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May 17, 2012

HRB 50 - ACA Updates 5-17-12

Released May 17, 2012I Download as a PDF

May 17, 2012 -- The health care reform law continues to generate regulations and clarifications. 

Summary of Benefits and Coverage

Most recently, the governing agencies have issued some additional Frequently Asked Questions relating to the Summary of Benefits and Coverage (“SBC”).  An SBC is a document required to be provided both by individual and group health plans.  Of particular note, this guidance again underscores a good faith compliance standard in the first year.  In other words, penalties will not be assessed as long as the plan is making a good faith effort to comply.

The FAQs clarify that if a plan is comprised of insurance products from multiple vendors, the plan sponsor can assemble the various SBCs from each vendor.  The FAQs suggest a cover letter that indicates multiple SBCs being used to reflect the plan would be prudent.  It is important to note that after the first year, information from the various vendors must be compiled into a single SBC, according to the FAQs.  The plan sponsor can accomplish this, or it can ask one of its vendors to accomplish this.

SBCs may be provided to covered participants electronically. The DOL provides an additional safe harbor for electronic delivery:

  • SBCs may be provided electronically in connection with an online enrollment or renewal of coverage under the plan.
  • SBCs also may be provided electronically to participants who request an online version.

In either situation, the individual must have the option to receive a paper copy upon request. For plans subject to ERISA, the DOL rules relating to electronic disclosure still applies (see Electronic Distribution of SBC in this CBIZ Health Reform Bulletin, Summary of Benefits and Coverage)

Due to a clerical error, the SBC Template has been updated. The revised documents can be accessed from both the DOL’s and CCIIO’s websites; the revised editions are labeled “corrected on May 11, 2012” in the lower right corner of the first page.

The agencies are developing a streamlined calculator that can be used in producing the coverage examples contained in the SBCs.

Minimum Loss Ratio Guidance

One of the requirements of the ACA is that insured plans must spend at least 85% of premium dollars paid by the large group market (over 100 employees) on medical claims; 80% in the small group (100 or fewer employees) and individual markets.  If the plan does not meet the required target, a rebate is owed to the policyholder and subscriber.

There has been an outstanding question as to whether plans that meet this standard, i.e., do not owe a rebate, have any notice obligations.  A new set of final and interim final regulations clarify that for this first year, plans that do not owe a rebate are required to issue a notice.   The regulations include model language that can be used in the notice.  Important to many is that this notice is only required during this first year.  The MLR notice can be included with other plan materials, such as open enrollment documents, provided to enrollees on or after July 1, 2012. 


About the Author:  Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law.  Ms. McLeese is based in the CBIZ Leawood, Kansas office.


The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation.

The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.



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