Legislation & Regulation

Clarifying Benefit Packages Takes Time, Insurers Insist

Health plan officials are not doing handstands over the federal government’s extension of a deadline to disclose benefits to members in a readable form

John Carroll

Earlier this year, federal regulators cut the health insurance industry some slack when they extended the allowed time for health plans to come up with a simple, easy-to-read explanation of the benefits available to consumers.

The spring 2012 deadline outlined by the Affordable Care Act for the Summary of Benefits and Coverage — or SBC — became the fall deadline under the final set of rules outlined by three federal agencies.

When a beneficiary joins a plan during open enrollment on or after September 23, insurers and employers will be required to offer a eight-page outline that includes, in plain English and type that is large enough to read, what members are on the hook for and what insurers cover. 

“The current patchwork of non-uniform consumer disclosure requirements makes shopping for coverage inefficient, difficult, and time-consuming, particularly in the individual and small group market, but also in some large employer plans in which workers may be confused about the value of their health benefits as part of their total compensation,” regulators noted in February’s final rules. “As a result of this confusion, health insurance issuers and employers may face less pressure to compete on price, benefits, and quality, contributing to inefficiency in the health insurance and labor markets.”


Any plan sponsor or administrator that fails to comply with the new rules will face a fine of $1,000 for each individual beneficiary as well as a $100 tax liability.

“I think it is a very reasonable compromise,” Lynn Quincy, senior policy analyst at Consumers Union, says of the six-month extension. “Clearly the insurers and large employers need some time to retool their information systems so they can provide these forms.” This extension gives them the needed ramp-up time.

But it’s hard to find anyone on the insurance side — or the big employers they work with — who would agree with her. Even after the final rules were issued by HHS, America’s Health Insurance Plans was still mustering support for its argument to push the deadline back by 18 months, asserting that the short timeframe would punish the industry with an expensive and onerous rush job.

“That implementation date is not feasible,” Robert Zirkelbach, press secretary at AHIP, told MANAGED CARE.

Plagued by delays

The whole regulatory process leading up to the final rules has been plagued by delays, AHIP noted back in the fall of 2011. AHIP estimated the initial implementation and first year of operation under the SBC rules would cost the industry $382 million (see “How Much It Will Cost to Follow Regulations?” on the next page), well over twice what HHS had estimated. An 18-month compliance window would cut the initial implementation costs by 23 cents on the dollar, the lobbying group says.

Thomas Hartford, senior general counsel of Regence BlueCross BlueShield of Utah who has been working on the project, welcomed some significant concessions in the final rules. Premiums won’t have to be revealed in the SBC, he notes. AHIP and others had objected to that, claiming it would have been virtually impossible to provide.

The later deadline was welcome, Hartford noted, even though Regence was “disappointed in the proximity of the Sept. 23, 2012 effective date. We also have lingering concerns about possible member confusion arising from the mandatory use of one-size-fits-all terminology that the regulators have acknowledged may have different meanings under different plans.”

Work on the SBCs has begun, he adds, but complying this fall will be tough.

“Regence has begun mocking up some draft SBCs and believes it will be a very significant challenge to describe any but the simplest of products as instructed, while remaining within the eight-page limitation,” he adds. “Complying with the SBC production requirements in the regulations will be very demanding. Not just initially, but in the future, and the sooner efforts are begun, the better.”

AHIP has also resisted key provisions. It’s unrealistic, the group argues, to expect plans to meet a rule to provide an SBC outline to a consumer in seven days when some 150,000 contract variations may exist. Regulators should allow 15 days to match a person or employer to a set of benefit explanations.

Just requiring the SBCs to be available at the time of enrollment ignores the fact that labor groups often demand changes in benefits after a plan year begins. AHIP called for rule changes to account for clerical errors, advance notification of modifications, and more. And AHIP has plenty of major league allies willing to weigh in on this issue.

James Klein, the president of the American Benefits Council, said the final implementation date is “abrupt, disruptive, and burdensome, and should be delayed by twelve months to minimize these adverse consequences or a transition rule for employers should be provided.” Employers, he added, are in the early stage of deciding on 2013 health benefits.


A lengthy delay, though, is exactly what consumer groups have been fiercely opposed to for months.

By requiring insurers to outline who covers what and how high those costs can go, consumers get a chance to understand things like just how little the limited-benefit plans pay for. So if a plan has capped coverage of, say, $25,000, members will know just how quickly that money can be spent.

And insurers are likely to benefit enormously as well.

“It shows what the health plan pays,” says Quincy of Consumers Union. “That may seem obvious, but if you think about traditional health plan descriptions, it’s all about what the consumer pays, and in our testing it was actually eye-opening to see how much the health plan was paying on their behalf.”

How much will it cost to follow regulations?

Call it a failure in communication. The managed care industry and the government have provided strikingly different estimates for just how much it should cost health plans to follow regulations on describing costs and benefits in clear language. The government wants benefits summarized in an eight-page form, and said plans needed to comply by last month (March). After insurers complained that it would be nearly impossible to meet that deadline, it was pushed back to September 23. In a letter that America’s Health Insurance Plans sent to the Center for Medicare & Medicaid Services dated Oct. 21, 2011, the group provided a survey of members taken last September showing how costly it would be to comply with the Summary of Benefits and Coverage (SBC) and the Uniform Glossary requirements.

Cost was just one factor mentioned in the 10-page letter. AHIP also stated that the proposed template “fails to reflect all of the benefit designs available in the market today. We are concerned that consumers and enrollees will receive insufficient information from the SBC template about innovative and creative products, such as those incorporating value-based design features and patient-centered medical homes, that cannot be adequately described within the confines of the template.”

Two very different projections
AHIP projected implementation
AHIP projected annual operations
$188 million
$194 million
HHS projected 2011
HHS projected 2012
HHS projected 2013
$25 million
$73 million
$58 million

Source: AHIP Center for Policy and Research

Notes: AHIP survey results based on companies with 127 million enrollees and extrapolated to an estimated universe of 180 million enrollees. Estimated costs are in 2011 dollars. HHS estimates include both implementation and ongoing operations costs.

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