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April 25, 2013

HRB 71 - Updated Summary of Benefits and Coverage (SBC) Guidance and New FAQs

Released April 25, 2013I Download as a PDF

April 25, 2013 -- The Department of Labor’s Employee Benefits Security Administration (EBSA), as well as the Departments of Health and Human Services and Treasury have jointly issued new Summary of Benefits and Coverage (SBC) FAQs along with an updated template and sample completed SBC.

As background, the ACA requires plans to provide an SBC (see prior Health Reform Bulletins: ACA Updates: Summary of Benefits and Coverage, 5/17/12; Summary of Benefits and Coverage, 3/21/12; and ACA Updates-Final Rules: Summary of Benefits and Coverage, 2/10/12).

The SBC form originally issued was only for use during the first year of compliance.  The governing agencies have just released the updated SBC template and sample completed SBC that can be used for the second year of compliance.  The second year of compliance is defined as coverage beginning on or after January 1, 2014 and before January 1, 2015.

The only substantive change to this form is that the SBC must include a statement that the plan does or does not meet minimum essential coverage (MEC) standards and that the plan does or does not meet the minimum value standard.

MEC generally includes coverage under:

  • Employer-sponsored group health plans, whether insured or self-funded, and grandfathered plans, as well as COBRA coverage (if actually elected) and retiree coverage.  It also includes group health coverage sponsored by non-profit and for-profit entities, and governmental entities, including local governments
  • Government-sponsored plans such as Medicare, Medicaid, Children's Health Insurance Program (CHIP), TRICARE, and various Veteran’s health programs
  • Individual health policies, including a qualified health plan offered by an Exchange
  • Other similar types of comprehensive health coverage recognized by HHS as minimum essential coverage 

It should be noted that HIPAA-excepted coverage alone will not qualify as minimum essential coverage.  For examples of HIPAA-excepted coverage, see Health Reform Bulletin Individual Minimum Essential Coverage and  Affordability Standard, 02/06/13.

As a reminder, MEC is important in that it is the level of coverage that most individuals, legally present in the United States, must maintain in order to avoid the individual shared responsibility tax that will take effect January 1, 2014.  It is important for large employers, in that it is the level of coverage the employer must offer to its full-time employees in order to avoid the risk of a ‘no coverage’ shared responsibility penalty.

Minimum value is the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage, which may not be less than 60 percent of such costs.

The governing agencies state that a plan can continue to use the current SBC form as long as it is accompanied by a cover letter including language explaining the plan’s compliance with the MEC standard and minimum value standards.  Model language is as follows:

Does this Coverage Provide Minimum Essential Coverage?
The Affordable Care Act requires most people to have health care coverage that qualifies as “minimum essential coverage.” This plan or policy [does/does not] provide minimum essential coverage.

Does this Coverage Meet the Minimum Value Standard?
In order for certain types of health coverage (for example, individually purchased insurance or job-based coverage) to qualify as minimum essential coverage, the plan must pay, on average, at least 60 percent of allowed charges for covered services. This is called the “minimum value standard.” This health coverage [does/does not] meet the minimum value standard for the benefits it provides.

The FAQs affirm that the governing agencies will continue to honor a good faith compliance standard.  What this means is, as long as a plan is making its best effort to comply with the SBC requirement, this will be given credence.

The FAQs also affirm that previously issued safe harbor and other good faith compliance standards remain in force.  A couple of safe harbors that are of particular note include:

  • The relief provided to expatriate plans (FAQs Part IX, Q13),
  • Rules relating to carve-out plans (FAQs Part VIII, Q5),
  • Rules relating to electronic distribution of SBCs (FAQs Part IX, Q1), and
  • Relief from an issuer’s obligation to provide an SBC for a plan component that it does not insure (FAQs Part IX, Q10).

In conclusion, plans should be prepared to use the new SBC form on January 1, 2014, or at minimum include the cover letter as described above.


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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