Are You Communicating Your Employees' Benefits Correctly?

Most employers who offer health insurance coverage use the annual open enrollment period to communicate benefits details to employees. Typically, this effort consists of distributing a summary of benefits produced by the insurance carriers and communication pieces tailored to the employees and the company’s overall benefits program. But soon, these materials won’t be enough. 

Healthcare Reform Means More Benefits Communication

Beginning with the first day of an open enrollment period on or after September 23, 2012, employers will need to take extra steps to comply with a new regulation required by the Patient Protection and Affordable Care Act.  

Then, group health plans and insurers will need to provide a uniform summary of benefits coverage (SBC) to participants or beneficiaries for each option offered for which they’re eligible. Designed to allow consumers to compare plans with consistent and plain language, the SBCs must: 

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• Be included with any other open enrollment materials

• Be presented in a uniform format

• Not be longer than four pages (double-sided)

• Use a minimum of 12-point font size

• Be presented in a “culturally and linguistically appropriate manner,” which requires different languages depending on the employee population

What Must the Summary Include

The SBCs must include a lot of information in just four pages, including:

• Uniform definitions of standard insurance and medical plans

• Descriptions of coverage, including cost sharing for each of the essential benefits offered and any other benefits required

• Exceptions, reductions and coverage limitations

• Out-of-pocket obligations including copays, deductibles and coinsurance

• Renewability and coverage provisions

• A “coverage facts label” with examples illustrating common benefit scenarios

• Whether the plan offered is considered “minimum essential coverage” as defined by healthcare reform

• A statement that the plan sponsor ensures its share of the total allowed costs of benefits provided under the plan or coverage is not less than 60%

• A statement that the SBC is a summary of the plan only and that the coverage document itself (i.e. certificate of coverage) should be referenced to determine contractual provisions

While comprehensive, the new SBCs do not replace the need for employers to continue to provide Summary Plan Documents (SPDs) and Summaries of Material Modifications (SMMs), for example, changes to plan designs. 

Timeline for Distributing the SBC

The employer must distribute the SBC at open enrollment prior to the renewal along with all other open enrollment materials.  

If an employer requires participants or beneficiaries to renew in order to maintain coverage for a succeeding year, a new SBC must be provided no later than the date the renewal materials are distributed. For automatic renewals, the employer must distribute the SBC 30 days prior to the renewal of the new plan year.  

Employers must also offer SBCs for any special enrollments and/or upon request.  

Fines for Failure to Provide

The SBC requirement is a serious one: Health and Human Services will fine employers up to $1,000 for each willful failure to provide the SBC. That means a penalty for every employee, COBRA participant and new hire. 

This new requirement represents a significant change for employers. And with a deadline just six month away, the time to act is now. For more information, including model templates, employers can visit the HHS Web site.

Amy Gallagher has over 19 years of healthcare industry experience.  As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

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