REG-140038-10 [United States Internal Revenue Bulletin]
Copyright: | (c) 2011 Superintendent of Documents |
Source: | Proquest LLC |
Wordcount: | 25681 |
26 CFR Parts 54 and 602
DEPARTMENT OF LABOR
29 CFR Part 2590
45 CFR Part 147
Notice of Proposed Rulemaking
Summary of Benefits and Coverage and the Uniform Glossary
AGENCIES:
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains proposed regulations regarding disclosure of 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 to help plans and individuals better understand their health coverage, as well as other coverage options. The templates and instructions to be used in making these disclosures are being issued separately in today's
DATE: Comment date. Comments are due on or before
ADDRESSES: Written comments may be submitted to any of the addresses specified below. Any comment that is submitted to any Department will be shared with the other Departments. Please do not submit duplicates.
All comments will be made available to the public. WARNING: Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments are posted on the Internet exactly as received, and can be retrieved by most Internet search engines. No deletions, modifications, or redactions will be made to the comments received, as they are public records. Comments may be submitted anonymously.
* Federal eRulemaking Portal: http://www. régulions, gov. Follow the instructions for submitting comments.
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Comments received by the
You may submit comments in one of four ways (please choose only one of the ways listed):
1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the "More Search Options" tab.
2. By regular mail. You may mail written comments to the following address ONLY:
Attention: CMS-9982-P,
P.O. Box 8016,
Please allow sufficient time for mailed comments to be received before the close of the comment period.
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Mail Stop C4-26-05,
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Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.
Submission of comments on paperwork requirements. You may submit comments on this document's paperwork requirements by following the instructions at the end of the "Collection of Information Requirements" section in this document.
Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.
Comments received timely will also be available for public inspection as they are received, generally beginning approximately three weeks after publication of a document, at the headquarters of the
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* Mail: CC:PA:LPD:PR (REG-140038-10), room 5205,
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SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable Care Act, Pub. L. 111-148, was enacted on
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 27242 (implemented in 29 CFR 2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements of part 7 of ERISA and tide 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 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 HD.
The Departments of
II. Overview of the Proposed 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 in compiling and providing a summary of benefits and coverage (SBC) that "accurately describes the benefits and coverage under the applicable plan or coverage." The statute directs the Departments, in developing such standards, to "consult with the
These regulations generally propose standards for group health plans (and their plan administrators), and health insurance issuers offering group or individual health insurance coverage, that will govern who provides an SBC, who receives an SBC, when the SBC will be provided, and how it will be provided. The Departments invite comment on the standards of the proposed regulations.
In conjunction with these proposed regulations, the Departments are publishing a document today that provides the proposed template for the SBC (with proposed instructions and sample language for completing the template) and the proposed uniform glossary that are identical to the documents that were developed and agreed to by the entire NAIC working group and then voted on and approved by the full NAIC. Instead of proposing possible changes to the NAICs proposed SBC template and related materials, the document published today incorporates all of the NAIC working group's recommended materials (with the exception of a sample coverage example5) and invites public comment. The Departments recognize that changes to the SBC template may be appropriate to accommodate various types of plan and coverage designs, to provide additional information to individuals, or to improve the efficacy of the disclosures recommended by the NAIC. In addition, the SBC template and related documents were drafted by the NAIC primarily for use by health insurance issuers.6
In general, the Departments have heard concerns about the potential redundancies and additional cost associated with elements of the SBC requirement - including the uniform glossary and the coverage facts labels - particularly for those plans and group health insurance issuers that already provide a Summary Plan Description (SPD) under 29 CFR 2520.104b-2. Comments are solicited on whether the SBC should be allowed to be provided within an SPD if the SBC is intact and prominently displayed at the beginning of the SPD (for example, immediately after a cover page and table of contents), and if the timing requirements for providing the SBC (described in paragraph (a) of the proposed regulations) are satisfied. The Departments also welcome further comments on ways the SBC might be coordinated with other group health plan disclosure materials (e.g., application and open season materials) to communicate effectively with participants and beneficiaries about their coverage and make it easy for them to compare coverage options while also avoiding undue cost or burden on plans and group health insurance issuers.
Consistent with the goals of balancing effective communication and ease of comparison for individuals with minimization of cost and duplication, other sections of this preamble outline and invite comment on potential approaches to major elements of the SBC - the statutorily -required uniform glossary and the coverage examples - in the interest of streamlining standards and making implementation of these components as helpful and user-friendly for individuals, and as workable and efficient as possible.
As discussed below, PHS Act section 2715 generally directs group health plans and health insurance issuers to comply with the SBC requirements beginning on or after
2. Providing the SBC
Paragraph (a) of the proposed regulations implements the general disclosure requirement and sets forth the proposed standards for who provides an SBC, to whom, and when. PHS Act section 2715 generally sets forth 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
In general, the proposed rules direct that the SBC be provided when a plan or individual is comparing health coverage options. If the information in the SBC changes between the time of application, when the coverage is offered, and when a policy is issued (often the case only for individual market coverage), the proposal would require that an updated SBC be provided. If the information is unchanged, the SBC does not need to be provided again, except upon request. This general approach is explained more fully below.
a. Provision of the SBC Automatically by an Issuer to a Plan
Paragraph (a)(1)(i) of the proposed regulations provides that a health insurance issuer offering group health insurance coverage provide the SBC to a group health plan (including, for this purpose, its sponsor) upon an application or request for information by the plan about the health coverage (see section U.A.2.C. of this preamble, below, for a discussion of this proposal). Under this proposal, the SBC must be provided as soon as practicable following the request, but in no event later than seven days following the request. If an SBC is provided upon request for information about health coverage and the plan subsequently applies for health coverage, a second SBC will be provided automatically only if the information in the SBC has changed. If there is a change to the information in the SBC before the coverage is offered, or before the first day of coverage, the issuer must update and provide a current SBC to the plan no later than the date of the offer (or no later than the first day of coverage, as applicable). The Departments recognize that often the only change to the SBC is a final premium quote (usually in the individual health insurance market or the small group market). The Departments request comments on whether, in such circumstances, premium information can be provided in another way that is easily understandable and useful to plan sponsors and individuals, other than by sending a new, full SBC.
An issuer also must provide a new SBC if and when the policy, certificate, or contract (for simplicity, referred to collectively as a "policy" in the remainder of this preamble) is renewed or reissued. In the case of renewal or reissuance, if the issuer requires written application materials for renewal (in either paper or electronic form), it must provide the SBC no later than the date the materials are distributed. 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.
b. Provision of the SBC Automatically by a Plan or Issuer to Participants and Beneficiaries
Under paragraph (a)(1)(ii) of the proposed 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 beneficiary8 with respect to each benefit package offered for which the participant or beneficiary is eligible.9 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 and any beneficiaries. If there is any change to the information required to be in the SBC 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.
The plan or issuer must also provide the SBC to special enrollees within seven days of a request for enrollment pursuant to a special enrollment period. 10 Additionally, the plan or issuer must provide a new SBC if and when the coverage is renewed. Specifically, if written application materials are required for renewal (in either paper or electronic form), the SBC must be provided no later than the date the materials are distributed. If renewal is automatic, the proposed rules provide that the SBC must be provided no later than 30 days prior to the first day of coverage in the new plan year.
c. Provision of the SBC Upon Request
The regulations propose that a health insurance issuer offering group health insurance coverage provide the SBC to a group health plan (and a plan or issuer must provide the SBC to a participant or beneficiary) upon request, as soon as practicable, but in no event later than seven days following the request. Although PHS Act section 2715 does not specifically reference furnishing SBCs on request, PHS Act section 2715(a) authorizes the Departments to develop standards for providing the SBC to applicants, enrollees, policyholders, and certificate holders. The Departments believe that this provision recognizes that plans and individuals may need or desire the information provided in the SBC at times other than those set forth in the statute to ensure that the plans and individuals have continuous access to coverage and cost information to make informed choices about health coverage.11 In addition, while the "upon request" provision may result in some additional administrative work for plans and issuers, the Departments have used discretion elsewhere in these proposed regulations to create special rules for avoiding duplication and also propose to reduce burden by facilitating electronic transmittal of the SBC, where appropriate. Accordingly, the Departments have sought to balance providing consumer access to SBCs with minimizing burdens on employers and insurers.
d. Special Rules to Prevent Unnecessary Duplication With Respect to Group Health Coverage
The Departments propose, in paragraph (a)( l)(iii), three rules to streamline provision of the SBC and prevent unnecessary duplication with respect to group health plan coverage. First, the requirement to provide an SBC will be considered satisfied for all entities if the SBC is provided by any entity, so long as all timing and content requirements are also satisfied. For example, if a health insurance issuer offering group health insurance coverage provides a complete, timely SBC to the plan's participants and beneficiaries, the plan's requirement to provide the SBC will be satisfied.
Second, if a participant and any beneficiaries are known to reside at the same address, providing a single SBC to that address will satisfy the obligation to provide the SBC for all individuals residing at that address. However, if a beneficiary's last known address is different than the participant's last known address, a separate SBC must be provided to the beneficiary at the beneficiary's last known address.
Finally, to further reduce unnecessary duplication with respect to a group health plan that offers multiple benefit packages, in connection with renewal, the plan and issuer only need to automatically provide a new SBC with respect to the benefit package in which a participant or beneficiary is enrolled. SBCs are not required to be provided automatically 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 for which the participant or beneficiary is eligible, the SBC must be provided as soon as practicable, but in no event later than seven days following the request.
e. Provision of the SBC by an Issuer Offering Individual Market Coverage
Under these regulations, the Secretary of HHS sets forth proposed standards applicable to individual health insurance coverage for who provides an SBC, to whom, and when. The intent is to parallel the proposed group market requirements described above, with only those changes necessary to reflect the differences between the two markets. For example, individual policyholders 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 as soon as practicable after receiving a request for application or a request for information, but in no event later than seven days after receipt of the request. If an individual later applies for the same policy, a second SBC is required to be provided only if the information in the SBC has changed.
An issuer that makes an offer of coverage must provide an updated SBC only if it has modified the terms of coverage for the individual (including as a result of medical underwriting) that are required to be reflected in the SBC. Similarly, when an individual accepts the offer of coverage, if any terms are modified before the first day of coverage, an updated SBC must again be provided no later than the first day of coverage. A health insurance issuer will provide an SBC annually at renewal, no later than 30 days before the start of the new policy year, reflecting any changes effective for the new policy year.
Finally, similar to the group health coverage rules, 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), if all those individuals are known to reside at the same address, a single SBC may be provided to that address. This single SBC will satisfy the requirement to provide the SBC for all individuals residing at that address. However, if an individual's last known address is different than the last known address of the individual requesting coverage, the policyholder, or a dependent of either, a separate SBC must be provided to that individual at the individual's last known 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 parallel the content elements set forth in the statute. As discussed above, the Departments are issuing a document that proposes to use the NAICs recommended SBC template and instructions to satisfy the SBC content and appearance requirements of PHS Act section 2715.
A few of the content elements included in the NAICs recommendations warrant further explanation and discussion. The template developed by the NAIC working group and transmitted to the Departments includes four elements not specified in the statute. Consistent with the Departments' approach of including all of the NAICs recommended materials, the proposed regulations include these additional recommended elements. The four additional elements are: (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 Departments have included these elements in the proposed regulation consistent with the NAICs recommendations. PHS Act section 2715(a) requires the Departments to develop regulations for provision of an SBC that accurately describes benefits and coverage, which includes the statutory content elements listed above, but the Departments believe they are not limited to them. The statute also requires the Departments to consult with the NAIC on the development of the standards for the SBC, which includes content. The Departments' proposal includes all of the NAICs recommendations, including the additional content, and the Departments invite comments on this approach and the four additional SBC content elements. For example, with respect to the requirement to include an Internet address that may be used to obtain a copy of the uniform glossary, the Departments invite comments on whether the SBC also should disclose the option to receive a paper copy of the uniform glossary upon request.
The NAIC instructions provide that the premium generally is the premium as charged by the issuer (which may be evidenced in a rate table attached to the SBC),12 or the cost of coverage in the case of self-insured plans. The NAIC instructions further provide that, in the case of a group health plan, a participant or beneficiary should consult the employer for information regarding the actual cost of coverage net of any employer subsidy. This raises issues regarding the ability to compare premium or cost information between coverage options. The Departments request comments regarding whether the SBC should include premium or cost information and if so, the extent to which such information should reflect the actual cost to an individual net of any employer contribution, as well as the extent to which the cost information should include costs for different tiers of coverage (for example, self-only, family). The Departments also request comments on how this information can be provided in a way that allows individuals and plan sponsors to make meaningful comparisons about the cost of their coverage options.
With respect to the definitions, the Departments propose to follow an approach consistent with the recommendations received from the NAIC.13 Specifically, PHS Act section 2715(b)(3)(A) requires plans and issuers to include in the SBC "uniform definitions" of common health insurance terms that are consistent with the standards developed under section 2715(g). PHS Act section 2715(g) directs the Departments to "provide for the development of standards for the definitions of terms used in health insurance coverage," including specified insurance-related terms and medical terms, as well as other terms the Departments determine are important to define.
The NAIC working group adopted a two-part approach to the definitions. First, it drafted a consumer-friendly uniform glossary, which includes definitions of health coverage terminology, to be provided in connection with the SBC. The NAICs uniform glossary provides simple, general, descriptive definitions designed to help consumers understand terms and concepts commonly used in health coverage. For example, "out-of-pocket limit" is defined in the NAICs uniform glossary as:
The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100 % of the allowed amount. This limit never includes your premium, balance-billed charges or health care your health insurance or plan doesn't cover. Some health insurance or plans don't count all of your co-payments, deductibles, co-insurance payments, out-of-network payments or other expenses toward this limit.
In these proposed regulations, and as described more fully below under section U.C. of this preamble under the heading "Uniform Glossary", the Departments propose that the NAIC uniform glossary be used to satisfy the requirements of PHS Act 2715(g).
At the same time, these generic glossary definitions, alone, would not necessarily help consumers understand what terms mean under a given plan or policy, nor would they support meaningful comparison of coverage options under PHS Act section 2715(b)(3)(A) because the generic terms used in the glossary are not planor policy-specific and would not enable consumers to understand what the terms actually mean in the context of a specific contract. Therefore, in addition to the uniform glossary, the NAIC working group also developed a "Why this Matters" column for the draft SBC template (with instructions for plans and issuers to use in completing the SBC template).14 The instructions specify how plans and issuers must describe each coverage component in the SBC. For example, the instructions indicate what information must be provided about a plan's out-of-pocket limit on cost sharing, including whether copayments, out-of-network coinsurance, and deductibles are subject to this limit.
In the Departments' proposal, the "Why this Matters" column in the SBC template, together with the instructions for completing this column, constitute the definitions required to be provided under PHS Act section 2715(b)(3)(A). This approach allows plans and issuers flexibility in how they design benefits and coverage features, but proposes that benefits and features be described in a consistent way so that individuals and employers will understand them and appreciate differences from one plan or policy to the next.
With respect to the element of the SBC regarding a statement about whether a plan or coverage 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 minimum value requirements (minimum essential coverage statement),15 because this content is not relevant until other elements of the Affordable Care Act are implemented, this statement is not in the NAIC recommendations. For the same reason, these proposed regulations provide that the minimum essential coverage statement is not required to be in the SBC until the plan or coverage is required to provide an SBC with respect to coverage beginning on or after
Starting in 2014, certain individuals who purchase health insurance coverage through the new Affordable Insurance Exchanges ("Exchanges") may be eligible for a premium tax credit to help pay for the cost of that coverage. In general, individuals offered affordable minimum essential coverage under an employer-sponsored plan will not be eligible to receive a premium tax credit. Correctly establishing whether an employer is offering affordable minimum essential coverage is important to individuals, employers, and Exchanges and necessitates the verification of certain information about employer coverage, including the information in the minimum essential coverage statement. The Departments are exploring several reporting options under the Affordable Care Act and other applicable statutory authorities17 to determine how information about employer-provided coverage can be provided and verified in a manner that limits the burden on individuals, employers, and Exchanges. Because the statutory SBC elements include the information in the minimum essential coverage statement, the Departments invite comments on how employers might provide this information to employees and the Exchanges in a manner that minimizes duplication and burden. The Departments also recognize that some of the plan level information that is required to be provided in the SBC is also required to be provided under section 6056 of the Code (requiring employers to report to the
The last SBC content item that merits further discussion is the coverage facts label. The statute requires that an SBC contain a "coverage facts label." For ease of reference, the regulations propose to use "coverage examples," the term recommended by the NAIC, in place of the statutory term. As specified in the statute, the proposed regulations provide that the coverage examples illustrate benefits provided under the plan or coverage for common benefits scenarios, including pregnancy and serious or chronic medical conditions. The coverage example would estimate what proportion of expenses under an illustrative benefits scenario might be covered by a given plan or policy. Consumers then could use this information to compare their share of the costs of care under different plan or coverage options to make an informed purchasing decision.
Under the proposed regulations, consistent with the recommendations of the NAIC working group, 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 available through the National Guideline Clearinghouse. 18A benefits scenario would include the information needed to simulate how claims would be processed under the scenario to generate an estimate of cost sharing a consumer could expect to pay under the benefit package. The document published contemporaneously with these proposed regulations includes specific instructions and an HHS website with specific information necessary to simulate benefits covered under the plan or policy for specified benefits scenarios.19
These proposed regulations provide that the Departments may identify up to six coverage examples that may be required in an SBC. A maximum of six coverage examples was discussed by the NAIC working group, so that consumers may easily read, understand, and compare how benefits are provided for different common medical conditions. In future years, the SBC may include coverage examples in addition to the three proposed now. The Departments propose to limit the number of coverage examples to no more than six to limit the burden on plans and issuers and to ensure that there is adequate space in the SBC to present coverage examples in a manner that is easy to read and useful for individuals. A document published contemporaneously with these proposed regulations adopts a phase-in approach to the coverage examples, and uses the three coverage examples recommended by NAIC for inclusion first - having a baby (normal delivery), treating breast cancer, and managing diabetes.20
The Departments invite comments on the proposed coverage examples, whether additional benefits scenarios would be helpful and, if so, what those examples should be. The Departments also invite comments on the benefits and costs associated with developing multiple coverage examples, as well as how multiple coverage examples might promote or hinder the ability to understand and compare terms of coverage. It is anticipated that any additional coverage examples will only be required to be provided prospectively, and that plans and issuers will be provided with adequate time for compliance. Additionally, the Departments invite comments on whether and how to phase in tiie implementation of the requirement to provide coverage examples. For example, one option would provide that in 2012, coverage examples would only need to be provided for the SBCs with respect to a subset of all benefits packages offered by group health plans or health insurance issuers, with coverage examples required to be provided for all benefits packages in later years. Comments are invited on these issues.
Comments are also requested on whether it would be feasible or desirable to permit plans and issuers to input plan- or policy-specific information into a central Internet portal, such as the Federal health care reform website (www.healthcare.gov), that would use the information to generate the coverage examples for each plan or policy. The examples would then be available on the Internet portal for access by individuals. Alternatively, some have suggested that plans and issuers might provide individuals, in a convenient format in the SBC, the several items of plan- or policy-specific information necessary to generate the coverage examples and a reference to the Internet portal, so that individuals could input the information into the Internet portal to generate the coverage examples for the plan or policy. The Departments note that the NAIC considered and rejected the idea of a "cost calculator" or similar tool. The Departments solicit comments on the cost and benefits of these alternatives, including whether such approaches would provide an efficient and effective method for individuals, plans, and issuers to generate or access the coverage examples and how any such approaches could adequately serve individuals who do not have regular access to the Internet (for example, by disclosing in the SBC the option to obtain paper copies of coverage examples generated by the plan or issuer).
4. Appearance.
Section 2715 of the PHS Act sets forth the appearance for 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 proposed regulations, consistent with the NAIC recommendation, interpret the four-page limitation as four double-sided pages.21 The Departments' view is that this approach will enable group health plans, participants and beneficiaries, and individuals in the individual insurance market to receive enough information to shop for, compare, and make informed decisions regarding various coverage options that may be available to them.22 The Departments seek comments on this approach.
Consistent with the NAIC recommendations provided to the Departments,23 under these proposed regulations, a group health plan or a health insurance issuer will provide the SBC as a stand-alone document in the form authorized by the Departments and completed in accordance with the instructions and guidance for completing the SBC that are authorized by the Departments. As noted earlier in this preamble, comments are invited on whether and how the SBC might best be coordinated with the SPD and other group health plan disclosure materials.
5. Form and Manner
a. Group health plan coverage
To facilitate faster and less burdensome disclosure of the SBC, and consistent with PHS Act section 2715(d)(2), the proposed regulations set forth rules to facilitate electronic transmittal of the SBC, where appropriate. Specifically, an SBC provided by a plan or issuer to a participant or beneficiary may be provided in paper form. Alternatively, for plans and issuers subject to ERISA or the Code, the SBC may be provided electronically if the requirements of the
With respect to an SBC provided by an issuer to a plan, the SBC may be provided in paper form or electronically (such as email transmittal or an Internet posting on the issuer's website or on www.healthcare.gov). For electronic forms, the format must be readily accessible by the plan; the SBC must be provided in paper form free of charge upon request; and for Internet postings, the plan must be notified by paper or email that the documents are available on the Internet, and given the web address. The Departments invite comments on whether any clarifications are needed with respect to the "readily accessible" standard (for example, whether the requirements for passwords or special software create a sufficient burden that the documents are not "readily accessible"). The Departments also invite comment on whether modifications or adaptations of the SBC are necessary to facilitate or improve electronic disclosure.
b. Individual health insurance coverage
With respect to the individual market, the proposed regulations set forth the circumstances in which an issuer offering individual health insurance coverage may provide an SBC in either paper or electronic form. Specifically, under these proposed regulations, unless specified otherwise by an individual, an issuer would be required to provide an SBC (and any subsequent SBC) in paper form if, upon the individual's request for information or request for an application, the individual makes the request in person, by phone or by fax, or by U.S. mail or courier service; or if, when submitting an application, the individual completes the application for coverage by hand, by phone or by fax, or by U.S. mail or courier service. As an alternative, the Departments seek comments on whether it might be appropriate to allow issuers to fulfill an individual's request in electronic form, unless the individual requests a paper form.
Under this proposed rule, an issuer may provide an SBC (and any subsequent SBC) in electronic form (such as through an Internet posting or via electronic mail) if an individual requests information or requests an application for coverage electronically; or, if an individual submits an application for coverage electronically.
To ensure actual receipt of an SBC provided in electronic form, these proposed regulations would set forth certain safeguards for electronic disclosure in the individual market. Under the proposed regulations, an issuer that provides the SBC electronically must:
* Request that an individual acknowledge receipt of the SBC;
* Make the SBC available in an electronic format that is readily usable by the general public;
* If the SBC is posted on the Internet, display the SBC in a location that is prominent and readily accessible to the individual and provide timely notice, in electronic or non-electronic form, to each individual who requests information about, or an application for, coverage, that apprises the individual the SBC is available on the Internet and includes the applicable Internet address;
* Promptly provide a paper copy of the SBC upon request without charge, penalty, or the imposition of any other condition or consequence, and provide the individual with the ability to request a paper copy of the SBC both by using the issuer's Web site (such as by clicking on a clearly identified box to make the request) and by calling a readily available telephone line, the number for which is prominently displayed on the issuer's Web site, policy documents, and other marketing materials related to the policy and clearly identified as to purpose; and
* Ensure an SBC provided in electronic form is provided in accordance with the appearance, content, and language requirements of this section.
The Departments welcome comments as to whether these or other safeguards are appropriate.
Finally, consistent with the standards for electronic disclosure, these proposed regulations seek to reduce the burden of providing an SBC to individuals shopping for coverage. Specifically, these proposed regulations provide that a health insurance issuer that complies with the requirements set forth at 45 CFR 159. 120 (75 FR 24470) for reporting to the Federal health care reform insurance Web portal would be deemed to comply with the requirement to provide the SBC to an individual requesting information about coverage prior to submitting an application. Any SBC furnished at the time of application or subsequently, however, would be required to be provided in a form and manner consistent with the rules described above.
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." These proposed regulations 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 providing appeals notices in a culturally and linguistically appropriate manner under PHS Act section 2719, and paragraph (e) of its implementing regulations.25 In general, those rules provide that, in specified counties of
Section 2715(d)(4) of the PHS Act directs that a group health plan or health insurance issuer offering group or individual health insurance coverage to provide notice of a material modification if it makes a material modification (as defined under ERISA section 102, 29 U.S.C. 1022) in any of the terms of the plan or coverage involved that is not reflected in the most recently provided SBC. The proposed regulations interpret the statutory reference to the SBC to mean that only a material modification that would affect the content of the SBC would require plans and issuers to provide this notice. In these circumstances, the notice must be provided to enrouées (or, in the individual market, policyholders) no later than 60 days prior to the date on which such change will become effective, if it is not reflected in the most recent SBC provided and occurs other than in connection with a renewal or reissuance of coverage. 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.27 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), or more stringent requirements for receipt of benefits. As a result, it also includes changes or modifications that reduce or eliminate benefits, increase premiums and cost-sharing, or impose a new referral requirement.
PHS Act section 2715 and these proposed regulations describe the timing for when a notice of material modification must be provided in situations other than upon renewal at the end of a plan or policy year when a new SBC is provided under the rules of paragraph (a) of the proposed rules. 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, paragraph (b) of the proposed regulations would require a notice of modifications to be provided 60 days in advance of the effective date of the change. This notice could be satisfied either by a separate notice describing the material modification or by providing an updated SBC reflecting the modification. For ERISA-covered group health plans subject to PHS Act section 2715, this notice is in advance of the timing under the
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 develop standards for such other terms that will help consumers understand and compare the terms of coverage and the extent of medical benefits (including any exceptions and limitations).
The NAIC working group recommended,28 and the Departments are proposing to adopt for this purpose, inclusion of 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 uniform glossary proposed by the Departments is being issued in a document published elsewhere in today's
The Departments invite comments on the uniform glossary, including the content of the definitions and whether there are additional terms that are important to include in the uniform glossary so that individuals and employers may understand and compare the terms of coverage and the extent of medical benefits (or exceptions to those benefits). For example, the Departments are considering whether glossary definitions of any of the following terms would be helpful: claim, external review, maternity care, preexisting condition, preexisting condition exclusion period, or specialty drug. It is anticipated that any additional terms would be included in the uniform glossary prospectively, and that plans and issuers would be provided adequate time for compliance.
The proposed regulations direct a plan or issuer to make the uniform glossary available upon request within seven days. The timing of disclosure is intended to be generally consistent with the proposed requirement, described in section II.A.2.C of this preamble. A plan or issuer may satisfy this disclosure requirement by providing an Internet address where an individual may review and obtain the uniform glossary, as described in section ?.?.3 of this preamble. This Internet address may be a place the document can be found on the plan's or issuer's website. It may also be a place the document can be found on the website of either the
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)). These provisions apply so that the requirements of part 7 of ERISA and part A of title XXVB 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 XXVn of the PHS Act. Accordingly, State laws that impose on health insurance issuers requirements 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, these proposed regulations would not prevent States from imposing separate, additional disclosure requirements on health insurance issuers. The Departments recognize the need to balance States' interest in information disclosure regarding insurance coverage with the primary objective of PHS Act section 2715 (as stated in the section title) of providing for the development and use of a short, uniform explanation of coverage document so that consumers may make apples-to-apples comparisons of plan and coverage options.
E. Failure to Provide
PHS Act section 2715(f), incorporated into ERISA section 715 and Code section 98 15, provides that a group health plan (ineluding 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.
Enforcement of Part A of Title XXVB of the PHS Act, including section 2715, is generally governed by PHS Act section 2723 and corresponding regulations at 45 CER. 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
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
Paragraph (e) of the regulations proposed by HHS clarifies that States have primary enforcement authority over health insurance issuers for any violations, whether willful or not, using their own remedies. These proposed regulations also clarify 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. Proposed paragraph (e) of the HHS 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 section 2715 of the PHS Act.
2. Departments of Labor and the Treasury
On
a.
b.
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
Section 2715(f) of the PHS Act suba plan sponsor or designated administrator to a fine of not more than
F Applicability
PHS Act section 2715 directs that the requirement for group health plans and health insurance issuers to provide an SBC "prior to any enrollment restriction" applies not later than 24 months after the date of enactment (i.e., beginning on or after
The NAIC transmitted its final materials to the Departments on
The Departments also request comments on whether any special rules are necessary to accommodate expatriate plans. The Departments note that, in the context of group health plan coverage, section 4(b)(4) of ERISA provides that a plan maintained outside
III. Economic Impact and Paperwork Burden
A. Executive Orders 12866 and 13 563 -
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 mies, and of promoting flexibility. This rule has been designated a "significant regulatory action" under section 3(f) of Executive Order 12866. Accordingly, the rale has been reviewed by the
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects (
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. ERISAcovered group health plan sponsors 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.31 Indeed, a recent analysis of SPDs from 40 employer health plans from across
In the individual market, health insurance issuers are subject to various, diverse State disclosure laws. For example, States like Massachusetts,33 New York,34 Rhode Island,35 Utah36 and Vermont37 have established minimum standards for disclosure of health insurance information but 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.38
2. Need for Regulatory Action
The 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.39 Such search costs arise, in part, due to a lack of uniform information across the various coverage options, particularly in the individual market but also in some large employer plans. Although not directly comparable, in Medigap, a market with standardized benefits, the average per beneficiary search cost was estimated at
Given this difficulty in obtaining relevant information, 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 insurance works. Oftentimes, health insurance contracts and benefit descriptions are written in technical language that requires a sophisticated level of health insurance literacy 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
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 2011-2013. Estimates are not provided for subsequent years, because there will be significant changes in the marketplace in 2014 related to the offering of new individual and small group plans through the Affordable Insurance Exchanges, and the wide-ranging scope of these changes makes it difficult to project results for 2014 and beyond.
The direct benefits of these proposed 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 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 proposed regulations would also benefit consumers by reducing the time they spend searching for and compiling health plan and coverage information.
Under the proposed regulations, group health plans and health insurance issuers would incur costs to compile and provide the summary of benefits and coverage disclosures (that includes coverage examples (CEs)) and a uniform glossary of health coverage and medical terms. The Departments estimate that the annualized cost may be around
The Departments anticipate that the provisions of these proposed regulations will help consumers 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.
4. Benefits
In developing these proposed 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 proposed regulations. Nonetheless, the Departments were able to identify several benefits, which are discussed below.
These proposed regulations could generate significant economic and social welfare benefits to consumers. Under these proposed 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 proposed 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 proposed 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.43 For example, a RAND study of
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 information about benefits.45 In particular, the use of coverage examples46 called for by these proposed 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 proposed regulations would 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.
Finally, these proposed 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 proposed 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 proposed regulations direct group health plans and health insurance issuers to compile and provide a summary of benefits and coverage (SBC) (that includes coverage examples (CEs)) 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. However, there is uncertainty arising from general data limitations and the degree to which economies of scale can be realized to reduce costs for issuers and TPAs. The costs estimates employ assumptions that we believe more than fully capture expected issuer and third-party administrator costs, and perhaps overestimate them if, for example, economies of scale are achievable. On the basis of such assumptions, the Departments estimate that issuers and TPAs will incur approximately
General Assumptions
In order to assess the potential administrative costs relating to these proposed regulations, the Departments consulted with industry experts to gain insight into the tasks and level of resources required. Based on these discussions, the Departments estimate that there will be two categories of principal costs associated with the standards in these proposed regulations: one-time start-up costs and 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 (YT) 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 proposed standards; to produce, review, distribute, and update the SBC disclosures;49 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 fully-insured plans will rely on health insurance issuers, and self-insured plans will rely on TPAs, to perform these functions. While plans may prepare the SBC disclosures internally, the Departments 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.50 Thus, the Departments use health insurance issuers and TPAs as the unit of analysis for the purposes of estimating administrative costs.
As discussed in the Medical Loss Ratio (MLR) interim final rule (75 FR 74918), 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.51 The number of covered lives includes individuals in the individual market as well as those in insured group health plans.
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.52 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 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.53 Based on conversations with one 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. These estimates may be adjusted proportionally in the final regulations based upon additional information about the number of TPAs serving self-insured plans.
Because the SBC disclosures are closely related to disclosures that issuers and TPAs provide today as a part of their normal operations (e.g., information on premiums, covered benefits, and cost sharing), the incremental costs of compiling and providing such readily available information in the proposed, standardized format is estimated to be modest.54 The per-issuer or -TPA cost will largely be determined by its 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 it 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
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 provides a synopsis of the number of issuers and TPAs.
Staffing Assumptions
Table 6 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. We welcome comments that provide better information or data about any of the following assumptions.
IT Systems and Workflow Process Changes
The Departments estimate 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. The Departments assume that these IT systems and workflow process changes would be implemented only by IT professionals. Furthermore, the Departments assume that a medium issuer/TPA would need about 75% of large issuer's/TPA's time, and a small issuer would need about 50% of a large issuer's/TPA's time, to implement IT systems and workflow process changes.
The Departments estimate 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. The Departments assume such teams would be comprised of IT professionals (45%), benefits/sales professionals (50%), and attorneys (5%). We 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).
The Departments assume that each issuer/TPA would incur a maintenance cost to maintain IT systems and address changes in regulatory requirements. The Departments assume the maintenance cost would equal 15% of the total one-time burden noted above (for example, the Departments assume it will take a large issuer 15% of 1120 hours, or 168 hours). The Departments further assume that the teams to implement the maintenance tasks would be comprised of IT professionals (55%), benefits/sales professionals (40%), and attorneys (5%).
The Departments assume that the one-time and maintenance costs to implement IT systems changes and to address these regulations would be split between the costs to produce SBCs (50%) and the costs to produce the CEs (50%).
Production and Review of SBCs and CEs
The Departments estimate that each issuer/TPA would need 3 hours to produce, and 1 hour to review, SBCs (not including CEs) for all products. The Departments assume that the 3 hours needed to produce the SBCs would be equally divided between IT professionals and benefits/sales professionals. The Departments assume that the 1 hour needed to review the SBCs would be equally divided between financial managers for benefits/sales professionals and attorneys.
In 2012 and 2013, issuers and TPAs would produce CEs for three benefits scenarios. The Departments estimate it will take each issuer/TPA 90 hours to produce, and 30 hours to review, CEs for all applicable products. The Departments assume that the 90 hours to produce the CEs would be equally divided between IT professionals and benefits/sales professionals. The Departments also assume that the 30 hours to review the CEs would be equally divided between financial managers for benefits/sales professionals and attorneys.
The Departments assume that in 2012 and 2013, respectively, issuers and TPAs would provide, upon request, a paper copy of the uniform glossary to 2.5% and 5% of covered individuals who receive a glossary. The Departments 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.
For each individual who receives the SBC or uniform glossary 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
Distribution Assumptions
The Departments make the following assumptions regarding the distribution of the SBC disclosures (including CEs).57 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:
* 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% of the number of enrollees at any point during the course of a year.58
* In 20 1 3 , about 2% of covered individuals would receive a notice of modifications.59 Further, the burden 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.
* Electronic distribution will 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 is based on the methodology used to analyze the cost burden for the DOL claims procedure regulation (OMB Control Number 1210-0053).60 The estimate for the individual market is based on statistics set forth by the
* SBC disclosures would be distributed with usual marketing and enrollment materials, thus, costs to mail the documents will be negligible. However, notices of modifications would require mailing and supply costs as follows:
* Printing costs
Cost Estimate
The Tables below present costs and burden hours for issuers and TPAs associated the proposed disclosure requirements of PHS Act section 2715. Tables 3-5 contain cost estimates for 2011, 2012, and 2013, derived from the labor hours presented in Table 3 and the hourly rate estimates presented in Table 7, 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).
6. Regulatory Alternatives
Several provisions in these proposed regulations involved policy choices. A first policy choice involved determining how to minimize the burden of providing the SBC to individuals and employers 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, the proposed regulations provide that issuers offering health insurance coverage in connection with the individual market that make information for their standard policies available on the Secretary of HHS's Web portal (HealthCare.gov), in compliance with 45 CFR 159.120, will have satisfied the requirement to provide an SBC to individuals who request information about coverage. The Departments believe this approach promotes regulatory efficiency, minimizing the administrative burden on health insurance issuers without lessening the protections under PHS Act section 2715.
A second 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 the proposed regulations, the Departments allow a plan or issuer to provide a single SBC in circumstances in which a participant and any beneficiaries (or, in the individual market, the primary subscriber and any covered dependents) are known to reside at the same address.
In the group market, the proposed 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.
A third policy choice related to the interpretation of the PHS Act section 2715(d)(4), which requires notice of any material modification (as defined for purposes of section 102 of ERISA) 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 proposed regulations would interpret this provision as requiring notice only for a material modification that (1) affects the information in the SBC; and (2) occurs other than in connection with renewal or reissuance of coverage (that is, a mid-plan or -policy year change). This approach is consistent with the language of section 2715(d)(4) and is more narrowly focused on what we interpret to be the purpose of that provision.
B. Regulatory Flexibility Act -
The Regulatory Flexibility Act (RFA) requires agencies that issue a regulation to analyze options for regulatory relief of small businesses if a proposed 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
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 we prepared for the proposed rule on establishment of the
Additionally, as discussed in the Medical Loss Ratio interim final rule (75 FR 74918), HHS used a data set created from 2009
The Departments estimate that issuers and TPAs earning less than
C. Special Analyses -
For purposes of the
D. Unfunded Mandates Reform Act -
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 states that agencies assess anticipated costs and benefits before issuing any proposed 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
E. Paperwork Reduction Act
1.
Section 2715 of the PHS Act directs the Departments, in consultation with the
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.
In developing these collections of information, the Departments have incorporated the documents recommended by the NAIC, including the SBC template (with instructions, samples and a guide for coverage examples calculations to be used in completing the template) and the uniform glossary. These collection instruments were developed over a period of several months and agreed to by the entire NAIC working group and recommended to the Departments by the NAIC.
Currently, the Departments are soliciting public comments for 60 days concerning these disclosures. The Departments have submitted a copy of these interim final regulations to OMB in accordance with 44 U.S.C. 3507(d) for review of the information collections. The Departments and OMB are particularly interested in comments that:
* Evaluate whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
* Evaluate the accuracy of the agency's estimate of the burden of the collection of information, including the validity of the methodology and assumptions used;
* Enhance the quality, utility, and clarity of the information to be collected; and
* Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, for example, by permitting electronic submission of responses.
Comments should be sent to the
The Departments estimate 858 respondents each year from 2011-2013. 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).62
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.63 The Departments define small issuers as those with total earned premiums less than
2011 Burden Estimate
While the disclosures in these proposed regulations are not required until
With respect to task (1), the Departments estimate about 97,000 burden hours and an equivalent cost of about
With respect to task (2), the Departments estimate about 580,000 burder hours and an equivalent cost of about
The Departments assume the total one-time administrative burden will be divided equally between 2011 and 2012. Thus, in 2011, the Departments estimate a one-time administrative cost of about
2012 Burden Estimate
The estimate 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 SBC responses.
* The Departments assume that of the total number of SBC responses, 38% would be sent electronically in the small and large group markets. Accordingly, the Departments estimate that about 29,000,000 SBCs would be electronically distributed, and about 48,000,000 SBCs would be distributed in paper fonn. The Departments assume there are no costs associated with electronic disclosures; there are costs only with regard to paper disclosures.
Summary of Benefits and Coverage (not including coverage examples) - The estimated hour burden is about 820,000 hours, and the estimated total cost is about
Task 2: Coverage Examples - The estimated hour burden is about hours, and the estimated total cost is about
Task 3: Glossary Requests - The Departments assume that in 2012, issuers and TPAs will begin responding to glossary requests to covered individuals, and that 2.5% of covered individuals, who receive paper SBCs, will request glossaries. The Departments further estimate that the burden and cost of providing the notices to be 2.5% of the burden and cost of distributing paper SBCs, plus an additional cost burden of
Task 4: One-Time Administrative Costs - As mentioned above, the Departments estimate a one-time administrative cost of about
The total 2012 burden estimate is about
2013 Burden Estimate
Task 1: Summary of Benefits and Coverage (not including coverage examples) - The number of SBC responses is assumed to remain constant. Thus, in 2013, the Departments again estimate a total cost of about
Task 2: Coverage Examples - The Departments again estimate a total cost of about
Task 3: Notices of Modifications - The Departments assume that in 2013, issuers and TPAs would send notices of modifications to covered individuals, and that 2% of covered individuals would receive such notice. The Departments further estimate that the burden and cost of providing the notices to be 2% of the combined burden and cost of the SBCs including the coverage examples, plus an additional cost burden for
Task 4: Glossary Requests - The Departments assume that in 2013, issuers and TPAs will again respond to glossary requests to covered individuals, and that 5% of covered individuals, who receive paper SBCs, will request glossaries. The Departments further estimate that the burden and cost of providing the glossaries to be 5% of the burden and cost of distributing paper SBCs, plus an additional cost burden for
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% of the one-time administrative burden. Accordingly, the estimated hour burden is about 100,000 hours, and the estimated total cost is about
The total 2013 cost estimate is about
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:
Title: Affordable Care Act Uniform Explanation of Coverage Documents
OMB Number: XXXX-XXX; XXXX-XXXX.
Affected Public: Business or other for profit; not-for-profit institutions.
Total Respondents: 858.
Total Responses: 80,000,000.
Frequency of Response: On-going.
Estimated Total Annual Burden Hours: 600,000 hours (
Estimated Total Annual Burden Cost:
2.
The Department estimates 333 respondents each year from 2011-2013. 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.65
To account for variation in firm size, the Department estimates a weighted burden on the basis of issuer's 2009 total earned premiums for comprehensive major medical coverage.66 The Department defines small issuers as those with total earned premiums less than
2011 Burden Estimate
While the disclosures in these proposed regulations are not required until
With respect to task (1), the Department estimates about 38,000 burden hours, and an equivalent cost of about
With respect to task (2), the Department estimates 230,000 burden hours, and equivalent cost of out
The Department assumes the total onetime administrative burden will be divided equally between 2011 and 2012. Thus, in 2011, the Department estimates a one-time administrative cost of about
2012 Burden Estimate
The hour and cost burden for the collections of information are as follows:
* The Department estimates that there will be about 13,000,000 SBC responses in 2012.
* The Department assumes that 38 percent of the SBCs would be sent electronically in the group market, and 70 percent of the SBCs would be sent electronically in the individual market. Accordingly, the Department estimates that about 5,900,000 SBCs would be electronically distributed, and about 7,400,000 SBCs would be distributed in paper fonn. The Department assumes there are no costs associated with electronic disclosures, and there are costs only with regard to paper disclosures.
Task 1: Summary of benefits and coverage (not including coverage examples) - The estimated hour burden is about 170,000 hours, and the estimated total cost is about
Task 2: Coverage Examples - The estimated hour burden is about hours, and the estimated total cost is about
Task 3: Glossary Requests - The Department assumes that in 2012, issuers and TPAs will begin responding to glossary requests to covered individuals, and that 2.5% of covered individuals, who receive paper SBCs, will request glossaries. The Departments further estimate that the burden and cost of providing the glossaries to be 2.5% of the burden and cost of distributing paper SBCs, plus an additional cost burden of
Task 4: One-Time Administrative Costs: As mentioned above, the Department estimates a one-time administrative cost of about$ 14,000,000 across the industry and a total of 270,000 burden hours, and assumes this burden will be equally divided between 2011 and 2012. Thus, in 2012, the Department estimates a one-time administrative cost of about
The total 2012 burden estimate is about
2013 Burden Estimate
Task 1: Summary of benefits and coverage (not including coverage examples) - The number of SBC responses is assumed to remain constant. Thus, in 2013, the Department again estimates a total cost of about
Task 2: Coverage Examples - In 2013, the Department again estimates a total cost of about
Task 3: Notices of Modifications - The Department assumes that in 2013, issuers will begin sending notices of modifications to covered individuals, and that 2% of covered individuals will receive such notice. The Department further estimates that the burden and cost of providing the notices to be 2% of the combined burden and cost of the SBCs including the coverage examples, plus an additional cost burden for
Task 4: Glossary Requests - The Department assumes that in 2013, issuers and TPAs will again respond to glossary requests to covered individuals, and that 5% of covered individuals, who receive paper SBCs, will request glossaries. The Department further estimates that the burden and cost of providing the glossaries to be 5% of the burden and cost of distributing paper SBCs, plus an additional cost burden of
Task 5: Maintenance Administrative Costs - In 2013, the Department assume that issuers and TPAs will need to make updates to address changes in standards, and, thus, incur 15% of the one-time administrative burden. Accordingly, the estimated hour burden is about 40,000 hours, and the estimated total cost is about
The total 2013 cost estimate is about
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.
Agency:
Title: Affordable Care Act Uniform Explanation of Coverage Documents
OMB Number: 0938-New.
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: 310,000 hours.
Estimated Total Annual Burden Cost:
To obtain copies of the supporting statement and any related forms for the proposed paperwork collections referenced above, access CMS' Web site at http://www.cms.gov/PaperworkReducûonActofl995/PRAL/list.asp#TopOfPage or email your request, including your address, phone number, OMB number, and CMS document identifier, to Paperwork® cms.hhs.gov, or call the Reports Clearance Office at 410-786-1326.
If you comment on this information collection and recordkeeping requirements, please do either of the following:
1. Submit your comments electronically as specified in the ADDRESSES section of this proposed rule; or
2. Submit your comments to the
Attention: CMS Desk Officer, CMS-9982-P
Fax: 202-395-5806; or
E-mail: [email protected]
E. Federalism Statement-Department of Labor and Department of
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 proposed 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 proposed 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 73 1 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 HTPAA 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 HTPAA indicates that this is intended to be the "narrowest" preemption of State laws (
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
Pursuant to the requirements set forth in section 8(a) of Executive Order 13132, and by the signatures affixed to this proposed rule, the Departments certify that the
IV. Statutory Authority
* * * * *
CMS-9982-P
Dated
Dated
CMS-9982-P
BILLING CODE 4120-01-P
26
Accordingly, 26 CFR Parts 54 and 602 are proposed to be amended as follows:
PART 54- PENSION EXCISE TAXES
Paragraph 1. The authority citation for Part 54 is amended by adding an entry for
§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.
Par. 2. Section 54.9815-2715 is added to read as follows:
§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 rales of this section.
(i) By a group health insurance issuer to a group health plan - (A) A health insurance issuer offering group health insurance coverage must provide the SBC to a group health plan (or its sponsor) upon application or request for information about the health coverage as soon as practicable following the request, but in no event later than seven days following the request. If an SBC is provided upon request for information about health coverage and the plan (or its sponsor) subsequently applies for health coverage, a second SBC must be provided under this paragraph (a)(l)(i)(A) only if the information required to be in the SBC has changed.
(B) If there is any change in the information required to be in the SBC before the coverage is offered, or 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 date of the offer (or no later than the first day of coverage, as applicable).
(C) 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 when the policy, certificate, or contract is renewed or reissued.
(1) In the case of renewal or reissuance, if written application is required for renewal (in either paper or electronic form), the SBC must be provided no later than the date the 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.
(D) If a group health plan (or its sponsor) requests an SBC from a health insurance issuer offering group health insurance coverage, it must be provided as soon as practicable, but in no event later than seven days following the request for an SBC.
(ii) By a group health insurance issuer and a group health plan to participants and beneficiaries - (A) 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 the rules of paragraph (a)(l)(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) 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.
(C) If there is any change to the information required to be in the SBC 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) The plan or issuer must provide the SBC to special enrollees (as described in § 54.9801-6) within seven days of a request for enrollment pursuant to a special enrollment right.
(E) 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.
(1) If written application is required for renewal (in either paper or electronic form), the SBC must be provided no later than the date the materials are distributed.
(2) If renewal is automatic, the SBC must be provided no later than 30 days prior to the first day of coverage under the new plan year.
(F) A plan or issuer must provide the SBC to participants or beneficiaries upon request, as soon as practicable, but in no event later than seven days following the request.
(iii) Special rules to prevent unnecessary duplication with respect to group health coverage - (A) An entity required to provide an SBC under paragraph (a)(1) of this section 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 participant and any beneficiaries are known to reside at the same address, and a single SBC is provided to that address, the requirement to provide the SBC is satisfied with respect to all individuals residing at that address. 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 with respect to benefit packages in which the participant or beneficiary are 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 in accordance with the rules of paragraph (a)(l)(ii) of this section, which requires the SBC to be provided as soon as practicable, but in no event later than seven days following the request.
(2) Content - (i) In general. 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;
(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 the rules of paragraph (a)(2)(ii) of this section;
(G) With respect to coverage beginning on or after
(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;
(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;
(L) An Internet address for obtaining the uniform glossary, as described in paragraph (c) of this section; and
(M) Premiums (or in the case of a selfinsured group health plan, cost of coverage).
(ii) Coverage examples. The SBC must include coverage examples that illustrate benefits provided under the plan or coverage for common benefits scenarios (including pregnancy and serious or chronic medical conditions) that are identified by the Secretary in accordance with the following:
(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 section, 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 available through the National Guideline Clearinghouse,
(C) Demonstration of benefit provided. To demonstrate benefits provided under the plan or coverage, a plan or issuer simulates how claims would be processed under the scenarios provided by the Secretary to generate an estimate of cost sharing a consumer could expect to pay under the benefit package. The demonstration of benefits will take into account any cost sharing, excluded benefits, and other limitations on coverage, as described by the Secretary in guidance.
(3) Appearance. A group health plan and a health insurance issuer must provide an SBC as a stand-alone document in the form authorized by the Secretary and completed in accordance with the instructions for completing the SBC that are authorized 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 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 tiie documents are available on the Internet and provides the Internet address.
(ii) An SBC provided by a plan or issuer to a participant or beneficiary may be provided in paper form. Alternatively, the SBC may be provided electronically if the requirements of 29 CFR 2520.104b-l are met.
(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 §54.98 15-27 19T(e) are met as applied to the SBC.
(b) Notice of modifications. 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 such modification will become effective. The notice of modification must be provided in a form that is consistent with the rules of 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 format requirements of paragraphs (c)(3) and (c)(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, for 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 authorized in guidance, ensuring that the uniform glossary is presented in a uniform format and utilizes 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 days of the request. (Under the rules of paragraph (a) of this section, the form authorized in guidance for the SBC will disclose to participants and beneficiaries their rights to request a copy of the uniform glossary.)
(d) Preemption. With respect to the standards for providing an SBC required under paragraph (a) of this section, 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
(f) Applicability date. This section is applicable beginning
PART 602- OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 3. The authority citation for part 602 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 4. Section 602.101(b) is amended by adding the following entry in numerical order to the table to read as follows:
§602.101 OMB Control numbers.
*****
(b) * * *
1 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.
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.
3 In developing its recommendations, die NAIC considered the results of various consumer testing sponsored by both insurance industry and consumer associations. Specifically, the draft SBC template, including die coverage examples, and the draft uniform glossary underwent consumer testing to assist in determining adjustments to ensure the final product was consumer friendly. Summaries of this testing are available at: http://www.naic.org/documents/committees _b_consumer_information_101012_ahip_focus_group_summary.pdf; http://www.naic.org/documents/committees_b_consumer_information_110603_ahip_bcbsa_consumerjesting.pdf; http://www.naic.org/documents/committees_b_consumer_information_101014_consumers_union.pdf (a more detailed summary of which is accessible at: http://prescriptionforchange.org/pdf/CU_Consumer_Testing_Report_Dec_2010.pdf); and http://www.naic.org/documents/committees_b_consumer_information_110603_consumers_union_testing.pdf.
4 Information on the NAIC working group, including drafts of SBC materials and other supporting documents developed for compliance with PHS Act section 27 15, working group membership lists, and meeting minutes, is available at: http://www.naic.org/committees_b_consumer_information.htm.
5 The Appendices do not include a sample coverage example calculation for breast cancer in die individual market diat was transmitted by die NAIC. Upon review, it appeared mat some of the data in the example might be subject to copyright protection. Moreover, the sample coverage example provided by NAIC was limited to breast cancer in the individual market and did not address the other two coverage examples - maternity coverage and diabetes. Finally, particular coding information and pricing information included in die sample would change annually, which would result in the data included in the sample becoming outdated relatively quickly. Accordingly, HHS is publishing on its website (at http://cciio.cms.gov), the coding and pricing information necessary to perform coverage example calculations for all three coverage examples. HHS will update this information annually.
6
7 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.
8 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 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.
9 Widi respect to insured group healdi plan coverage, PHS Act section 2715 generally places the obligation to provide an SBC on bodi a plan and issuer. As discussed below, under section n.A.2.d., "Special Rules to Prevent Unnecessary Duplication With Respect to Group Health Coverage", if eidier die issuer or die plan provides the SBC, both will have satisfied dieir obligations. As they do with other notices required of bodi plans and issuers under Part 7 of ERISA, Tide XXVII of die PHS Act, and Chapter 100 of die Code, die Departments expect plans and issuers to make contractual arrangements for sending SBCs. Accordingly, die remainder of this preamble generally refers to requirements for plans or issuers.
10 Regulations regarding special enrollment can be found at 26 CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117.
11 Moreover, this provision is consistent with requirements under ERISA section 104(b)(4), which requires ERISA-covered group health plans to provide to participants and beneficiaries, upon request, copies of the instruments under which die plan is established or operated.
12 See page 4 of the NAIC Draft Instruction Guide for Group Policies (available at http://wwwMaic.org/documents/committees_b_consumerJnformation_hhs_dol_siibmission_1107_inst_grp.pdf).
13
14
15 PHS Act section 2715(b)(3)(G) provides that this statement must indicate whether die plan or coverage (1) provides minimum essential coverage (as defined under section 5000A(f) of the Code) and (2) ensures mat the plan's or coverage's share of die total allowed costs of benefits provided under die plan or coverage is not less dian 60 percent of such costs.
16 The minimum essential coverage and minimum value requirements are part of a larger set of healdi coverage reforms diat take effect on
17 In addition to section 2715 of die PHS Act, diese audiorities include, but are not limited to, section 6056 of the Code, as added by section 1514 of the Affordable Care Act (requiring employers to report to die
18 The National Guideline Clearinghouse, within the
19 A general instruction guide for completing the coverage examples portion of the SBC, which is identical to that transmitted by the NAIC, is included in the document published today by the Departments. These instructions, together with specific assumptions for coding data and reimbursement rates published today on HHS's website comprise the Departments' instructions for completing the coverage examples portion of the SBC. See http://cciio.cms.gov. http://www.naic.org/doeuments/committees_b_consumerjnformation_hhs_dol_submission_1107_templo.te_blank.xls. The coding and reimbursement rate assumptions were developed by HHS and are also open for public comment
20 See http://www.naic.org/documents/committees_b_consumer_information_final_coverage_ex.pdf.
21 PHS Act section 2715(b)(1) does not prescribe whedier die 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 die extent of statutorily-required content in PHS Act section 2715(b)(3), as well as die appearance and language requirements of PHS Act sections 2715(b)(1) and (2), die Departments are interpreting four pages to be four double-sided pages, in order to ensure mat this information is presented in an understandable and meaningful way.
22 PHS Act sections 2715(b)(3)(A) and (g)(2) clearly reference consumers comparing coverage and PHS Act section 2715(b)(1) requires a uniform format, to enable shopping and comparing health coverage options.
23
24 On
25 See 75 FR 43330 (
26 The SBC template, as recommended by the NAIC, does not include this statement; however, these proposed regulations would require that plans and issuers include it.
27 See DOL Information Letter,
28
29 See 64 FR 70164 (
30 Section 2715 is applicable to both grandfathered and non-grandfathered health plans. See 26 CFR 54.98 15- 125 1(d), 29 CFR 2590.715-1251(d), and 45 CFR 147.120(d).
31
32 "How Readable Are Summary Plan Descriptions For Healtìi Care Plans?"
33 M.G.L.A 176Q § 5 (2010).
34 NY Ins. Law § 321 7-a (2010).
35
36 Utah Code § 31A-22-613.5 (2010).
37 Division of
38 For example.
39 M. Susan Marquis et al., "Consumer Decision Making in the Individual Health Insurance Market," 25 Health Affairs w.226, w.231-w.232 (
40 Nicole Maestas et al., "Price Variation in Markets with Homogenous Goods: The Case of Medigap,"
41 For example, as discussed earlier, die average Summary Plan Description is written at a first-year college reading level.
42 D.W. Garnick,
43 Judith H. Hibbard and
44 M. Susan Marquis et al., "Consumer Decision Making in the Individual Health Insurance Market," 25 Health Affairs w.226, w.23 1 -w.232 (
45 A study of
46 The NAIC recommends that the term "coverage examples" be used as reference to the statutory term "coverage facts labels," and the Departments concur with this recommendation.
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).
49 Plans and issuers subject to ERISA or die Code may provide SBCs electronically only if the requirements of the
50 See, for example, die
51 The NAIC data actually indicate 442 issuers and 74,830,101 covered lives. But die Departments have limited diese values to only two significant figures given general data uncertainty. For example, the NAIC data do not include issuers regulated by
52
53 See, for example, the
54 For example, issuers in die individual and small group markets already report some of die SBC information to HHS for display in die plan finder on die HealdiCare.gov website. Issuers have been reporting data to HHS since
55 The premium revenue data come from me 2009 NAIC financial statements, also known as 'Blanks," where insurers report information about thieir various lines of business.
56 See the Technical Appendix to die MLR interim final rule, available at http://cciio.cms.gov.
57 Although CEs are an integral component of SBCs, die costs associated with CEs are different from die rest of die SBC, and, mus, are separately calculated within this analysis.
58 Based on this assumption, die Departments estimated mat small issuers or TPAs have about 1 80,000 shoppers in a given year, medium issuers or TPAs have 3,700,000 shoppers in a given year, and large issuers or TPAs have 11,000,000 shoppers in a given year.
59 ERISA section 104(b) requires ERISA-covered plans to furnish participants and beneficiaries with a Summary of Material Modifications (SMM) no later dian 210 days after die end of the plan year in which die material change was adopted. As part of its analysis for die
60 See the ERISA e-disclosure rule at 29 CFR 25 20.1 04b- 1.
61
62 The Departments estimate that there are 440 issuers and 750 TPAs. Because die
63 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
64 For the purposes of these and other estimates in this section III.E, the Departments again use the assumptions oudined above in section III.A.5.
65 The Department estimates that there are 440 issuers and 750 TPAs. Because the Department shares the hour and cost burden for issuers with the
66 The premium revenue data come from me 2009 NAIC financial statements, also known as "Blanks," where insurers report information about their various lines of business
67 For the purposes of these and other estimates in this section III.B, the Departments again use the assumptions outlined above in section III.A.5.
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