 90 days from enrollment. The revised timing
requirement related to providing an SBC in connection with special
enrollment is expected to reduce administrative costs for providing
SBCs to these individuals, who have already chosen the plan, policy, or
benefit package in which to enroll. To the extent individuals who are
eligible for special enrollment and are contemplating their coverage
options would like to receive SBCs earlier, they may always request an
SBC with respect to any particular plan, policy, or benefit package and
the SBC is required to be provided as soon as practicable, but in no
event later than seven business days following receipt of the request
(as discussed more fully below).
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\11\ Regulations regarding special enrollment are available at
26 CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117.
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c. Provision of the SBC Upon Request in Group Health Coverage
As discussed earlier in this preamble, a health insurance issuer
offering group health insurance coverage must provide the SBC to a
group health plan (and a plan or issuer must provide the SBC to a
participant or beneficiary) upon request for an SBC or summary
information about the health coverage, as soon as practicable, but in
no event later than seven business days following receipt of the
request. The Departments received several comments addressing the
requirement to provide the SBC upon request. Many comments were
supportive of this approach, especially with regards to participants
and beneficiaries needing information about their coverage in the
middle of a plan year after life changes. Other comments suggested that
providing SBCs to employers and individuals who are only ``shopping''
for coverage and not yet enrolled is unnecessary and will require
multiple SBCs to be provided as employers and individuals go through
underwriting.
The final regulations retain the requirement that the SBC be
provided upon request to participants, beneficiaries and employers,
including prior to submitting an application for coverage, because the
SBC provides information that not only helps consumers understand their
coverage, but also helps consumers compare coverage options prior to
selecting coverage. The Departments believe it is essential for
employers, participants, and beneficiaries to have this information to
help make informed coverage decisions and believe that the
modifications to the SBC template, including the removal of premium
information, adequately addresses the concerns that health insurance
issuers will have to provide multiple SBCs to employers and individuals
prior to underwriting.
Health insurance issuers offering individual market coverage must
also provide the SBC to individuals upon request, to allow consumers
reviewing coverage options the same ability to compare coverage options
in the individual market, as well in the Exchanges and the group
markets.
d. Special Rules to Prevent Unnecessary Duplication With Respect to
Group Health Coverage
The proposed regulations provided three rules to streamline
provision of the SBC and prevent unnecessary duplication with respect
to group health plan coverage. Paragraph (a)(1)(iii) of the final
regulations retains these special rules, with some modifications. The
first states that the requirement to provide an SBC generally will be
considered satisfied for all entities if it is provided by any entity,
so long as all timing and content requirements are satisfied. The
second states that a single SBC may be provided to a participant and
any beneficiaries at the participant's last known address. However, if
a beneficiary's last known address is different than the participant's
last known address, a separate SBC is required to be provided to the
beneficiary at the beneficiary's last known address. Finally, under the
special rule providing that SBCs are not required to be provided
automatically upon renewal for benefit packages in which the
participant or beneficiary is not enrolled, a plan or issuer generally
has up to seven business days (rather than seven calendar days, as
specified in the proposed regulation) to respond to a request to
provide the SBC with respect to another benefit package for which the
participant or beneficiary is eligible.
Many commenters pointed out the potential duplication and confusion
that can result with carve-out arrangements, which is generally when a
plan or issuer contracts with an administrative service provider (such
as a pharmacy benefit manager or managed behavioral health
organization) to manage prescribed functions such as managed care and
utilization review. Plans and issuers should coordinate with their
service providers, and with each other, to ensure that the SBCs they
provide are accurate.
e. Provision of the SBC by an Issuer Offering Individual Market
Coverage
Under these final regulations, the Secretary of HHS sets forth
standards applicable to individual health insurance coverage about who
provides an SBC, to whom, and when. The provisions of the final
regulations for individual market coverage parallel the group market
requirements described above, with only those changes necessary to
reflect the differences between the two markets, and the provisions of
the final regulations are intended to more clearly reflect the
similarity between the two sets of rules.
[[Page 8673]]
For example, individuals and dependents in the individual market are
comparable to group health plan participants and beneficiaries.
Accordingly, an issuer offering individual health insurance coverage
must provide an SBC to an individual or dependent upon receiving an
application for any health insurance policy, as soon as practicable
following receipt of the application, but in no event later than seven
business days following receipt of the application. If there is any
change in the information required to be in the SBC between the
application for coverage and the first day of coverage, the issuer must
update and provide a current SBC to an individual or dependent no later
than the first day of coverage.\12\ Additionally, an issuer must
provide the SBC to any individual or dependent upon request for an SBC
or summary information about a health insurance product as soon as
practicable, but in no event later than seven business days following
the request. Similar to the group market, a request for an SBC or
summary information includes a request made at any time, including
prior to applying for coverage.
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\12\ As noted elsewhere in this preamble, the final regulations,
in contrast to the proposed regulations, do not include premium
information as a required element of the SBC. Because, in many
cases, the only change to the information required to be in the SBC
before the first day of coverage is the premium, the Departments
anticipate that the number of circumstances in which issuers will
have to provide a second SBC before the first day of coverage will
significantly decrease under the final regulation.
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The final regulations retain the individual market anti-duplication
rule, similar to the group health coverage anti-duplication rule, for
individual health insurance coverage that covers more than one
individual (or an application for coverage that is being made for more
than one individual). In that case, as under the proposed regulations,
a single SBC may generally be provided to one address, unless any
dependents are known to reside at a different address.
3. Content
PHS Act section 2715(b)(3) generally provides that the SBC must
include:
a. Uniform definitions of standard insurance terms and medical
terms so that consumers may compare health coverage and understand the
terms of (or exceptions to) their coverage;
b. A description of the coverage, including cost sharing, for each
category of benefits identified by the Departments;
c. The exceptions, reductions, and limitations on coverage;
d. The cost-sharing provisions of the coverage, including
deductible, coinsurance, and copayment obligations;
e. The renewability and continuation of coverage provisions;
f. A coverage facts label that includes examples to illustrate
common benefits scenarios (including pregnancy and serious or chronic
medical conditions) and related cost sharing based on recognized
clinical practice guidelines;
g. A statement about whether the plan provides minimum essential
coverage as defined under section 5000A(f) of the Code, and whether the
plan's or coverage's share of the total allowed costs of benefits
provided under the plan or coverage 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 to
determine the governing contractual provisions of the coverage; and
i. A contact number to call with questions and an Internet web
address where a copy of the actual individual coverage policy or group
certificate of coverage can be reviewed and obtained.
The proposed regulations generally mirrored the content elements
set forth in the statute, with four additional elements recommended by
the NAIC: (1) For plans and issuers that maintain one or more networks
of providers, an Internet address (or similar contact information) for
obtaining a list of the network providers; (2) for plans and issuers
that maintain a prescription drug formulary, an Internet address where
an individual may find more information about the prescription drug
coverage under the plan or coverage; (3) an Internet address where an
individual may review and obtain the uniform glossary; and (4) premiums
(or cost of coverage for self-insured group health plans). The proposed
regulations solicited comments on these additional four content
elements. In addition, the proposed regulations solicited comments on
whether the SBC should include a disclosure informing individuals of
their right to receive a paper copy of the glossary upon request.
These final regulations retain the first two proposed additional
content elements without change, modify the third, and delete the
fourth. The final regulations retain: (1) The inclusion of an Internet
address (or other contact information) for obtaining a list of the
network providers, and (2) the inclusion of an Internet address (or
similar contact information) where an individual may find more
information about the prescription drug coverage under the plan or
coverage. The final regulations also retain the requirement of the
inclusion of an Internet address where an individual may review and
obtain the uniform glossary, with a modification. The Departments
received several comments regarding the inclusion of information
concerning the uniform glossary including a suggestion that individuals
be informed of their right to request a paper copy of the uniform
glossary. Commenters noted that the omission of such a disclosure would
deny important information to some individuals who are most in need of
this information. After review and consideration of the comments, the
final regulations require information for obtaining copies of the
uniform glossary, which includes an Internet address where an
individual may review the uniform glossary, a contact phone number to
obtain a paper copy of the uniform glossary, and a disclosure that
paper copies of the uniform glossary are available. It is important to
note that the definitions in the glossary are solely for the purpose of
these regulations; they do not, for example, apply to Medicare coverage
policy nor the Secretary of Health and Human Services' definition of
essential health benefits.
The final regulations do not require the SBC to include premium or
cost of coverage information. The Departments received numerous
comments on this issue. Comments supporting the inclusion of premium
information stated that this information was essential for consumers to
make meaningful coverage comparisons, and it was necessary for
consumers to make coverage comparisons and understand their total
financial exposure, as well as useful to encourage competition in the
markets on both price and value. One comment stated that employees also
need this information to know if the coverage offered by an employer
meets the Affordable Care Act's affordability test,\13\ which
determines the eligibility of employees for premium tax credits with
respect to qualified health plans purchased on an Exchange.\14\
Comments opposing this additional content requirement stated that this
requirement would be administratively burdensome in the group market,
where health insurance issuers do not have information on employer
contributions, and would not be able to provide
[[Page 8674]]
accurate cost of coverage information to employees. In addition, some
comments noted that it would not be possible to provide an accurate
premium estimate prior to medical underwriting. Some comments
recommended that premium information be provided in a separate
document, for example, a premium table.
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\13\ See Code section 36B(c)(2)(C)(i)(II), as added by section
1401 of the Affordable Care Act.
\14\ Providing information in the SBC for individuals relating
to Exchanges and the premium tax credit is addressed in the document
containing further compliance guidance that is published elsewhere
in this issue of the Federal Register.
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After considering all of the comments, the final regulations do not
require the SBC to include premium or cost of coverage information. The
Departments understand that it is administratively and logistically
complex to convey this information to individuals in an SBC in
divergent circumstances in both the individual and group markets,
including, for example, when premiums differ based on family size and
when, in the group market, employer contributions impact cost of
coverage. The Departments recognize that the inclusion of premium
information in the SBC could result in numerous SBCs being required to
be provided to individuals. However, if premium information is not
required, only a single SBC might be necessary. The Departments believe
that premium information can be more efficiently and effectively
provided by means other than the SBC. For example, in the individual
market, the Departments note that some of this information may be
available through the Federal health care reform Web portal,
HealthCare.gov,\15\ to individuals shopping for coverage. Furthermore,
the Departments anticipate that premium information for qualified
health plans will be made widely available through Exchanges for
coverage effective beginning in 2014.
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\15\ Established pursuant to 45 CFR 159.120 (75 FR 24470).
---------------------------------------------------------------------------
With respect to the uniform definitions required by the statute,
the Departments proposed to follow the NAIC's recommended two-part
approach, requiring provision of--(1) a uniform glossary, which
includes definitions of health coverage terminology, to be provided in
connection with the SBC, and (2) a ``Why this Matters'' column for the
SBC template (with instructions for plans and issuers to use in
completing the SBC template).\16\ The Departments retain this approach
in the final regulations. The guidance document published elsewhere in
today's Federal Register addresses comments received on the SBC and
related materials (including the uniform glossary) and details the
changes from the initial proposal.
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\16\ National Association of Insurance Commissioners, Consumer
Information Working Group, December 17, 2010, Final Package of
Attachments. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_final_materials.pdf.
---------------------------------------------------------------------------
The statute also directs that the SBC include a statement about
whether a plan or coverage provides minimum essential coverage, as
defined under section 5000A(f) of the Code, (minimum essential coverage
statement) and whether the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage meets
applicable minimum value requirements (minimum value statement).\17\
However, this content is not relevant until other elements of the
Affordable Care Act are implemented. Therefore, the final regulations
require the minimum essential coverage and minimum value statements to
be included in SBCs with respect to coverage beginning on or after
January 1, 2014.\18\ Future guidance will address the minimum essential
coverage and minimum value statements.
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\17\ PHS Act section 2715(b)(3)(G) provides that this statement
must indicate whether the plan or coverage (1) provides minimum
essential coverage (as defined under section 5000A(f) of the Code)
and (2) ensures that the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage is not
less than 60 percent of such costs. The minimum essential coverage
and minimum value requirements are part of a larger set of health
coverage reforms that take effect on January 1, 2014.
\18\ In the Notice providing compliance guidance published
separately in today's Federal Register, the Departments state that
the SBC template (with instructions, samples, and a guide for
coverage example calculations to be used in completing the SBC
template) does not provide language to comply with these
requirements because the Notice authorizes these documents only with
respect to the first year of applicability. Information on the
minimum essential coverage statement and the minimum value statement
will be provided in future guidance.
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The statute also requires that an SBC contain a ``coverage facts
label.'' For ease of reference, the proposed regulations used the term
``coverage examples'' in place of the statutory term. The Departments
received many comments regarding the coverage examples. Some comments
supported the general approach in the proposed regulations and
indicated that coverage examples would be a valuable comparison tool
for consumers. Other comments expressed concerns that the coverage
examples would cause confusion for consumers, as the examples do not
represent the actual treatment plan for any particular individual, or
might not represent the actual costs that an individual might incur for
a similar cost of treatment. Some such comments urged the Departments
to take a different approach to the coverage examples, such as
providing an actual cost calculator. The Departments also received
comments on the number of coverage examples that should be required, as
well as which benefit scenarios should be included in the final
regulations. Comments varied with regards to the number of recommended
coverage examples, ranging from one to more than six.
These final regulations retain the general approach to the coverage
examples that was proposed.\19\ Consumer testing performed on behalf of
the NAIC \20\ demonstrated that the coverage examples facilitated
individuals' understanding of the benefits and limitations of a plan or
policy and helped them make more informed choices about their options.
Such testing also showed that individuals were able to comprehend that
the examples were only illustrative. Additionally, while some plans
provide very useful coverage calculators to their enrollees to help
them make health care decisions, they are not uniform across all plans
and most are not available to individuals prior to enrollment, making
it difficult for individuals and employers to make coverage
comparisons. Nonetheless, as discussed in the guidance document issued
elsewhere in this issue of the Federal Register, the Departments are
taking a phased approach to implementing the coverage examples and
intend to consider additional feedback from consumer testing in the
future.
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\19\ The Departments are making one technical change in these
final regulations. The proposed regulations stated that the
underlying benefits scenario for a coverage example must be based on
recognized clinical practice guidelines ``available through'' the
National Guideline Clearinghouse (NGC), Agency for Healthcare
Research and Quality. The Departments believe that the proposed
regulations would have inadvertently excluded recognized clinical
practice guidelines available through other sources, such as the
National Comprehensive Cancer Network. Accordingly, these final
regulations provide that a benefits scenario must be based on
recognized clinical guidelines ``as defined by'' the NGC. Currently,
the NGC uses a definition set forth by the Institute of Medicine.
The current definition of clinical practice guidelines adopted by
NGC is available at http://www.guideline.gov/about/inclusion-criteria.aspx.
\20\ A summary of the focus group testing done by America's
Health Insurance Plans is available at: http://www.naic.org/documents/committees_b_consumer_information_101012_ahip_focus_group_summary.pdf, a summary of the focus group testing done
by Consumers Union on the coverage examples is available at: http://prescriptionforchange.org/wordpress/wp-content/uploads/2011/08/A_New_Way_of_Comparing_Health_Insurance.pdf.
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To the extent a plan's terms that are required to be in the SBC
template cannot reasonably be described in a manner consistent with the
template and instructions, the plan or issuer must
[[Page 8675]]
accurately describe the relevant plan terms while using its best
efforts to do so in a manner that is still consistent with the
instructions and template format as reasonably possible. Such
situations may occur, for example, if a plan provides a different
structure for provider network tiers or drug tiers than is contemplated
by the template and these instructions, if a plan provides different
benefits based on facility type (such as hospital inpatient versus non-
hospital inpatient), in a case where the effects of a health FSA or an
HRA are being described, or if a plan provides different cost sharing
based on participation in a wellness program.
Finally, the Departments solicited comments on whether any special
rules are necessary to accommodate expatriate plans and received
comments related to adjustments needed for expatriate plan coverage.
Some commenters noted that PHS Act section 2715(d)(3) refers to a
health insurance issuer ``offering health insurance coverage within the
United States.'' \21\ Other commenters suggested that coverage
information that is particularly important to expatriates (such as
medical evacuation, repatriation benefits, and country-appropriate
care) be exempt from the requirements under PHS Act section 2715. These
final regulations include a special provision that provides that, in
lieu of summarizing coverage for items and services provided outside
the United States, a plan or issuer may provide an Internet address (or
similar contact information) for obtaining information about benefits
and coverage provided outside the United States. Also, to the extent
the plan or policy provides coverage available within the United
States, the plan or issuer is still required to provide an SBC in
accordance with PHS Act section 2715 that accurately summarizes
benefits and coverage available within the United States.
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\21\ The Departments note that, in the context of group health
plan coverage, section 4(b)(4) of ERISA provides that a plan
maintained outside the United States primarily for the benefit of
persons substantially all of whom are nonresident aliens is exempt
from ERISA title I, including ERISA section 715.
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4. Appearance
PHS Act section 2715 sets forth standards related to the appearance
of the SBC. Specifically, the statute provides that the SBC is to be
presented in a uniform format, utilizing terminology understandable by
the average plan enrollee, that does not exceed four pages in length,
and does not include print smaller than 12-point font. The final
regulations retain the interpretation from the proposed regulations
that the four-page limitation is four double-sided pages.\22\
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\22\ PHS Act section 2715(b)(1) does not prescribe whether the
four pages are four single-sided pages or four double-sided pages.
The SBC template transmitted by NAIC exceeded four single-sided
pages. After considering the extent of statutorily-required content
in PHS Act section 2715(b)(3), as well as the appearance and
language requirements of PHS Act sections 2715(b)(1) and (2), the
Departments are interpreting four pages to be four double-sided
pages, in order to ensure that this information is presented in an
understandable and meaningful way.
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The proposed regulations requested comments regarding the
requirement to provide the SBC as a stand-alone document. Specifically,
comments were requested about whether the SBC should be allowed to be
included in a summary plan description (SPD) if it is intact and
prominently displayed and the timing requirements for delivery of the
SBC are met. The Departments received many comments in response to this
request. Some comments opposed allowing the SBC to be included
alongside or within an SPD, noting that SPDs tend to be lengthy
documents and allowing this would be contrary to the purpose of
requiring a short summary document. However, many comments supported
this approach, indicating that permitting this option would reduce
burdens and costs associated with printing and disseminating the SBC
documents.
Paragraph (a)(3) of these final regulations requires plans and
issuers to provide the SBC in the form specified by the Secretaries in
guidance and completed in accordance with the instructions for
completing the SBC that are specified by the Secretaries in guidance. A
guidance document published elsewhere in this issue of the Federal
Register provides such guidance. The Notice specifies that SBCs
provided in connection with group health plan coverage may be provided
either as a stand-alone document or in combination with other summary
materials (for example, an SPD), if the SBC information is intact and
prominently displayed at the beginning of the materials (such as
immediately after the Table of Contents in an SPD) and in accordance
with the timing requirements for providing an SBC. For health insurance
coverage offered in the individual market, the SBC must be provided as
a stand-alone document, but HHS notes that it can be included in the
same mailing as other plan materials. This guidance regarding
appearance may be modified for years after the first year of
applicability.
5. Form
a. Group Health Plan Coverage
To facilitate faster and less burdensome disclosure of the SBC, and
to be consistent with PHS Act section 2715(d)(2), which permits
disclosure in either paper or electronic form, the proposed regulations
set forth rules to permit greater use of electronic transmittal of the
SBC. Those proposed regulations generally permitted issuers to provide
the SBC to plans electronically (such as an email or Internet posting)
if certain conditions were met, and required plans and issuers
providing the SBC to participants and beneficiaries to comply with the
Department of Labor's electronic disclosure safe harbor requirements at
29 CFR 2520.104b-1(c). In all circumstances, the proposed regulations
permitted plans and issuers to provide SBCs in paper form.
Comments generally supported permitting provision of the SBC
electronically; however, some comments also asked for more flexibility
with regard to electronic provision to participants and beneficiaries.
These comments generally requested the rule for provision to
participants and beneficiaries mirror the rule for provision to plans,
and suggested this change would reduce costs and burdens associated
with delivery. Other comments raised concerns about decreased consumer
protection if the rules for providing an electronic SBC are too
flexible. Some commenters also asked to extend to the group market the
option available to individual market issuers to provide information to
HealthCare.gov to be in compliance with the requirement to provide the
SBC upon request for information about coverage prior to submitting an
application.
After taking into account all of the comments, these final
regulations generally retain the approach from the proposed regulations
with respect to an SBC provided electronically by an issuer to a plan.
For SBCs provided electronically by a plan or issuer to participants
and beneficiaries, these final regulations make a distinction between a
participant or beneficiary who is already covered under the group
health plan, and a participant or beneficiary who is eligible for
coverage but not enrolled in a group health plan. This distinction
should provide new flexibility in some circumstances, while also
ensuring adequate consumer protections where necessary. For
participants and beneficiaries who are already covered under the group
health plan, these final regulations permit
[[Page 8676]]
provision of the SBC electronically if the requirements of the
Department of Labor's regulations at 29 CFR 2520.104b-1 are met.
(Paragraph (c) of those regulations includes an electronic disclosure
safe harbor.\23\) For participants and beneficiaries who are eligible
for but not enrolled in coverage, these final regulations permit the
SBC to be provided electronically if the format is readily accessible
and a paper copy is provided free of charge upon request. Additionally,
if the electronic form is an Internet posting, the plan or issuer must
timely advise the individual in paper form (such as a postcard) or
email that the documents are available on the Internet, provide the
Internet address, and notify the individual that the documents are
available in paper form upon request. The Departments note that the
rules for participants and beneficiaries who are eligible for but not
enrolled in coverage are substantially similar to the requirements for
an issuer providing an electronic SBC to a plan. Finally, as in the
proposed regulations, plans, and participants and beneficiaries (both
covered, and eligible but not enrolled) have the right to receive an
SBC in paper format, free of charge, upon request.
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\23\ On April 7, 2011, the Department of Labor published a
Request for Information regarding electronic disclosure at 76 FR
19285. In it, the Department of Labor stated that it is reviewing
the use of electronic media by employee benefit plans to furnish
information to participants and beneficiaries covered by employee
benefit plans subject to ERISA. Because these regulations adopt the
ERISA electronic disclosure rules by cross-reference, any changes
that may be made to 29 CFR 2520.104b-1 in the future would also
apply to the SBC.
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b. Individual Health Insurance Coverage
The Departments received several comments on the proposed
regulations, which generally required paper delivery of the SBC and set
forth certain circumstances in which electronic disclosure is
permissible. Some comments recommended the SBC for individual market
coverage be provided in paper form by default, unless the individual
explicitly elects electronic delivery. These comments cautioned against
assuming individuals have regular access to a computer or a requisite
level of computer literacy simply because an individual submits a
request online. Instead, they argued individuals should be able to
specify the form in which they prefer to receive the SBC.
Other comments recommended greater flexibility for electronic
delivery to reduce the costs of compliance, including eliminating the
requirement to acknowledge receipt of an SBC provided through
electronic delivery methods. These comments urged the Departments to
adopt broader standards that reflect the current state of technology.
Specifically, they recommended extending the electronic delivery rules
that apply to disclosure from the issuer to the plan in paragraph
(a)(4)(i) of the final regulations, to disclosure in the individual
market. Some comments also suggested that plans provide in their
enrollment materials a notice of the individual's right to receive a
paper copy of the SBC upon request, and a telephone number or other
contact information for making such request.
The Departments determined it is appropriate to amend the
individual market standards in the proposed regulations related to the
form and manner of delivery. Rather than specifying the circumstances
making paper or electronic appropriate, these final regulations
establish the general standard that an issuer offering individual
health insurance coverage must provide the SBC in a manner that can
reasonably be expected to provide actual notice regardless of the
format. These final regulations provide several examples of methods of
delivery that may satisfy this requirement. For instance, an issuer may
reasonably expect an individual or dependent to receive actual notice
if the issuer provides the SBC by email to an individual who has agreed
to receive the SBC (or other electronic disclosures) by email from the
issuer and who has provided an email address for that purpose. Or, if
the SBC is posted on the Internet, an individual may reasonably be
expected to receive actual notice if the issuer timely advises the
individual in paper form (such as a postcard) that the documents are
available on the Internet and includes the applicable Internet address.
These final regulations substantially retain the safeguards for
electronic disclosure in the proposed regulations. Under these final
regulations, an issuer providing the SBC electronically must ensure
that the format is readily accessible; the SBC is placed in a location
that is prominent and readily accessible; the SBC is provided in an
electronic form that is consistent with the appearance, content, and
language requirements of these final regulations; and that the issuer
notifies the individual or dependent that the SBC is available from the
issuer in paper form without charge upon request. These final
regulations remove the ``acknowledge receipt'' requirement. However,
the regulations also require that the SBC be provided in an electronic
form which can be electronically retained and printed. These final
regulations provide standards for the form and manner of providing the
SBC that balance the objective of protecting consumers by providing
accessible information with the goal of simplifying information
collection burdens on issuers.
Finally, the final regulations clarify the provision that would
deem health insurance issuers in the individual market to be in
compliance with the requirement to provide the SBC to an individual
requesting information about coverage prior to submitting an
application if the issuer provides the information to HealthCare.gov.
The final regulations clarify that a health insurance issuer offering
individual health insurance coverage must provide all of the content
required under paragraph (a)(2), as specified in guidance by the
Secretary, to HealthCare.gov to be deemed compliant with the
requirement to provide an SBC to an individual requesting summary
information prior to submitting an application for coverage. The final
regulations further clarify that any SBC furnished pursuant to a
request for an SBC, at the time of application or subsequently, would
be required to be provided in a form and manner consistent with the
rules described above. The Departments determined that this provision
is consistent with the standards for electronic disclosure and reduces
the burden of providing an SBC to individuals shopping for individual
health insurance coverage.
The Departments received comments in support of this approach which
stated HealthCare.gov provides useful summary information about health
insurance products that are available to both individuals and small
employers shopping for coverage and recommended the final regulations
similarly extend the ``deemed compliance'' provision to the small group
market. At this time, the Departments are reviewing comments requesting
that the regulations extend the deemed compliance provision to the
small group market and may issue future guidance on this issue.
6. Language
PHS Act section 2715(b)(2) provides that standards shall ensure
that the SBC ``is presented in a culturally and linguistically
appropriate manner.'' The final regulations retain the approach of the
proposed regulations and provide that, to satisfy the requirement to
provide the SBC in a culturally and linguistically appropriate manner,
a plan or issuer follows the rules for
[[Page 8677]]
providing notices with respect to claims and appeals in a culturally
and linguistically appropriate manner under PHS Act section 2719, and
paragraph (e) of its implementing regulations.\24\ Note, nothing in
these final regulations should be construed as limiting an individual's
rights under Federal or State civil rights statutes, such as Title VI
of the Civil Rights Act of 1964 (Title VI) which prohibits recipients
of Federal financial assistance, including issuers participating in
Medicare Advantage, from discriminating on the basis of race, color, or
national origins. To ensure non-discrimination on the basis of national
origin, recipients are required to take reasonable steps to ensure
meaningful access to their programs and activities by limited English
proficient persons. For more information, see, ``Guidance to Federal
Financial Assistance Recipients Regarding Title VI Prohibition Against
National Origin Discrimination Affecting Limited English Proficient
Persons,'' available at http://www.hhs.gov/ocr/civilrights/resources/specialtopics/lep/policyguidancedocument.html. While the Departments
received several comments regarding the thresholds set forth in the
claims and appeals regulations, the Departments are not making any
changes to those standards through these final regulations. Any changes
suggested will be considered as part of future rulemakings related to
the regulations under PHS Act section 2719, so that the two rules
remain consistent.
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\24\ See 75 FR 43330 (July 23, 2010), as amended by 76 FR 37208
(June 24, 2011).
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B. Notice of Modification
PHS Act section 2715(d)(4) directs that a group health plan or
health insurance issuer offering group or individual health insurance
coverage must provide notice of any material modification if it makes a
material modification (as defined under ERISA section 102) in any of
the terms of the plan or coverage involved that is not reflected in the
most recently provided SBC. The comments generally supported the
standards regarding the notice of modification in the proposed
regulations, which are adopted as final regulations without change.
However, some comments requested clarification concerning the
requirement to provide a notice of modification. For example, several
comments requested clarification on what changes in the terms of
coverage would rise to the level of a material modification. For
purposes of PHS Act section 2715, the proposed and final regulations
interpret the statutory reference to the SBC to mean that only a
material modification in the terms of the plan or coverage that would
affect the content of the SBC; that is not reflected in the most
recently provided SBC; and that occurs other than in connection with a
renewal or reissuance of coverage would trigger the notice. In these
circumstances, the notice would be required to be provided to enrollees
(or, in the individual market, covered individuals) no later than 60
days prior to the date on which such change will become effective. A
material modification, within the meaning of section 102 of ERISA,
includes any modification to the coverage offered under a plan or
policy that, independently, or in conjunction with other
contemporaneous modifications or changes, would be considered by an
average plan participant (or in the case of individual market coverage,
an average individual covered under a policy) to be an important change
in covered benefits or other terms of coverage under the plan or
policy.\25\ A material modification could be an enhancement of covered
benefits or services or other more generous plan or policy terms. It
includes, for example, coverage of previously excluded benefits or
reduced cost-sharing. A material modification could also be a material
reduction in covered services or benefits, as defined in 29 CFR
2520.104b-3(d)(3) of the Department of Labor' regulations, or more
stringent requirements for receipt of benefits. As a result, it also
includes changes or modifications that reduce or eliminate benefits,
increase cost-sharing, or impose a new referral requirement.\26\
(However, changes to the information in the SBC resulting from changes
in the regulatory requirements for an SBC are not changes to the plan
or policy requiring the mid-year provision of a notice of modification,
unless specified in such new requirements.)
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\25\ See DOL Information Letter, Washington Star/Washington-
Baltimore Newspaper Guild to Munford Page Hall, II, Baker & McKenzie
(February 8, 1985).
\26\ See, e.g., Ward v. Maloney, 386 F.Supp.2d 607, 612
(M.D.N.C. 2005), which discusses judicial interpretations of when an
amendment is and is not a material modification.
---------------------------------------------------------------------------
The Departments also received comments seeking clarification on
when a notice of modification must be provided. Several comments
suggested that this notice must also be provided for modifications
effective for new plan or policy years. The final regulations require
that this notice be provided only for changes other than in connection
with a renewal or reissuance of coverage. At renewal, plans and issuers
must provide an updated SBC in accordance with the requirements
otherwise applicable to SBCs. PHS Act section 2715 and paragraph (b) of
the final regulations specify the timing for providing a notice of
modification in situations other than in connection with a renewal or
reissuance of coverage. To the extent a plan or policy implements a
mid-year change that is a material modification, that affects the
content of the SBC, and that occurs other than in connection with a
renewal or reissuance of coverage, the final regulations require a
notice of modification to be provided 60 days in advance of the
effective date of the change. Comments generally supported the
flexibility provided in the proposed regulations, which permitted plans
and issuers to either provide an updated SBC reflecting the
modifications or provide a separate notice describing the material
modifications. Plans and issuers continue to have this flexibility
under these final regulations.
For ERISA-covered group health plans subject to PHS Act section
2715, this notice is required in advance of the timing requirements
under the Department of Labor's regulations at 29 CFR 2520.104b-3 for
providing a summary of material modification (SMM) (generally not later
than 210 days after the close of the plan year in which the
modification or change was adopted, or, in the case of a material
reduction in covered services or benefits, not later than 60 days after
the date of adoption of the modification or change). In situations
where a complete notice is provided in a timely manner under PHS Act
section 2715(d)(4), an ERISA-covered plan will also satisfy the
requirement to provide an SMM under Part 1 of ERISA.
C. Uniform Glossary
Section 2715(g)(2) of the PHS Act directs the Departments to
develop standards for definitions for at least the following insurance-
related terms: co-insurance, co-payment, deductible, excluded services,
grievance and appeals, non-preferred provider, out-of-network co-
payments, out-of-pocket limit, preferred provider, premium, and UCR
(usual, customary and reasonable) fees. Section 2715(g)(3) of the PHS
Act directs the Departments to develop standards for definitions for at
least the following 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. Additionally, the statute directs the Departments
to
[[Page 8678]]
develop standards for such other terms as will help consumers
understand and compare the terms of coverage and the extent of medical
benefits (including any exceptions and limitations).
The final regulations adopt the approach of the proposed
regulations with respect to the uniform glossary. This includes the
adoption of the NAIC recommendation to include the following additional
terms in the uniform glossary: Allowed amount, balance billing,
complications of pregnancy, emergency medical condition, emergency
services, habilitation services, health insurance, in-network co-
insurance, in-network co-payment, 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 Departments received a number of comments on the proposed
uniform glossary. Several comments recommended that the final glossary
include additional terms. In general, these comments recommended
additional terms to provide consumers with additional information to
help them better understand their coverage and the content of the SBC.
These comments suggested the glossary include additional terms that may
appear in the SBC and that may cause confusion, including specialty
drugs, mental health services and behavioral health, cosmetic surgery,
and preventive care. In addition, some commenters recommended including
definitions for complex or potentially confusing insurance terms,
including explanations of plan types (such as health maintenance
organizations or ERISA plans) and terms such as actuarial value and
cost-sharing. Other commenters warned against making the uniform
glossary too long.
Some commenters recommended modifications to certain definitions in
the uniform glossary. For example, several comments recommended
modification to the term ``medical necessity.'' In developing the final
uniform glossary, the Departments were very cognizant of the consumer
testing performed by the NAIC with respect to the uniform glossary
included in the proposed regulations and the need to convey in concise,
easy-to-understand language basic medical and coverage terms.\27\
Accordingly, very minor changes were made in the final uniform
glossary, and it continues to include a disclaimer that the terms and
definitions of terms in particular plans or policies may differ from
those contained in the glossary, together with information on how to
get a copy of the actual policy or plan document.
---------------------------------------------------------------------------
\27\ A summary of the focus group testing done by America's
Health Insurance Plans is available at: http://www.naic.org/documents/committees_b_consumer_information_101012_ahip_focus_group_summary.pdf, a summary of the focus group testing done
by Consumers Union on the SBC template and the uniform glossary is
available at: http://www.commonwealthfund.org/Publications/Issue-Briefs/2011/Feb/Making-Health-Insurance-Cost-Sharing-Clear.aspx.
---------------------------------------------------------------------------
Some commenters requested flexibility to use their own, plan-
specific or policy-specific terms in the glossary. PHS Act section
2715(g) is titled ``Development of Standard Definitions.'' The NAIC
developed the uniform glossary to provide generalized, plain-English
definitions for common coverage and medical terms. The document was
intended to help consumers understand the basics of insurance. At the
same time, the document specifically cautions that it is intended to be
a general educational tool and that individual plan terms may differ
(and refers consumers to the SBC for information on how to get an
accurate description of their actual plan or policy terms). A guidance
document published elsewhere in this issue of the Federal Register
announces the availability of the final uniform glossary. The SBC may
be used by plans and issuers to convey more accurate descriptions,
where appropriate.
Like the proposed regulations, the final regulations direct a plan
or issuer to make the uniform glossary available upon request within
seven business days. A plan or issuer satisfies this requirement by
complying with the content requirement described in paragraph
(a)(2)(i)(L) of the final regulations, which requires that the SBC
include an Internet address where an individual may review and obtain
the uniform glossary, a contact phone number to obtain a paper copy of
the uniform glossary, and a disclosure that paper copies are available
upon request. The Internet address may be a place where the document
can be found on the plan's or issuer's Web site, or the Web site of
either the Department of Labor or HHS. However, a plan or issuer must
make a paper copy of the glossary available within seven business days
upon request. Group health plans and health insurance issuers must
provide the uniform glossary in the appearance specified by the
Departments, so that the glossary is presented in a uniform format and
uses terminology understandable by the average plan enrollee or
individual covered under an individual policy.
D. Preemption
Section 2715 of the PHS Act is incorporated into ERISA section 715,
and Code section 9815, and is subject to the preemption provisions of
ERISA section 731 and PHS Act section 2724 (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)). Under these provisions, the
requirements of part 7 of ERISA and part A of title XXVII of the PHS
Act, as amended by the Affordable Care Act, are not to be ``construed
to supersede any provision of State law which establishes, implements,
or continues in effect any standard or requirement solely relating to
health insurance issuers in connection with group or individual health
insurance coverage except to the extent that such standard or
requirement prevents the application of a requirement'' of part A of
title XXVII of the PHS Act. Accordingly, State laws that impose
requirements on health insurance issuers that are stricter than those
imposed by the Affordable Care Act will not be superseded by the
Affordable Care Act. Moreover, PHS Act section 2715(e) provides that
the standards developed under PHS Act section 2715(a), ``shall preempt
any related State standards that require [an SBC] that provides less
information to consumers than that required to be provided under this
section, as determined by the [Departments].'' Reading these two
preemption provisions together, the final regulations do not prevent
States from imposing separate, additional disclosure requirements on
health insurance issuers.
The Departments received several comments seeking clarification on
the preemption of State disclosure standards. These comments indicate
that many States have existing disclosure requirements that may be
duplicative and noted consumers could be confused by multiple
disclosures. These final regulations retain the preemption standard as
stated in the proposed regulations. However, the Departments take note
of the concerns about the potential for consumer confusion, and
encourage States to take steps to harmonize existing State requirements
with these Federal consumer disclosure requirements. The Departments
will work with States to clarify the requirements, potential
differences, and options.
In addition, some comments requested clarification that States may
not require the modification of the SBC or uniform glossary in their
own disclosure standards. Comments stated that any State modifications
to these
[[Page 8679]]
documents would defeat the purpose of having an SBC template and
uniform glossary, and one comment requested that any State law
modifications to these documents be preempted, and that any additional
content required by State law be limited to an addendum to the SBC. If
States require health insurance issuers to provide information not
contained in the SBC or uniform glossary, then they may require issuers
to provide that information only if it is provided in a document that
is separate from the SBC. This separate document can, however, be
provided at the same time as the SBC.
E. Failure To Provide
PHS Act section 2715(f), incorporated into ERISA section 715 and
Code section 9815, provides that a group health plan (including its
administrator), and a health insurance issuer offering group or
individual health insurance coverage, that ``willfully fails to provide
the information required under this section shall be subject to a fine
of not more than $1,000 for each such failure.'' In addition, under PHS
Act section 2715(f), a separate fine may be imposed for each individual
or entity for whom there is a failure to provide an SBC. Due to the
different enforcement jurisdictions of the Departments, as well as
their different underlying enforcement structures, the mechanisms for
imposing the new penalty vary slightly, as discussed below.
1. Department of HHS
Enforcement of Part A of Title XXVII of the PHS Act, including
section 2715, is generally governed by PHS Act section 2723 and
corresponding regulations at 45 CFR 150.101 et seq. Under those
provisions, a State has the discretion to enforce the provisions
against health insurance issuers in the first instance, and the
Secretary of HHS only enforces a provision after the Secretary
determines that a State has failed to substantially enforce the
provision. If a State enforces a provision such as PHS Act section
2715, it uses its own enforcement mechanisms. If the Secretary
enforces, the statute provides for penalties of up to $100 per day for
each affected individual.
PHS Act section 2715(f) provides that an entity that willfully
fails to provide the information required under PHS Act section 2715
shall be subject to a fine of not more than $1,000 for each such
failure. Such failure constitutes a separate offense with respect to
each enrollee. This penalty can only be imposed by the Secretary.
Paragraph (e) of the final regulations clarifies that States have
primary enforcement authority over health insurance issuers for any
violations, whether willful or not, using their own remedies and that
PHS Act section 2715 does not limit the Secretary's authority to impose
penalties for willful violations regardless of State enforcement.
However, the Secretary intends to use enforcement discretion if the
Secretary determines that the State is adequately addressing willful
violations.
The Secretary of HHS has direct enforcement authority for
violations by non-Federal governmental plans, and will use the
appropriate penalty for violations of section 2715, depending on
whether the violation is willful. Paragraph (e) of the HHS final
regulations cross references the enforcement regulations at 45 CFR
150.101 et seq., and states that they relate to any failure, regardless
of intent, by a health insurance issuer or non-Federal governmental
plan, to comply with any requirement of PHS Act section 2715.
2. Departments of Labor and the Treasury
The Department of Labor enforces the requirements of part 7 of
ERISA with respect to ERISA-covered group health plans (generally,
plans other than church plans or plans maintained by a governmental
entity) and the Department of the Treasury enforces the requirements of
chapter 100 of the Code with respect to group health plans maintained
by an entity that is not a governmental entity. On April 21, 1999,
pursuant to section 104 of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), Public Law 104-191, the Secretaries
entered into a memorandum of understanding \28\ that, among other
things, established a mechanism for coordinating enforcement and
avoiding duplication of effort for shared jurisdiction. The memorandum
of understanding applies, as appropriate, to health legislation enacted
after April 21, 1999 over which at least two of the Departments share
jurisdiction, including PHS Act section 2715 as incorporated into ERISA
and the Code. Therefore, in enforcing PHS Act section 2715, the
Departments of Labor and the Treasury will coordinate to avoid
duplication in the case of group health plans that are not church plans
and that are not maintained by a governmental entity.
---------------------------------------------------------------------------
\28\ See 64 FR 70164 (December 15, 1999).
---------------------------------------------------------------------------
a. Department of Labor
The Department of Labor will issue separate regulations in the
future describing the procedures for assessment of the civil fine
provided under PHS Act section 2715(f) as incorporated by section 715
of ERISA. In accordance with ERISA section 502(b)(3), 29 U.S.C.
1132(b)(3), the Secretary of Labor is not authorized to assess this
fine against a health insurance issuer.
b. Department of the Treasury
If a group health plan (other than a plan maintained by a
governmental entity) fails to comply with the requirements of chapter
100 of the Code, an excise tax is imposed under section 4980D of the
Code. The excise tax is generally $100 per day per individual for each
day that the plan fails to comply with chapter 100 with respect to that
individual. Numerous rules under section 4980D reduce the amount of the
excise tax for failures due to reasonable cause and not to willful
neglect. Special rules apply for church plans. Taxpayers subject to the
excise tax under section 4980D are required to report the failures
under chapter 100 and the amount of the excise tax on IRS Form 8928.
See 26 CFR 54.4980D-1, 54.6011-2, and 54.6151-1.
Section 2715(f) of the PHS Act subjects a plan sponsor or
designated administrator to a fine of not more than $1,000 for each
failure to provide an SBC. Unless and until future guidance provides
otherwise, group health plans subject to chapter 100 of the Code should
continue to report the excise tax of section 4980D on IRS Form 8928
with respect to failures to comply with PHS Act section 2715. The
Secretaries of Labor and the Treasury will coordinate to determine
appropriate cases in which the fine of PHS Act section 2715(f) should
be imposed on group health plans that are in the jurisdiction of both
Departments.
F. Applicability
PHS Act section 2715 provides that the requirement for group health
plans and health insurance issuers to provide an SBC applies not later
than 24 months after the date of enactment of the Affordable Care Act
(which is March 23, 2012). PHS Act section 2715 also provides that
group health plans and health insurance issuers shall provide the SBC
pursuant to standards developed by the Departments. The proposed
regulations proposed an applicability date beginning March 23, 2012. At
the same time, the Departments invited comments generally, as well as
[[Page 8680]]
on a range of discrete issues, including the timing of the application
of the SBC requirement. On November 17, 2011, the Departments issued
guidance \29\ providing that, until final regulations are issued and
applicable, plans and issuers are not required to comply with PHS Act
section 2715.
---------------------------------------------------------------------------
\29\ See FAQs About Affordable Care Act Implementation Part VII
and Mental Health Parity Implementation, available at www.dol.gov/ebsa/faqs/faq-aca7.html and http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs7.html">cciio.cms.gov/resources/factsheets/aca_implementation_faqs7.html.
---------------------------------------------------------------------------
The Departments received numerous comments on the applicability
date of the regulations. Several comments stated plans and issuers
would need time to make changes to their systems and workflow processes
and could not come into compliance by March 23, 2012 without incurring
significant cost and administrative challenges. Some comments recommend
delaying applicability for 12 months, noting that PHS Act section 2715
contemplates that plans and issuers would have 12 months from the date
the Secretary develops standards to begin providing the SBC, while
others recommended delaying applicability for 18 to 24 months to allow
sufficient time for group health plans to revise and coordinate service
vendor agreements. Other comments stated the requirements should apply
beginning with a plan's open enrollment period to avoid disruption
during the plan year. Still others recommended phasing in the
requirements by market segment, starting with the individual market
initially and broadening over time to include the group market. These
commenters emphasized the complexity in the group market of
coordinating between the plan and the issuer (and perhaps across
multiple issuers and/or service providers) and the greater need for
standardized information in the individual market (where there are no
other Federal requirements to provide summary information). Finally,
some comments expressed support for the proposed March 23, 2012
applicability date, arguing individuals and employers should receive
the consumer protections of PHS Act section 2715 no later than the date
intended by statute.
Following review of the comments submitted on this issue and
further consideration of the administrative and systems changes
required to implement these requirements, the Departments have
determined it would not be feasible to require plans and issuers to
comply with the standards in the final regulations beginning March 23,
2012 and have delayed the applicability date for six months from that
which was proposed to provide sufficient time for plans and issuers to
come into compliance with these provisions. The Departments agree that
implementing these provisions to coincide with employers' typical open
enrollment processes in the group market will reduce confusion for
current enrollees who typically make enrollment decisions during annual
open enrollment periods and will avoid unnecessary cost to group health
plan sponsors of producing these materials off-cycle. The final
regulations provide that the requirements to provide an SBC, notice of
modification, and uniform glossary under PHS Act section 2715 and these
final regulations apply for disclosures with respect to participants
and beneficiaries who enroll or re-enroll in group health coverage
through an open enrollment period (including re-enrollees and late
enrollees), beginning on the first day of the first open enrollment
period that begins on or after September 23, 2012. For administrative
simplicity, with respect to disclosures to participants and
beneficiaries who enroll in group health plan coverage other than
through an open enrollment period (including individuals who are newly
eligible for coverage and special enrollees), PHS Act section 2715 and
these final regulations apply on the first day of the first plan year
that begins on or after September 23, 2012. For disclosures to plans,
and to individuals and dependents in the individual market, these
requirements are applicable to health insurance issuers beginning
September 23, 2012.
IV. Economic Impact and Paperwork Burden
A. Executive Orders 12866 and 13563--Department of Labor and Department
of Health and Human Services
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rule has been designated a ``significant regulatory
action'' under section 3(f) of Executive Order 12866. Accordingly, the
rule has been reviewed by the Office of Management and Budget.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year). As discussed below, the Departments have concluded that these
final regulations would not have economic impacts of $100 million or
more in any one year or otherwise meet the definition of an
``economically significant rule'' under Executive Order 12866.
Nonetheless, consistent with Executive Orders 12866 and 13563, the
Departments have provided an assessment of the potential benefits and
the costs associated with this final regulation.
The Departments have updated the cost estimates from what was
presented in the proposed regulations. Since publication of the
proposed regulations, the Departments have continued to refine
assumptions and estimates to take into account policy decisions made in
the final regulations and to incorporate better data. The estimates
presented in this rule are a result of those efforts and represent the
Departments' best estimate. Discussion of the public comments and the
updates to the Departments' estimates are included in the relevant
sections of the impact analysis. While the Departments believe the
estimates in these final regulations represent the Departments' best
estimate, the Departments emphasize there is considerable uncertainty,
as is common with regulations implementing new policies, and the
discussion throughout the impact analysis reflects this.
1. Current Regulatory Framework
Health plan sponsors and issuers do not currently uniformly
disclose information to consumers about benefits and coverage in a
simple and consistent way. ERISA-covered group health plans are
required to describe important plan information concerning eligibility,
benefits, and participant rights and responsibilities in a summary plan
description (SPD). But as these documents have increased in size and
complexity--for example, due to the insertion of more legalistic
language that is designed to mitigate the employer's risk of
litigation--they have become more difficult for participants and
beneficiaries to understand.\30\ Indeed, a recent analysis of SPDs from
40 employer health plans from across the United States (varying based
on geography, firm size, and industry sector) found that, on average,
SPDs are generally written at a first year college reading level (with
readability ranging
[[Page 8681]]
from a 9th grade reading level to nearly a college graduate reading
level).\31\ Moreover, the formats of existing SPDs are not
standardized. For example, while these documents could be dozens of
pages long, there is no requirement that they include an executive
summary. Additionally, group health plans not covered by ERISA, such as
plans sponsored by State and local governments, are not required to
comply with such disclosure requirements.
---------------------------------------------------------------------------
\30\ ERISA Advisory Council. Report of the Working Group on
health and Welfare Benefit Plans' Communication. November 2005.
Available at: http://www.dol.gov/ebsa/publications/AC_1105c_report.html.
\31\ ``How Readable Are Summary Plan Descriptions For Health
Care Plans?'' Employee Benefit Research Institute (EBRI) Notes.
October 2006, Vol. 27, No. 10. Available at: http://www.ebri.org/pdf/notespdf/EBRI_Notes_10-20061.pdf.
---------------------------------------------------------------------------
In the individual market, health insurance issuers are subject to
various, diverse State disclosure laws. For example, States like
Massachusetts,\32\ New York,\33\ Rhode Island,\34\ Utah \35\ and
Vermont \36\ have established minimum standards for disclosure of
health insurance information. However, even within such States,
consumer disclosures vary widely with respect to their required
content. Additionally, some State disclosure laws are limited to
current enrollees, so that individuals shopping for coverage do not
receive information about health insurance coverage options. Other
State disclosure requirements only extend to managed care
organizations, and not to other segments of the market.\37\
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\32\ M.G.L.A. 176Q Sec. 5 (2010).
\33\ NY Ins. Law Sec. 3217-a (2010).
\34\ Office of the Health Insurance Commissioner Regulation 5:
Standards for Readability of Health Insurance Forms, State of Rhode
Island and Providence Plantations, August 21, 2010.
\35\ Utah Code Sec. 31A-22-613.5 (2010).
\36\ Division of Health Care Administration, Rule 10.000:
Quality Assurance Standards and Consumer Protections for Managed
care Plans, State of Vermont, September 20, 1997.
\37\ For example, New York requires Health Maintenance
Organizations to provide to prospective members, as well as
policyholders, information on cost-sharing, including out-of-network
costs, limitations and exclusions on benefits, prior authorization
requirements, and other disclosures such as appeal rights. NY Ins.
Law section 3217-a (2010). Utah requires each insurer issuing a
health benefit plan to provide all enrollees, prior to enrollment in
the health benefit plan, written disclosure of restrictions or
limitations on prescription drugs and biologics, coverage limits
under the plan, and any limitation or exclusion of coverage. Utah
Code section 31A-22-613.5 (2010). Rhode Island requires all health
insurance forms to meet minimum readability standards. Office of the
Health Insurance Commissioner Regulation 5: Standards for
Readability of Health Insurance Forms, State of Rhode Island and
Providence Plantations, August 21, 2010.
---------------------------------------------------------------------------
2. Need for Regulatory Action
Congress added new PHS Act section 2715 through the Affordable Care
Act to ensure that plans and issuers provide benefits and coverage
information in a more uniform format that helps consumers to better
understand their coverage and better compare coverage options. These
final regulations are necessary to provide standards for a summary of
benefits and coverage (SBC) and a uniform glossary of terms used in
health coverage. This approach is consistent with Executive Order
13563, which directs agencies to ``identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public. These approaches include * * * disclosure
requirements as well as provision of information to the public in a
form that is clear and intelligible.''
The current patchwork of consumer disclosure requirements makes the
process of shopping for coverage an inefficient, difficult, and time-
consuming task. Consumers incur significant search costs while trying
to locate reliable cost, coverage and benefit data.\38\ Such search
costs arise, in part, due to a lack of uniform information across the
various coverage options, particularly in the individual and small
group markets, but also in large employer plans. Although not directly
comparable, in Medigap, a market with standardized benefits, the
average per-beneficiary search cost was estimated at $72--far higher
than in other insurance markets, such as auto insurance.\39\
---------------------------------------------------------------------------
\38\ M. Susan Marquis et al., ``Consumer Decision Making in the
Individual Health Insurance Market,'' 25 Health Affairs w.226,
w.231-w.232 (May 2006). Available at: http://content.healthaffairs.org/content/25/3/w226.full.pdf+html.
\39\ Nicole Maestas et al., ``Price Variation in Markets with
Homogenous Goods: The Case of Medigap,'' National Bureau of Economic
Research (January 2009).
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In addition to individual consumers, employers, especially small
business employers, also face a daunting search process when they shop
for health coverage. A 2011 study of the commercial health insurance
market found that many employers, especially small businesses, lack the
necessary knowledge, sophistication, and information to efficiently
choose appropriate health plans to purchase on behalf of their
employees. This lack of knowledge, sophistication, and information
requires health insurers to spend more money on marketing to target
small business employers. Health insurers then pass the extra marketing
costs on to employers in the form of higher premiums. The study
determined that in 1997, this inefficiency cost consumers in the fully
insured market $34.4 billion. Employers' lack of knowledge,
sophistication, and information also produces incentives for health
insurers to charge different prices for identical products to different
customers, depending upon the customer's negotiating skills. This price
variability causes 64 percent more turnover in plan membership, than
would otherwise occur. High levels of turnover discourage health
insurers from promoting healthy lifestyles and investing in the future
health of their policyholders.\40\
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\40\ Cebul, Randall D., James B. Rebitzer, Lowell J. Taylor, and
Mark E. Votruba. 2011. ``Unhealthy Insurance Markets: Search
Frictions and the Cost and Quality of Health Insurance.'' American
Economic Review, 101 (August 2011): 1842-1871.
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Given this difficulty in obtaining comparable information across
and within health insurance markets, consumers may not always make
informed purchase decisions that best meet the health and financial
needs of themselves, their families, or their employees. Similarly,
workers may overestimate or underestimate the value of employer-
sponsored health benefits, and thus their total compensation; and
health insurance issuers and employers may face less pressure to
compete on price, benefits, and quality, leading to inefficiency in the
health insurance and labor markets.
Furthermore, research suggests that many consumers do not
understand how health coverage works. Oftentimes, contracts and benefit
descriptions are written in technical language that requires a
sophisticated level of literacy that many people do not have.\41\ One
study found that consumers have particular difficulty understanding
cost sharing and tend to underestimate their coverage for mental
health, substance abuse and prescription drug benefits, while
overestimating their coverage for long-term care.\42\
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\41\ For example, as discussed earlier, the average Summary Plan
Description is written at a first-year college reading level. See
Employee Benefit Research Institute, October 2006.
\42\ D.W. Garnick, A.M. Hendricks, K.E. Thorpe, J.P. Newhouse,
K. Donelan and R.J. Blendon. ``How well do Americans understand
their health coverage?'' Health Affairs, 12(3). 1993:204-12.
Available at: http://content.healthaffairs.org/content/12/3/204.full.pdf.
---------------------------------------------------------------------------
3. Summary of Impacts
Table 1 below depicts an accounting statement summarizing the
Departments' assessment of potential benefits, costs, and transfers
associated with this regulatory action. The Departments have limited
the period covered by the RIA to 2012-2013. Estimates are not provided
for subsequent years, because there will be significant changes in the
marketplace in 2014, including those related to the offering of new
individual and small group plans through the Affordable
[[Page 8682]]
Insurance Exchanges, and new market reforms outside of the new
Exchanges, and the wide-ranging scope of these changes makes it
difficult to project results for 2014 and beyond.
The direct benefits of these final regulations come from improved
information, which will enable consumers, both individuals and
employers, to better understand the coverage they have and allow
consumers choosing coverage to more easily compare coverage options. As
a result, consumers may make better coverage decisions, which more
closely match their preferences with respect to benefit design, level
of financial protection, and cost. The Departments believe that such
improvements will result in a more efficient, competitive market. These
final regulations would also benefit consumers by reducing the time
they spend searching for and compiling health plan and coverage
information.
Under the final regulations, group health plans and health
insurance issuers would incur costs to compile and provide the summary
of benefits and coverage disclosures and a uniform glossary of health
coverage and medical terms. The Departments estimate that the
annualized cost may be around $73 million, although there is
considerable uncertainty arising from general data limitations and the
degree to which economies of scale exist for disclosing this
information. The Departments' annualized cost estimates for the final
regulation are higher than the estimated annualized cost of $50
million, which was set forth in the proposed regulations, because,
among other things, the Departments now have narrowed the cost estimate
period from 2011-2013 to 2012-2013. This change reflects the fact that
the Departments issued guidance on November 17, 2011 providing that,
until final regulations are issued and applicable, plans and issuers
are not required to comply with PHS Act section 2715, and the fact that
these final regulations are being published in 2012.\43\ Nonetheless,
these final regulations lower overall administrative costs compared to
the proposed regulations because of several policy changes, notably the
omission of premium or cost of coverage information from SBCs, the
provision of only two coverage examples, and provisions allowing
greater flexibility for electronic disclosures prior to enrollment in
coverage.
---------------------------------------------------------------------------
\43\ See FAQs About Affordable Care Act Implementation Part VII
and Mental Health Parity Implementation, available at www.dol.gov/ebsa/faqs/faq-aca7.html and http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs7.html">cciio.cms.gov/resources/factsheets/aca_implementation_faqs7.html.
---------------------------------------------------------------------------
The Departments anticipate that the provisions of these final
regulations will help consumers, including employers, make better
health coverage choices and more easily understand their coverage. In
accordance with Executive Orders 12866 and 13563, the Departments
believe that the benefits of this regulatory action justify the costs.
Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits:
Qualitative:
Improved information will enable consumers, including applicants, enrollees, and policyholders, to more easily
and efficiently understand and compare coverage, and as a result, make better choices.
----------------------------------------------------------------------------------------------------------------
Costs Estimate Year dollar Discount rate Period
percent covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($ millions/year).......... $73 2012 7 2012-2013
73 2012 3 2012-2013
----------------------------------------------------------------------------------------------------------------
4. Benefits
In developing these final regulations, the Departments carefully
considered their potential effects, including costs, benefits, and
transfers. Because of data limitations, the Departments did not attempt
to quantify expected benefits of these final regulations. Nonetheless,
the Departments were able to identify several benefits, which are
discussed below.
These final regulations could generate significant economic and
social welfare benefits to consumers. Under these final regulations,
health insurance issuers and group health plans would provide clear and
consistent information to consumers. Uniform disclosure is anticipated
to benefit individuals shopping for, or enrolled in, group and
individual health insurance coverage and group health plans. The direct
benefits of these final regulations come from improved information,
which will enable consumers to better understand the coverage they have
and allow consumers choosing coverage to more easily compare options.
As a result, consumers will make better coverage decisions, which more
closely match their preferences with respect to benefit design, level
of financial protection, and cost. The Departments believe that such
improvements will result in a more efficient, competitive market.
These final regulations would also benefit consumers by reducing
the time they spend searching for and compiling health plan and
coverage information. As stated above, consumers in the individual
market, as well as consumers in some large employer-sponsored plans,
have a number of coverage options and must make a choice using
disclosures and tools that vary widely in content and format. A growing
body of decision-making research suggests that the abundance and
complexity of information can overwhelm consumers and create a
significant non-price barrier to coverage.\44\ For example, a RAND
study of California's individual market found that reducing barriers to
information about health insurance products would lead to increases in
purchase rates comparable to modest price subsidies.\45\ By ensuring
consumers have access to readily available, concise, and understandable
information about their coverage options, these final regulations could
reduce consumers' cost of obtaining information and may increase health
insurance purchase rates and satisfaction with the plan purchased.
---------------------------------------------------------------------------
\44\ Judith H. Hibbard and Ellen Peters, ``Supporting Informed
Consumer Health Care Decisions: Data Presentation Approaches that
Facilitate the Use of Information in Choice,'' 24 Annu. Rev. Public
Health 413, 416 (2003).
\45\ M. Susan Marquis et al., ``Consumer Decision Making in the
Individual Health Insurance Market,'' 25 Health Affairs w.226,
w.231-w.232 (May 2006). Available at: http://content.healthaffairs.org/content/25/3/w226.full.pdf+html.
---------------------------------------------------------------------------
Furthermore, greater transparency in pricing and benefits
information will allow consumers to make more informed purchasing
decisions, resulting in cost-savings for some value-conscious consumers
who today pay higher premiums because of imperfect
[[Page 8683]]
information about benefits.\46\ In particular, the use of coverage
examples called for by these final regulations would better enable
consumers to understand how key coverage provisions operate in the
context of recognizable health care situations and more meaningfully
compare the level of financial protection offered by a plan or
coverage, resulting in potential cost-savings.\47\ \48\ The Departments
therefore expect that uniform disclosures under these final regulations
will enable consumers to derive more value from their health coverage
and enhance the ability of plan sponsors, particularly small
businesses, to purchase products that are appropriate to both their
needs and the health and financial needs of their employees.
---------------------------------------------------------------------------
\46\ A study of California's individual market found that 25
percent of consumers chose products with premiums that were more
than 30 percent higher than the median price for an actuarially
equivalent product for a similar person. Melinda Beeuwkes Buntin et
al., ``Trends and Variability In Individual Insurance Products,''
Health Affairs w3.449, w3.457 (2003), available at http://content.healthaffairs.org/content/early/2003/09/24/hlthaff.w3.449.citation.
\47\ Shoshanna Sofaer et al., ``Helping Medicare Beneficiaries
Choose Health Insurance: The Illness Episode Approach, 30 The
Gerontologist 308-315 (1990).
\48\ Michael Schoenbaum et al., ``Health Plan Choice and
Information about Out-of-Pocket Costs: An Experimental Analysis,''
38 Inquiry 35-48 (Spring 2001).
---------------------------------------------------------------------------
Finally, these final regulations are expected to facilitate
consumers' ability to understand their coverage. As stated above,
research suggests that consumers do not understand how coverage works
or the terminology used in health insurance policies. Consequently,
consumers may face unexpected medical expenses if they become seriously
ill. They may also become confused by a coverage or payment decision
made by their plan or issuer, leading to inefficiency in the operation
of employee benefit plans and health insurance coverage. By making it
easier for consumers to understand the key features of their coverage,
these final regulations would enhance consumers' ability to use their
coverage. Additionally, the uniform format will make it easier for
consumers who change jobs or insurance coverage to see how their new
plan or coverage benefits are similar to and different from their
previous coverage.
5. Costs
Section 2715 of the PHS Act and these final regulations direct
group health plans and health insurance issuers to compile and provide
an SBC and a uniform glossary of health coverage and medical terms. The
Departments have attempted to quantify one-time start-up costs as well
as maintenance costs associated with these requirements. However, there
is considerable uncertainty arising from general data limitations and
the degree to which economies of scale can be realized to reduce costs
for issuers and third party administrators (TPAs).
In the proposed regulations, the Departments estimated total
administrative costs to be $25 million in 2011, $73 million in 2012,
and $58 million in 2013. The Departments now estimate that issuers and
TPAs will incur approximately $90 million in one-time costs and
maintenance costs in 2012, and $55 in maintenance costs in 2013. These
costs and the methodology used to estimate them are discussed below,
and presented in Tables 2-6 below.
General Assumptions
In order to assess the potential administrative costs relating to
these final regulations, the Departments consulted with several
industry experts, including individuals at large health insurance
issuers and representing a TPA association, individuals who formerly
worked at health insurance companies, and insurance market researchers,
to gain insight into the tasks and level of resources required. The
discussions focused on estimating the costs that would be start-up
versus maintenance, and determining which functions or departments of
an insurance company or TPA would be involved in implementing the
provision. In addition, we reviewed the analyses of other Affordable
Care Act regulations that impose new requirements on health insurance
issuers and TPAs, to determine appropriate work levels and categories
for this regulation. Particularly, we analyzed the Medical Loss Ratio
(MLR) interim final rule (75 FR 74918). Based on these discussions, the
Departments estimate that there will be two categories of principal
costs associated with the standards in these final regulations: one-
time start-up costs and ongoing maintenance costs. The one-time start-
up costs include costs to develop teams to review the new standards and
costs to implement workflow and process changes, particularly the
development of information technology (IT) systems interfaces that
would generate SBC disclosures through data housed in a number of
different systems. The maintenance costs include costs to maintain and
update IT systems in compliance with the final standards; to produce,
review, distribute, and update the SBC disclosures; to produce and
distribute notices of modifications; and to provide the glossary in
paper form upon request.
With respect to the individual market, issuers are responsible for
generating, reviewing, updating, and distributing SBCs. With respect to
employer-sponsored coverage, the Departments assume that fully-insured
plans will rely on health insurance issuers, and self-insured plans
will rely on TPAs, to perform these functions. Some commenters stated
that some employers internally prepare plan materials and do not rely
on TPAs. While the Departments acknowledge that some plans may
internally prepare the SBC disclosures, the Departments do not have
sufficient data to develop separate estimates for such plans.
Therefore, the Departments continue to make this simplifying assumption
because most plans appear to rely on issuers and TPAs for the purpose
of administrative duties such as enrollment and claims processing.\49\
Thus, the Departments have used health insurance issuers and TPAs as
the units of analysis for the purposes of estimating administrative
costs in this regulatory impact analysis.
---------------------------------------------------------------------------
\49\ See, for example, the Department of Labor's March 2011
report to Congress on self-insured health plans, available at http://www.dol.gov/ebsa/pdf/ACAReportToCongress032811.pdf.
---------------------------------------------------------------------------
As discussed in the MLR interim final rule, the Departments
estimate there are about 440 firms offering comprehensive coverage in
the individual, small, or large group markets, and 75 million covered
lives therein.\50\ The number of covered lives includes individuals in
the individual market as well as those in insured group health plans.
---------------------------------------------------------------------------
\50\ The NAIC data actually indicate 442 issuers and 74,830,101
covered lives. But the Departments have limited these values to only
two significant figures given general data uncertainty. For example,
the NAIC data do not include issuers regulated by California's
Department of Managed Health Care (DMHC) as well as small, single-
State issuers that are not required by State regulators to submit
NAIC annual financial statements.
---------------------------------------------------------------------------
With respect to the self-insured market, the Departments estimate
there are 77 million individuals in self-insured ERISA-covered plans
and approximately 14 million individuals in self-insured non-Federal
governmental plans.\51\ The Departments note that, according to 2007
Economic Census data, there are 2,243 TPAs providing administrative
services for health and/or welfare funds. However, there is some
uncertainty as to whether all of those TPAs serve self-insured plans;
many
[[Page 8684]]
issuers, for example, have subsidiary lines of business through
administrative services only (ASO) contracts through which they perform
third-party administrative functions for self-insured plans.\52\ Based
on conversations with a national TPA association, the Departments
assume that about one-third of the total number of TPAs, or about 748
TPAs, are relevant for purposes of this analysis. However, given the
considerable overlap between issuers and TPAs, the Departments
recognize there may be fewer affected TPAs, so these estimates should
be considered an upper bound of burden estimates.
---------------------------------------------------------------------------
\51\ U.S. Department of Labor, EBSA calculations using the March
2009 Current Population Survey Annual Social and Economic Supplement
and the 2009 Medical Expenditure Panel Survey; see also interim
final rule for internal claims and appeals and external review
processes (75 FR 43330, 43345).
\52\ See, for example, the Department of Labor's March 2011
report to Congress on self-insured health plans, available at http://www.dol.gov/ebsa/pdf/ACAReportToCongress032811.pdf.
---------------------------------------------------------------------------
Because the SBC disclosures are closely related to disclosures that
issuers and TPAs provide today as a part of their normal operations
(for example, covered benefits and cost sharing), the Departments
estimate that the incremental costs of compiling and providing such
readily available information in the final, standardized format is
estimated to be modest.\53\ The regulated community has taken exception
to this assumption, and it has stated in written comments, and
discussions with the Departments, that information will need to be
pulled from multiple sources. However, an opposite conclusion appears
to have been reached by a November 2011 survey related to the regulated
community's preparedness for SBCs. Particularly, the survey noted that
existing communications practices and technology would allow affected
entities to be in compliance even by the statutory compliance date of
March 23, 2012.\54\ The results of this survey are also consistent with
comments indicating that timely compliance is feasible.
---------------------------------------------------------------------------
\53\ For example, issuers in the individual and small group
markets already report some of the SBC information to HHS for
display in the plan finder on the HealthCare.gov Web site. Issuers
have been reporting data to HHS since May 2010 and have refreshed
that data on a quarterly basis. These reporting entities have
demonstrated that they have the capacity to report information on
plan benefit design. See http://finder.healthcare.gov/. Further,
ERISA-covered plans already report some of the SBC information in
summary plan descriptions (SPDs).
\54\ See December 13, 2011 news release for HighRoads Pulse
Study, available at http://newsroom.highroads.com/hr-compliance-connection/highroads-study-shows-employers-will-not-eliminate-benefits-coverage-due-to-health-care-reform. Among other things, the
study's author noted, ``SBCs have not caused a great concern among
organizations. * * * This is partly a reflection of current
communications practices--many employers are already providing a
level of communication close to that required by the SBC
regulations--and partly a reflection of HR departments embracing
technology. By using automation to leverage existing data, they are
better able to respond to required changes. That will enable timely
compliance once the new deadline is determined.''
---------------------------------------------------------------------------
The per-issuer or per-TPA cost will largely be determined by size
(based on annual premium revenues) and current practices--most
importantly, whether the issuer or TPA maintains a robust information
technology infrastructure, including a plan benefits design database.
Moreover, with regard to issuers, administrative costs may be related
to the number of markets in which a company operates (that is,
individual, small group, or large group market); the number of policies
it offers; and the number of States and licensed entities through which
it offers coverage.
To account for variations among issuers, the Departments classify
them by size as small, medium, and large issuers based on 2009 premium
revenue for individual, small group, and large group comprehensive
coverage.\55\ Consistent with the assumptions that were used in the MLR
interim final rule, small issuers are defined as those earning up to
$50 million in annual premium revenue; medium issuers as those earning
between $50 million and $1 billion in annual premium revenue; and large
issuers as those earning more than $1 billion in annual premium
revenue. Based on these assumptions, the Departments estimate there are
140 small, 230 medium, and 70 large issuers.
---------------------------------------------------------------------------
\55\ The premium revenue data come from the 2009 NAIC financial
statements, also known as ``Blanks,'' where insurers report
information about their various lines of business.
---------------------------------------------------------------------------
To account for variations among TPAs, the Departments applied the
proportions of small, medium, and large issuers to the estimated 750
TPAs. The Departments acknowledge that issuers and TPAs are different
and may not have the same size variation. Nonetheless, given general
data limitations, the Departments have adopted this methodology, and,
on its basis, estimate that there are 240 small, 390 medium, and 120
large TPAs. Table 2 below summarizes the estimated number of issuers
and TPAs.
Table 2--Issuer and TPA Size Classification
------------------------------------------------------------------------
Small Medium Large
------------------------------------------------------------------------
Issuers................................... 140 230 70
TPAs...................................... 240 390 120
------------------------------------------------------------------------
Staffing Assumptions
Table 5 below summarizes the Departments' staffing assumptions,
including the estimated number of hours for each task for a small,
medium, or large issuer/TPA as well as the percentage of time that
different professionals devote to each task. The following assumptions
are based on the best information available to the Departments at this
time. Particularly, the following series of assumptions are based on
conversations with industry experts, the Departments' understanding of
the regulated community, and previous analysis in the MLR interim final
rule.
IT Systems and Workflow Process Changes
In the proposed regulations, the Departments estimated that it
would take a large issuer/TPA about 960 hours to implement IT systems
and workflow process changes, based on discussions with a large issuer.
These final regulations incorporate policy changes designed to reduce
administrative burden. The Departments estimate that the administrative
burden to implement IT systems and workflow process changes would be
reduced, at least, by about 10 percent.\56\ Accordingly, the
Departments are reducing the 960 hours time burden downward, by 10
percent, to 864 hours. The Departments continue to assume that IT
systems and workflow process changes would be implemented only by IT
professionals. Furthermore, the Departments continue to assume that a
medium issuer/TPA would need about 75 percent of a large issuer's/TPA's
time, and a small issuer would need about 50 percent of a large
issuer's/TPA's time, to implement IT systems and workflow process
changes. These estimates are based on the assumption that medium and
smaller issuers and TPA's have fewer products/clients that need to come
into compliance.
---------------------------------------------------------------------------
\56\ A 10 percent is a conservative estimate of the reduction in
administrative burden. A national association of insurance companies
informed the Departments that premium information alone may account
for 10 percent of compliance costs. Given that the omission of
premium information from SBCs is one of several policy changes in
these final regulations, we conclude that there could be, at a
minimum, a 10 percent reduction in administrative burden.
---------------------------------------------------------------------------
In the proposed regulations, the Departments estimated that it
would take a large issuer/TPA about 160 hours to develop teams to
analyze the new standards in relation to their current workflow
processes. These final regulations incorporate policy changes designed
to reduce administrative
[[Page 8685]]
burden. The Departments estimate that the administrative burden to
develop teams would be reduced by about 10 percent. Accordingly, the
Departments are revising the 160 hours time burden downward, by 10
percent, to 144 hours. The Departments continue to assume teams would
be comprised of IT professionals (45 percent), benefits/sales
professionals (50 percent), and attorneys (5 percent), based on
technical analysis presented in the MLR interim final rule. The
Departments also continue to scale down the burden for medium and small
issuers/TPAs by assuming the same relative proportion as above (that
is, 75 percent and 50 percent, respectively).
In the proposed regulations, the Departments assumed that, in 2013,
each issuer/TPA would incur a separate maintenance cost to maintain IT
systems and address changes in regulatory provisions. The Departments
assumed the maintenance cost would equal 15% of the total one-time
burden noted above (for example, the Departments assumed it will take a
large issuer 15% of 1008 hours, or 151 hours). The Departments further
assumed that the teams to implement the maintenance tasks would be
comprised of IT professionals (55%), benefits/sales professionals
(40%), and attorneys (5%). The Departments maintain these assumptions
in these final regulations.
The Departments continue to assume that the one-time and
maintenance costs to implement IT systems changes and address
regulatory requirements would be split between the costs to produce
SBCs and the costs to produce the coverage examples (CEs).
Production and Review of SBCs and CEs
In the proposed regulations, the Departments estimated that each
issuer/TPA would need 3 hours to produce, and 1 hour to review, SBCs
(not including CEs) for all products. Some commenters thought this time
burden was an underestimate. However, these commenters did not provide
data that could allow the Departments to adjust their estimates.
Accordingly, in these final regulations, the Departments are retaining
their original estimates. The Departments also continue to assume that
the 3 hours needed to produce SBCs would be equally divided between IT
professionals and benefits/sales professionals. The Departments also
continue to assume that the 1 hour needed to review SBCs would be
equally divided between financial managers for benefits/sales
professionals and attorneys, based on previous analyses related to the
MLR regulation.
In the proposed regulations, the Departments estimated it would
take each issuer/TPA about 90 hours to produce, and about 30 hours to
review, CEs related to three benefits scenarios for all applicable
products, based on the MLR regulation. However, under the guidance
document published elsewhere in this issue of the Federal Register,
issuers and TPAs will need to produce a CE related to only two benefits
scenarios in 2012 and 2013. Accordingly, in these final regulations,
the Departments are adjusting the time burden downward by one-third.
The Departments now estimate that each issuer/TPA would need about 60
hours to produce, and about 20 hours to review, two CEs for all
products. The Departments continue to assume that the 60 hours to
produce the two CEs would be equally divided between IT professionals
and benefits/sales professionals. The Departments also continue to
assume that the 20 hours to review the two CEs would be equally divided
between financial managers and attorneys.
For each individual who receives the SBC in paper form, the
Departments estimate that printing and distributing the paper
disclosures would take clerical staff about 1 minute (0.02 hours) in
the group markets and about 2 minutes (0.03 hours) in the individual
market. The Departments assume that the individual market has lower
economies of scale and, thus, increased distribution costs.
Labor Cost Assumptions
Table 7 below presents the Departments' hourly labor cost
assumptions (stated in 2012 dollars) for each staff category based on
Bureau of Labor Statistics (BLS) data. The Departments use mean hourly
wage estimates from the BLS May 2010 National Occupational Employment
and Wage Estimates (accessed at http://www.bls.gov/oes/current/oes_nat.htm#00-0000) for computer systems analysts (Occupation Code 15-
1121), insurance underwriters (Occupation Code 13-2053), financial
managers (Occupation Code 23-1011), executive secretaries and
administrative assistants (Occupation Code 43-6011), and attorneys
(Occupation Code 23-1011) as the basis for estimating labor costs for
2012 through 2013 and adjust the hourly wage rate to include a 33
percent fringe benefit estimate for private sector employees.\57\
---------------------------------------------------------------------------
\57\ See the Technical Appendix to the MLR interim final rule,
available at http://cciio.cms.gov.
---------------------------------------------------------------------------
Distribution Assumptions
The Departments make the following assumptions regarding the
distribution of the SBC disclosures (including CEs).\58\ These
assumptions are based on the best information available to the
Departments at this time. Particularly, the following series of
assumptions are based on conversations with industry experts, the
Departments' understanding of the regulated community, and previous
analysis in the MLR interim final rule. The distribution assumptions
are as follows:
---------------------------------------------------------------------------
\58\ Although CEs are an integral component of SBCs, the costs
associated with CEs are different from the rest of the SBC, and,
thus, are separately calculated within this analysis.
---------------------------------------------------------------------------
The SBCs would be limited to one per household for family
members located at the same residence. According to one large issuer,
there are 2.2 covered lives per family.
The number of individuals who would receive an SBC before
enrolling in the plan or coverage equals 20 percent of the number of
enrollees at any point during the course of a year.\59\
---------------------------------------------------------------------------
\59\ Based on this assumption, the Departments make the
following estimate. Prior to enrollment in a given year, 180,000
individuals would receive SBCs from small issuers or TPAs; 3,700,000
individuals would receive SBCs from medium issuers or TPAs;
11,000,000 individuals would receive SBCs from large issuers or
TPAs.
---------------------------------------------------------------------------
In 2012 and 2013, respectively, about 2.5 percent and 5
percent of covered individuals who receive a paper SBC would receive a
paper glossary from issuers and TPAs. The Departments assume that the
burden and cost of providing paper glossaries would be proportional to
the burden and cost of providing papers SBCs, excluding coverage
examples. The Departments also assume that individuals who do not
request a paper copy of the glossary will access it electronically
using the Internet address provided in the SBC. These assumptions,
presented here in these final regulations, have not changed from the
proposed regulations.
In 2013, about 2 percent of covered individuals would
receive a notice of modifications.\60\ Further, the burden
[[Page 8686]]
and cost of providing such notices would be proportional to the
combined burden and cost of providing the SBCs, including CEs. In 2012,
the first year of implementation, the number of notices of
modifications would be negligible.
---------------------------------------------------------------------------
\60\ ERISA section 104(b) requires ERISA-covered plans to
furnish participants and beneficiaries with a Summary of Material
Modifications (SMM) no later than 210 days after the end of the plan
year in which the material change was adopted or in the case of a
material reduction in covered services or benefits, no later than 60
days after adoption of the modification or change. As part of its
analysis for the Department of Labor's SPD/SMM regulations (29 CFR
2520.104b-3), the Department estimated that about 20 percent of
health plans would need to distribute SMM in a given year due to
plan amendments. However, almost all of these modifications occur
between plan years--not during a plan year; therefore, the
modifications would be required to be disclosed in a SBC that is
distributed upon renewal of coverage. The Departments, thus, expect
that only two percent of plans will need to issue a notice of
modification in the middle of a plan year, because mid-year changes
that would result in an update to the SBC are very rare, based on
the Department of Labor's experience with ERISA plans. For purposes
of simplification, the Departments extend this assumption to the
individual market as well.
---------------------------------------------------------------------------
In the proposed regulations, the Departments estimated
that electronic distribution would account for 38 percent of all
disclosures in the group market and 70 percent of all disclosures in
the individual market. The estimate for the group market was based on
the methodology used to analyze the cost burden for the Department of
Labor's claims procedure regulation (OMB Control Number 1210-0053).\61\
---------------------------------------------------------------------------
\61\ See the ERISA e-disclosure rule at 29 CFR 2520.104b-1.
---------------------------------------------------------------------------
In these final regulations, the Departments are revising
upward their estimate of electronic distribution in the group market to
50 percent for pre-enrollment disclosures. This upward revision is
justified, because, for participants and beneficiaries who are eligible
but not enrolled for coverage, these final regulations permit the SBC
to be provided electronically if the format is readily accessible and a
paper copy is provided free of charge upon request.
The estimate for the group market remains the same for
post-enrollment disclosures. The estimate for the individual market
also remains the same, and is based on statistics set forth by the
National Telecommunications and Information Administration, which
indicate that 30 percent of Americans do not use the Internet.\62\
---------------------------------------------------------------------------
\62\ U.S. Department of Commerce, National Telecommunications
and Information Administration, Digital Nation (February 2010),
available at http://www.ntia.doc.gov/reports/2010/NTIA_internet_use_report_Feb2010.pdf.
---------------------------------------------------------------------------
SBC disclosures would be distributed with usual marketing
and enrollment materials, thus, costs to mail the documents will be
negligible. However, paper glossaries and notices of modifications
would require mailing and supply costs as follows: $0.45 postage cost
per mailing and $0.05 supply cost per mailing. The postage costs have
increased by $0.01 from the $0.44, as set forth in the proposed
regulations, to reflect new first-class postage rates effective January
22, 2012.
Printing costs $0.03 per side of a page. The Departments
estimate that it would cost $0.18 to print a complete SBC (which is six
sides of a page based on the length of the NAIC sample completed SBC)
and $0.12 to print the uniform glossary (which is four sides of a page,
based on the length of the NAIC recommended uniform glossary). This
cost burden is in addition to the time it would take clerical staff to
print and distribute the SBC or glossary.
Cost Estimate
The Tables below present costs and burden hours for issuers and
TPAs associated with the final disclosure requirements of PHS Act
section 2715. Tables 3-4 contain cost estimates for 2012 and 2013,
derived from the labor hours presented in Table 5 and the hourly rate
estimates presented in Table 6, as well as estimates of non-labor
costs. Labor hour estimates were developed for each one-time and
maintenance task associated with analyzing requirements, developing IT
systems, and producing SBCs (that include CEs).
Table 3--2012 Hour Burden, Equivalent Cost, and Cost Burden--2012 Dollars
----------------------------------------------------------------------------------------------------------------
Number of
affected Hour burden Equivalent Cost burden Number of
entities cost (non-labor) disclosures
----------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers....... 440 570,000 $21,000,000 $2,700,000 570,000
SBC Requirements--TPAs.......... 750 760,000 30,000,000 3,600,000 60,000
Coverage Example Requirements-- 440 193,000 10,500,000 1,400,000 193,000
Issuers........................
Coverage Example Requirements-- 750 330,000 17,900,000 1,800,000 330,000
TPAs...........................
Glossary Requests--Issuers...... 440 10,000 310,000 350,000 10,000
Glossary Requests--TPAs......... 750 12,000 380,000 460,000 12,000
-------------------------------------------------------------------------------
Subtotal.................... .............. 1,900,000 80,000,000 10,000,000 1,900,000
-------------------------------------------------------------------------------
Total 2012 Costs........ .............. .............. 90,000,000 .............. ..............
----------------------------------------------------------------------------------------------------------------
Table 4--2013 Hour Burden, Equivalent Cost, and Cost Burden--2012 Dollars
----------------------------------------------------------------------------------------------------------------
Number of
affected Hour burden Equivalent Cost burden Number of
entities cost (non-labor) disclosures
----------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers....... 440 430,000 $14,000,000 $2,700,000 41,000,000
SBC Requirements--TPAs.......... 750 540,000 18,000,000 3,600,000 49,000,000
Coverage Example Requirements-- 440 59,000 3,300,000 1,400,000 41,000,000
Issuers........................
Coverage Example Requirements-- 750 100,000 5,600,000 1,800,000 49,000,000
TPAs...........................
Notice of Material 440 8,900 290,000 310,000 820,000
Modifications--Issuers.........
Notice of Material 750 11,000 380,000 400,000 990,000
Modifications--TPAs............
Glossary Requests--Issuers...... 440 20,000 630,000 710,000 1,100,000
Glossary Requests--TPAs......... 750 25,000 760,000 920,000 1,500,000
-------------------------------------------------------------------------------
Subtotal.................... .............. 1,200,000 43,000,000 12,000,000 94,000,000
-------------------------------------------------------------------------------
Total 2013 Costs........ .............. .............. 55,000,000 .............. ..............
----------------------------------------------------------------------------------------------------------------
[[Page 8687]]
Table 5--Estimated Staffing Hours for Small, Medium, and Large Issuers and TPAs
----------------------------------------------------------------------------------------------------------------
Hours
Percent of -----------------------------------------------
Staffing hour assumptions hours by task Small issuer/ Medium issuer/ Large issuer/
TPA TPA TPA
----------------------------------------------------------------------------------------------------------------
IT Development and Workflow Process Change:
One-Time Develop Teams/Analyze Requirements .............. 72 108 144
(IT, underwriting/sales)...................
IT Professionals Benefits/Sales............. 45 32 49 65
Professionals............................... 50 36 54 72
Attorneys................................... 5 4 5 7
Implementing Systems Changes (IT and .............. 432 648 864
workflow)..................................
IT Professionals............................ 100 432 648 864
Maintenance:
Updating to Address Changes in Requirements. .............. 76 113 151
IT Professionals............................ 55 42 62 83
Benefits/Sales Professionals................ 40 30 45 60
Attorneys................................... 5 4 6 8
SBC Requirement (maintenance):
Producing SBCs.............................. .............. 3 3 3
IT Professionals............................ 50 1.5 1.5 1.5
Benefits/Sales Professionals................ 50 1.5 1.5 1.5
Internal Review of SBCs..................... .............. 1 1 1
Financial Managers--Benefits/Sales 50 0.5 0.5 0.5
Professionals..............................
Attorneys................................... 50 0.5 0.5 0.5
Producing and Distributing Paper Version of SBCs
(Group Markets):
Clerical Staff.............................. 100 0.02 0.02 0.02
Producing and Distributing Paper Version of SBCs
(Individual Market):
Clerical Staff.............................. 100 0.03 0.03 0.03
CE Requirement (maintenance):
Producing CEs............................... .............. 60 60 60
IT Professionals............................ 50 30 30 30
Benefits/Sales Professionals................ 50 30 30 30
Internal Review of CEs...................... .............. 20 20 20
Financial Managers--Benefits/Sales 50 10 10 10
Professionals..............................
Attorneys................................... 50 10 10 10
----------------------------------------------------------------------------------------------------------------
Table 6--Estimated Loaded Hourly Wages for Staff Categories
------------------------------------------------------------------------
Loaded hourly
Staff category BLS Code wage (2012
dollars)
------------------------------------------------------------------------
IT Professionals............... Computer Systems $54.52
Analysts (Occupation
Code 15-1121).
Financial Professionals-- Insurance Underwriters 43.76
Benefits/Sales. (Occupation Code 13-
2053).
Financial Manager.............. Financial Managers 78.50
(Occupation Code 11-
3031).
Attorneys...................... Lawyers (Occupation 86.86
Code 23-1011).
Clerical Staff................. Executive Secretaries 30.78
and Administrative
Assistants (Occupation
Code 43-6011).
------------------------------------------------------------------------
The Departments received many comments stating that the preliminary
cost analysis underestimated the one-time start-up costs as well as
maintenance costs. For example, one commenter did a survey of its
members (hereinafter ``regulated community survey''), wherein 36 member
companies responded to questions regarding implementation and
maintenance costs. The commenter extrapolated the survey results to all
enrollees with coverage in the United States. Accordingly, the
commenter projected that one-time implementation costs would be $188
million and maintenance costs would be $194 million per year. The
commenter stated that a significant cost driver was the March 23, 2012
deadline to switch from current benefit descriptions to the new uniform
SBCs. Accordingly, the commenter estimated that there could be a
savings of 23 percent with an 18-month extension of the implementation
timeline. The commenter also stated that additional factors affecting
costs were, among other things, the proposed regulations' requirement
to provide premium information; the number and complexity of coverage
examples; the renewal process and timeframe to provide SBCs; the number
of variations of SBCs to be delivered to each applicant or enrollee;
paper delivery of SBCs to most group enrollees; and insufficient
flexibility in the SBC template. As discussed elsewhere in this
preamble, the Departments have taken steps to ease administrative
burden related to most of these factors, and therefore believe that
these estimates do not reflect the policies in the final rule.
Because the regulated community survey, as well other commenters'
cost estimates, did not provide specific, detailed cost information, it
is difficult for the Department to acquire more than a general
understanding of the differences between the Departments' cost
estimates and the commenters' cost estimates. Accordingly, the
Departments continue to believe that there is considerable uncertainty
arising from general data limitations and the degree to which economies
of scale are achievable.
Even if the Departments were to utilize the regulated community
survey, or other commenters' cost estimates, it
[[Page 8688]]
would be necessary for the Departments to discount those projected
costs to account for policy changes in these final regulations.
Particularly, these final regulations now omit premium or cost of
coverage information from SBCs, provide for only two coverage examples,
and allow greater flexibility for electronic disclosures prior to
enrollment in coverage.
6. Regulatory Alternatives
Several provisions in these final regulations involved policy
choices. A first policy choice involved the applicability date of these
final regulations. The Departments received many comments indicating
that the proposed March 23, 2012 applicability date was not practical
for compliance. Accordingly, in these final regulations, the
Departments are delaying the applicability of these provisions by six
months to provide plans and issuers additional time to comply. As
discussed elsewhere in this preamble, for disclosures to plans, and to
individuals and dependents in the individual market, these final
regulations apply to health insurance issuers beginning September 23,
2012. Similarly, for the group market, for disclosures with respect to
participants and beneficiaries who enroll or re-enroll through an open
enrollment period (including re-enrollees and late enrollees), these
final regulations apply beginning on the first day of the first open
enrollment period that begins on or after September 23, 2012. For
disclosures with respect to participants and beneficiaries who enroll
other than through an open enrollment period (including individuals who
are newly eligible for coverage and special enrollees), these final
regulations apply on the first day of the first plan year that begins
on or after September 23, 2012. This approach to implementation should
lessen administrative burden on the regulated community.
A second policy choice involved whether to include premium or cost
of coverage information in the SBC. The Departments received many
comments that expressed concerns about the complexity of conveying such
information in both the individual and group markets. As noted above in
the preamble to these final regulations, the Departments believe that
premium information can be more efficiently and effectively provided in
documentation other than the SBC. Therefore, the Departments are not
requiring plans and issuers to include premium or cost of coverage
information in the SBC. Accordingly, this policy choice should also
lessen administrative burden on the regulated community.
A third policy choice involved the number of coverage examples that
plans issuers must provide in the SBC. The Departments received a
number of comments about the potential cost and burden associated with
providing coverage examples. To address these concerns, the guidance
document published elsewhere in this issue of the Federal Register
clarifies that for the first year of applicability, the SBC will
include only two coverage examples--having a baby (normal delivery) and
routine maintenance of well-controlled type 2 diabetes. Additional
coverage examples will be added in later years. This policy choice
should also lessen administrative burden on the regulated community.
A fourth policy choice involved determining how to minimize the
burden of providing the SBC to individuals shopping for health
insurance coverage. The Departments recognize it may be difficult for
issuers to provide accurate information about the terms of coverage
prior to underwriting. Accordingly, these final regulations provide
that if individual health insurance issuers provide the information
required by these final regulations and as specified in guidance
published by the Secretary to the HHS Secretary's Web portal
(HealthCare.gov), as established by 45 CFR 159.120, then they will be
deemed to have satisfied the requirement to provide an SBC to
individuals who request summary information about coverage prior to
submitting an application. The Departments determined this approach
promotes regulatory efficiency, minimizing the administrative burden on
health insurance issuers without significantly lessening the
protections under PHS Act section 2715.
A fifth policy choice related to electronic distribution of SBCs.
The Departments received comments about the electronic transmission of
SBCs to participants and beneficiaries in the group market.
Specifically, some comments requested that plans and issuers be
permitted to provide SBCs to participants and beneficiaries in a manner
other than those set forth by the Department of Labor's electronic
disclosure safe harbor requirements at 29 CFR 2520.104b-1(c). These
final regulations retain the proposed requirements, but make a
distinction between a participant or beneficiary who is already covered
under the group health plan, and a participant or beneficiary who is
eligible for coverage but not enrolled in a group health plan. This
distinction should provide new flexibility in some circumstances, while
also ensuring adequate consumer protections where necessary, and will
help reduce the burden of providing the SBC to participants and
beneficiaries prior to enrollment.
A sixth policy choice related to whether, in the case of covered
individuals residing at the same address, one SBC would satisfy the
disclosure requirement with respect to all such individuals, or whether
multiple SBCs would be required to be provided. Under these final
regulations, a single SBC may be provided to a family unless any
individuals are known to reside at a different address. Separate SBCs
will therefore need to be provided only in limited circumstances.
A seventh policy choice related to how many SBCs a participant or
beneficiary would automatically receive from a group health plan at
renewal. The final regulations would further limit burden by requiring
a plan or issuer to provide, at renewal, a new SBC for only the benefit
package in which a participant or beneficiary is enrolled. That is, if
the plan offers multiple benefits packages, an SBC is not required for
each benefit package offered under the group health plan, which the
Departments believe would otherwise create an undue burden during open
season. Participants and beneficiaries would be able to receive upon
request an SBC for any benefits package for which they are eligible.
The Departments believe this balanced approach addresses the needs of
plans, issuers, and consumers, at renewal.
An eighth policy choice related to the interpretation of the PHS
Act section 2715(d)(4), which requires notice of any material
modification in any of the terms of the plan or coverage that is not
reflected in the most recently provided SBC. The Departments note that
a material modification, within the meaning of section 102 of ERISA and
its implementing regulations at 29 CFR 2520.104b-3, is broadly defined
to include any modification to the coverage offered under the plan or
policy, that independently, or in conjunction with other
contemporaneous modifications or changes, would be considered by the
average plan participant to be an important change in covered benefits
or other terms of coverage under the plan or policy. The final
regulations interpret this provision as requiring notice only for a
material modification that would affect the content of the SBC; that is
not reflected in the most recently provided SBC; and that occurs other
than in connection with renewal or reissuance of coverage (that is, a
mid-plan or
[[Page 8689]]
policy-year change). This approach is consistent with the language of
PHS Act section 2715(d)(4) and is more narrowly focused on what we
interpret to be the purpose of that provision.
B. Regulatory Flexibility Act--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (RFA) requires agencies that issue a
regulation to analyze options for regulatory relief of small businesses
if a final rule has a significant impact on a substantial number of
small entities. The RFA generally defines a ``small entity'' as (1) a
proprietary firm meeting the size standards of the Small Business
Administration (SBA), (2) a nonprofit organization that is not dominant
in its field, or (3) a small government jurisdiction with a population
of less than 50,000. (States and individuals are not included in the
definition of ``small entity.'') The Departments use as their measure
of significant economic impact on a substantial number of small
entities a change in revenues of more than 3 to 5 percent.
As discussed in the Web Portal interim final rule (75 FR 24481),
HHS examined the health insurance industry in depth in the Regulatory
Impact Analysis that HHS prepared for the final rule on establishment
of the Medicare Advantage program (69 FR 46866, August 3, 2004). In
that analysis, HHS determined that there were few if any insurance
firms underwriting comprehensive health insurance policies (in
contrast, for example, to travel insurance policies or dental discount
policies) that fell below the size thresholds for ``small'' business
established by the SBA. Currently, the SBA size threshold is $7 million
in annual receipts for both health insurers (North American Industry
Classification System, or NAICS, Code 524114) and TPAs (NAICS Code
524292).
Additionally, as discussed in the Medical Loss Ratio interim final
rule (75 FR 74918), HHS used a data set created from 2009 National
Association of Insurance Commissioners (NAIC) Health and Life Blank
annual financial statement data to develop an updated estimate of the
number of small entities that offer comprehensive major medical
coverage in the individual and group markets. For purposes of that
analysis, HHS used total Accident and Health (A&H) earned premiums as a
proxy for annual receipts. HHS estimated that there were 28 small
entities with less than $7 million in A&H earned premiums offering
individual or group comprehensive major medical coverage; however, this
estimate may overstate the actual number of small health insurance
issuers offering such coverage, since it does not include receipts from
these companies' other lines of business. These 28 small entities
represent about 6.4 percent of the approximately 440 health insurers
that are accounted for in this RIA. Based on this calculation, the
Departments assume that there are an equal percentage of TPAs that are
small entities. That is, 48 small entities represent about 6.4 percent
of the approximately 750 TPAs that are accounted for in this RIA.
The Departments estimate that issuers and TPAs earning less than
$50 million in annual premium revenue, including the 76 small entities
mentioned above, would incur costs of approximately $33,000 and $10,000
per issuer/TPA in 2012 and 2013, respectively. Numbers of this
magnitude do not approach the amounts necessary to be considered a
``significant economic impact'' on firms with revenues in the order of
millions of dollars. Additionally, as discussed earlier, the
Departments believe that these estimates overstate the number of small
entities that will be affected by the requirements in this final
regulation, as well as the relative impact of these requirements on
these entities, because the Departments have based their analysis on
the affected entities' total A&H earned premiums (rather than their
total annual receipts). Accordingly, the Departments have determined
and certify that these final regulations will not have a significant
economic impact on a substantial number of small entities, and that a
regulatory flexibility analysis is not required.
C. Special Analyses--Department of the Treasury
For purposes of the Department of the Treasury it has been
determined that this Treasury decision is not a significant regulatory
action as defined in Executive Order 12866. Therefore, a regulatory
assessment is not required. It has also been determined that section
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these final regulations. It is hereby certified that the
collections of information contained in this Treasury decision will not
have a significant impact on a substantial number of small entities.
Accordingly, a regulatory flexibility analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not required. Section 54.9815-
2715 of the final regulations requires both group health insurance
issuers and group health plans to distribute an SBC and notice of any
material modifications to the plan that affect the information required
in the SBC. Under these final regulations, if a health insurance issuer
satisfies the obligations to distribute an SBC and a notice of
modifications, those obligations are satisfied not just for the issuer
but also for the group health plan. For group health plans maintained
by small entities, it is anticipated that the health insurance issuer
will satisfy these obligations for both the plan and the issuer in
almost all cases. For this reason, these information collection
requirements will not impose a significant impact on a substantial
number of small entities. Pursuant to section 7805(f) of the Code, the
notice of proposed rulemaking preceding these regulations was submitted
to the Chief Counsel for Advocacy of the Small Business Administration
for comment on its impact on small business.
D. Unfunded Mandates Reform Act--Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 that
agencies assess anticipated costs and benefits before issuing any final
rule that includes a Federal mandate that could result in expenditure
in any one year by State, local or Tribal governments, in the
aggregate, or by the private sector, of $100 million in 1995 dollars
updated annually for inflation. In 2011, that threshold level is
approximately $136 million. These final regulations include no mandates
on State, local, or Tribal governments. These final regulations include
directions to produce standardized consumer disclosures that will
affect private sector firms (for example, health insurance issuers
offering coverage in the individual and group markets, and third-party
administrators providing administrative services to group health
plans), but we conclude that these costs will not exceed the $136
million threshold. Thus, we conclude that these final regulations do
not impose an unfunded mandate on State, local or Tribal governments or
the private sector. Regardless, consistent with policy embodied in
UMRA, this notice of final rulemaking has been designed to be the least
burdensome alternative for State, local and Tribal governments, and the
private sector while achieving the objectives of the Affordable Care
Act.
E. Paperwork Reduction Act
1. Department of Labor and Department of the Treasury
Section 2715 of the PHS Act directs the Departments, in
consultation with the National Association of Insurance Commissioners
(NAIC) and a working group comprised of stakeholders, to
[[Page 8690]]
``develop standards for use by a group health plan and a health
insurance issuer in compiling and providing to applicants, enrollees,
and policyholders and certificate holders a summary of benefits and
coverage explanation that accurately describes the benefits and
coverage under the applicable plan or coverage.'' For disclosures to
plans, and to individuals and dependents in the individual market,
these final regulations apply to health insurance issuers beginning
September 23, 2012. Similarly, for the group market, for disclosures
with respect to participants and beneficiaries who enroll or re-enroll
through an open enrollment period (including re-enrollees and late
enrollees), these final regulations apply beginning on the first day of
the first open enrollment period that begins on or after September 23,
2012. For disclosures with respect to participants and beneficiaries
who enroll other than through an open enrollment period (including
individuals who are newly eligible for coverage and special enrollees),
these final regulations apply on the first day of the first plan year
that begins on or after September 23, 2012.
To implement this provision, collection of information requirements
relate to the provision of the following:
Summary of benefits and coverage.
Coverage examples (as components of each SBC).
A uniform glossary of health coverage and medical terms
(uniform glossary).
Notice of modifications.
A copy of the ICR may be obtained by contacting the PRA addressee: G.
Christopher Cosby, Office of Policy and Research, U.S. Department of
Labor, Employee Benefits Security Administration, 200 Constitution
Avenue NW., Room N-5718, Washington, DC 20210. Telephone: (202) 693-
8410; Fax: (202) 219-4745. These are not toll-free numbers. Email:
[email protected]. ICRs submitted to OMB also are available at
reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).
The Departments estimate 858 respondents each year from 2012-2013.
This estimate reflects approximately 220 issuers offering comprehensive
major medical coverage in the small and large group markets, and
approximately 638 third-party administrators (TPAs).\63\
---------------------------------------------------------------------------
\63\ The Departments estimate that there are 440 issuers and 750
TPAs. Because the Department of Labor and the Department of the
Treasury share the hour and cost burden for issuers and TPAs with
the Department of Health and Human Services, the burden to produce
the SBCs including Coverage Examples for group health plans is
calculated using half the number of issuers (220) and 85 percent of
the TPAs (638). While the group health plans could prepare their own
SBCs, the Departments assume that SBCs would be prepared by service
providers, i.e., issuers and TPAs.
---------------------------------------------------------------------------
To account for variation in firm size, the Departments estimate a
weighted burden on the basis of issuer's 2009 total earned premiums for
comprehensive major medical coverage.\64\ The Departments define small
issuers as those with total earned premiums less than $50 million;
medium issuers as those with total earned premiums between $50 million
and $999 million; and large issuers as those with total earned premiums
of $1 billion or more. Accordingly, the Departments estimate
approximately 70 small, 115 medium, and 35 large issuers. Similarly,
the Departments estimate approximately 204 small, 332 medium, and 102
large TPAs.
---------------------------------------------------------------------------
\64\ The premium revenue data come from the 2009 NAIC financial
statements, also known as ``Blanks,'' where insurers report
information about their various lines of business.
---------------------------------------------------------------------------
2012 Burden Estimate
In 2012, the Departments estimate a one-time administrative burden
of about 620,000 hours with an equivalent cost of about $34,000,000
across the industry to prepare for the provisions of these final
regulations. This calculation is made assuming issuers and TPAs will
need to implement two principal tasks: (1) develop teams to analyze
current workflow processes against the new rules and (2) make
appropriate changes to IT systems and processes. With respect to task
(1), the Departments estimate about 88,000 burden hours with an
equivalent cost of about $4,500,000. The Departments calculate these
estimates as follows: \65\
---------------------------------------------------------------------------
\65\ For the purposes of these and other estimates in this
section IV.E, the Departments again use the assumptions outlined
above in section IV.A.5.
Task 1--Analyze Current Workflow and New Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 32 $1,800 49 $2,600 65 $3,500
Benefits/Sales Professionals................................. 43.76 36 1,600 54 2,400 72 3,200
Attorneys.................................................... 86.86 4 310 5 500 7 630
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 72 3,700 108 5,500 144 7,300
------------------------------------------------------------------------------------------
Total for all issuers/TPAs........................... ........... 20,000 1,000,000 48,000 2,500,000 20,000 1,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to task (2), the Departments estimate about 530,000
burden hours with an equivalent cost of about $29,000,000. The
Departments calculate these estimates as follows:
Task 2--IT Changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 432 $24,000 648 $35,000 864 $47,000
------------------------------------------------------------------------------------------
[[Page 8691]]
Total per issuer/TPA..................................... ........... 432 24,000 648 35,000 864 47,000
------------------------------------------------------------------------------------------
Total for all issuers/TPAs........................... ........... 120,000 6,600,000 290,000 16,000,000 120,000 6,400,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
In addition to the one-time administrative costs mentioned above,
the Departments assume that plans and issuers will incur additional
administrative burden. With regard to this administrative burden, the
estimated hour and cost burden for the collections of information in
2012 are as follows:
The Departments estimate that there will be about
77,000,000 SBCs.
The Departments assume 50 percent of the total number of
SBCs would be sent electronically prior to enrollment, and 38 percent
would be sent electronically after enrollment, in the small and large
group markets. Accordingly, the Departments estimate that about
31,000,000 SBCs would be electronically distributed, and about
46,000,000 SBCs would be distributed in paper form. The Departments
assume there are costs only for paper disclosures, but no costs for
electronic disclosures.
Task 3: SBCs--The estimated hour burden for preparing the SBCs is
about 780,000 hours with an equivalent cost of about $24,000,000, and a
cost burden of about $5,500,000. The Departments calculate these
estimates as follows:
Task 3: Equivalent Costs for Producing SBCs
[Except coverage examples]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 1.5 $82 1.5 $82 1.5 $82
Benefits/Sales Professionals................................. 43.76 1.5 66 1.5 66 1.5 66
Financial Managers........................................... 78.50 0.5 39 0.5 39 0.5 39
Attorneys.................................................... 86.86 0.5 43 0.5 43 0.5 43
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 4 230 4 230 4 230
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 1,100 63,000 1,800 100,000 500 32,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 3: Equivalent Costs for Distributing SBCs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly wage Total number of Total
rate Hours per SBC SBCs Total hours equivalent cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clerical staff..................................................... $30.78 0.017 46,000,000 780,000 $24,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 3: Cost Burden for Printing SBCs
----------------------------------------------------------------------------------------------------------------
Total number of Total cost
Cost per SBCs SBCs burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.12 46,000,000 $5,500,000
----------------------------------------------------------------------------------------------------------------
Task 4: Two Coverage Examples--The estimated hour burden for
producing and printing coverage examples is about 69,000 hours with an
equivalent cost of about $4 million, and a cost burden of about
$2,800,000. The Departments calculate these estimates as follows:
Task 4: Equivalent Costs for Producing Coverage Examples
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 30 $1,640 30 $1,640 30 $1,640
Benefits/Sales Professionals................................. 43.76 30 1,310 30 1,310 30 1,310
Financial Managers........................................... 78.50 10 780 10 780 10 780
Attorneys.................................................... 86.86 10 870 10 870 10 870
------------------------------------------------------------------------------------------
[[Page 8692]]
Total per issuer/TPA..................................... ........... 80 4,600 80 4,600 80 4,600
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 21,900 1,260,000 36,000 2,100,000 11,000 630,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 4: Cost Burden for Printing Coverage Examples
----------------------------------------------------------------------------------------------------------------
Printing cost Total CE sets Total cost
per CE set printed burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.06 46,000,000 $2,800,000
----------------------------------------------------------------------------------------------------------------
Task 5: Glossary Requests--The Departments assume that, in 2012,
issuers and TPAs will begin responding to glossary requests from
covered individuals, and that 2.5 percent of covered individuals, who
receive paper SBCs, will request glossaries in paper form. The
Departments estimate that the hour and cost burden of providing the
notices to be 2.5 percent of the hour and cost burden of distributing
paper SBCs, plus an additional cost burden of $0.50 for each glossary
(including $0.45 for first-class postage and $0.05 for supply costs).
Accordingly, in 2012, the Departments estimate an hour burden of about
24,000 hours with an equivalent cost of about $740,000 and a cost
burden of about $740,000 associated with about 1,200,000 glossary
requests.
The total 2012 burden estimate is about 1,500,000 hours with an
equivalent cost of about $63,000,000 and cost burden of about
$9,000,000.
2013 Burden Estimate
Task 1: SBCs--The number of disclosures is assumed to remain
constant at about 77,000,000. Accordingly, in 2013, the Departments
again estimate a burden of about 780,000 hours with an equivalent cost
of about $5,500,000 and a cost burden of about $24,000,000 for
preparing and distributing SBCs.
Task 2: Two Coverage Examples--The Departments again estimate about
69,000 hours with an equivalent cost of about $4,000,000 and a cost
burden of about $2,800,000 for producing and printing coverage
examples.
Task 3: Notices of Modifications--The Departments assume that, in
2013, issuers and TPAs would send notices of modifications to covered
individuals, and that two percent of covered individuals would receive
such notice. The Departments estimate that the hour and cost burden of
providing the notices to be two percent of the combined hour and cost
burden of providing the SBCs including the coverage examples, plus an
additional cost burden of $0.50 for each paper notice (including $0.45
for first-class postage and $0.05 for supply costs). Accordingly, in
2013, the Departments estimate an hour burden of about 17,000 hours
with an equivalent cost of $570,000 and a cost burden of about $630,000
associated with preparing and distributing about 1,500,000 notices of
modification. [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]?>
Task 4: Glossary Requests--The Departments assume that, in 2013,
issuers and TPAs will again respond to glossary requests from covered
individuals, and that five percent of covered individuals, who receive
paper SBCs, will request glossaries in paper form. The Departments
estimate that the burden and cost of providing the glossaries to be
five percent of the hour and cost burden of distributing paper SBCs,
plus an additional cost burden for $0.50 for each glossary (including
$0.45 for first-class postage and $0.05 for supply costs). Accordingly,
in 2013, the Departments estimate an hour burden of about 39,000 hours
with an equivalent cost of about $1,200,000 and a cost burden of about
$1,400,000 associated with 2,300,000 glossary requests.
Task 5: Maintenance Administrative Costs--In 2013, the Departments
assume that issuers and TPAs will need to make updates to address
changes in standards, and, thus, incur 15 percent of the one-time
administrative burden. Accordingly, the estimated hour burden is about
93,000 hours, with an equivalent cost of about $4,800,000. The
Departments calculate these estimates as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 42 $2,300 62 $3,400 83 $4,500
Benefits/Sales Professionals................................. 43.76 30 1,300 45 2,000 60 2,600
Attorneys.................................................... 86.86 4 350 6 520 8 690
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 76 4,000 113 5,900 151 7,800
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 21,000 1,100,000 51,000 2,600,000 21,000 1,100,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
The total 2013 burden estimate is about 1,000,000 hours with an
equivalent cost of nearly $35,000,000 and a cost burden of $10,000,000.
Estimates are not provided for subsequent years, because there will
be significant changes in the marketplace in 2014, including those
related to the offering of new individual and small group plans through
the Affordable Insurance Exchanges, and new market reforms outside of
the new Exchanges, and the wide-ranging scope of these
[[Page 8693]]
changes makes it difficult to project results for 2014 and beyond.
The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number.
The 2012-2013 paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Affordable Care Act Uniform Explanation of Coverage
Documents
OMB Number: 1210-0147; 1545-2229.
Affected Public: Business or other for profit; not-for-profit
institutions.
Total Respondents: 858.
Total Responses: 79,500,000.
Frequency of Response: On-going.
Estimated Total Annual Burden Hours (two year average): 620,000
hours (Employee Benefits Security Administration); 620,000 hours
(Internal Revenue Service).
Estimated Total Annual Cost Burden (two year average): $4,800,000
(Employee Benefits Security Administration); $4,800,000 (Internal
Revenue Service).
2. Department of Health and Human Services
ICRs Related to the Summary of Benefits and Uniform Glossary (45 CFR
147.200)
The Department estimates 333 respondents each year from 2012-2013.
This estimate reflects the approximately 220 issuers offering
comprehensive major medical coverage in the individual market and to
fully-insured non-federal governmental plans, and 113 TPAs acting as
service providers for self-insured non-federal governmental plans.\66\
---------------------------------------------------------------------------
\66\ The Department estimates that there are 440 issuers and 750
TPAs. Because the Department shares the hour and cost burden for
issuers with the Department of Labor and the Department of the
Treasury, the burden to produce the SBCs including coverage examples
for non-federal governmental plans and issuers in the individual
market is calculated using half the number of issuers (221) and 15%
of TPAs (113). While non-federal governmental plans could prepare
their own SBCs, the Department assumes that SBCs would be prepared
by service providers, i.e., issuers and TPAs.
---------------------------------------------------------------------------
To account for variation in firm size, the Department estimates a
weighted burden on the basis of issuers' 2009 total earned premiums for
comprehensive major medical coverage.\67\ The Department defines small
issuers as those with total earned premiums less than $50 million;
medium issuers as those with total earned premiums between $50 million
and $999 million; and large issuers as those with total earned premiums
of $1 billion or more. Accordingly, the Department estimates
approximately 70 small, 115 medium, and 35 large issuers. Similarly,
the Department estimates approximately 36 small, 59 medium, and 18
large TPAs.
---------------------------------------------------------------------------
\67\ The premium revenue data come from the 2009 NAIC financial
statements, also known as ``Blanks,'' where insurers report
information about their various lines of business
---------------------------------------------------------------------------
2012 Burden Estimate
In 2012, the Department estimates a one-time administrative burden
of about 230,000 hours with an equivalent cost of about $13,000,000
across the industry to prepare for the provisions of these final
regulations. This calculation is made assuming issuers and TPAs will
need to implement two principal tasks: (1) develop teams to analyze
current workflow processes against the new standards and (2) make
appropriate changes to IT systems and processes.
With respect to task (1), the Department estimates about 34,000
burden hours with an equivalent cost of about $1,800,000. The
Department calculates these estimates as follows:\68\
---------------------------------------------------------------------------
\68\ For the purposes of these and other estimates in this
section IV.E, the Department again use the assumptions outlined
above in section IV.A.5.
Task 1: Analyze Current Workflow and New Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA
Hourly Wage -----------------------------------------------------------------------------
Rate Equivalent Equivalent Equivalent
Hours Cost Hours Cost Hours Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 32 $1,800 49 $2,600 65 $3,500
Benefits/Sales Professionals................................. 43.76 36 1,600 54 2,400 72 3,200
Attorneys.................................................... 86.86 4 310 5 500 7 600
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 72 3,700 108 6,000 144 7,000
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 7,600 390,000 19,000 1,000,000 7,600 370,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to task (2), the Department estimates about 200,000
burden hours with an equivalent cost of about $11,000,000. The
Department calculates these estimates as follows:
Task 2: IT Changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA
Hourly Wage -----------------------------------------------------------------------------
Rate Equivalent Equivalent Equivalent
Hours Cost Hours Cost Hours Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 432 $24,000 648 $35,000 864 $50,000
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 432 24,000 648 35,000 864 50,000
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 46,000 2,500,000 110,000 6,100,000 46,000 2,700,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 8694]]
In addition to the one-time administrative costs mentioned above,
the Department assumes that plans and issuers will incur additional
administrative burden. With regard to this administrative burden, the
estimated hour and cost burden for the collections of information in
2012 are as follows:
The Department estimates that there will be about
13,000,000 SBCs.
The Department assumes 50 percent of the total number of
SBCs would be sent electronically prior to enrollment, and 38 percent
would be sent electronically after enrollment, in the small and large
group markets. The Department further assumes 70 percent of SBCs would
be sent electronically in the individual market. Accordingly, the
Department estimates that about 7,100,000 disclosures would be
electronically distributed, and about 6,200,000 disclosures would be
distributed in paper form. The Department assumes there are costs only
for paper disclosures, but no costs for electronic disclosures
Task 3: SBCs--The estimated hour burden is about 130,000 hours with
an equivalent cost of about $4,200,000, and a cost burden of about
$740,000. The Department calculates these estimates as follows:
Task 3--Equivalent Costs for Producing SBCs (Except Coverage Examples)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Issuer Medium Issuer Large Issuer
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 1.5 $82 1.5 $82 1.5 $82
Benefits/Sales Professionals................................. 43.76 1.5 66 1.5 66 1.5 66
Financial Managers........................................... 78.50 0.5 39 0.5 39 0.5 39
Attorneys.................................................... 86.86 0.5 43 0.5 43 0.5 43
------------------------------------------------------------------------------------------
Total per issuer......................................... ........... 4 230 4 230 4 230
------------------------------------------------------------------------------------------
Total for all issuers.................................... ........... 420 24,000 700 40,000 210 12,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 3--Equivalent Costs for Distributing SBCs (Including Coverage Examples)
----------------------------------------------------------------------------------------------------------------
Total Total
Hourly wage Hours per number of Total hours equivalent
rate SBC SBCs cost
----------------------------------------------------------------------------------------------------------------
Clerical Staff, Individual Market.............. $30.78 0.033 1,700,000 56,000 $1,700,000
Clerical Staff, Group Market................... 30.78 0.017 4,500,000 77,000 2,400,000
----------------------------------------------------------------
Total...................................... ........... ........... 6,200,000 130,000 4,100,000
----------------------------------------------------------------------------------------------------------------
Task 3--Cost Burden for Printing SBCs (Except Coverage Examples)
----------------------------------------------------------------------------------------------------------------
Cost per SBC Total SBCs Cost burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.12 6,200,000 $740,000
----------------------------------------------------------------------------------------------------------------
Task 4: Two Coverage Examples--The estimated hour burden for
producing and printing coverage examples is about 27,000 hours with an
equivalent cost of about $1,500,000, and a cost burden of about
$370,000. The Department calculates these estimates as follows:
Task 4--Equivalent Costs for Producing Coverage Examples
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 30 $1,640 30 $1,640 30 $1,640
Benefits/Sales Professionals................................. 43.76 30 1,310 30 1,310 30 1,310
Financial Managers........................................... 78.50 10 780 10 780 10 780
Attorneys.................................................... 86.86 10 870 10 870 10 870
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 80 4,600 80 4,600 80 4,600
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 8,500 490,000 14,000 800,000 4,200 240,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 8695]]
Task 4--Cost Burden for Printing Coverage Examples
----------------------------------------------------------------------------------------------------------------
Printing cost Total CE sets Total cost
per CE set printed burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.06 6,200,000 $370,000
----------------------------------------------------------------------------------------------------------------
Task 5: Glossary Requests--The Department assumes that, in 2012,
issuers and TPAs will begin responding to glossary requests from
covered individuals, and that 2.5 percent of covered individuals, who
receive paper SBCs, will request glossaries in paper form. The
Department assumes that the hour and cost burden of providing the
glossaries to be 2.5 percent of the hour and cost burden of
distributing paper SBCs, plus an additional cost burden of $0.50 for
each glossary (including $0.45 for first-class postage and $0.05 for
supply costs). Accordingly, in 2012, the Department estimates an hour
burden of about 2,700 hours with an equivalent cost of about $82,000
and a cost burden of about $99,000 associated with about 160,000
glossary requests.
The total 2012 burden estimate is about 390,000 hours, or 1,200
hours per respondent, with an equivalent cost of about $19,000,000, or
$57,000 per respondent, and cost burden of about $1,200,000, or $3,600
per respondent.
2013 Burden Estimate
Task 1: SBCs--The number of disclosures is assumed to remain
constant at 13,000,000. Thus, in 2013, the Department again estimates
an hour burden of about 130,000 hours with an equivalent cost of about
$4,200,000 and cost burden of about $740,000.
Task 2: Two Coverage Examples--The Department again estimates an
hour burden of about 27,000 hours with an equivalent cost of about
$1,500,000 and cost burden of about $370,000 for producing and printing
coverage examples.
Task 3: Notices of Modifications--The Department assumes that, in
2013, issuers will begin sending notices of modifications to covered
individuals, and that two percent of covered individuals would receive
such notice. The Department estimates that the hour and cost burden of
providing the notices to be two percent of the combined hour and cost
burden of providing the SBCs including the coverage examples, plus an
additional cost burden of $0.50 for each paper notice (including $0.45
for first-class postage and $0.05 for supply costs). Accordingly, in
2013, the Department estimates an hour burden of about 3,100 hours with
an equivalent cost of about $118,000 and a cost burden of about $22,000
associated with about 260,000 notices of modification.
Task 4: Glossary Requests--The Department assumes that, in 2013,
issuers and TPAs will again respond to glossary requests from covered
individuals, and that five percent of covered individuals, who receive
paper SBCs, will request glossaries in paper form. The Department
estimates that the hour and cost burden of providing the glossaries to
be 5 percent of the hour and cost burden of distributing paper SBCs,
plus an additional cost burden of $0.50 for each glossary (including
$0.45 for first-class postage and $0.05 for supply costs). Accordingly,
in 2013, the Department estimates an hour burden of about 5,300 hours
with an equivalent cost of $160,000 and a cost burden of about $190,000
associated with 310,000 glossary requests.
Task 5: Maintenance Administrative Costs--In 2013, the Department
assumes that issuers and TPAs will need to make updates to address
changes in standards, and, thus, incur 15 percent of the one-time
administrative burden. Accordingly, the estimated hour burden is about
36,000 hours with an equivalent cost of about $1,800,000. The
Department calculates these estimates as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals............................................. $54.52 42 $2,300 62 $3,400 83 $4,500
Benefits/Sales Professionals................................. 43.76 30 1,300 45 2,000 60 2,600
Attorneys.................................................... 86.86 4 350 6 520 8 690
------------------------------------------------------------------------------------------
Total per issuer/TPA..................................... ........... 76 4,000 113 5,900 151 7,800
------------------------------------------------------------------------------------------
Total for all issuers/TPAs............................... ........... 8,100 420,000 20,000 1,000,000 8,000 410,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
The total 2013 burden estimate is about 200,000 hours, or about 600
hours per respondent, with an equivalent cost of about $7,800,000, or
$23,000 per respondent, and cost burden of about $1,400,000, or $4,200
per respondent.
Estimates are not provided for subsequent years, because there will
be significant changes in the marketplace in 2014, including those
related to the offering of new individual and small group plans through
the Affordable Insurance Exchanges, and new market reforms outside of
the new Exchanges, and the wide-ranging scope of these changes makes it
difficult to project results for 2014 and beyond.
The Department notes that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number.
The 2012-2013 paperwork burden estimates are summarized as follows:
Type of Review: New collection (Request for a new OMB Control
Number).
Agency: Department of Health and Human Services.
Title: Affordable Care Act Uniform Explanation of Coverage
Documents
CMS Identifier (OMB Control Number): CMS-10407 (0938-1146).
Affected Public: Business; State, Local, or Tribal Governments.
Total Respondents: 333.
Total Responses: 13,000,000.
Frequency of Response: On-going.
Estimated Total Annual Burden Hours (two year average): 300,000
hours.
Estimated Total Annual Cost Burden (two year average): $1,300,000.
[[Page 8696]]
ICRs Related to Deemed Compliance Reporting (45 CFR
147.200(a)(4)(iii)(C))
Under 45 CFR 147.200(a)(4)(iii)(C), if individual health insurance
issuers provide information required by these final regulations to the
HHS Secretary's Web portal (HealthCare.gov), as established by 45 CFR
159.120, then they will be deemed to have satisfied the requirement to
provide an SBC to individuals who request information about coverage
prior to submitting an application for coverage. Individual health
insurance issuers already provide most SBC content elements to
HealthCare.gov, except for five data elements related to patient
responsibility for each coverage example: deductibles, co-payments, co-
insurance, limits or exclusions, and the total of all four cost-sharing
amounts.
Accordingly, the additional burden associated with the requirements
under Sec. 147.200(a)(4)(iii)(C) is the time and effort it would take
each of the 220 issuers in the individual market to enter the five
additional data elements into an Excel spreadsheet. We estimate that it
will take these issuers about 110 hours, at a total estimated cost of
about $3,300, for each coverage example. For two coverage examples, the
burden and cost would be about 220 hours at a cost of about $6,600.
In deriving these figures, we used the following hourly labor rates
and estimated the time to complete each task: $ 30.78/hr and 0.5 hr/
issuer for clerical staff to enter data into an Excel spreadsheet, or
about $15 per respondent per coverage example.
This information collection requirement reflects the clarification
in these final regulations that issuers must provide all content
required in the SBC, including the information necessary for coverage
examples, to Healthcare.gov to be deemed compliant. The aforementioned
burden estimates will be submitted for OMB review and approval as a
revision to the information collection request currently approved under
OMB control number 0938-1086.
To obtain copies of the supporting statement and any related forms
for the final paperwork collections referenced above, access CMS' Web
site at http://www.cms.gov/PaperworkReductionActof1995/PRAL/list.asp#TopOfPage or email your request, including your address, phone
number, OMB number, and CMS document identifier, to
[email protected], or call the Reports Clearance Office at 410-786-
1326.
F. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific criteria by Federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have
federalism implications must consult with State and local officials and
describe the extent of their consultation and the nature of the
concerns of State and local officials in the preamble to the
regulation.
In the Departments' view, these final rules have federalism
implications, because it would have direct effects on the States, the
relationship between national governments and States, or on the
distribution of power and responsibilities among various levels of
government relating to the disclosure of health insurance coverage
information to consumers. Under these final rules, all group health
plans and health insurance issuers offering group or individual health
insurance coverage, including self-funded non-federal governmental
plans as defined in section 2791 of the PHS Act, would be required to
follow uniform standards for compiling and providing a summary of
benefits and coverage to consumers. Such Federal standards developed
under PHS Act section 2715(a) would preempt any related State standards
that require a summary of benefits and coverage that provides less
information to consumers than that required to be provided under PHS
Act section 2715(a).
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of section 731 of
ERISA and section 2724 of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the HIPAA requirements
(including those of the Affordable Care Act) are not to be ``construed
to supersede any provision of State law which establishes, implements,
or continues in effect any standard or requirement solely relating to
health insurance issuers in connection with group health insurance
coverage except to the extent that such standard or requirement
prevents the application of a requirement'' of a Federal standard. The
conference report accompanying HIPAA indicates that this is intended to
be the ``narrowest'' preemption of State laws (See House Conf. Rep. No.
104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018).
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the Affordable
Care Act requirements that are the subject of this rulemaking.
Accordingly, States have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the Federal
law. However, under these final rules, a State would not be allowed to
impose a requirement that modifies the summary of benefits and coverage
required to be provided under PHS Act section 2715(a), because it would
prevent the application of this final rule's uniform disclosure
requirement.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments have engaged in efforts to consult with and work
cooperatively with affected States, including consulting with, and
attending conferences of, the National Association of Insurance
Commissioners and consulting with State insurance officials on an
individual basis. It is expected that the Departments will act in a
similar fashion in enforcing the Affordable Care Act, including the
provisions of section 2715 of the PHS Act. Throughout the process of
developing these final regulations, to the extent feasible within the
specific preemption provisions of HIPAA as it applies to the Affordable
Care Act, the Departments have attempted to balance the States'
interests in regulating health insurance issuers, and Congress' intent
to provide uniform minimum protections to consumers in every State. By
doing so, it is the Departments' view that they have complied with the
requirements of Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to this final rule, the
Departments certify that the Employee Benefits Security Administration
and the Centers for Medicare & Medicaid Services have complied with the
requirements of Executive Order 13132 for the attached final rule in a
meaningful and timely manner.
[[Page 8697]]
G. Congressional Review Act
This regulation is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to Congress and the Comptroller General for
review.
V. Statutory Authority
The Department of the Treasury regulations are adopted pursuant to
the authority contained in sections 7805 and 9833 of the Code.
The Department of Labor regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169,
1181-1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b,
and 1191c; sec. 101(g), Public Law104-191, 110 Stat. 1936; sec. 401(b),
Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d),
Public Law 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e),
Public Law 111-148, 124 Stat. 119, as amended by Public Law 111-152,
124 Stat. 1029; Secretary of Labor's Order 3-2010, 75 FR 55354
(September 10, 2010).
The Department of Health and Human Services regulations are adopted
pursuant to the authority contained in sections 2701 through 2763,
2791, and 2792 of the PHS Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: February 7, 2012.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).
Signed this 7th day of February, 2012.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: February 6, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: February 6, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
Department of the Treasury
Internal Revenue Service
26 CFR Chapter 1
Accordingly, the Internal Revenue Service amends 26 CFR parts 54
and 602 as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for Part 54 is amended by adding an
entry for Sec. 54.9815-2715 in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9815-2715 also issued under 26 U.S.C. 9833.
0
Par. 2. Section 54.9815-2715 is added to read as follows:
Sec. 54.9815-2715 Summary of benefits and coverage and uniform
glossary.
(a) Summary of benefits and coverage--(1) In general. A group
health plan (and its administrator as defined in section 3(16)(A) of
ERISA), and a health insurance issuer offering group health insurance
coverage, is required to provide a written summary of benefits and
coverage (SBC) for each benefit package without charge to entities and
individuals described in this paragraph (a)(1) in accordance with the
rules of this section.
(i) SBC provided by a group health insurance issuer to a group
health plan--(A) Upon application. A health insurance issuer offering
group health insurance coverage must provide the SBC to a group health
plan (or its sponsor) upon application for health coverage, as soon as
practicable following receipt of the application, but in no event later
than seven business days following receipt of the application.
(B) By first day of coverage (if there are changes). If there is
any change in the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
issuer must update and provide a current SBC to the plan (or its
sponsor) no later than the first day of coverage.
(C) Upon renewal. If the issuer renews or reissues the policy,
certificate, or contract of insurance (for example, for a succeeding
policy year), the issuer must provide a new SBC as follows:
(1) If written application is required (in either paper or
electronic form) for renewal or reissuance, the SBC must be provided no
later than the date the written application materials are distributed.
(2) If renewal or reissuance is automatic, the SBC must be provided
no later than 30 days prior to the first day of the new plan or policy
year; however, with respect to an insured plan, if the policy,
certificate, or contract of insurance has not been issued or renewed
before such 30-day period, the SBC must be provided as soon as
practicable but in no event later than seven business days after
issuance of the new policy, certificate, or contract of insurance, or
the receipt of written confirmation of intent to renew, whichever is
earlier.
(D) Upon request. If a group health plan (or its sponsor) requests
an SBC or summary information about a health insurance product from a
health insurance issuer offering group health insurance coverage, an
SBC must be provided as soon as practicable, but in no event later than
seven business days following receipt of the request.
(ii) SBC provided by a group health insurance issuer and a group
health plan to participants and beneficiaries--(A) In general. A group
health plan (including its administrator, as defined under section
3(16) of ERISA), and a health insurance issuer offering group health
insurance coverage, must provide an SBC to a participant or beneficiary
(as defined under sections 3(7) and 3(8) of ERISA), and consistent with
paragraph (a)(1)(iii) of this section, with respect to each benefit
package offered by the plan or issuer for which the participant or
beneficiary is eligible.
(B) Upon application. The SBC must be provided as part of any
written application materials that are distributed by the plan or
issuer for enrollment. If the plan or issuer does not distribute
written application materials for enrollment, the SBC must be
distributed no later than the first date on which the participant is
eligible to
[[Page 8698]]
enroll in coverage for the participant or any beneficiaries.
(C) By first day of coverage (if there are changes). If there is
any change to the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
plan or issuer must update and provide a current SBC to a participant
or beneficiary no later than the first day of coverage.
(D) Special enrollees. The plan or issuer must provide the SBC to
special enrollees (as described in Sec. 54.9801-6) no later than the
date by which a summary plan description is required to be provided
under the timeframe set forth in ERISA section 104(b)(1)(A) and its
implementing regulations, which is 90 days from enrollment.
(E) Upon renewal. If the plan or issuer requires participants or
beneficiaries to renew in order to maintain coverage (for example, for
a succeeding plan year), the plan or issuer must provide a new SBC when
the coverage is renewed, as follows:
(1) If written application is required for renewal (in either paper
or electronic form), the SBC must be provided no later than the date on
which the written application materials are distributed.
(2) If renewal is automatic, the SBC must be provided no later than
30 days prior to the first day of the new plan or policy year; however,
with respect to an insured plan, if the policy, certificate, or
contract of insurance has not been issued or renewed before such 30-day
period, the SBC must be provided as soon as practicable but in no event
later than seven business days after issuance of the new policy,
certificate, or contract of insurance, or the receipt of written
confirmation of intent to renew, whichever is earlier.
(F) Upon request. A plan or issuer must provide the SBC to
participants or beneficiaries upon request for an SBC or summary
information about the health coverage, as soon as practicable, but in
no event later than seven business days following receipt of the
request.
(iii) Special rules to prevent unnecessary duplication with respect
to group health coverage--(A) An entity required to provide an SBC
under this paragraph (a)(1) with respect to an individual satisfies
that requirement if another party provides the SBC, but only to the
extent that the SBC is timely and complete in accordance with the other
rules of this section. Therefore, for example, in the case of a group
health plan funded through an insurance policy, the plan satisfies the
requirement to provide an SBC with respect to an individual if the
issuer provides a timely and complete SBC to the individual.
(B) If a single SBC is provided to a participant and any
beneficiaries at the participant's last known address, then the
requirement to provide the SBC to the participant and any beneficiaries
is generally satisfied. However, if a beneficiary's last known address
is different than the participant's last known address, a separate SBC
is required to be provided to the beneficiary at the beneficiary's last
known address.
(C) With respect to a group health plan that offers multiple
benefit packages, the plan or issuer is required to provide a new SBC
automatically upon renewal only with respect to the benefit package in
which a participant or beneficiary is enrolled; SBCs are not required
to be provided automatically upon renewal with respect to benefit
packages in which the participant or beneficiary is not enrolled.
However, if a participant or beneficiary requests an SBC with respect
to another benefit package (or more than one other benefit package) for
which the participant or beneficiary is eligible, the SBC (or SBCs, in
the case of a request for SBCs relating to more than one benefit
package) must be provided upon request as soon as practicable, but in
no event later than seven business days following receipt of the
request.
(2) Content--(i) In general. Subject to paragraph (a)(2)(iii) of
this section, the SBC must include the following:
(A) Uniform definitions of standard insurance terms and medical
terms so that consumers may compare health coverage and understand the
terms of (or exceptions to) their coverage, in accordance with guidance
as specified by the Secretary;
(B) A description of the coverage, including cost sharing, for each
category of benefits identified by the Secretary in guidance;
(C) The exceptions, reductions, and limitations of the coverage;
(D) The cost-sharing provisions of the coverage, including
deductible, coinsurance, and copayment obligations;
(E) The renewability and continuation of coverage provisions;
(F) Coverage examples, in accordance with paragraph (a)(2)(ii) of
this section;
(G) With respect to coverage beginning on or after January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) and whether the
plan's or coverage's share of the total allowed costs of benefits
provided under the plan or coverage meets applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, certificate, or contract of insurance should be
consulted to determine the governing contractual provisions of the
coverage;
(I) Contact information for questions and obtaining a copy of the
plan document or the insurance policy, certificate, or contract of
insurance (such as a telephone number for customer service and an
Internet address for obtaining a copy of the plan document or the
insurance policy, certificate, or contract of insurance);
(J) For plans and issuers that maintain one or more networks of
providers, an Internet address (or similar contact information) for
obtaining a list of network providers;
(K) For plans and issuers that use a formulary in providing
prescription drug coverage, an Internet address (or similar contact
information) for obtaining information on prescription drug coverage;
and
(L) An Internet address for obtaining the uniform glossary, as
described in paragraph (c) of this section, as well as a contact phone
number to obtain a paper copy of the uniform glossary, and a disclosure
that paper copies are available.
(ii) Coverage examples. The SBC must include coverage examples
specified by the Secretary in guidance that illustrate benefits
provided under the plan or coverage for common benefits scenarios
(including pregnancy and serious or chronic medical conditions) in
accordance with this paragraph (a)(2)(ii).
(A) Number of examples. The Secretary may identify up to six
coverage examples that may be required in an SBC.
(B) Benefits scenarios. For purposes of this paragraph (a)(2)(ii),
a benefits scenario is a hypothetical situation, consisting of a sample
treatment plan for a specified medical condition during a specific
period of time, based on recognized clinical practice guidelines as
defined by the National Guideline Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
assumptions, including the relevant items and services and
reimbursement information, for each claim in the benefits scenario.
(C) Illustration of benefit provided. For purposes of this
paragraph (a)(2)(ii), to illustrate benefits provided under the plan or
coverage for a particular benefits scenario, a plan or issuer simulates
claims processing in accordance with
[[Page 8699]]
guidance issued by the Secretary to generate an estimate of what an
individual might expect to pay under the plan, policy, or benefit
package. The illustration of benefits provided will take into account
any cost sharing, excluded benefits, and other limitations on coverage,
as specified by the Secretary in guidance.
(iii) Coverage provided outside the United States. In lieu of
summarizing coverage for items and services provided outside the United
States, a plan or issuer may provide an Internet address (or similar
contact information) for obtaining information about benefits and
coverage provided outside the United States. In any case, the plan or
issuer must provide an SBC in accordance with this section that
accurately summarizes benefits and coverage available under the plan or
coverage within the United States.
(3) Appearance. A group health plan and a health insurance issuer
must provide an SBC in the form, and in accordance with the
instructions for completing the SBC, that are specified by the
Secretary in guidance. The SBC must be presented in a uniform format,
use terminology understandable by the average plan enrollee, not exceed
four double-sided pages in length, and not include print smaller than
12-point font.
(4) Form--(i) An SBC provided by an issuer offering group health
insurance coverage to a plan (or its sponsor), may be provided in paper
form. Alternatively, the SBC may be provided electronically (such as by
email or an Internet posting) if the following three conditions are
satisfied--
(A) The format is readily accessible by the plan (or its sponsor);
(B) The SBC is provided in paper form free of charge upon request;
and
(C) If the electronic form is an Internet posting, the issuer
timely advises the plan (or its sponsor) in paper form or email that
the documents are available on the Internet and provides the Internet
address.
(ii) An SBC provided by a group health plan or health insurance
issuer to a participant or beneficiary may be provided in paper form.
Alternatively, the SBC may be provided electronically (such as by email
or an Internet posting) if the requirements of this paragraph
(a)(4)(ii) are met.
(A) With respect to participants and beneficiaries covered under
the plan, the SBC may be provided electronically if the requirements of
29 CFR 2520.104b-1 are met.
(B) With respect to participants and beneficiaries who are eligible
but not enrolled for coverage, the SBC may be provided electronically
if--
(1) The format is readily accessible;
(2) The SBC is provided in paper form free of charge upon request;
and
(3) In a case in which the electronic form is an Internet posting,
the plan or issuer timely notifies the individual in paper form (such
as a postcard) or email that the documents are available on the
Internet, provides the Internet address, and notifies the individual
that the documents are available in paper form upon request.
(5) Language. A group health plan or health insurance issuer must
provide the SBC in a culturally and linguistically appropriate manner.
For purposes of this paragraph (a)(5), a plan or issuer is considered
to provide the SBC in a culturally and linguistically appropriate
manner if the thresholds and standards of Sec. 54.9815-2719T(e) are
met as applied to the SBC.
(b) Notice of modification. If a group health plan, or health
insurance issuer offering group health insurance coverage, makes any
material modification (as defined under section 102 of ERISA) in any of
the terms of the plan or coverage that would affect the content of the
SBC, that is not reflected in the most recently provided SBC, and that
occurs other than in connection with a renewal or reissuance of
coverage, the plan or issuer must provide notice of the modification to
enrollees not later than 60 days prior to the date on which the
modification will become effective. The notice of modification must be
provided in a form that is consistent with paragraph (a)(4) of this
section.
(c) Uniform glossary--(1) In general. A group health plan, and a
health insurance issuer offering group health insurance coverage, must
make available to participants and beneficiaries the uniform glossary
described in paragraph (c)(2) of this section in accordance with the
appearance and the form and manner requirements of paragraphs (c)(3)
and (4) of this section.
(2) Health-coverage-related terms and medical terms. The uniform
glossary must provide uniform definitions, specified by the Secretary
in guidance, of the following health-coverage-related terms and medical
terms:
(i) Allowed amount, appeal, balance billing, co-insurance,
complications of pregnancy, co-payment, deductible, durable medical
equipment, emergency medical condition, emergency medical
transportation, emergency room care, emergency services, excluded
services, grievance, habilitation services, health insurance, home
health care, hospice services, hospitalization, hospital outpatient
care, in-network co-insurance, in-network co-payment, medically
necessary, network, non-preferred provider, out-of-network co-
insurance, out-of-network co-payment, out-of-pocket limit, physician
services, plan, preauthorization, preferred provider, premium,
prescription drug coverage, prescription drugs, primary care physician,
primary care provider, provider, reconstructive surgery, rehabilitation
services, skilled nursing care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary determines are important to
define so that individuals and employers may compare and understand the
terms of coverage and medical benefits (including any exceptions to
those benefits), as specified in guidance.
(3) Appearance. A group health plan, and a health insurance issuer,
must provide the uniform glossary with the appearance specified by the
Secretary in guidance to ensure the uniform glossary is presented in a
uniform format and uses terminology understandable by the average plan
enrollee.
(4) Form and manner. A plan or issuer must make the uniform
glossary described in this paragraph (c) available upon request, in
either paper or electronic form (as requested), within seven business
days after receipt of the request.
(d) Preemption. State laws that require a health insurance issuer
to provide an SBC that supplies less information than required under
paragraph (a) of this section are preempted.
(e) Failure to provide. A group health plan or health insurance
issuer that willfully fails to provide information required under this
section to a participant or beneficiary is subject to a fine of not
more than $1,000 for each such failure. A failure with respect to each
participant or beneficiary constitutes a separate offense for purposes
of this paragraph (e).
(f) Effective/Applicability date--(1) This section is applicable to
group health plans and group health insurance issuers in accordance
with this paragraph (f). (See Sec. 54.9815-1251T(d), providing that
this section applies to grandfathered health plans.)
(i) For disclosures with respect to participants and beneficiaries
who enroll or re-enroll through an open enrollment period (including
re-enrollees and late enrollees), this section applies beginning on the
first day of the first open enrollment period that begins on or after
September 23, 2012; and
(ii) For disclosures with respect to participants and beneficiaries
who
[[Page 8700]]
enroll in coverage other than through an open enrollment period
(including individuals who are newly eligible for coverage and special
enrollees), this section applies beginning on the first day of the
first plan year that begins on or after September 23, 2012.
(2) For disclosures with respect to plans, this section is
applicable to health insurance issuers beginning September 23, 2012.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 3. The authority citation for part 602 continues to read in part
as follows:
Authority: 26 U.S.C. 7805. * * *
0
Par. 4. Section 602.101(b) is amended by adding the following entry in
numerical order to the table to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
* * * * *
54.9815-2715............................................ 1545-2229
* * * * *
------------------------------------------------------------------------
Department of Labor
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons stated in the preamble, the Employee Benefits
Security Administration amends 29 CFR part 2590 as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
1. The authority citation for part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b),
Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d),
Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub.
L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat.
1029; Secretary of Labor's Order 3-2010, 75 FR 55354 (September 10,
2010).
Subpart C--Other Requirements
0
2. Section 2590.715-2715 is added to subpart C to read as follows:
Sec. 2590.715-2715 Summary of benefits and coverage and uniform
glossary.
(a) Summary of benefits and coverage--(1) In general. A group
health plan (and its administrator as defined in section 3(16)(A) of
ERISA), and a health insurance issuer offering group health insurance
coverage, is required to provide a written summary of benefits and
coverage (SBC) for each benefit package without charge to entities and
individuals described in this paragraph (a)(1) in accordance with the
rules of this section.
(i) SBC provided by a group health insurance issuer to a group
health plan--(A) Upon application. A health insurance issuer offering
group health insurance coverage must provide the SBC to a group health
plan (or its sponsor) upon application for health coverage, as soon as
practicable following receipt of the application, but in no event later
than seven business days following receipt of the application.
(B) By first day of coverage (if there are changes). If there is
any change in the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
issuer must update and provide a current SBC to the plan (or its
sponsor) no later than the first day of coverage.
(C) Upon renewal. If the issuer renews or reissues the policy,
certificate, or contract of insurance (for example, for a succeeding
policy year), the issuer must provide a new SBC as follows:
(1) If written application is required (in either paper or
electronic form) for renewal or reissuance, the SBC must be provided no
later than the date the written application materials are distributed.
(2) If renewal or reissuance is automatic, the SBC must be provided
no later than 30 days prior to the first day of the new plan or policy
year; however, with respect to an insured plan, if the policy,
certificate, or contract of insurance has not been issued or renewed
before such 30-day period, the SBC must be provided as soon as
practicable but in no event later than seven business days after
issuance of the new policy, certificate, or contract of insurance, or
the receipt of written confirmation of intent to renew, whichever is
earlier.
(D) Upon request. If a group health plan (or its sponsor) requests
an SBC or summary information about a health insurance product from a
health insurance issuer offering group health insurance coverage, an
SBC must be provided as soon as practicable, but in no event later than
seven business days following receipt of the request.
(ii) SBC provided by a group health insurance issuer and a group
health plan to participants and beneficiaries--(A) In general. A group
health plan (including its administrator, as defined under section
3(16) of ERISA), and a health insurance issuer offering group health
insurance coverage, must provide an SBC to a participant or beneficiary
(as defined under sections 3(7) and 3(8) of ERISA), and consistent with
paragraph (a)(1)(iii) of this section, with respect to each benefit
package offered by the plan or issuer for which the participant or
beneficiary is eligible.
(B) Upon application. The SBC must be provided as part of any
written application materials that are distributed by the plan or
issuer for enrollment. If the plan or issuer does not distribute
written application materials for enrollment, the SBC must be
distributed no later than the first date on which the participant is
eligible to enroll in coverage for the participant or any
beneficiaries.
(C) By first day of coverage (if there are changes). If there is
any change to the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
plan or issuer must update and provide a current SBC to a participant
or beneficiary no later than the first day of coverage.
(D) Special enrollees. The plan or issuer must provide the SBC to
special enrollees (as described in Sec. 2590.701-6 of this Part) no
later than the date by which a summary plan description is required to
be provided under the timeframe set forth in ERISA section 104(b)(1)(A)
and its implementing regulations, which is 90 days from enrollment.
(E) Upon renewal. If the plan or issuer requires participants or
beneficiaries to renew in order to maintain coverage (for example, for
a succeeding plan year), the plan or issuer must provide a new SBC when
the coverage is renewed, as follows:
(1) If written application is required for renewal (in either paper
or electronic form), the SBC must be provided no later than the date on
which the written application materials are distributed.
(2) If renewal is automatic, the SBC must be provided no later than
30 days prior to the first day of the new plan or policy year; however,
with respect to an insured plan, if the policy, certificate, or
contract of insurance has not been issued or renewed before such 30-day
period, the SBC must be provided as soon as practicable but in no event
later than seven business days after issuance of the new policy,
certificate, or contract of insurance, or the receipt of written
[[Page 8701]]
confirmation of intent to renew, whichever is earlier.
(F) Upon request. A plan or issuer must provide the SBC to
participants or beneficiaries upon request for an SBC or summary
information about the health coverage, as soon as practicable, but in
no event later than seven business days following receipt of the
request.
(iii) Special rules to prevent unnecessary duplication with respect
to group health coverage--(A) An entity required to provide an SBC
under this paragraph (a)(1) with respect to an individual satisfies
that requirement if another party provides the SBC, but only to the
extent that the SBC is timely and complete in accordance with the other
rules of this section. Therefore, for example, in the case of a group
health plan funded through an insurance policy, the plan satisfies the
requirement to provide an SBC with respect to an individual if the
issuer provides a timely and complete SBC to the individual.
(B) If a single SBC is provided to a participant and any
beneficiaries at the participant's last known address, then the
requirement to provide the SBC to the participant and any beneficiaries
is generally satisfied. However, if a beneficiary's last known address
is different than the participant's last known address, a separate SBC
is required to be provided to the beneficiary at the beneficiary's last
known address.
(C) With respect to a group health plan that offers multiple
benefit packages, the plan or issuer is required to provide a new SBC
automatically upon renewal only with respect to the benefit package in
which a participant or beneficiary is enrolled; SBCs are not required
to be provided automatically upon renewal with respect to benefit
packages in which the participant or beneficiary is not enrolled.
However, if a participant or beneficiary requests an SBC with respect
to another benefit package (or more than one other benefit package) for
which the participant or beneficiary is eligible, the SBC (or SBCs, in
the case of a request for SBCs relating to more than one benefit
package) must be provided upon request as soon as practicable, but in
no event later than seven business days following receipt of the
request.
(2) Content--(i) In general. Subject to paragraph (a)(2)(iii) of
this section, the SBC must include the following:
(A) Uniform definitions of standard insurance terms and medical
terms so that consumers may compare health coverage and understand the
terms of (or exceptions to) their coverage, in accordance with guidance
as specified by the Secretary;
(B) A description of the coverage, including cost sharing, for each
category of benefits identified by the Secretary in guidance;
(C) The exceptions, reductions, and limitations of the coverage;
(D) The cost-sharing provisions of the coverage, including
deductible, coinsurance, and copayment obligations;
(E) The renewability and continuation of coverage provisions;
(F) Coverage examples, in accordance with paragraph (a)(2)(ii) of
this section;
(G) With respect to coverage beginning on or after January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) of the Internal
Revenue Code and whether the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage meets
applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, certificate, or contract of insurance should be
consulted to determine the governing contractual provisions of the
coverage;
(I) Contact information for questions and obtaining a copy of the
plan document or the insurance policy, certificate, or contract of
insurance (such as a telephone number for customer service and an
Internet address for obtaining a copy of the plan document or the
insurance policy, certificate, or contract of insurance);
(J) For plans and issuers that maintain one or more networks of
providers, an Internet address (or similar contact information) for
obtaining a list of network providers;
(K) For plans and issuers that use a formulary in providing
prescription drug coverage, an Internet address (or similar contact
information) for obtaining information on prescription drug coverage;
and
(L) An Internet address for obtaining the uniform glossary, as
described in paragraph (c) of this section, as well as a contact phone
number to obtain a paper copy of the uniform glossary, and a disclosure
that paper copies are available.
(ii) Coverage examples. The SBC must include coverage examples
specified by the Secretary in guidance that illustrate benefits
provided under the plan or coverage for common benefits scenarios
(including pregnancy and serious or chronic medical conditions) in
accordance with this paragraph (a)(2)(ii).
(A) Number of examples. The Secretary may identify up to six
coverage examples that may be required in an SBC.
(B) Benefits scenarios. For purposes of this paragraph (a)(2)(ii),
a benefits scenario is a hypothetical situation, consisting of a sample
treatment plan for a specified medical condition during a specific
period of time, based on recognized clinical practice guidelines as
defined by the National Guideline Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
assumptions, including the relevant items and services and
reimbursement information, for each claim in the benefits scenario.
(C) Illustration of benefit provided. For purposes of this
paragraph (a)(2)(ii), to illustrate benefits provided under the plan or
coverage for a particular benefits scenario, a plan or issuer simulates
claims processing in accordance with guidance issued by the Secretary
to generate an estimate of what an individual might expect to pay under
the plan, policy, or benefit package. The illustration of benefits
provided will take into account any cost sharing, excluded benefits,
and other limitations on coverage, as specified by the Secretary in
guidance.
(iii) Coverage provided outside the United States. In lieu of
summarizing coverage for items and services provided outside the United
States, a plan or issuer may provide an Internet address (or similar
contact information) for obtaining information about benefits and
coverage provided outside the United States. In any case, the plan or
issuer must provide an SBC in accordance with this section that
accurately summarizes benefits and coverage available under the plan or
coverage within the United States.
(3) Appearance. A group health plan and a health insurance issuer
must provide an SBC in the form, and in accordance with the
instructions for completing the SBC, that are specified by the
Secretary in guidance. The SBC must be presented in a uniform format,
use terminology understandable by the average plan enrollee, not exceed
four double-sided pages in length, and not include print smaller than
12-point font.
(4) Form--(i) An SBC provided by an issuer offering group health
insurance coverage to a plan (or its sponsor), may be provided in paper
form. Alternatively, the SBC may be provided electronically (such as by
email or an Internet posting) if the following three conditions are
satisfied--
(A) The format is readily accessible by the plan (or its sponsor);
[[Page 8702]]
(B) The SBC is provided in paper form free of charge upon request;
and
(C) If the electronic form is an Internet posting, the issuer
timely advises the plan (or its sponsor) in paper form or email that
the documents are available on the Internet and provides the Internet
address.
(ii) An SBC provided by a group health plan or health insurance
issuer to a participant or beneficiary may be provided in paper form.
Alternatively, the SBC may be provided electronically (such as by email
or an Internet posting) if the requirements of this paragraph
(a)(4)(ii) are met.
(A) With respect to participants and beneficiaries covered under
the plan, the SBC may be provided electronically if the requirements of
29 CFR 2520.104b-1 are met.
(B) With respect to participants and beneficiaries who are eligible
but not enrolled for coverage, the SBC may be provided electronically
if:
(1) The format is readily accessible;
(2) The SBC is provided in paper form free of charge upon request;
and
(3) In a case in which the electronic form is an Internet posting,
the plan or issuer timely notifies the individual in paper form (such
as a postcard) or email that the documents are available on the
Internet, provides the Internet address, and notifies the individual
that the documents are available in paper form upon request.
(5) Language. A group health plan or health insurance issuer must
provide the SBC in a culturally and linguistically appropriate manner.
For purposes of this paragraph (a)(5), a plan or issuer is considered
to provide the SBC in a culturally and linguistically appropriate
manner if the thresholds and standards of Sec. 2590.715-2719(e) of
this Part are met as applied to the SBC.
(b) Notice of modification. If a group health plan, or health
insurance issuer offering group health insurance coverage, makes any
material modification (as defined under section 102 of ERISA) in any of
the terms of the plan or coverage that would affect the content of the
SBC, that is not reflected in the most recently provided SBC, and that
occurs other than in connection with a renewal or reissuance of
coverage, the plan or issuer must provide notice of the modification to
enrollees not later than 60 days prior to the date on which the
modification will become effective. The notice of modification must be
provided in a form that is consistent with paragraph (a)(4) of this
section.
(c) Uniform glossary--(1) In general. A group health plan, and a
health insurance issuer offering group health insurance coverage, must
make available to participants and beneficiaries the uniform glossary
described in paragraph (c)(2) of this section in accordance with the
appearance and form and manner requirements of paragraphs (c)(3) and
(4) of this section.
(2) Health-coverage-related terms and medical terms. The uniform
glossary must provide uniform definitions, specified by the Secretary
in guidance, of the following health-coverage-related terms and medical
terms:
(i) Allowed amount, appeal, balance billing, co-insurance,
complications of pregnancy, co-payment, deductible, durable medical
equipment, emergency medical condition, emergency medical
transportation, emergency room care, emergency services, excluded
services, grievance, habilitation services, health insurance, home
health care, hospice services, hospitalization, hospital outpatient
care, in-network co-insurance, in-network co-payment, medically
necessary, network, non-preferred provider, out-of-network co-
insurance, out-of-network co-payment, out-of-pocket limit, physician
services, plan, preauthorization, preferred provider, premium,
prescription drug coverage, prescription drugs, primary care physician,
primary care provider, provider, reconstructive surgery, rehabilitation
services, skilled nursing care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary determines are important to
define so that individuals and employers may compare and understand the
terms of coverage and medical benefits (including any exceptions to
those benefits), as specified in guidance.
(3) Appearance. A group health plan, and a health insurance issuer,
must provide the uniform glossary with the appearance specified by the
Secretary in guidance to ensure the uniform glossary is presented in a
uniform format and uses terminology understandable by the average plan
enrollee.
(4) Form and manner. A plan or issuer must make the uniform
glossary described in this paragraph (c) available upon request, in
either paper or electronic form (as requested), within seven business
days after receipt of the request.
(d) Preemption. See Sec. 2590.731 of this part. In addition, State
laws that require a health insurance issuer to provide an SBC that
supplies less information than required under paragraph (a) of this
section are preempted.
(e) Failure to provide. A group health plan that willfully fails to
provide information required under this section to a participant or
beneficiary is subject to a fine of not more than $1,000 for each such
failure. A failure with respect to each participant or beneficiary
constitutes a separate offense for purposes of this paragraph (e).
(f) Applicability date--(1) This section is applicable to group
health plans and group health insurance issuers in accordance with this
paragraph (f). (See Sec. 2590.715-1251(d), providing that this section
applies to grandfathered health plans.)
(i) For disclosures with respect to participants and beneficiaries
who enroll or re-enroll through an open enrollment period (including
re-enrollees and late enrollees), this section applies beginning on the
first day of the first open enrollment period that begins on or after
September 23, 2012; and
(ii) For disclosures with respect to participants and beneficiaries
who enroll in coverage other than through an open enrollment period
(including individuals who are newly eligible for coverage and special
enrollees), this section applies beginning on the first day of the
first plan year that begins on or after September 23, 2012.
(2) For disclosures with respect to plans, this section is
applicable to health insurance issuers beginning September 23, 2012.
Department of Health and Human Services
45 CFR Subtitle A
For the reasons stated in the preamble, the Department of Health
and Human Services amends 45 CFR part 147 as follows:
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
2. The authority citation for part 147 continues to read as follows:
Authority: Sections 2701 through 2763, 2791, and 2792 of the
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
0
3. Add Sec. 147.200 to read as follows:
Sec. 147.200 Summary of benefits and coverage and uniform glossary.
(a) Summary of benefits and coverage- (1) In general. A group
health plan (and its administrator as defined in section 3(16)(A) of
ERISA), and a health insurance issuer offering group or individual
health insurance coverage, is required to provide a written summary of
benefits and coverage (SBC) for each benefit package without charge to
[[Page 8703]]
entities and individuals described in this paragraph (a)(1) in
accordance with the rules of this section.
(i) SBC provided by a group health insurance issuer to a group
health plan--(A) Upon application. A health insurance issuer offering
group health insurance coverage must provide the SBC to a group health
plan (or its sponsor) upon application for health coverage, as soon as
practicable following receipt of the application, but in no event later
than seven business days following receipt of the application.
(B) By first day of coverage (if there are changes). If there is
any change in the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
issuer must update and provide a current SBC to the plan (or its
sponsor) no later than the first day of coverage.
(C) Upon renewal. If the issuer renews or reissues the policy,
certificate, or contract of insurance (for example, for a succeeding
policy year), the issuer must provide a new SBC as follows:
(1) If written application is required (in either paper or
electronic form) for renewal or reissuance, the SBC must be provided no
later than the date the written application materials are distributed.
(2) If renewal or reissuance is automatic, the SBC must be provided
no later than 30 days prior to the first day of the new plan or policy
year; however, with respect to an insured plan, if the policy,
certificate, or contract of insurance has not been issued or renewed
before such 30-day period, the SBC must be provided as soon as
practicable but in no event later than seven business days after
issuance of the new policy, certificate, or contract of insurance, or
the receipt of written confirmation of intent to renew, whichever is
earlier.
(D) Upon request. If a group health plan (or its sponsor) requests
an SBC or summary information about a health insurance product from a
health insurance issuer offering group health insurance coverage, an
SBC must be provided as soon as practicable, but in no event later than
seven business days following receipt of the request.
(ii) SBC provided by a group health insurance issuer and a group
health plan to participants and beneficiaries--(A) In general. A group
health plan (including its administrator, as defined under section
3(16) of ERISA), and a health insurance issuer offering group health
insurance coverage, must provide an SBC to a participant or beneficiary
(as defined under sections 3(7) and 3(8) of ERISA), and consistent with
paragraph (a)(1)(iii) of this section, with respect to each benefit
package offered by the plan or issuer for which the participant or
beneficiary is eligible.
(B) Upon application. The SBC must be provided as part of any
written application materials that are distributed by the plan or
issuer for enrollment. If the plan or issuer does not distribute
written application materials for enrollment, the SBC must be
distributed no later than the first date on which the participant is
eligible to enroll in coverage for the participant or any
beneficiaries.
(C) By first day of coverage (if there are changes). If there is
any change to the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
plan or issuer must update and provide a current SBC to a participant
or beneficiary no later than the first day of coverage.
(D) Special enrollees. The plan or issuer must provide the SBC to
special enrollees (as described in 45 CFR 146.117) no later than the
date by which a summary plan description is required to be provided
under the timeframe set forth in ERISA section 104(b)(1)(A) and its
implementing regulations, which is 90 days from enrollment.
(E) Upon renewal. If the plan or issuer requires participants or
beneficiaries to renew in order to maintain coverage (for example, for
a succeeding plan year), the plan or issuer must provide a new SBC when
the coverage is renewed, as follows:
(1) If written application is required for renewal (in either paper
or electronic form), the SBC must be provided no later than the date on
which the written application materials are distributed.
(2) If renewal is automatic, the SBC must be provided no later than
30 days prior to the first day of the new plan or policy year; however,
with respect to an insured plan, if the policy, certificate, or
contract of insurance has not been issued or renewed before such 30-day
period, the SBC must be provided as soon as practicable but in no event
later than seven business days after issuance of the new policy,
certificate, or contract of insurance, or the receipt of written
confirmation of intent to renew, whichever is earlier.
(F) Upon request. A plan or issuer must provide the SBC to
participants or beneficiaries upon request for an SBC or summary
information about the health coverage, as soon as practicable, but in
no event later than seven business days following receipt of the
request.
(iii) Special rules to prevent unnecessary duplication with respect
to group health coverage--(A) An entity required to provide an SBC
under this paragraph (a)(1) with respect to an individual satisfies
that requirement if another party provides the SBC, but only to the
extent that the SBC is timely and complete in accordance with the other
rules of this section. Therefore, for example, in the case of a group
health plan funded through an insurance policy, the plan satisfies the
requirement to provide an SBC with respect to an individual if the
issuer provides a timely and complete SBC to the individual.
(B) If a single SBC is provided to a participant and any
beneficiaries at the participant's last known address then the
requirement to provide the SBC to the participant and any beneficiaries
is generally satisfied. However, if a beneficiary's last known address
is different than the participant's last known address, a separate SBC
is required to be provided to the beneficiary at the beneficiary's last
known address.
(C) With respect to a group health plan that offers multiple
benefit packages, the plan or issuer is required to provide a new SBC
automatically upon renewal only with respect to the benefit package in
which a participant or beneficiary is enrolled; SBCs are not required
to be provided automatically upon renewal with respect to benefit
packages in which the participant or beneficiary is not enrolled.
However, if a participant or beneficiary requests an SBC with respect
to another benefit package (or more than one other benefit package) for
which the participant or beneficiary is eligible, the SBC (or SBCs, in
the case of a request for SBCs relating to more than one benefit
package) must be provided upon request as soon as practicable, but in
no event later than seven business days following receipt of the
request.
(iv) SBC provided by a health insurance issuer offering individual
health insurance coverage--(A) Upon application. A health insurance
issuer offering individual health insurance coverage must provide an
SBC to an individual covered under the policy (including every
dependent) upon receiving an application for any health insurance
policy, as soon as practicable following receipt of the application,
but in no event later than seven business days following receipt of the
application.
(B) By first day of coverage (if there are changes). If there is
any change in the information required to be in the SBC that was
provided upon application and before the first day of coverage, the
issuer must update and provide a
[[Page 8704]]
current SBC to the individual no later than the first day of coverage.
(C) Upon renewal. The issuer must provide the SBC to policyholders
annually at renewal. The SBC must reflect any modified policy terms
that would be effective on the first day of the new policy year. The
SBC must be provided as follows:
(1) If written application is required (in either paper or
electronic form) for renewal or reissuance, the SBC must be provided no
later than the date on which the written application materials are
distributed.
(2) If renewal or reissuance is automatic, the SBC must be provided
no later than 30 days prior to the first day of the new policy year;
however, if the policy, certificate, or contract of insurance has not
been issued or renewed before such 30-day period, the SBC must be
provided as soon as practicable but in no event later than seven
business days after issuance of the new policy, certificate, or
contract of insurance, or the receipt of written confirmation of intent
to renew, whichever is earlier.
(D) Upon request. A health insurance issuer offering individual
health insurance coverage must provide an SBC to any individual or
dependent anytime an individual requests an SBC or summary information
about a health insurance product as soon as practicable, but in no
event later than seven business days following receipt of the request.
For purposes of this paragraph (a)(1)(iv)(D), a request for an SBC or
summary information about a health insurance product includes a request
made both before and after an individual submits an application for
coverage.
(v) Special rule to prevent unnecessary duplication with respect to
individual health insurance coverage. If a single SBC is provided to an
individual and any dependents at the individual's last known address,
then the requirement to provide the SBC to the individual and any
dependents is generally satisfied. However, if a dependent's last known
address is different than the individual's last known address, a
separate SBC is required to be provided to the dependent at the
dependents' last known address.
(2) Content--(i) In general. Subject to paragraph (a)(2)(iii) of
this section, the SBC must include the following:
(A) Uniform definitions of standard insurance terms and medical
terms so that consumers may compare health coverage and understand the
terms of (or exceptions to) their coverage, in accordance with guidance
as specified by the Secretary;
(B) A description of the coverage, including cost sharing, for each
category of benefits identified by the Secretary in guidance;
(C) The exceptions, reductions, and limitations of the coverage;
(D) The cost-sharing provisions of the coverage, including
deductible, coinsurance, and copayment obligations;
(E) The renewability and continuation of coverage provisions;
(F) Coverage examples, in accordance with paragraph (a)(2)(ii) of
this section;
(G) With respect to coverage beginning on or after January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) of the Internal
Revenue Code and whether the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage meets
applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, certificate, or contract of insurance should be
consulted to determine the governing contractual provisions of the
coverage;
(I) Contact information for questions and obtaining a copy of the
plan document or the insurance policy, certificate, or contract of
insurance (such as a telephone number for customer service and an
Internet address for obtaining a copy of the plan document or the
insurance policy, certificate, or contract of insurance);
(J) For plans and issuers that maintain one or more networks of
providers, an Internet address (or similar contact information) for
obtaining a list of network providers;
(K) For plans and issuers that use a formulary in providing
prescription drug coverage, an Internet address (or similar contact
information) for obtaining information on prescription drug coverage;
and
(L) An Internet address for obtaining the uniform glossary, as
described in paragraph (c) of this section, as well as a contact phone
number to obtain a paper copy of the uniform glossary, and a disclosure
that paper copies are available.
(ii) Coverage examples. The SBC must include coverage examples
specified by the Secretary in guidance that illustrate benefits
provided under the plan or coverage for common benefits scenarios
(including pregnancy and serious or chronic medical conditions) in
accordance with this paragraph (a)(2)(ii).
(A) Number of examples. The Secretary may identify up to six
coverage examples that may be required in an SBC.
(B) Benefits scenarios. For purposes of this paragraph (a)(2)(ii),
a benefits scenario is a hypothetical situation, consisting of a sample
treatment plan for a specified medical condition during a specific
period of time, based on recognized clinical practice guidelines as
defined by the National Guideline Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
assumptions, including the relevant items and services and
reimbursement information, for each claim in the benefits scenario.
(C) Illustration of benefit provided. For purposes of this
paragraph (a)(2)(ii), to illustrate benefits provided under the plan or
coverage for a particular benefits scenario, a plan or issuer simulates
claims processing in accordance with guidance issued by the Secretary
to generate an estimate of what an individual might expect to pay under
the plan, policy, or benefit package. The illustration of benefits
provided will take into account any cost sharing, excluded benefits,
and other limitations on coverage, as specified by the Secretary in
guidance.
(iii) Coverage provided outside the United States. In lieu of
summarizing coverage for items and services provided outside the United
States, a plan or issuer may provide an Internet address (or similar
contact information) for obtaining information about benefits and
coverage provided outside the United States. In any case, the plan or
issuer must provide an SBC in accordance with this section that
accurately summarizes benefits and coverage available under the plan or
coverage within the United States.
(3) Appearance. A group health plan and a health insurance issuer
must provide an SBC in the form, and in accordance with the
instructions for completing the SBC, that are specified by the
Secretary in guidance. The SBC must be presented in a uniform format,
use terminology understandable by the average plan enrollee (or, in the
case of individual market coverage, the average individual covered
under a health insurance policy), not exceed four double-sided pages in
length, and not include print smaller than 12-point font. A health
insurance issuer offering individual health insurance coverage must
provide the SBC as a stand-alone document.
(4) Form--(i) An SBC provided by an issuer offering group health
insurance coverage to a plan (or its sponsor), may
[[Page 8705]]
be provided in paper form. Alternatively, the SBC may be provided
electronically (such as by email or an Internet posting) if the
following three conditions are satisfied--
(A) The format is readily accessible by the plan (or its sponsor);
(B) The SBC is provided in paper form free of charge upon request;
and
(C) If the electronic form is an Internet posting, the issuer
timely advises the plan (or its sponsor) in paper form or email that
the documents are available on the Internet and provides the Internet
address.
(ii) An SBC provided by a group health plan or health insurance
issuer to a participant or beneficiary may be provided in paper form.
Alternatively, for non-Federal governmental plans, the SBC may be
provided electronically if the plan conforms to either the substance of
the ERISA provisions at 29 CFR 2590.715-2715(a)(4)(ii), or the
provisions governing electronic disclosure for individual health
insurance issuers set forth in paragraph (a)(4)(iii) of this section.
(iii) An issuer offering individual health insurance coverage must
provide an SBC in a manner that can reasonably be expected to provide
actual notice in paper or electronic form.
(A) An issuer satisfies the requirements of this paragraph
(a)(4)(iii) if the issuer:
(1) Hand-delivers a printed copy of the SBC to the individual or
dependent;
(2) Mails a printed copy of the SBC to the mailing address provided
to the issuer by the individual or dependent;
(3) Provides the SBC by email after obtaining the individual's or
dependent's agreement to receive the SBC or other electronic
disclosures by email;
(4) Posts the SBC on the Internet and advises the individual or
dependent in paper or electronic form, in a manner compliant with
paragraphs (a)(4)(iii)(A)(1) through (3), that the SBC is available on
the Internet and includes the applicable Internet address; or
(5) Provides the SBC by any other method that can reasonably be
expected to provide actual notice.
(B) An SBC may not be provided electronically unless:
(1) The format is readily accessible;
(2) The SBC is placed in a location that is prominent and readily
accessible;
(3) The SBC is provided in an electronic form which can be
electronically retained and printed;
(4) The SBC is consistent with the appearance, content, and
language requirements of this section;
(5) The issuer notifies the individual or dependent that the SBC is
available in paper form without charge upon request and provides it
upon request.
(C) Deemed compliance. A health insurance issuer offering
individual health insurance coverage that provides the content required
under paragraph (a)(2) of this section, as specified in guidance
published by the Secretary, to the federal health reform Web portal
described in 45 CFR 159.120 will be deemed to satisfy the requirements
of paragraph (a)(1)(iv)(D) of this section with respect to a request
for summary information about a health insurance product made prior to
an application for coverage. However, nothing in this paragraph should
be construed as otherwise limiting such issuer's obligations under this
section.
(5) Language. A group health plan or health insurance issuer must
provide the SBC in a culturally and linguistically appropriate manner.
For purposes of this paragraph (a)(5), a plan or issuer is considered
to provide the SBC in a culturally and linguistically appropriate
manner if the thresholds and standards of Sec. 147.136(e) of this
chapter are met as applied to the SBC.
(b) Notice of modification. If a group health plan, or health
insurance issuer offering group or individual health insurance
coverage, makes any material modification (as defined under section 102
of ERISA) in any of the terms of the plan or coverage that would affect
the content of the SBC, that is not reflected in the most recently
provided SBC, and that occurs other than in connection with a renewal
or reissuance of coverage, the plan or issuer must provide notice of
the modification to enrollees (or, in the case of individual market
coverage, an individual covered under a health insurance policy) not
later than 60 days prior to the date on which the modification will
become effective. The notice of modification must be provided in a form
that is consistent with paragraph (a)(4) of this section.
(c) Uniform glossary--(1) In general. A group health plan, and a
health insurance issuer offering group health insurance coverage, must
make available to participants and beneficiaries, and a health
insurance issuer offering individual health insurance coverage must
make available to applicants, policyholders, and covered dependents,
the uniform glossary described in paragraph (c)(2) of this section in
accordance with the appearance and form and manner requirements of
paragraphs (c)(3) and (4) of this section.
(2) Health-coverage-related terms and medical terms. The uniform
glossary must provide uniform definitions, specified by the Secretary
in guidance, of the following health-coverage-related terms and medical
terms:
(i) Allowed amount, appeal, balance billing, co-insurance,
complications of pregnancy, co-payment, deductible, durable medical
equipment, emergency medical condition, emergency medical
transportation, emergency room care, emergency services, excluded
services, grievance, habilitation services, health insurance, home
health care, hospice services, hospitalization, hospital outpatient
care, in-network co-insurance, in-network co-payment, medically
necessary, network, non-preferred provider, out-of-network co-
insurance, out-of-network co-payment, out-of-pocket limit, physician
services, plan, preauthorization, preferred provider, premium,
prescription drug coverage, prescription drugs, primary care physician,
primary care provider, provider, reconstructive surgery, rehabilitation
services, skilled nursing care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary determines are important to
define so that individuals and employers may compare and understand the
terms of coverage and medical benefits (including any exceptions to
those benefits), as specified in guidance.
(3) Appearance. A group health plan, and a health insurance issuer,
must provide the uniform glossary with the appearance specified by the
Secretary in guidance to ensure the uniform glossary is presented in a
uniform format and uses terminology understandable by the average plan
enrollee (or, in the case of individual market coverage, an average
individual covered under a health insurance policy).
(4) Form and manner. A plan or issuer must make the uniform
glossary described in this paragraph (c) available upon request, in
either paper or electronic form (as requested), within seven business
days after receipt of the request.
(d) Preemption. For purposes of this section, the provisions of
section 2724 of the PHS Act continue to apply with respect to
preemption of State law. In addition, State laws that require a health
insurance issuer to provide an SBC that supplies less information than
required under paragraph (a) of this section are preempted.
(e) Failure to provide. A health insurance issuer or a non-federal
governmental health plan that willfully fails to provide information
required under this section is subject to a fine of not more than
$1,000 for each such failure. A failure with respect to each covered
individual constitutes a
[[Page 8706]]
separate offense for purposes of this paragraph (e). HHS will enforce
these provisions in a manner consistent with 45 CFR 150.101 through
150.465.
(f) Applicability date--(1) This section is applicable to group
health plans and group health insurance issuers in accordance with this
paragraph (f). (See Sec. 147.140(d), providing that this section
applies to grandfathered health plans.)
(i) For disclosures with respect to participants and beneficiaries
who enroll or re-enroll through an open enrollment period (including
re-enrollees and late enrollees), this section applies beginning on the
first day of the first open enrollment period that begins on or after
September 23, 2012; and
(ii) For disclosures with respect to participants and beneficiaries
who enroll in coverage other than through an open enrollment period
(including individuals who are newly eligible for coverage and special
enrollees), this section applies beginning on the first day of the
first plan year that begins on or after September 23, 2012.
(2) For disclosures with respect to plans, and to individuals and
dependents in the individual market, this section is applicable to
health insurance issuers beginning September 23, 2012.
[FR Doc. 2012-3228 Filed 2-9-12; 11:15 am]
BILLING CODE P