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SBC Regulation poses potential problems for employers

The Department of Health and Human Services recently announced that employers offering private health plans must provide employees with summary of benefits coverage, which is a user-friendly brief outlining available plan options and costs, including copays and deductibles.

While the intent of these SBCs is to provide health care consumers with more transparency into their benefits, it could pose problems for employers, says J.D. Piro, senior vice president and leader of the health law group at Aon Hewitt, a human capital consulting firm in Chicago.

The original effective date for SBCs was scheduled for March 23, but many employers expressed their hope for the deadline to be set at least a year out, Piro says. In fact, according to a recent survey by HighRoads, a human resources and employee benefits management provider in Woburn, Mass., fewer than half of employers were ready to distribute their SBCs by the March 23 deadline.

Although HHS implemented an extension, the new deadline for SBCs was only set for open enrollment dates after Sept. 23, which does not give employers much time to make sure they are fully in compliance with this new regulation when considering everything that must be completed.

“It’s going to be a significant burden for employers to put all of this together because you have to have to provide a very specific document,” Piro says. “It has to be a four-page, double-sided, 12-point-font document, and you have to provide a uniform definition of standard insurance terms and a description of coverage, including cost sharing. There’s a lot for employers to do.”

In the experience of Steve Wojcik, vice president of public policy at National Business Group on Health, a nonprofit dedicated to representing large employers’ perspective on national health policy issues in New York, many employers also find the requirement for SBCs redundant and even costly.

Employers are already required to provide a summary plan description to all employees under Employee Retirement Income Security Act, but with the addition of SBCs, they now have to invest resources in creating a document that already exists through SPDs.

“At best, SBCs could be redundant; at worst, they could be potentially confusing to employees,” Wojcik says. “Employers will be spending all this time, money and resources complying with the government requirement on top of all the things we already do to communicate benefits to employees and plan participants encouraging them to make wise benefits decisions, so that’s a big issue. It’s layered on top of the other requirements that are already there because of ERISA.”

With so many requirements and possible higher administrative costs, Piro maintains that employers should start preparing SBCs now. The regulations are not impossible to meeting, but ensuring these SBCs are compliant with the law can be burdensome and take some time.

“There’s a whole range of things that the government is requiring to be put in these SBCs,” Piro says. “Preparing SBCs are something employers have to start doing now in order to be ready for the fall.”