New Health Insurance Document Creates an “Apples to Apples” Approach for Health Insurance Shopping

We have a new acronym to remember in the health insurance world. It is the SBC – the Summary of Benefits and Coverage. The SBC is a four-page uniform template pre-filled with the important provisions of a specific health insurance plan. Basically, it is the “Cliffs Notes” version of the plan’s material features. The SBC must be accompanied by a glossary of health insurance and medical terms.

According to the US Department of Health and Human Services (HHS), “the Summary of Benefits and Coverage will enable consumers to easily understand their health coverage and determine the best health insurance options for themselves and their families.” This new document is one tool the federal government is using in an attempt to create more transparency and understanding for consumers in health insurance plans.

Through the use of the standardized format, the document is intended to provide more of an “apples to apples” comparison approach to health insurance shopping. HHS likens the document to food nutrition fact labels required for packaged food. Previously, employers and health care consumers relied heavily on health care providers’ marketing materials when shopping and securing health insurance plans. The new document is intended to assist the more than 180 million Americans with private health coverage in selecting and understanding their health insurance benefits.

However, the new document requirement comes with new compliance burdens for employers offering health insurance coverage under both grandfathered and non-grandfathered plans. Beginning with your company’s first open enrollment period following September 23, 2012, an SBC must be included in your company’s open enrollment materials. (If you do not provide open enrollment materials, the document must be provided at least 30 days prior to the plan’s effective date.) Also, for employees eligible to enroll during the plan year, the employer must ensure the employee receives an SBC if the enrollment date is after the plan’s next annual renewal date.

Unless your health plan is self-funded, your health insurance provider is required to draft the SBC. However, the responsibility to distribute the SBC is shared by both the health insurance company and the employer, and penalties may be assessed to either or both parties for the failure to provide the SBC when required.