Implementing the Summary of Benefits and Coverage Provision of the ACA

The Patient Protection and Affordable Care Act of 2010 (ACA) includes a provision requiring private individual and group health plans to provide all applicants and enrollees with a uniform summary of benefits and coverage (SBC). The provision is meant to help consumers compare health insurance options prior to enrollment and understand their coverage when they enroll. The SBC provision applies to all health plans, both individual and group, and takes effect March 23, 2012. The Henry J. Kaiser Family Foundation’s Focus on Health Reform project recently issued a brief titled Uniform Coverage Summaries for Consumers outlining the SBC provision and describing ways the provision will be used after 2014, when health insurance exchanges will provide new health plan options for the individual and small group markets. A proposed federal regulation covering the SBC requirement calls for the summary to be no longer than 4 double-sided pages. Additional requirements stipulate that the SBC use words that are “understandable to the average consumer and be presented in a culturally and linguistically appropriate manner.” In addition, it cannot contain “fine print.” The summary has to describe the plan’s premium, coverage features (exclusions or benefit limits), and patient cost-sharing for each of the categories of the essential health benefits required under the ACA, and rules regarding use of network providers. In addition, it must indicate whether the plan meets standards for minimum essential coverage and has an actuarial value of at least 60%. Finally, it must include “coverage facts labels” that illustrate how the plan or policy would cover common benefit scenarios. The regulation was drafted with input from the National Association of Insurance Commissioners (NAIC). Recommendations from the NAIC were made following a year-long project that included consumer advocates, insurers, healthcare providers, advocates for those with limited proficiency in English, and others who made recommendations and tested them with consumers and insurers. The regulation “hews closely” to the NAIC recommendations, according to the Kaiser brief. Another requirement of the ACA is the development of “standards for definitions” of terms used in health coverage, particularly medical terms and those related to insurance. A glossary of insurance terms was developed by the NAIC; the ACA calls for the glossary to be made available to applicants and enrollees. For example, the term “out-of-pocket limit” is defined in the glossary as “the most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100%.... Some health insurance or plans don’t count all of your copayments, deductibles…or other expenses toward this limit.” This definition, combined with detailed instructions for completing the SBC, will give consumers specific information about how the out-of-pocket limit works in any given plan or policy. In 2014, health insurance exchanges will offer new health plan options for individuals and small businesses. There will be requirements for these plans to comply with the regulations calling for the standardized SBC format. Individuals may move in and out of exchange coverage, and the standardized SBCs are intended to allow consumers to compare current and new coverage. Plans offered through the exchanges will be labeled bronze, silver, gold, or platinum according to their actuarial value; however, actuarial value does not provide consumers with a clear picture of what is covered and what is not covered, the Kaiser brief noted. The proposed regulations call for illustrations of coverage indicating how the plan would cover common medical events such as an uncomplicated pregnancy, treatment for breast cancer, and management of diabetes. When the NAIC tested the use of coverage illustrations, people found the concrete examples helpful in understanding and comparing coverage. The Kaiser brief concluded with a section on balancing the benefits and costs of the SBC regulation. According to estimates cited in the brief, over the next 3 years, developing, updating, and providing the SBC and glossary to consumers will cost insurers and third-party administrators for self-funded employer health plans approximately $50 per year. Implementing the requirements while moderating the costs of implementation is an important issue. Strategies to limit costs while ensuring consumers receive the information may be considered, the brief noted. One suggestion is phasing in some of the SBC requirements, such as the component for new coverage illustrations. Also under consideration is the extent to which the federal government can provide technical assistance to health insurers and third-party administrators during implementation; assistance such as training, help lines, and sharing of best practices could help reduce the costs of providing consumers with the important information.