Standards for Plan Summary of Benefits and Coverage

Those of us who administer employee benefit plans are very familiar with the requirement of ERISA to furnish a Summary Plan Description (SPD) to newly eligible employees. ERISA requires that SPD’s contain information about the sponsors and administers of the plan, when an employee is eligible to enroll and participant in the plan, a description of the plan and its benefits, when employees vest in those benefits and how to claim benefits and file appeals. The SPD is written in a manner, which is understood by the average plan participant, is accurate and comprehensive, and designed to make participants and their beneficiaries aware of their rights and requirements under the plan. However, many plan administrators simply provide a modified copy of the “insurance” policy to employees.

The Patient Protection and Affordable Care Act provides further directions on furnishing plan “summary” information about health care plan benefits and coverage to participants. Among the uniform standards is a format of no more than 4 pages (Assume 8 ½ x 11) in a font no smaller than 12 points. There is no mention of margins; we can assume more details will follow when the Secretary issues regulations. Further standards include requirement that the summary is written “in a culturally and linguistically appropriate manner”. The summary is required of both “grandfathered” plans as well as new health care plans implemented after the passage of the Act.

Unlike SPD’s, the document must include; uniform definitions of standard insurance terms and medical terms, description of the benefits coverage, cost sharing arrangements, exceptions, reductions and limitations on coverage; deductible, coinsurance and co-payment amount, re-enrollment and continuation of coverage requirements, examples of common benefits situations statement whether the coverage provides minimum essential coverage, that the coverage total costs of benefits provided is not less than 60%, that the coverage document itself should be consulted to determine the governing contractual provisions, contact number for the participant to call and an Internet web address where, and a copy of the actual individual coverage policy can be reviewed and obtained.

The document is to be provided to an enrollee prior to the time of enrollment or re-enrollment in either a written or an electronic form. We can assume that final regulations will give us directions on a “safe harbor” for electronic forms of communications. Provisions are in the Act to address plan modifications, similar to Summary of Material Modification guidelines but 60 days prior to the modification’s effective date. Of course, there are penalties for non-compliance of up to $1,000 per non-compliance event no maximum is listed.

The Secretary is required to develop standards for the definitions of both insurance and medical terms; including; premium, deductible, co-insurance, co-payment, out-of-pocket limit, preferred provider, on-preferred provider, out-of-network co-payments, UCR (usual, customary and reasonable) fees, excluded services, grievance and appeals, hospitalization, hospital outpatient care, emergency room care, physician services, prescription drug coverage, durable medical equipment, home health care, skilled nursing care, rehabilitation services, hospice services, emergency medical transportation, “and such other terms as the Secretary determines are important”.

Summary information standards developed by the Secretary will be reviewed and updated periodically. With that said, it can be expected that over time the summary style, format, and contents will have to be modified.