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March 22, 2012

Affordable Care Act Requires New "Summary of Benefits and Coverage"

The Departments of the Treasury, Labor and Health and Human Services issued as joint final regulations on February 9, 2012 concerning a new participant notice known as the Summary of Benefits and Coverage (“SBC”). The regulations and related information may be found at:  An SBC must be provided to each plan participant and beneficiary in a group health plan.  The regulations implement a portion of the Patient Protection and Affordable Care Act signed by President Obama in 2010.  On March 20, the agencies issued additional guidance in the form of 24 FAQs on the Department of Labor website that address the implementation of the SBC requirements. See:

The SBC is designed to help consumers to better understand their health coverage and to compare medical options available under an employer’s group health plan.

Who Provides the SBC

If a plan is fully insured, the insurance company is required to provide the SBC to the group health plan.  For a self-funded, non-insured group health plan, the plan administrator must provide the SBC.

How the SBC is Provided

The SBC must be provided in writing and without charge.  Employers should make arrangements with their insurers to determine if the insurance company will provide the SBC directly to the employees or to the employer for distribution to eligible employees.

If mailed, only one SBC must be provided per participant, unless beneficiaries are at separate addresses.  Electronic delivery is permitted if certain requirements are met. 

When the SBC must be Given to Employees

The SBC must be provided to eligible employees:

  1. During Enrollment:  The SBC must be provided with the application materials and before the date the participant is eligible to join the plan.  It should to be noted that the SBC is not the same as the summary plan description (SPD) or summary of material modifications (SMM) which may also be delivered at enrollment. The SBC is a new separate document and should not be confused with the SPD or SMM that are required by ERISA.
  2. Upon Renewal of Coverage:   If the renewal is automatic, the SBC must be provided within 30 days of the new plan year and only the SBC for the renewed coverage must be provided. If renewal is not automatic, the SBC must be distributed with the application materials.
  3. Upon request:  The SBC must be provided within seven days of a request even if the participant is not eligible for the particular coverage.  In addition, a uniform glossary must be delivered within 7 days of a request.  A sample uniform glossary is provided with the final regulations.
  4. Upon special enrollment:  HIPAA enrollees must be provided a SBC within 90 days of enrollment.
  5. Upon material modification of the plan:  In the case of a mid- year modification to coverage, 60 days advance notice is required before the change is effective.  Notice may be given by providing an updated SBC or by a separate description of the benefit reduction or enhancement.        

Contents of the SBC

A separate SBC must be produced for each health option offered under a group health plan.  Each of these SBCs must cover the following items:

  1. Uniform definitions of standard insurance and medical terms;
  2. Description of the coverage;
  3. Exceptions, reductions, and limitations on coverage;
  4. Cost-sharing provisions, including deductibles, coinsurance, and copayments;
  5. Renewability and continuation of coverage provisions;
  6. Coverage examples that illustrate how common benefits scenarios are treated.  Examples under the final regulations are a normal childbirth and treatment of well-controlled type 2 diabetes;
  7. For coverage beginning on or after January 1, 2014:a statement about whether the plan provides “minimum essential coverage” as defined in the Internal Revenue Code;
  8. A statement that the SBC is only a summary and that the plan document or insurance policy must be consulted;
  9. Contact information for questions and obtaining a copy of the plan document or policy;
  10. Web Addresses to obtain a list of providers if the employer provides a choice, to obtain drug formulary information if applicable, and to obtain the uniform glossary.  

 Effective Date

To the relief of many, the effective date of the SBC requirements has been pushed back from March 23, 2012 to September 23, 2012.  This means the final rules will be in full effect for the first day of an open enrollment season beginning after September 23, 2012.  In the case of calendar year group health plans, this means the start of the enrollment period for the 2013 plan year.


Insurers and self-insured plans that fail to provide the SBC can be fined up to $1000 for each willful failure. Failure with regard to each participant is considered a separate failure. Failures are also subject to excise tax penalties under the Internal Revenue Code of $100 per day, per individual.

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If you have any questions regarding the SBC requirements for your employer health plan, please do not hesitate to contact us.