[Federal Register Volume 76, Number 162 (Monday, August 22, 2011)]
[Proposed Rules]
[Pages 52442-52475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21193]
[[Page 52441]]
Vol. 76
Monday,
No. 162
August 22, 2011
Part III
Department of the Treasury
Internal Revenue Service
26 CFR Parts 54 and 602
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Department of Labor
Employee Benefits Security Administration
29 CFR Part 2590
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Department of Health and Human Services
45 CFR Part 147
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Summary of Benefits and Coverage and the Uniform Glossary; Proposed
Rules
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 /
Proposed Rules
[[Page 52442]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
[REG-140038-10]
RIN 1545-BJ94
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB52
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 147
[CMS-9982-P]
RIN 0938-AQ73
Summary of Benefits and Coverage and the Uniform Glossary
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.
ACTION: Notice of proposed rulemaking.
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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 Federal Register.
DATES: Comment date. Comments are due on or before October 21, 2011.
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.
Department of Labor. Comments to the Department of Labor,
identified by RIN 1210-AB52, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected].
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, Attention: RIN 1210-AB52.
Comments received by the Department of Labor will be posted without
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and
available for public inspection at the Public Disclosure Room, N-1513,
Employee Benefits Security Administration, 200 Constitution Avenue,
NW., Washington, DC 20210.
Department of Health and Human Services. In commenting, please
refer to file code CMS-9982-P. Because of staff and resource
limitations, we cannot accept comments by facsimile (FAX) transmission.
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: Centers for Medicare & Medicaid Services,Department of
Health and Human Services,Attention: CMS-9982-P, P.O. Box 8016,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9982-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call (410) 786-7195 in advance to schedule your arrival with one
of our staff members.
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 Web
site 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
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. EST. To schedule an appointment to view public comments,
phone 1-800-743-3951.
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Internal Revenue Service. Comments to the IRS, identified by REG-
140038-10, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: CC:PA:LPD:PR (REG-140038-10), Room 5205, Internal
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044.
Hand or courier delivery: Monday through Friday between
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-140038-10),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue,
NW., Washington DC 20224.
All submissions to the IRS will be open to public inspection and
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC
from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Heather Raeburn,
Employee Benefits Security Administration, Department of Labor, at
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of
the Treasury, at (202) 622-6080; Jennifer Libster or Padma Shah,
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, at (301) 492-4252.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS) Web site (http://www.cms.hhs.gov/HealthInsReformforConsume/01_Overview.asp) and information on health
reform can be found at http://www.healthcare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable Care Act, Public Law 111-148,
was enacted on March 23, 2010; the Health Care and Education
Reconciliation Act, Public Law 111-152, was enacted on March 30, 2010
(these are collectively known as the ``Affordable Care Act''). The
Affordable Care Act reorganizes, amends, and adds to the provisions of
part A of title XXVII of the Public Health Service Act (PHS Act)
relating to group health plans and health insurance issuers in the
group and individual markets. The term ``group health plan'' includes
both insured and self-insured group health plans.\1\ The Affordable
Care Act adds section 715(a)(1) to the Employee Retirement Income
Security Act (ERISA) and section 9815(a)(1) to the Internal Revenue
Code (the Code) to incorporate the provisions of part A of title XXVII
of the PHS Act into ERISA and the Code, and make them applicable to
group health plans, and health insurance issuers providing health
insurance coverage in connection with group health plans. The PHS Act
sections incorporated by this reference are sections 2701 through 2728.
PHS Act sections 2701 through 2719A are substantially new, though they
incorporate some provisions of prior law. PHS Act sections 2722 through
2728 are sections of prior law renumbered, with some, mostly minor,
changes.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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Subtitles A and C of title I of the Affordable Care Act amend the
requirements of title XXVII of the PHS Act (changes to which are
incorporated into ERISA by section 715). The preemption provisions of
ERISA section 731 and PHS Act section 2724 \2\ (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements of
part 7 of ERISA and title XXVII of the PHS Act, as amended by the
Affordable Care Act, are not to be ``construed to supersede any
provision of State law which establishes, implements, or continues in
effect any standard or requirement solely relating to health insurance
issuers in connection with group or individual health insurance
coverage except to the extent that such standard or requirement
prevents the application of a requirement'' of provisions added to the
PHS Act by the Affordable Care Act. Accordingly, State laws that 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 II.D.
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\2\ Code section 9815 incorporates the preemption provisions of
PHS Act section 2724. Prior to the Affordable Care Act, there were
no express preemption provisions in chapter 100 of the Code.
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The Departments of Health and Human Services (HHS), Labor, and the
Treasury (the Departments) are taking a phased approach to issuing
regulations implementing the revised PHS Act sections 2701 through
2719A and related provisions of the Affordable Care Act. These proposed
regulations propose standards for implementing PHS Act section 2715. As
discussed more fully below, templates and instructions for meeting the
disclosure requirements of PHS Act section 2715 are being issued
separately in today's Federal Register.
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 National Association of Insurance Commissioners'' (referred to
in this preamble as the ``NAIC''), ``a working group composed of
representatives of health insurance-related consumer advocacy
organizations, health insurance issuers, health care professionals,
patient advocates including those representing individuals with limited
English proficiency, and other qualified individuals.'' The NAIC
convened a working group (NAIC working group) comprised of a diverse
group of stakeholders. This working group met frequently each month for
over one year while developing its recommendations.\3\ Throughout the
process, NAIC working group draft documents and meeting notes were
displayed on the NAIC's Web site for public review, and several
interested parties filed formal comments. In addition to participation
from the NAIC working group members, conference calls and in-person
meetings were open to other interested parties
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and individuals and provided an opportunity for non-member feedback.
The Departments have received transmittals from the NAIC that include a
recommended template for the SBC (with instructions and samples to be
used in completing the template) and a recommended uniform glossary.\4\
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\3\ In developing its recommendations, the NAIC considered the
results of various consumer testing sponsored by both insurance
industry and consumer associations. Specifically, the draft SBC
template, including the 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_consumer_testing.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 2715, working group membership
lists, and meeting minutes, is available at: http://www.naic.org/committees_b_consumer_information.htm.
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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 NAIC's 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 example \5\) 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\
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\5\ The Appendices do not include a sample coverage example
calculation for breast cancer in the individual market that was
transmitted by the NAIC. Upon review, it appeared that 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 the sample would change annually, which would result in
the data included in the sample becoming outdated relatively
quickly. Accordingly, HHS is publishing on its Web site (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\ National Association of Insurance Commissioners, Consumer
Information Working Group, December 17, 2010 Letter to the
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
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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 March 23, 2012. Comments are
requested regarding factors that may affect the feasibility of
implementation within this time frame. After the public comment period
on these documents, the Departments will finalize the SBC template and
instructions. Consistent with PHS Act section 2715(c), the Departments
will periodically review and update the documents as appropriate,
taking into account public comments.
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 the United States; or (B) in
the case of a self-insured group health plan, the plan sponsor or
designated administrator of the plan (as such terms are defined in
section 3(16) of ERISA).'' \7\ Accordingly, these proposed regulations
would interpret PHS Act section 2715 to apply to both group health
plans and health insurance issuers offering group or individual health
insurance coverage. In addition, consistent with the statute, these
proposed regulations would make a plan administrator of a group health
plan responsible for providing an SBC. Under the proposed regulations,
the SBC would be provided in writing free of charge.
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\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.
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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
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by the plan about the health coverage (see section II.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 beneficiary \8\ 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.
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\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\ With respect to insured group health plan coverage, PHS Act
section 2715 generally places the obligation to provide an SBC on
both a plan and issuer. As discussed below, under section II.A.2.d.,
``Special Rules to Prevent Unnecessary Duplication With Respect to
Group Health Coverage'', if either the issuer or the plan provides
the SBC, both will have satisfied their obligations. As they do with
other notices required of both plans and issuers under Part 7 of
ERISA, Title XXVII of the PHS Act, and Chapter 100 of the Code, the
Departments expect plans and issuers to make contractual
arrangements for sending SBCs. Accordingly, the remainder of this
preamble generally refers to requirements for plans or issuers.
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The 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.
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\10\ Regulations regarding special enrollment can be found at 26
CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117.
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c. Provision of the SBC Upon Request
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.
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\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 the plan is
established or operated.
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d. Special Rules To Prevent Unnecessary Duplication With Respect to
Group Health Coverage
The Departments propose, in paragraph (a)(1)(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
[[Page 52446]]
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 NAIC's 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 NAIC's
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
NAIC's 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 NAIC's 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 NAIC's 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
[[Page 52447]]
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.
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\12\ See page 4 of the NAIC Draft Instruction Guide for Group
Policies (available at http://www.naic.org/documents/committees_b_consumer_information_hhs_dol_submission_1107_inst_grp.pdf).
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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.
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\13\ National Association of Insurance Commissioners, Consumer
Information Working Group, December 17, 2010 Letter to the
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
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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 NAIC's 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 NAIC's
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 II.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 plan- or 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.
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\14\ National Association of Insurance Commissioners, Consumer
Information Working Group, December 17, 2010, Final Package of
Attachments. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_final_materials.pdf.
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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 January 1, 2014.\16\
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\15\ PHS Act section 2715(b)(3)(G) provides that this statement
must indicate whether the plan or coverage (1) provides minimum
essential coverage (as defined under section 5000A(f) of the Code)
and (2) ensures that the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage is not
less than 60 percent of such costs.
\16\ The minimum essential coverage and minimum value
requirements are part of a larger set of health coverage reforms
that take effect on January 1, 2014. The Departments' proposal
recognizes this effective date and the need for additional guidance
with respect to these requirements and is consistent with the
recommendation in the transmittal letter from the NAIC. The NAIC
will continue to work to develop a recommendation for this SBC
requirement and will submit it to the Departments at a later date.
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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 authorities \17\ 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 IRS specific information
related to employer-sponsored health coverage
[[Page 52448]]
provided to employees) and are coordinating their efforts to determine
how and whether the same data can be used for multiple purposes. To
help develop a simple, efficient system for employers, the Treasury
Department and the IRS intend to request comments on employer
information reporting required under section 6056 of the Code.
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\17\ In addition to section 2715 of the PHS Act, these
authorities 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 the Internal Revenue Service specific
information related to employer-sponsored health coverage provided
to employees); and section 18B of the Fair Labor Standards Act, as
added by section 1512 of the Affordable Care Act (requiring
employers to disclose to employees information regarding Exchange
coverage options).
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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.\18\ A 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 Web site with specific information necessary to simulate benefits
covered under the plan or policy for specified benefits scenarios.\19\
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\18\ The National Guideline Clearinghouse, within the Agency for
Healthcare Research and Quality (AHRQ), publishes systematically
developed statements to assist practitioner and patient decisions
about appropriate health care for specific clinical circumstances,
available at http://www.guideline.gov/.
\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 Web
site comprise the Departments' instructions for completing the
coverage examples portion of the SBC. See http://cciio.cms.gov.
http://www.naic.org/documents/committees_b_consumer_information_hhs_dol_submission_1107_template_blank.xls. The coding and
reimbursement rate assumptions were developed by HHS and are also
open for public comment.
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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\
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\20\ See http://www.naic.org/documents/committees_b_consumer_information_final_coverage_ex.pdf.
---------------------------------------------------------------------------
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 the
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 Web site (http://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
[[Page 52449]]
regarding various coverage options that may be available to them.\22\
The Departments seek comments on this approach.
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\21\ PHS Act section 2715(b)(1) does not prescribe whether the
four pages are four single-sided pages or four double-sided pages.
The SBC template transmitted by NAIC exceeded four single-sided
pages. After considering the extent of statutorily-required content
in PHS Act section 2715(b)(3), as well as the appearance and
language requirements of PHS Act sections 2715(b)(1) and (2), the
Departments are interpreting four pages to be four double-sided
pages, in order to ensure that this information is presented in an
understandable and meaningful way.
\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.
---------------------------------------------------------------------------
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.
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\23\ National Association of Insurance Commissioners, Consumer
Information Working Group, December 17, 2010 Letter to the
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
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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
Department of Labor's electronic disclosure safe harbor at 29 CFR
2520.104b-1(c) are met.\24\ For non-Federal governmental plans, the
regulations propose that the SBC may be provided electronically if
either the substance of the provisions of the Department of Labor's
electronic disclosure rule are met, or if the provisions governing
electronic disclosure in the individual health insurance market
(described below) are met.
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\24\ On April 7, 2011, the Department of Labor published a
Request for Information regarding electronic disclosure at 76 FR
19285. In it, the Department of Labor stated that it is reviewing
the use of electronic media by employee benefit plans to furnish
information to participants and beneficiaries covered by employee
benefit plans subject to ERISA. Because these regulations adopt the
ERISA electronic disclosure rules by cross-reference, any changes
that may be made to 29 CFR 2520.104b-1 in the future would also
apply to the SBC.
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With respect to an SBC provided by an issuer to a plan, the SBC may
be provided in paper form or electronically (such as e-mail transmittal
or an Internet posting on the issuer's Web site or on http://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 e-mail 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
[[Page 52450]]
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 the United
States, plans and issuers must provide interpretive services, and must
provide written translations of the SBC upon request in certain non-
English languages. In addition, in such counties, English versions of
the SBC must disclose the availability of language services in the
relevant language.\26\ The counties in which this must be done are
those in which at least ten percent of the population residing in the
county is literate only in the same non-English language, as determined
in guidance. The Departments welcome comments on whether and how to
provide written translations of the SBC in these non-English languages.
(Note, nothing in these proposed regulations should be construed as
limiting an individual's rights under Federal or State civil rights
statutes, such as Title VI of the Civil Rights Act of 1964 (Title VI)
which prohibits recipients of Federal financial assistance, including
issuers participating in Medicare Advantage, from discriminating on the
basis of race, color, or national origin. To ensure non-discrimination
on the basis of national origin, recipients are required to take
reasonable steps to ensure meaningful access to their programs and
activities by limited English proficient persons. For more information,
see, ``Guidance to Federal Financial Assistance Recipients Regarding
Title VI Prohibition Against National Origin Discrimination Affecting
Limited English Proficient Persons,'' available at http://www.hhs.gov/ocr/civilrights/resources/specialtopics/lep/policyguidancedocument.html.)
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\25\ See 75 FR 43330 (July 23, 2010), as amended by 76 FR 37208
(June 24, 2011).
\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.
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B. Notice of Modifications
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 enrollees (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.
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\27\ See DOL Information Letter, Washington Star/Washington-
Baltimore Newspaper Guild to Munford Page Hall, II, Baker & McKenzie
(February 8, 1985).
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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 Department of Labor's regulations set
forth at 29 CFR 2520.104b-3 that require the provision of a summary of
material modification (SMM) (generally not later than 210 days after
the close of the plan year in which the modification or change was
adopted, or, in the case of a material reduction in covered services or
benefits, not later than 60 days after the date of adoption of the
modification or change). In situations where a complete notice is
provided in a timely manner under PHS Act section 2715(d)(4), of
course, an ERISA-covered plan will also satisfy the requirement to
provide an SMM under Part 1 of ERISA. The Departments invite comments
on this expedited notice requirement, including whether there are any
circumstances where 60-day advance notice might be difficult. The
Departments also solicit comments on the format of the notice of
modification, particularly for plans and issuers not subject to ERISA.
C. Uniform Glossary
Section 2715(g)(2) of the PHS Act directs the Departments to
develop standards for definitions for at least the following insurance-
related terms: co-insurance, co-payment, deductible, excluded services,
grievance and appeals, non-preferred provider, out-of-network co-
payments, out-of-pocket limit, preferred provider, premium, and UCR
(usual, customary and reasonable) fees. Section 2715(g)(3) of the PHS
Act directs the Departments to develop standards for definitions for at
least the following medical terms: durable medical equipment, emergency
medical transportation, emergency room care, home health care, hospice
services, hospital outpatient care, hospitalization, physician
services, prescription drug coverage, rehabilitation services, and
skilled nursing care. Additionally, the statute directs the Departments
to 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
[[Page 52451]]
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 Federal Register.
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\28\ National Association of Insurance Commissioners, Consumer
Information Working Group, December 17, 2010 Letter to the
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
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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 II.A.3 of this preamble. This Internet address
may be a place the document can be found on the plan's or issuer's Web
site. It may also be a place the document can be found on the Web site
of either the Department of Labor or HHS. However, a plan or issuer
must make a paper copy of the glossary available upon request. Group
health plans and health insurance issuers will provide the uniform
glossary in the appearance authorized by the Departments, so that the
glossary is presented in a uniform format and uses terminology
understandable by the average plan enrollee or individual covered under
an individual policy.
D. Preemption
Section 2715 of the PHS Act is incorporated into ERISA section 715,
and Code section 9815, and is subject to the preemption provisions of
ERISA section 731 and PHS Act section 2724 (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)). These provisions apply so that the
requirements of part 7 of ERISA and part A of title XXVII of the PHS
Act, as amended by the Affordable Care Act, are not to be ``construed
to supersede any provision of State law which establishes, implements,
or continues in effect any standard or requirement solely relating to
health insurance issuers in connection with group or individual health
insurance coverage except to the extent that such standard or
requirement prevents the application of a requirement'' of part A of
title XXVII of the PHS Act. Accordingly, State laws that impose 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 9815, provides that a group health plan (including its
administrator), and a health insurance issuer offering group or
individual health insurance coverage, that ``willfully fails to provide
the information required under this section shall be subject to a fine
of not more than $1,000 for each such failure.'' In addition, under PHS
Act section 2715(f), a separate fine may be imposed for each individual
or entity for whom there is a failure to provide an SBC. Due to the
different enforcement jurisdictions of the Departments, as well as
their different underlying enforcement structures, the mechanisms for
imposing the new penalty may vary slightly, as discussed below.
1. Department of HHS
Enforcement of Part A of Title XXVII of the PHS Act, including
section 2715, is generally governed by PHS Act section 2723 and
corresponding regulations at 45 CFR 150.101 et seq. Under those
provisions, a State has the discretion to enforce the provisions
against health insurance issuers in the first instance, and the
Secretary of HHS only enforces a provision after the Secretary
determines that a State has failed to substantially enforce the
provision. If a State enforces a provision such as PHS Act section
2715, it uses its own enforcement mechanisms. If the Secretary
enforces, the statute provides for penalties of up to $100 per day for
each affected individual.
PHS Act section 2715(f) provides that an entity that willfully
fails to provide the information required under PHS Act section 2715
shall be subject to a fine of not more than $1,000 for each such
failure. Such failure with respect to each enrollee constitutes a
separate offense. This penalty can only be imposed by the Secretary.
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
The Department of Labor enforces the requirements of part 7 of
ERISA and the Department of the Treasury enforces the requirements of
chapter 100 of the Code with respect to group health plans
[[Page 52452]]
maintained by an entity that is not a governmental entity. Generally
the enforcement authority under these provisions applies to all
nongovernmental group health plans, but the Department of Labor does
not enforce the requirements of part 7 of ERISA with respect to church
plans.
On April 21, 1999, pursuant to section 104 of the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191,
the Secretaries entered into a memorandum of understanding \29\ that,
among other things, established a mechanism for coordinating
enforcement and avoiding duplication of effort for shared jurisdiction.
The memorandum of understanding applies, as appropriate, to health
legislation enacted after April 21, 1999 over which at least two of the
Departments share jurisdiction, including section 2715 of the PHS Act
as incorporated into ERISA and the Code. Therefore, in enforcing PHS
Act section 2715, the Departments of Labor and the Treasury will
coordinate to avoid duplication in the case of group health plans that
are not church plans and that are not maintained by a governmental
entity.
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\29\ See 64 FR 70164 (December 15, 1999).
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a. Department of Labor
The Department of Labor will issue separate regulations in the
future describing the procedures for assessment of the civil fine
provided under PHS Act section 2715(f) as incorporated by section 715
of ERISA. In accordance with ERISA 502(b)(3), 29 U.S.C. 1132(b)(3), the
Secretary of Labor is not authorized to assess this fine against a
health insurance issuer.
b. Department of the Treasury
If a group health plan (other than a plan maintained by a
governmental entity) fails to comply with the requirements of chapter
100 of the Code, an excise tax is imposed under section 4980D of the
Code. The excise tax is generally $100 per day per individual for each
day that the plan fails to comply with chapter 100 with respect to that
individual. Numerous rules under section 4980D reduce the amount of the
excise tax for failures due to reasonable cause and not to willful
neglect. Special rules apply for church plans. Taxpayers subject to the
excise tax under section 4980D are required to report the failures
under chapter 100 and the amount of the excise tax on IRS Form 8928.
See 26 CFR 54.4980D-1, 54.6011-2, and 54.6151-1.
Section 2715(f) of the PHS Act subjects a plan sponsor or
designated administrator to a fine of not more than $1,000 for each
failure to provide an SBC. Unless and until future guidance provides
otherwise, group health plans subject to chapter 100 of the Code should
continue to report the excise tax of section 4980D on IRS Form 8928
with respect to failures to comply with PHS Act section 2715. The
Secretaries of Labor and the Treasury will coordinate to determine
appropriate cases in which the fine of section 2715(f) should be
imposed on group health plans that are not maintained by a governmental
entity.
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 March 23, 2012).\30\ As
noted earlier, the statute also directs the Departments to consult with
the NAIC in developing the SBC standards. The Departments are
appreciative of the detailed and valuable work the NAIC and its working
group has performed in developing recommended standards and materials,
including the NAIC's extensive efforts to involve numerous stakeholder
groups in that process for over a year and to provide drafts of its
evolving materials to the Departments periodically. Accordingly, as
noted, the Departments are appending to the document accompanying these
proposed regulations the NAIC's SBC work product for public comment.
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\30\ Section 2715 is applicable to both grandfathered and non-
grandfathered health plans. See 26 CFR 54.9815-1251(d), 29 CFR
2590.715-1251(d), and 45 CFR 147.120(d).
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The NAIC transmitted its final materials to the Departments on July
29, 2011. In recognition of existing disclosure requirements under 29
CFR 2520.104b-2 for those group health plans that already provide SPDs
to participants and concerns raised about providing SBCs by the
statutory deadline, comments are solicited on whether and, if so, how
practical considerations might affect the timing of implementation. In
coordination with the request for comment elsewhere in this preamble on
a potential phase-in of the implementation of the requirement to
provide coverage examples, comments are invited also on how any
potential phase-in of those requirements could or should be coordinated
with the timing of the effectiveness of the general SBC standards.
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 the United States
primarily for the benefit of persons substantially all of whom are
nonresident aliens is exempt from ERISA title I, including ERISA
section 715. At the same time, in the Department of HHS's interim final
regulations relating to medical loss ratio (MLR) provisions published
at 75 FR 74864, a special rule was included for expatriate insurance
policies. The Departments invite comments on whether any adjustments
are needed under PHS Act section 2715 for expatriate plans and, if so,
for what types of coverage.
III. Economic Impact and Paperwork Burden
A. Executive Orders 12866 and 13563--Department of Labor and Department
of Health and Human Services
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rule has been designated a ``significant regulatory
action'' under section 3(f) of Executive Order 12866. Accordingly, the
rule has been reviewed by the Office of Management and Budget.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year). As discussed below, the Departments have concluded that these
proposed regulations would not have economic impacts of $100 million or
more in any one year or otherwise meet the definition of an
``economically significant rule'' under Executive Order 12866.
Nonetheless, consistent with Executive Orders 12866 and 13563, the
Departments have provided an assessment of the potential benefits and
the costs associated with this proposed regulation. The Departments
invite comment on this assessment.
1. Current Regulatory Framework
Health plan sponsors and issuers do not currently uniformly
disclose information to consumers about benefits
[[Page 52453]]
and coverage in a simple and consistent way. ERISA-covered 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 the United
States (varying based on geography, firm size, and industry sector)
found that, on average, SPDs are generally written at a first year
college reading level (with readability ranging from 9th grade reading
level to nearly a college graduate reading level).\32\ Moreover, the
formats of existing SPDs are not standardized; for example, while these
documents could be dozens of pages long, there is no requirement that
they include an executive summary. Additionally, group health plans not
covered by ERISA, such as plans sponsored by State and local
governments, are not required to comply with such disclosure
requirements.
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\31\ ERISA Advisory Council. Report of the Working Group on
Health and Welfare Benefit Plans' Communication. November 2005.
Available at: http://www.dol.gov/ebsa/publications/AC_1105c_report.html.
\32\ ``How Readable Are Summary Plan Descriptions For Health
Care Plans?'' Employee Benefit Research Institute (EBRI) Notes.
October 2006, Vol. 27, No. 10. Available at: http://www.ebri.org/pdf/notespdf/EBRI_Notes_10-20061.pdf.
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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\ Utah \36\ and
Vermont \37\ 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\
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\33\ M.G.L.A. 176Q Sec. 5 (2010).
\34\ NY Ins. Law Sec. 3217-a (2010).
\35\ Office of the Health Insurance Commissioner Regulation 5:
Standards for Readability of Health Insurance Forms, State of Rhode
Island and Providence Plantations, August 21, 2010.
\36\ Utah Code Sec. 31A-22-613.5 (2010).
\37\ Division of Health Care Administration, Rule 10.000:
Quality Assurance Standards and Consumer Protections for Managed
Care Plans, State of Vermont, September 20, 1997.
\38\ For example, New York requires Health Maintenance
Organizations to provide to prospective members, as well as
policyholders, information on cost-sharing, including out-of-network
costs, limitations and exclusions on benefits, prior authorization
requirements, and other disclosures such as appeal rights. NY Ins.
Law Sec. 3217-a (2010). Utah requires each insurer issuing a health
benefit plan to provide all enrollees, prior to enrollment in the
health benefit plan, written disclosure of restrictions or
limitations on prescription drugs and biologics, coverage limits
under the plan, and any limitation or exclusion of coverage. Utah
Code Sec. 31A-22-613.5 (2010). Rhode Island requires all health
insurance forms to meet minimum readability standards. Office of the
Health Insurance Commissioner Regulation 5: Standards for
Readability of Health Insurance Forms, State of Rhode Island and
Providence Plantations, August 21, 2010.
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2. Need for Regulatory Action
Congress added new PHS Act section 2715 through the Affordable Care
Act to ensure that plans and issuers provide benefits and coverage
information in a more uniform format that helps consumers to better
understand their coverage and better compare coverage options. These
proposed regulations are necessary to provide standards for a summary
of benefits and coverage and a uniform glossary of terms used in health
coverage. This approach is consistent with Executive Order 13563, which
directs agencies to ``identify and consider regulatory approaches that
reduce burdens and maintain flexibility and freedom of choice for the
public. These approaches include [* * *] disclosure requirements as
well as provision of information to the public in a form that is clear
and intelligible.''
The 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 $72--far higher than in other
insurance markets, such as auto insurance.\40\
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\39\ M. Susan Marquis et al., ``Consumer Decision Making in the
Individual Health Insurance Market,'' 25 Health Affairs w.226,
w.231-w.232 (May 2006). Available at: http://content.healthaffairs.org/content/25/3/w226.full.pdf+html.
\40\ Nicole Maestas et al., ``Price Variation in Markets with
Homogenous Goods: The Case of Medigap,'' National Bureau of Economic
Research (January 2009).
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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\
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\41\ For example, as discussed earlier, the average Summary Plan
Description is written at a first-year college reading level. See
Employee Benefit Research Institute, October 2006.
\42\ D.W. Garnick, A.M. Hendricks, K.E. Thorpe, J.P. Newhouse,
K. Donelan and R.J. Blendon. ``How well do Americans understand
their health coverage?'' Health Affairs, 12(3). 1993:204-12.
Available at: http://content.healthaffairs.org/content/12/3/204.full.pdf.
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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
[[Page 52454]]
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 $50
million, although there is uncertainty arising from general data
limitations and the degree to which economies of scale exist for
disclosing this information. The costs estimates employ assumptions
that we believe fully capture expected issuer and third-party
administrator (TPA) costs, and perhaps overestimate them if, for
example, economies of scale are achievable.
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.
Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Qualitative: Improved information will enable consumers to more easily and efficiently understand and compare
coverage, and as a result, make better choices.
----------------------------------------------------------------------------------------------------------------
Costs Estimate Year dollar Discount rate Period covered
percent
----------------------------------------------------------------------------------------------------------------
Annualized.............................. $51 2011 7 2011-2013
Monetized ($ millions/year)............. $47 2011 3 2011-2013
----------------------------------------------------------------------------------------------------------------
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 California's individual market found that reducing barriers to
information about health insurance products would lead to increases in
purchase rates comparable to modest price subsidies.\44\ By ensuring
consumers have access to readily available, concise, and understandable
information about their coverage options, these proposed regulations
could reduce consumers' cost of obtaining information and may increase
health insurance purchase rates.
---------------------------------------------------------------------------
\43\ Judith H. Hibbard and Ellen Peters, ``Supporting Informed
Consumer Health Care Decisions: Data Presentation Approaches that
Facilitate the Use of Information in Choice,'' 24 Annu. Rev. Public
Health 413, 416 (2003).
\44\ M. Susan Marquis et al., ``Consumer Decision Making in the
Individual Health Insurance Market,'' 25 Health Affairs w.226,
w.231-w.232 (May 2006). Available at: http://content.healthaffairs.org/content/25/3/w226.full.pdf+html.
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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 examples \46\ 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.
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\45\ A study of California's individual market found that 25
percent of consumers chose products with premiums that were more
than 30 percent higher than the median price for an actuarially
equivalent product for a similar person. Melinda Beeuwkes Buntin et
al.,''Trends and Variability In Individual Insurance Products,''
Health Affairs w3.449, w3.457 (2003), available at http://content.healthaffairs.org/content/early/2003/09/24/hlthaff.w3.449.citation.
\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).
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Finally, these proposed regulations are expected to facilitate
consumers' ability to understand their coverage. As
[[Page 52455]]
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 $25 million in costs in
2011, $73 million in costs in 2012, and $58 million in costs in 2013.
These costs and the methodology used to estimate them are discussed
below, and presented in Tables 2-5 below.
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 (IT)
systems interfaces that would generate SBC disclosures through data
housed in a number of different systems. The maintenance costs include
costs to maintain and update IT systems in compliance with the 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.
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\49\ Plans and issuers subject to ERISA or the Code may provide
SBCs electronically only if the requirements of the Department of
Labor's electronic disclosure safe harbor at 29 CFR 2520.104b-1 are
met. Otherwise, by default, plans and issuers must use paper
versions of SBCs.
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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.
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\50\ See, for example, the Department of Labor's March 2011
report to Congress on self-insured health plans, available at http://www.dol.gov/ebsa/pdf/ACAReportToCongress032811.pdf.
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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.
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\51\ The NAIC data actually indicate 442 issuers and 74,830,101
covered lives. But the Departments have limited these values to only
two significant figures given general data uncertainty. For example,
the NAIC data do not include issuers regulated by California's
Department of Managed Health Care (DMHC) as well as small, single-
State issuers that are not required by State regulators to submit
NAIC annual financial statements.
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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.
---------------------------------------------------------------------------
\52\ U.S. Department of Labor, EBSA calculations using the March
2009 Current Population Survey Annual Social and Economic Supplement
and the 2009 Medical Expenditure Panel Survey; see also interim
final rule for internal claims and appeals and external review
processes (75 FR 43330, 43345).
\53\ See, for example, the Department of Labor's March 2011
report to Congress on self-insured health plans, available at http://www.dol.gov/ebsa/pdf/ACAReportToCongress032811.pdf.
---------------------------------------------------------------------------
Because the SBC disclosures are closely related to disclosures that
issuers and TPAs provide today as a part of their normal operations
(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,
[[Page 52456]]
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.
---------------------------------------------------------------------------
\54\ For example, issuers in the individual and small group
markets already report some of the SBC information to HHS for
display in the plan finder on the HealthCare.gov Web site. Issuers
have been reporting data to HHS since May 2010 and have refreshed
that data on a quarterly basis. These reporting entities have
demonstrated that they have the capacity to report information on
plan benefit design. See http://finder.healthcare.gov/. Further,
ERISA-covered plans already report some of the SBC information in
summary plan descriptions (SPDs).
---------------------------------------------------------------------------
To account for variations among issuers, the Departments classify
them by size as small, medium, and large issuers based on 2009 premium
revenue for individual, small group, and large group comprehensive
coverage.\55\ Consistent with the assumptions that were used in the MLR
interim final rule, small issuers are defined as those earning up to
$50 million in annual premium revenue; medium issuers as those earning
between $50 million and $1 billion in annual premium revenue; and large
issuers as those earning more than $1 billion in annual premium
revenue. Based on these assumptions, the Departments estimate there are
140 small, 230 medium, and 70 large issuers.
---------------------------------------------------------------------------
\55\ The premium revenue data come from the 2009 NAIC financial
statements, also known as ``Blanks,'' where insurers report
information about their various lines of business.
---------------------------------------------------------------------------
To account for variations among TPAs, the Departments applied the
proportions of small, medium, and large issuers to the estimated 750
TPAs. The Departments acknowledge that issuers and TPAs are different
and may not have the same size variation. Nonetheless, given general
data limitations, the Departments have adopted this methodology, and,
on its basis, estimate that there are 240 small, 390 medium, and 120
large TPAs. Table 2 below provides a synopsis of the number of issuers
and TPAs.
Table 2--Issuer and TPA Size Classification
------------------------------------------------------------------------
Small Medium Large
------------------------------------------------------------------------
Issuers................................ 140 230 70
TPAs................................... 240 390 120
------------------------------------------------------------------------
Staffing Assumptions
Table 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 a 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 2011 dollars) for each staff category based on
BLS data. The Departments use mean hourly wage estimates from the
Bureau of Labor Statistics' (BLS) May 2009 National Occupational
Employment and Wage Estimates (accessed at http://www.bls.gov/oes/current/oes_nat.htm#00-0000) for computer systems analysts (Occupation
Code 15-1051), insurance underwriters (Occupation Code 13-2053),
financial managers (Occupation Code 23-1011), executive secretaries and
administrative assistants (Occupation Code 43-6011), and attorneys
(Occupation Code 23-1011) as the basis for estimating labor costs for
2011 through 2013 and adjust the hourly wage rate to include a 33%
fringe benefit estimate for private sector employees.\56\
---------------------------------------------------------------------------
\56\ See the Technical Appendix to the MLR interim final rule,
available at http://cciio.cms.gov.
---------------------------------------------------------------------------
Distribution Assumptions
The Departments make the following assumptions regarding the
distribution
[[Page 52457]]
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:
---------------------------------------------------------------------------
\57\ Although CEs are an integral component of SBCs, the costs
associated with CEs are different from the rest of the SBC, and,
thus, are separately calculated within this analysis.
---------------------------------------------------------------------------
The SBCs would be limited to one per household for family
members located at the same residence. According to one large issuer,
there are 2.2 covered lives per family.
The number of individuals who would receive an SBC before
enrolling in the plan or coverage equals 20% of the number of enrollees
at any point during the course of a year.\58\
---------------------------------------------------------------------------
\58\ Based on this assumption, the Departments estimated that
small issuers or TPAs have about 180,000 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.
---------------------------------------------------------------------------
In 2013, 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.
---------------------------------------------------------------------------
\59\ ERISA section 104(b) requires ERISA-covered plans to
furnish participants and beneficiaries with a Summary of Material
Modifications (SMM) no later than 210 days after the end of the plan
year in which the material change was adopted. As part of its
analysis for the Department of Labor's SPD/SMM regulations (29 CFR
2520.104b-(3)), the Department estimated that about 20 percent of
health plans would need to distribute SMM in a given year due to
plan amendments. However, almost all of these modification occur
between plan years--not during a plan year; therefore, the
modifications would be required to be disclosed in a SBC that is
distributed upon renewal of coverage. The Departments, thus, expects
that only two percent of plans will need to issue an updated SBC
mid-year, because mid-year changes that would result in an update to
the SBC are very rare. For purposes of simplification, the
Departments extend this assumption to the individual market as well.
---------------------------------------------------------------------------
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
National Telecommunications and Information Administration, which
indicate that 30% of Americans do not use the Internet.\61\
---------------------------------------------------------------------------
\60\ See the ERISA e-disclosure rule at 29 CFR 2520.104b-1.
\61\ U.S. Department of Commerce, National Telecommunications
and Information Administration, Digital Nation (February 2010),
available at http://www.ntia.doc.gov/reports/2010/NTIA_internet_use_report_Feb2010.pdf.
---------------------------------------------------------------------------
SBC disclosures would be distributed with usual marketing
and enrollment materials, thus, costs to mail the documents will be
negligible. However, notices of modifications would require mailing and
supply costs as follows: $0.44 postage cost per mailing and $0.05
supply cost per mailing.
Printing costs $0.03 cents per side of a page. Thus, it
would cost $0.18 to print a complete SBC (which is six sides of a page
based on the length of the NAIC sample completed SBC) and $0.12 cents
to print the uniform glossary (which is four sides of a page, based on
the length of the NAIC recommended uniform glossary). This cost burden
is in addition to the 1 minute or 2 minutes it would take clerical
staff to print and distribute the SBC or glossary.
Cost Estimate
The Tables below present costs and burden hours for issuers and
TPAs associated 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).
Table 3--2011 Hour Burden, Equivalent Cost, and Cost Burden--2011 Dollars
----------------------------------------------------------------------------------------------------------------
Number of
affected Hour burden Equivalent cost
entities
----------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers--One Time....................... 440 88,000 $4,600,000
SBC Requirements--TPAs--One-Time.......................... 750 150,000 7,800,000
Coverage Example Requirements--Issuers--One Time.......... 440 88,000 4,600,000
Coverage Example Requirements--TPAs--One-Time............. 750 150,000 7,800,000
Total................................................. ................ 240,000 25,000,000
----------------------------------------------------------------------------------------------------------------
Table 4--2012 Hour Burden, Equivalent Cost, and Cost Burden--2011 Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
affected Hour burden Equivalent cost Cost burden Number of
entities (non-labor) disclosures
--------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers..................................... 440 540,000 $18,000,000 $2,900,000 41,000,000
SBC Requirements--TPAs........................................ 750 660,000 23,000,000 3,700,000 49,000,000
Coverage Example Requirements--Issuers........................ 440 140,000 7,600,000 1,500,000 41,000,000
Coverage Example Requirements--TPAs........................... 750 240,000 13,000,000 1,800,000 49,000,000
Glossary Requests--Issuers.................................... 440 11,000 330,000 370,000 610,000
Glossary Requests--TPAs....................................... 750 13,000 370,000 470,000 770,000
Subtotal.................................................. ................ 1,600,000 62,000,000 11,000,000 91,000,000
Total 2012 Costs.......................................... ................ ................ 73,000,000 ................ ................
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 52458]]
Table 5--2013 Hour Burden, Equivalent Cost, and Cost Burden--2011 Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
affected Hour burden Equivalent cost Cost burden Number of
entities (non-labor) disclosures
--------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers..................................... 440 480,000 $15,000,000 $2,900,000 41,000,000
SBC Requirements--TPAs........................................ 750 560,000 17,000,000 3,700,000 49,000,000
Coverage Example Requirements--Issuers........................ 440 79,000 4,300,000 1,500,000 41,000,000
Coverage Example Requirements--TPAs........................... 750 130,000 7,200,000 1,800,000 49,000,000
Notice of Material Modifications--Issuers..................... 440 10,000 320,000 330,000 820,000
Notice of Material Modifications--TPAs........................ 750 12,000 400,000 400,000 1,000,000
Glossary Requests--Issuers.................................... 440 23,000 660,000 700,000 1,200,000
Glossary Requests--TPAs....................................... 750 26,000 750,000 900,000 1,500,000
Subtotal.................................................. ................ 1,300,000 46,000,000 12,000,000 95,000,000
Total 2013 Costs.......................................... ................ ................ 58,000,000 ................ ................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 6--Estimated Staffing Hours for Small, Medium, and Large Issuers and TPAs
----------------------------------------------------------------------------------------------------------------
Hours
Percent of hours -----------------------------------------------------
Staffing hour assumptions by task Medium issuer/
Small issuer/TPA TPA Large issuer/TPA
----------------------------------------------------------------------------------------------------------------
IT Development and Workflow Process Change
----------------------------------------------------------------------------------------------------------------
One-Time Develop Teams/Analyze ................ 80 120 160
Requirements (IT, underwriting/sales)..
IT Professionals Benefits/Sales..... 45 36 54 72
Professionals........................... 50 40 60 80
Attorneys........................... 5 4 6 8
Implementing Systems Changes (IT and ................ 480 720 960
workflow)..............................
IT Professionals.................... 100 480 720 960
Maintenance Updating to Address Changes ................ 84 126 168
in Requirements........................
IT Professionals Benefits/Sales..... 55 46.20 69.30 92.40
Professionals........................... 40 33.60 50.40 67.20
Attorneys........................... 5 4.20 6.30 8.40
----------------------------------------------------------------------------------------------------------------
SBC Requirement (maintenance)
----------------------------------------------------------------------------------------------------------------
Producing SBCs.......................... ................ 3 3 3
IT Professionals Benefits/Sales..... 50 1.5 1.5 1.5
Professionals........................... 50 1.5 1.5 1.5
Internal Review of SBCs................. ................ 1 1 1
Financial Managers--Benefits/Sales 50 0.5 0.5 0.5
Professionals......................
Attorneys........................... 50 0.5 0.5 0.5
Producing and Distributing Paper Version
of SBCs (Group Markets)................
Clerical Staff...................... 100 0.02 0.02 0.02
Producing and Distributing Paper Version
of SBCs (Individual Market)............
Clerical Staff...................... 100 0.03 0.03 0.02
----------------------------------------------------------------------------------------------------------------
CE Requirement (maintenance)
----------------------------------------------------------------------------------------------------------------
Producing 3 CEs......................... ................ 90 90 90
IT Professionals Benefits/Sales..... 50 45 45 45
Professionals........................... 50 45 45 45
Internal Review of 3 CEs................ ................ 30 30 30
Financial Managers--Benefits/Sales.. 50 15 15 15
Professionals...........................
Attorneys........................... 50 15 15 15
----------------------------------------------------------------------------------------------------------------
Table 7--Estimated Loaded Hourly Wages for Staff Categories
------------------------------------------------------------------------
Loaded hourly
Staff category BLS code wage (2011
Dollars)
------------------------------------------------------------------------
IT Professionals.............. Computer Systems $53.26
Analysts (Occupation
Code 15-1051).
Financial Professionals-- Insurance Underwriters 41.94
Benefits/Sales. (Occupation Code 13-
2053).
Financial Manager............. Financial Managers 75.32
(Occupation Code 11-
3031).
Attorneys..................... Lawyers (Occupation 85.44
Code 23-1011).
Clerical Staff................ Executive Secretaries 29.15
and Administrative
Assistants
(Occupation Code 43-
6011).
------------------------------------------------------------------------
[[Page 52459]]
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--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (RFA) requires agencies that issue a
regulation to analyze options for regulatory relief of small businesses
if a 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 Small Business
Administration (SBA), (2) a nonprofit organization that is not dominant
in its field, or (3) a small government jurisdiction with a population
of less than 50,000. (States and individuals are not included in the
definition of ``small entity.'') The Departments use as their measure
of significant economic impact on a substantial number of small
entities a change in revenues of more than 3 to 5 percent.
As discussed in the Web Portal interim final rule (75 FR 24481),
HHS examined the health insurance industry in depth in the Regulatory
Impact Analysis we prepared for the proposed rule on establishment of
the Medicare Advantage program (69 FR 46866, August 3, 2004). In that
analysis, HHS determined that there were few if any insurance firms
underwriting comprehensive health insurance policies (in contrast, for
example, to travel insurance policies or dental discount policies) that
fell below the size thresholds for ``small'' business established by
the SBA. Currently, the SBA size threshold is $7 million in annual
receipts for both health insurers (North American Industry
Classification System, or NAICS, Code 524114) and TPAs (NAICS Code
524292).
Additionally, as discussed in the Medical Loss Ratio interim final
rule (75 FR 74918), HHS used a data set created from 2009 National
Association of Insurance Commissioners (NAIC) Health and Life Blank
annual financial statement data to develop an updated estimate of the
number of small entities that offer comprehensive major medical
coverage in the individual and group markets. For purposes of that
analysis, HHS used total Accident and Health (A&H) earned premiums as a
proxy for annual receipts. HHS estimated that there were 28 small
entities with less than $7 million in A&H earned premiums offering
individual or group comprehensive major medical coverage; however, this
estimate may overstate the actual number of small health insurance
issuers offering such coverage, since it does not include receipts from
these companies' other lines of business. These 28 small entities
represent about 6.4 percent of the approximately 440 health insurers
that are accounted for in this RIA. Based on this calculation, the
Departments assume that there are an equal percentage of TPAs that are
small entities. That is, 48 small entities represent about 6.4 percent
of the approximately 750 TPAs that are accounted for in this RIA.
The Departments estimate that issuers and TPAs earning less than
$50 million in annual premium revenue, including the 76 small entities
mentioned above, would incur costs of approximately $15,000, $26,000,
and $15,000 per issuer/TPA in 2011, 2012 and 2013, respectively.
Numbers of this magnitude do not approach the amounts necessary to be
considered a ``significant economic impact'' on firms with revenues in
the order of millions of dollars. Additionally, as discussed earlier,
the Departments believe that these estimates overstate the number of
small entities that will be affected by the requirements in this
proposed regulation, as well as the relative impact of these
requirements on these entities, because the Departments have based
their analysis on the affected entities' total A&H earned premiums
(rather than their total annual receipts). Accordingly, the Departments
have determined and certify that these proposed rules will not have a
significant economic impact on a substantial number of small entities,
and that a regulatory flexibility analysis is not required.
[[Page 52460]]
C. Special Analyses--Department of the Treasury
For purposes of the Department of the Treasury it has been
determined that this notice of proposed rulemaking is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
regulatory assessment is not required. It has also been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
does not apply to these proposed regulations. It is hereby certified
that the collections of information contained in this notice of
proposed rulemaking will not have a significant impact on a substantial
number of small entities. Accordingly, a regulatory flexibility
analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is
not required. Section 54.9815-2715 of the proposed regulations would
require both group health insurance issuers and group health plans to
distribute an SBC and notice of any material modifications to the plan
that affect the information required in the SBC. Under these proposed
regulations, if a health insurance issuer satisfies the obligations to
distribute an SBC and a notice of modifications, those obligations are
satisfied not just for the issuer but also for the group health plan.
For group health plans maintained by small entities, it is anticipated
that the health insurance issuer will satisfy these obligations for
both the plan and the issuer in almost all cases. For this reason,
these information collection requirements will not impose a significant
impact on a substantial number of small entities. Pursuant to section
7805(f) of the Code, this regulation has been submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small business.
D. Unfunded Mandates Reform Act--Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 that
agencies assess anticipated costs and benefits before issuing any
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 $100 million in 1995
dollars updated annually for inflation. In 2011, that threshold level
is approximately $136 million. These proposed regulations include no
mandates on State, local, or Tribal governments. These proposed
regulations include directions to produce standardized consumer
disclosures that will affect private sector firms (for example, health
insurance issuers offering coverage in the individual and group
markets, and third-party administrators providing administrative
services to group health plans), but we tentatively conclude that these
costs will not exceed the $136 million threshold. Thus, we tentatively
conclude that these proposed regulations do not impose an unfunded
mandate on State, local or Tribal governments or the private sector.
Regardless, consistent with policy embodied in UMRA, this notice of
proposed rulemaking has been designed to be the least burdensome
alternative for State, local and Tribal governments, and the private
sector while achieving the objectives of the Affordable Care Act.
E. Paperwork Reduction Act
1. Department of Labor and Department of the Treasury
Section 2715 of the PHS Act directs the Departments, in
consultation with the National Association of Insurance Commissioners
(NAIC) and a working group comprised of stakeholders, to ``develop
standards for use by a group health plan and a health insurance issuer
in compiling and providing to applicants, enrollees, and policyholders
and certificate holders a summary of benefits and coverage explanation
that accurately describes the benefits and coverage under the
applicable plan or coverage.'' Plans and issuers are required to begin
providing the disclosure (herein referred to as a ``summary of benefits
and coverage'' or SBC) no later than March 23, 2012.
To implement this provision, collection of information requirements
relate to the provision of the following:
Summary of benefits and coverage.
Coverage examples (as components of each SBC).
A uniform glossary of health coverage and medical terms
(uniform glossary).
Notice of modifications.
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 Office of Information and Regulatory
Affairs, Attention: Desk Officer for the Employee Benefits Security
Administration either by fax to (202) 395-5806 or by e-mail to [email protected]. A copy of the ICR may be obtained by contacting
the PRA addressee: G. Christopher Cosby, Office of Policy and Research,
U.S. Department of Labor, Employee Benefits Security Administration,
200 Constitution Avenue, NW., Room N-5718, Washington, DC 20210.
Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free
numbers. E-mail: [email protected]. ICRs submitted to OMB also are
available at reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).
The Departments estimate 858 respondents each year from 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\
---------------------------------------------------------------------------
\62\ The Departments estimate that there are 440 issuers and 750
TPAs. Because the Department of Labor and the Department of the
Treasury share the hour and cost burden for issuers and TPAs with
the Department of Health and Human Services, the burden to produce
the SBCs including Coverage Examples for group health plans is
calculated using half the number of issuers (220) and 85% of the
TPAs (638). While the group health plans could prepare their own
SBCs including coverage examples, the Departments assume that SBCs
including coverage examples would be prepared by service providers,
i.e., issuers and TPAs.
---------------------------------------------------------------------------
[[Page 52461]]
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 $50 million;
medium issuers as those with total earned premiums between $50 million
and $999 million; and large issuers as those with total earned premiums
of $1 billion or more. Accordingly, the Departments estimate
approximately 70 small, 115 medium, and 35 large issuers. Similarly,
the Departments estimate approximately 204 small, 332 medium, and 102
large TPAs.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
2011 Burden Estimate
While the disclosures in these proposed regulations are not
required until March 2012, the Departments estimate a one-time
administrative cost of about $36,000,000 across the industry and a
total of about 680,000 burden hours to prepare for the provisions of
these proposed regulations. This calculation is made assuming issuers
and TPAs will need to implement two principal tasks: (1) Develop teams
to analyze current workflow processes against the new rules and (2)
make appropriate changes to IT systems and processes.
With respect to task (1), the Departments estimate about 97,000
burden hours and an equivalent cost of about $4,800,000. The
Departments calculate these estimates as follows:\64\
---------------------------------------------------------------------------
\64\ For the purposes of these and other estimates in this
section III.E, the Departments again use the assumptions outlined
above in section III.A.5.
Task 1--Analyze Current Workflow and New Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 36 $1,900 54 $2,900 72 $3,800
Benefits/Sales Professionals............ 41.94 40 1,700 60 2,500 80 3,400
Attorneys............................... 85.44 4 340 6 510 8 680
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 80 3,900 120 5,900 160 7,900
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 22,000 1,100,000 53,000 2,600,000 22,000 1,100,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to task (2), the Departments estimate about 580,000
burden hours and an equivalent cost of about $31,000,000. The
Departments calculate these estimates as follows:
Task 2--IT Changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 480 $26,000 720 $38,000 960 $51,000
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 480 26,000 720 38,000 960 51,000
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 130,000 7,100,000 320,000 17,000,000 130,000 7,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
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
$18,000,000 across the industry and about 340,000 hours. The
Departments assume issuers and TPAs will incur no other costs in 2011
related to the proposed collection of information.
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 form. 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 $30,000,000. The Departments calculate
these estimates as follows:
[[Page 52462]]
Task 1--Equivalent Costs for Producing SBCs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 1.5 $80 1.5 $80 1.5 $80
Benefits/Sales Professionals............ 41.94 1.5 63 1.5 63 1.5 63
Financial Managers...................... 75.32 0.5 38 0.5 38 0.5 38
Attorneys............................... 85.44 0.5 43 0.5 43 0.5 43
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 4 220 4 220 4 220
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 1100 61,000 1800 100,000 550 31,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 2--Equivalent Costs for Distributing SBCs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly wage Total number of Total
rate Hours per SBC SBCs Total hours equivalent cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clerical Staff..................................................... $29.15 0.017 48,000,000 820,000 $24,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 1--Cost Burden for Printing SBCs
----------------------------------------------------------------------------------------------------------------
Total cost
Cost per SBC Total SBCs burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.12 48,000,000 $5,800,0000
----------------------------------------------------------------------------------------------------------------
Task 2: Coverage Examples--The estimated hour burden is about
100,000 hours, and the estimated total cost is about $8,700,000. The
Departments calculate these estimates as follows:
Task 2--Equivalent Costs for Producing Coverage Examples
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 45 $2,400 45 $2,400 45 $2,400
Benefits/Sales Professionals............ 41.94 45 1,900 45 1,900 45 1,900
Financial Managers...................... 75.32 15 1,100 15 1,100 15 1,100
Attorneys............................... 85.44 15 1,300 15 1,300 15 1,300
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 120 6,700 120 6,700 120 6,700
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 33,000 1,900,000 53,000 3,000,000 16,000 900,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 2--Cost Burden for Printing Coverage Examples
----------------------------------------------------------------------------------------------------------------
Printing cost Total CEs Total cost
per CE printed burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.06 48,000,000 $2,900,000
----------------------------------------------------------------------------------------------------------------
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
$0.49 for each glossary (including $0.44 for first-class postage and
$0.05 for supply costs). Accordingly, in 2012, the Departments estimate
a total cost of about $1,300,000 and 21,000 burden hours associated
with about 1,200,000 glossary requests.
[[Page 52463]]
Task 4: One-Time Administrative Costs--As mentioned above, the
Departments estimate a one-time administrative cost of about
$36,000,000 across the industry and a total of about 680,000 burden
hours, and assume this burden will be equally divided between 2011 and
2012. Thus, in 2012, the Departments estimate a one-time administrative
cost of about $18,000,000 across the industry and about 340,000 burden
hours.
The total 2012 burden estimate is about $58,000,000. The total
number of burden hours is about 1,300,000.
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
$30,000,000 and about 820,000 burden hours for SBCs (not including
coverage examples).
Task 2: Coverage Examples--The Departments again estimate a total
cost of about $8,700,000 and 100,000 burden hours for coverage
examples.
Task 3: Notices of Modifications--The Departments assume that in
2013, issuers and TPAs would send notices of modifications to covered
individuals, and that 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 $0.49 for each paper notice (including $0.44 for first-class
postage and $0.05 for supply costs). Accordingly, in 2013, the
Departments estimate a total cost of about $1,400,000 and 18,000 burden
hours associated with about 1,500,000 notices of modification.
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
$0.49 for each glossary (including $0.44 for first-class postage and
$0.05 for supply costs). Accordingly, in 2013, the Departments estimate
a total cost of about $2,700,000 and 41,000 burden hours associated
with 2,400,000 glossary requests.
Task 5: Maintenance Administrative Costs--In 2013, the Departments
assume that issuers and TPAs will need to make updates to address
changes in standards, and, thus, incur 15% of the one-time
administrative burden. Accordingly, the estimated hour burden is about
100,000 hours, and the estimated total cost is about $5,400,000. The
Departments calculate these estimates as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 46.2 $2,500 69.3 $3,700 92.4 $4,900
Benefits/Sales Professionals............ 41.94 33.6 1,800 50.4 2,700 67.2 3,600
Attorneys............................... 85.44 4.2 220 6.3 340 8.4 450
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 84 4,500 126 6,700 168 8,900
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 23,000 1,200,000 56,000 3,000,000 23,000 1,200,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
The total 2013 cost estimate is about $48,000,000.The total number
of burden hours is about 1,100,000 hours.
The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number.
The 2012-2013 paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Affordable Care Act Uniform Explanation of Coverage
Documents.
OMB Number: 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 (Employee
Benefits Security Administration); 600,000 hours (Internal Revenue
Service).
Estimated Total Annual Burden Cost: $5,100,000 (Employee Benefits
Security Administration); $5,100,000 (Internal Revenue Service).
2. Department of Health and Human Services
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\
---------------------------------------------------------------------------
\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 Department of Labor and the Department of the
Treasury, the burden to produce the SBCs including coverage examples
for non-Federal governmental plans and issuers in the individual
market is calculated using half the number of issuers (221) and 15%
of TPAs (113). While non-Federal governmental plans could prepare
their own SBCs including Coverage Examples, the Department assumes
that SBCs including coverage examples would be prepared by service
providers, i.e., issuers and TPAs.
---------------------------------------------------------------------------
To account for variation in firm size, the Department estimates a
weighted burden on the basis of 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 $50 million;
medium issuers as those with total earned premiums between $50 million
and $999 million; and large issuers as those with total earned premiums
of $1 billion or more. Accordingly, the
[[Page 52464]]
Department estimates approximately 70 small, 115 medium, and 35 large
issuers. Similarly, the Department estimates approximately 36 small, 59
medium, and 18 large TPAs.
---------------------------------------------------------------------------
\66\ 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.
---------------------------------------------------------------------------
2011 Burden Estimate
While the disclosures in these proposed regulations are not
required until March 2012, the Department estimates a one-time
administrative cost of about $14,000,000 across the industry and
270,000 burden hours to prepare for the provisions of these proposed
regulations. This calculation is made assuming issuers and TPAs will
need to implement two principal tasks: (1) Develop teams to analyze
current workflow processes against the new standards and (2) make
appropriate changes to IT systems and processes.
With respect to task (1), the Department estimates about 38,000
burden hours, and an equivalent cost of about $1,900,000. The
Department calculates these estimates as follows: \67\
---------------------------------------------------------------------------
\67\ For the purposes of these and other estimates in this
section III.E, the Departments again use the assumptions outlined
above in section III.A.5.
Task 1--Analyze Current Workflow and New Rules
----------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly -----------------------------------------------------------------------
wage rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
----------------------------------------------------------------------------------------------------------------
IT Professionals............ $53.26 36 $1,900 54 $2,900 72 $3,800
Benefits/Sales Professionals 41.94 40 1,700 60 2,500 80 3,400
Attorneys................... 85.44 4 340 6 510 8 680
-----------------------------------------------------------------------------------
Total per issuer/TPA.... .......... 80 3,900 120 5,900 160 7,900
-----------------------------------------------------------------------------------
Total for all issuers/ .......... 8,500 420,000 21,000 1,000,000 8,500 450,000
TPAs...................
----------------------------------------------------------------------------------------------------------------
With respect to task (2), the Department estimates 230,000 burden
hours, and an equivalent cost of out $12,000,000. The Department
calculates these estimates as follows:
Task 2--IT Changes
----------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly -----------------------------------------------------------------------
wage rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
----------------------------------------------------------------------------------------------------------------
IT Professionals............ $53.26 480 $26,000 720 $38,000 960 $51,000
-----------------------------------------------------------------------------------
Total per issuer/TPA.... .......... 480 26,000 720 38,000 960 51,000
-----------------------------------------------------------------------------------
Total for all issuers/TPAs.. .......... 51,000 2,700,000 125,000 6,700,000 51,000 2,700,000
----------------------------------------------------------------------------------------------------------------
The Department assumes the total one-time administrative burden
will be divided equally between 2011 and 2012. Thus, in 2011, the
Department estimates a one-time administrative cost of about $7,000,000
across the industry and 135,000 burden hours. The Department assumes
issuers and TPAs will incur no other costs in 2011 related to the
proposed collection of information.
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
form. 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 $5,900,000. The Department calculates
these estimates as follows:
Task 1--Equivalent Costs for Producing SBCs
----------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly -----------------------------------------------------------------------
wage rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
----------------------------------------------------------------------------------------------------------------
IT Professionals............ $53.26 1.5 $80 1.5 $80 1.5 $80
Benefits/Sales Professionals 41.94 1.5 63 1.5 63 1.5 63
Financial Managers.......... 75.32 0.5 38 0.5 38 0.5 38
[[Page 52465]]
Attorneys................... 85.44 0.5 43 0.5 43 0.5 43
-----------------------------------------------------------------------------------
Total per issuer/TPA.... .......... 4 220 4 220 4 220
-----------------------------------------------------------------------------------
Total for all issuers/ .......... 420 24,000 700 39,000 200 12,000
TPAs...................
----------------------------------------------------------------------------------------------------------------
Task 1--Equivalent Costs for Distributing SBCs
----------------------------------------------------------------------------------------------------------------
Total
Hourly wage Hours per SBC Total number Total hours equivalent
rate of SBCs cost
----------------------------------------------------------------------------------------------------------------
Clerical Staff, Individual $29.15 0.033 2,700,000 89,000 $2,600,000
Market.........................
Clerical, Group Market.......... 29.15 0.017 4,700,000 80,000 2,300,000
-------------------------------------------------------------------------------
Total....................... .............. .............. 7,400,000 170,000 $4,900,000
----------------------------------------------------------------------------------------------------------------
Task 1--Cost Burden for Printing SBCs
----------------------------------------------------------------------------------------------------------------
Cost per SBC Total SBCs Cost burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.12 7,400,000 $890,000
----------------------------------------------------------------------------------------------------------------
Task 2: Coverage Examples--The estimated hour burden is about
40,000 hours, and the estimated total cost is about $2,700,000. The
Department calculates these estimates as follows:
Task 2--Equivalent Costs for Producing Coverage Examples
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 45 $2,400 45 $2,400 45 $2,400
Benefits/Sales Professionals............ 41.94 45 1,900 45 1,900 45 1,900
Financial Managers...................... 75.32 15 1,100 15 1,100 15 1,100
Attorneys............................... 85.44 15 1,300 15 1,300 15 1,300
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 120 6,700 120 6,700 120 6,700
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 13,000 710,000 21,000 1,200,000 6,400 350,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Task 2--Cost Burden for Printing Coverage Examples
----------------------------------------------------------------------------------------------------------------
Printing cost Total CEs Total cost
per CE printed burden
----------------------------------------------------------------------------------------------------------------
Printing Costs............................................... $0.06 7,400,000 $440,000
----------------------------------------------------------------------------------------------------------------
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 $0.49 for each glossary (including $0.44 for first-class
postage and $0.05 for supply costs). Accordingly, in 2012, the
Department estimates a total cost of about $240,000 and 4,300 burden
hours associated with about 190,000 glossary requests.
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 $7,000,000 across the industry and 135,000 burden hours.
[[Page 52466]]
The total 2012 burden estimate is about $16,000,000. The total
number of burden hours is 350,000.
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
$5,900,000 and 170,000 burden hours for SBCs (not including coverage
examples).
Task 2: Coverage Examples--In 2013, the Department again estimates
a total cost of about $2,700,000 and 40,320 burden hours for coverage
examples.
Task 3: Notices of Modifications--The Department assumes that in
2013, issuers will begin sending notices of modifications to covered
individuals, and that 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 $0.49 for each paper notice (including $0.44 for first-class
postage and $0.05 for supply costs). Accordingly, in 2013, the
Department estimates a total cost of about $300,000 and 4,200 burden
hours associated with about 260,000 notices of modification.
Task 4: Glossary Requests--The Department assumes that in 2013,
issuers and TPAs will again respond to glossary requests 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
$0.49 for each glossary (including $0.44 for first-class postage and
$0.05 for supply costs). Accordingly, in 2013, the Department estimates
a total cost of $470,000 and 8,500 burden hours associated with 370,000
glossary requests.
Task 5: Maintenance Administrative Costs--In 2013, the Departments
assume that issuers and TPAs will need to make updates to address
changes in standards, and, thus, incur 15% of the one-time
administrative burden. Accordingly, the estimated hour burden is about
40,000 hours, and the estimated total cost is about $2,000,000. The
Departments calculate these estimates as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small issuer/TPA Medium issuer/TPA Large issuer/TPA
Hourly wage -----------------------------------------------------------------------------------------------
rate Equivalent Equivalent Equivalent
Hours cost Hours cost Hours cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................ $53.26 46.2 $2,500 69.3 $3,700 92.4 $4,900
Benefits/Sales Professionals............ 41.94 33.6 1,800 50.4 2,700 67.2 3,600
Attorneys............................... 85.44 4.2 220 6.3 340 8.4 450
---------------------------------------------------------------------------------------------------------------
Total per issuer/TPA................ .............. 84 4,500 126 6,700 168 8,900
---------------------------------------------------------------------------------------------------------------
Total for all issuers/TPAs.......... .............. 8,900 470,000 22,000 1,100,000 8,900 470,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
The total 2013 cost estimate is about $11,000,000. The total number
of burden hours is about 260,000 hours.
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: Department of Health and Human Services.
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: $1,600,000.
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/PaperworkReductionActof1995/PRAL/list.asp#TopOfPage or e-mail your request, including your address,
phone number, OMB number, and CMS document identifier, to
[email protected], or call the Reports Clearance Office at 410-786-
1326.
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 Office of Information and Regulatory
Affairs, Office of Management and Budget, 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 Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific criteria by Federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have
federalism implications must consult with State and local officials and
describe the extent of their consultation and the nature of the
concerns of State and local officials in the preamble to the
regulation.
In the Departments' view, these 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
[[Page 52467]]
governmental plans as defined in section 2791 of the PHS Act, would be
required to follow uniform standards for compiling and providing a
summary of benefits and coverage to consumers. Such Federal standards
developed under PHS Act section 2715(a) would preempt any related State
standards that require a summary of benefits and coverage that provides
less information to consumers than that required to be provided under
PHS Act section 2715(a).
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of section 731 of
ERISA and section 2724 of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the HIPAA requirements
(including those of the Affordable Care Act) are not to be ``construed
to supersede any provision of State law which establishes, implements,
or continues in effect any standard or requirement solely relating to
health insurance issuers in connection with group health insurance
coverage except to the extent that such standard or requirement
prevents the application of a requirement'' of a Federal standard. The
conference report accompanying HIPAA indicates that this is intended to
be the ``narrowest'' preemption of State laws (See House Conf. Rep. No.
104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018).
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the Affordable
Care Act requirements that are the subject of this rulemaking.
Accordingly, States have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the Federal
law. However, under these proposed rules, a State would not be allowed
to impose a requirement that modifies the summary of benefits and
coverage required to be provided under PHS Act section 2715(a), because
it would prevent the application of this proposed rule's uniform
disclosure requirement.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments have engaged in efforts to consult with and work
cooperatively with affected States, including consulting with, and
attending conferences of, the National Association of Insurance
Commissioners and consulting with State insurance officials on an
individual basis. It is expected that the Departments will act in a
similar fashion in enforcing the Affordable Care Act, including the
provisions of section 2715 of the PHS Act. Throughout the process of
developing these proposed regulations, to the extent feasible within
the specific preemption provisions of HIPAA as it applies to the
Affordable Care Act, the Departments have attempted to balance the
States' interests in regulating health insurance issuers, and Congress'
intent to provide uniform minimum protections to consumers in every
State. By doing so, it is the Departments' view that they have complied
with the requirements of Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to this proposed rule, the
Departments certify that the Employee Benefits Security Administration
and the Centers for Medicare & Medicaid Services have complied with the
requirements of Executive Order 13132 for the attached proposed rule in
a meaningful and timely manner.
IV. Statutory Authority
The Department of the Treasury proposed regulations are proposed to
be adopted pursuant to the authority contained in sections 7805 and
9833 of the Code.
The Department of Labor proposed regulations are proposed to be
adopted pursuant to the authority contained in 29 U.S.C. 1027, 1059,
1135, 1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1185d,
1191, 1191a, 1191b, and 1191c; sec. 101(g), Public Law 104-191, 110
Stat. 1936; sec. 401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C.
651 note); sec. 512(d), Public Law 110-343, 122 Stat. 3881; sec. 1001,
1201, and 1562(e), Public Law 111-148, 124 Stat. 119, as amended by
Public Law 111-152, 124 Stat. 1029; Secretary of Labor's Order 3-2010,
75 FR 55354 (September 10, 2010).
The Department of Health and Human Services proposed regulations
are proposed to be adopted pursuant to the authority contained in
sections 2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C.
300gg through 300gg-63, 300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
Sarah Hall Ingram,
Acting Deputy Commissioner for Services and Enforcement, Internal
Revenue Service.
Signed this 15th day of August, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: July 28, 2011.
Donald Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Dated: August 9, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
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 Sec. 54.9815-2715 in numerical order to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9815-2715 also issued under 26 U.S.C. 9833.
Par. 2. Section 54.9815-2715 is added to read as follows:
Sec. 54.9815-2715 Summary of benefits and coverage and uniform
glossary.
(a) Summary of benefits and coverage--(1) In general. A group
health plan (and its administrator as defined in section 3(16)(A) of
ERISA), and a health insurance issuer offering group health insurance
coverage, is required to provide a written summary of benefits and
coverage (SBC) for each benefit package without charge to entities and
individuals described in this paragraph
[[Page 52468]]
(a)(1) in accordance with the rules 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)(1)(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)(1)(iii) of this section) with respect to each benefit package
offered by the plan or issuer for which the participant or beneficiary
is eligible.
(B) 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 Sec. 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)(1)(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 January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) and whether the
plan's or coverage's share of the total allowed costs of benefits
provided under the plan or coverage meets applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, 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
[[Page 52469]]
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 self-insured 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, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
types of services, dates of service, applicable billing codes, and
allowed charges for each claim in the benefits scenario.
(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 e-
mail 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 e-mail that
the 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-1
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 Sec. 54.9815-2719T(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 $1,000 for each such failure. A failure with respect to each
participant or beneficiary
[[Page 52470]]
constitutes a separate offense for purposes of this paragraph (e).
(f) Applicability date. This section is applicable beginning March
23, 2012. See Sec. 54.9815-1251T(d), providing that this section
applies to grandfathered health plans.
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:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
* * * * *
54.9815-2715............................................ 1545-
* * * * *
------------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
29 CFR part 2590 is proposed to be amended as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
1. The authority citation for part 2590 continues to read as
follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Pub. L.104-191, 110 Stat. 1936; sec. 401(b),
Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d),
Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub.
L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat.
1029; Secretary of Labor's Order 3-2010, 75 FR 55354 (September 10,
2010).
Subpart C--Other Requirements
2. Section 2590.715-2715 is added to Subpart C to read as follows:
Sec. 2590.715-2715 Summary of benefits and coverage and uniform
glossary.
(a) Summary of benefits and coverage--(1) In general. A group
health plan (and its administrator as defined in section 3(16)(A) of
ERISA), and a health insurance issuer offering group health insurance
coverage, is required to provide a written summary of benefits and
coverage (SBC) for each benefit package without charge to entities and
individuals described in this paragraph (a)(1) in accordance with the
rules of this section.
(i) 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)(1)(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)(1)(iii) of this section) with respect to each benefit package
offered by the plan or issuer for which the participant or beneficiary
is eligible.
(B) 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 Sec. 2590.701-6 of this Part) 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
[[Page 52471]]
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)(1)(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 January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) of the Internal
Revenue Code and whether the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage meets
applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, 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 self-insured 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, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
types of services, dates of service, applicable billing codes, and
allowed charges for each claim in the benefits scenario.
(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 e-
mail 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 e-mail that
the 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-1
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 Sec. 2590.715-2719(e) of
this Part 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
[[Page 52472]]
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. See Sec. 2590.731 of this Part. In addition, 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 that willfully fails to
provide information required under this section to a participant or
beneficiary is subject to a fine of not more than $1,000 for each such
failure. A failure with respect to each participant or beneficiary
constitutes a separate offense for purposes of this paragraph (e).
(f) Applicability date. This section is applicable beginning March
23, 2012. See Sec. 2590.715-1251(d) of this Part, providing that this
section applies to grandfathered health plans.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Subtitle A
The Department of Health and Human Services proposes to amend 45
CFR part 147 as follows:
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
1. The authority citation for part 147 continues to read as
follows:
Authority: Sections 2710 through 2763, 2791, and 2792 of the
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
2. Add Sec. 147.200 to read as follows:
Sec. 147.200 Summary of benefits and coverage and uniform glossary.
(a) Summary of benefits and coverage--(1) In general. A group
health plan (and its administrator as defined in section 3(16)(A) of
ERISA), and a health insurance issuer offering group or individual
health insurance coverage, is required to provide a written summary of
benefits and coverage (SBC) for each benefit package without charge to
entities and individuals described in this paragraph (a)(1) in
accordance with the rules 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)(1)(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)(1)(iii) of this section) with respect to each benefit package
offered by the plan or issuer for which the participant or beneficiary
is eligible.
(B) 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 45 CFR 146.117) 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.
[[Page 52473]]
(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)(1)(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.
(iv) By a health insurance issuer offering individual health
insurance coverage--(A) Individuals prior to coverage. A health
insurance issuer offering individual health insurance coverage must
provide an SBC to an individual upon receiving an application for, or a
request for information about, any health insurance policy, as soon as
practicable following the application or request, but in no event later
than seven days following the application or request.
(1) If an SBC is provided upon request for information about a
particular health insurance policy and the individual subsequently
submits an application for the same policy, a second SBC must be
provided under this paragraph (a)(1)(iv)(A) only if the information
required to be in the SBC has changed.
(2) If the issuer modifies the terms of coverage after receiving an
application for any health insurance policy (including modifications as
a result of medical underwriting) so that the information required to
be in the SBC has changed, the issuer must provide an updated SBC that
reflects these changes to the terms of coverage to the applicant, for
each policy for which an application was received, as soon as
practicable, but in no event later than the date on which the offer of
coverage is made.
(B) Individuals covered under individual health insurance
coverage--(1) A health insurance issuer offering individual health
insurance coverage must generally provide an SBC to an individual who
accepts an offer of coverage no later than the first day of coverage.
However, if the SBC is provided upon request for information about
health insurance coverage or at the time that an offer of coverage is
made under paragraph (a)(1)(iv)(A) of this section, the SBC must be
provided under this paragraph (a)(1)(iv)(B) only if the information
required to be in the SBC has changed.
(2) The issuer must provide the SBC to policyholders annually at
renewal, no later than 30 days prior to the first day of coverage under
the new policy year. The SBC must reflect any modified policy terms
that would be effective on the first day of the new policy year.
(C) Upon request. A health insurance issuer offering individual
health insurance coverage must provide an SBC to any policyholder or
covered dependent, upon request, as soon as practicable, but in no
event later than seven days following the request.
(v) Special rule to prevent unnecessary duplication with respect to
individual health insurance coverage. If the policy covers more than
one individual (or if an application for coverage is being made for
more than one individual); all those individuals are known to reside at
the same address; and a single SBC is provided to that address, then
the requirement to provide the SBC is satisfied with respect to all
individuals residing at that address. If an individual's last known
address is different than the last known address of the policyholder,
the issuer is required to provide an SBC to the individual at the
individual's last known address.
(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 January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) of the Internal
Revenue Code and whether the plan's or coverage's share of the total
allowed costs of benefits provided under the plan or coverage meets
applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, 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
[[Page 52474]]
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 self-insured 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, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
types of services, dates of service, applicable billing codes, and
allowed charges for each claim in the benefits scenario.
(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 (or, in the case of
individual market coverage, the average individual covered a health
insurance policy), 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 e-
mail 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 e-mail that
the 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, for non-
Federal governmental plans, the SBC may be provided electronically if
the plan conforms to either the substance of the ERISA provisions at 29
CFR 2520.104b-1, or the provisions governing electronic disclosure for
individual health insurance issuers set forth in paragraph
(a)(4)(iii)(B) of this section.
(iii) With respect to an SBC provided by an issuer offering
individual health insurance coverage, the SBC may be provided in either
electronic or paper form.
(A) Paper disclosure. Unless specified otherwise by an individual,
an issuer must provide an SBC (and any subsequent SBC) in paper form
if:
(1) Upon the individual's request for information or request for an
application for coverage, the individual makes the request in person,
by phone, or by mail; or
(2) When submitting an application for coverage, the individual
completes the application by phone or mail.
(B) Electronic disclosure--(1) An issuer may provide an SBC (and
any SBC provided thereafter) in electronic form (such as through an
Internet posting or via electronic mail) if:
(i) Upon an individual's request for information or request for an
application for coverage, the individual makes a request
electronically; or
(ii) When submitting an application, an individual completes an
application for coverage electronically.
(2) If an issuer provides an SBC in electronic form, the issuer
must:
(i) Request that an individual acknowledge receipt of the SBC;
(ii) Make the SBC available in an electronic format that is readily
usable by the general public;
(iii) 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 or applies for coverage that
apprises the individual the SBC is available on the Internet and
includes the applicable Internet address;
(iv) Promptly provide in accordance with the rules of paragraph
(iii), without charge, penalty, or the imposition of any other
condition or consequence, a paper copy of the SBC upon request. An
issuer must provide an 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
(v) Ensure an SBC provided in electronic form is provided in
accordance with the appearance, content, and language requirements of
this section.
(C) Deemed compliance. A health insurance issuer offering
individual health insurance coverage that complies with the
requirements set forth at 45 CFR Sec. 159.120 (relating to the Federal
health reform Web portal) is deemed to comply with the requirement to
provide the SBC to an individual requesting information prior to
applying for coverage. However, an issuer must provide any SBC provided
at the time of application or subsequently in a form and manner
compliant with the requirements of paragraphs (a)(4)(iii)(A) and
(a)(4)(iii)(B) of this section.
(5) Language. A group health plan or health insurance issuer must
provide the SBC in a culturally and linguistically appropriate manner.
For purposes of this paragraph (a)(5), a plan or issuer is considered
to provide the SBC in a culturally and linguistically appropriate
manner if the thresholds and standards of Sec. 147.136(e) of this
chapter are met as applied to the SBC.
(b) Notice of modifications. If a group health plan, or health
insurance issuer offering group or individual health insurance
coverage, makes any material modification (as defined under section 102
of ERISA, 29 U.S.C. 1022) in any of the terms of the plan or coverage
that would affect the content of the SBC, that is not reflected in the
most recently provided SBC, and that occurs other than in connection
with a renewal or reissuance of coverage, the plan or issuer must
provide notice of the modification to enrollees (or, in the case of
individual market coverage, an individual covered a health insurance
policy), 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
[[Page 52475]]
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, and a health
insurance issuer offering individual health insurance coverage must
make available to applicants, policyholders, and covered dependents,
the uniform glossary described in paragraph (c)(2) of this section in
accordance with the appearance and 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 (or, in the case of individual market coverage, an average
individual covered under a health insurance policy).
(4) Form and manner. A plan or issuer must make the uniform
glossary described in this paragraph (c) available upon request, in
either paper or electronic form (as requested), within seven 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,
beneficiaries, and individuals covered under an individual policy their
rights to request a copy of the uniform glossary.)
(d) Preemption. For purposes of this section, the provisions of
section 2724 of the PHS Act continue to apply with respect to
preemption of State law. In addition, 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 health insurance issuer or a non-Federal
governmental health plan that willfully fails to provide information
required under this section is subject to a fine of not more than
$1,000 for each such failure. A failure with respect to each covered
individual constitutes a separate offense for purposes of this
paragraph (e). HHS will enforce these provisions in a manner consistent
with 45 CFR 150.101 through 150.465.
(f) Applicability date. This section is applicable beginning March
23, 2012. See Sec. 147.140(d) of this chapter, providing that this
section applies to grandfathered health plans.
[FR Doc. 2011-21193 Filed 8-17-11; 11:15 am]
BILLING CODE 4120-01-P