The Summary of Benefits and Coverage (SBC) is a new plan document required by the Affordable Care Act. The purpose of the SBC is to give members information about health insurance benefits in an easy to understand format. All employers and insurance companies are required to use the same document format outlined by the final regulations.
The new SBC has required outlines which include:
- Basic benefits and coverage
- Cost sharing requirements
- Exclusion and limitations of the plan
- Examples of how the plan would cover:
- Normal delivery of a baby
- Type 2 Diabetes
- Information on how to access a uniform glossary that provides definitions of health coverage & medical terminology used in the SBC.
You do not need a SBC for:
- Stand alone dental
- Stand alone vision
- The bank account of a Health Savings Account Health
- FSAs if funded solely with employee pre‐tax salary reductions
To whom must the SBCs be provided?
- Covered EEs
- Their covered dependents
- Anyone who is eligible to enroll
Timelines and Triggers for Distributing the Summary of Benefits and Coverage
Employer Sponsored Plans
- Renewal – No later than 30 calendar days before policy’s effective date
- New business – within 7 days of receipt of application
- Active enrollment periods – SBC must be provided with enrollment materials
- Automatic enrollments – in which members do not have to take any action to sign up, the SBC must be provided no later than 30 days before the effective date.
- Open Enrollment –No later than first day of the open enrollment period
- New hires – SBC needs to be provided with enrollment or application materials. If enrollment materials are not distributed, then no later than the first day of enrollment.
- Special enrollee – any member that gets married, has a child, or loses other coverage and enrolls outside of open enrollment - 90 calendar days from enrollment.
- Upon request – within 7 days
- Material Modification* – No later than 60 days before the effective date of the coverage change. Send a notice of the Material Modification or a revised SBC.
*A material modification, as defined by ERISA is generally described as any modification to the benefits that either enhances or decreases the benefits to subscribers or that changes the content of the SBC.
Individual plans:
- Renewal– No later than 30 days before the first day the new policy’s effective date.
- New Application – within 7 days.
- Upon Request – within 7 days.
Distribution of the Summary of Benefits and Coverage
The SBC may be delivered either in paper form or electronically. If you choose to send the SBC electronically there are certain guidelines that need to be followed to avoid a penalty.
Employees that are already enrolled and have access to the company’s computer system is an integral part of their job.
- The email must protect any private information.
- Include the significance of the SBC
- Notify employee that a free paper copy is also available upon request.
- Maintain the style, content and format requirements of the SBC.
Employees that are already enrolled whose jobs do NOT have access to the company’s computer system as an integral part of their job. Prior consent must be obtained from the employee to receive the SBC electronically.
- The consent can be a paper notification or email and must include the following:
- Types of documents being sent
- How to access the SBC electronically
- Rights to withdraw from consent at any time
- Procedure for withdrawing consent
For anyone who is eligible for coverage but not yet enrolled:
- Paper notification or an email on how to access the electronic SBC.
- Ensure the SBC is readily accessible.
The employer is responsible for the distribution of the SBC to employees. The insurance companies will not be distributing the SBCs directly to your employees. This is important to note since there is a financial penalty attached to these new requirements.
Penalty Information
Included in the new SBC requirements are financial penalties for noncompliance. Employers offering group health insurance coverage that willfully fail to provide the SBC will be subject to a maximum fine of $1,000 daily for each employee plus a daily $100 penalty per employee in excise taxes.
For example if you have 50 employees and fail their SBC for 30 days:
Daily penalty 50 x $1000 = $50,000
30 days x $5000 = $1,500,000
Excise tax 50 x $ 100 = $5000
30 days x $500 = $150,000
TOTAL PENALTY: $1,650,000
However, during the first year of implementation the penalties will not be enforced as long as employers and insurance companies are working diligently and a good faith effort is being made to communicate the SBC to all parties.
If you are a current client of Creekstone Benefits and have any questions regarding the Summary Benefits and Coverage please contact us 740.967.0210.
For more detailed information and examples of the Summary of Benefits and Coverage please click on the links below:
