Benefits and Compensation

Pulled in 2 Directions: The Cost of Uniform Coverage Summaries

Health reform’s uniform summary of benefits and coverage (SBC) will cost insurers and third party administrators (TPAs) about $160 million over the next three years to develop, update, and provide the SBC and glossary to applicants and enrollees, its agency drafters estimate. That includes $25 million in 2011 , $73 million in 2012 and $58 million in 2013.

See pages 52457-8 of the proposed rule for a more detailed cost breakdown.

Under the rule, SBCs must be furnished to all individual and group health applicants and enrollees, and the requirement will take effect by March 23, 2012.  They must be brief – no longer than 4 pages according to the regulation. And yet they must describe the coverage in about a dozen ways, including: (1) uniform definitions of standard insurance and medical terms; (2) premiums and benefits, including cost-sharing; (3) exclusions, restrictions and limits; (4) continuation of coverage provisions; (5) illustrations of common benefits scenarios; (6) an internet address where consumers can find in-network providers; and more.

ERISA already requires that all employers who sponsor group health plan benefits must provide a “summary plan description” (SPD). Some employers have said they’ve historically been been compelled to increase the level of detail in SPDs to avoid legal liability. Now they’re being faulted for because SPDs are too long. No wonder why some experts think the new requirement is pulling employers in opposite directions. See this previous SmartHR blogpost.

Redundant?

Health Consumer advocate organization Kaiser Family Foundation doesn’t seem to see the problem from employers’ standpoint. It cites the rule to say the SBC is necessary and can’t be separate from the SPD.

The proposed rule notes that SPDs have grown to 100 pages in length in many cases, and tend to be written at a college reading level with significant technical language and jargon. In addition, ERISA does not require uniform standards for SPDs, so these documents will not always include the same content or order of information required under the SBC. The benefits to consumers of having more understandable, standardized information about health plan options are described in the proposed rule, though not quantified. Families and employers incur costs related to understanding and comparing health plan options. Low health insurance literacy rates are well-documented, as are difficulties consumers have understanding health insurance today. Research also shows that when consumers are confused by the complexity of … (Okay we get the point.)

When compliance time inevitably comes around, this NAIC document might be helpful.

There’s still time for employers to weigh in. The proposed rule calls for comments on:

  • whether requirements for the SBC – and, in particular, for the new coverage illustrations component – should be phased in to allow more time for implementation
  • whether large employer plans should be exempt from the requirement to provide the SBC
  • whether the SBC should be incorporated into the SPD instead of being provided as a stand-alone document
  • whether the SBC could inform users whether their plan meets requirements for minimum essential and affordable coverage.

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