Reg140038-10

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
[REG–140038–10]
RIN 1545–BJ94

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AB52

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Part 147
[CMS–9982–P]
RIN 0938–AQ73

Summary of Benefits and Coverage
and the Uniform Glossary
Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,
Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Notice of proposed rulemaking.
AGENCY:

This document contains
proposed regulations regarding
disclosure of the summary of benefits
and coverage and the uniform glossary
for group health plans and health
insurance coverage in the group and
individual markets under the Patient
Protection and Affordable Care Act.
This document implements the
disclosure requirements to help plans
and individuals better understand their
health coverage, as well as other
coverage options. The templates and
instructions to be used in making these
disclosures are being issued separately
in today’s Federal Register.
DATES: Comment date. Comments are
due on or before October 21, 2011.
ADDRESSES: Written comments may be
submitted to any of the addresses
specified below. Any comment that is
submitted to any Department will be
shared with the other Departments.
Please do not submit duplicates.
All comments will be made available
to the public. Warning: Do not include
any personally identifiable information
(such as name, address, or other contact
information) or confidential business
information that you do not want
publicly disclosed. All comments are

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SUMMARY:

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posted on the Internet exactly as
received, and can be retrieved by most
Internet search engines. No deletions,
modifications, or redactions will be
made to the comments received, as they
are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to
the Department of Labor, identified by
RIN 1210–AB52, by one of the following
methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail: [email protected].
• Mail or Hand Delivery: Office of
Health Plan Standards and Compliance
Assistance, Employee Benefits Security
Administration, Room N–5653, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210,
Attention: RIN 1210–AB52.
Comments received by the
Department of Labor will be posted
without change to http://
www.regulations.gov and http://
www.dol.gov/ebsa, and available for
public inspection at the Public
Disclosure Room, N–1513, Employee
Benefits Security Administration, 200
Constitution Avenue, NW., Washington,
DC 20210.
Department of Health and Human
Services. In commenting, please refer to
file code CMS–9982–P. Because of staff
and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
1. Electronically. You may submit
electronic comments on this regulation
to http://www.regulations.gov. Follow
the instructions under the ‘‘More Search
Options’’ tab.
2. By regular mail. You may mail
written comments to the following
address only: Centers for Medicare &
Medicaid Services,Department of Health
and Human Services,Attention: CMS–
9982–P, P.O. Box 8016, Baltimore, MD
21244–1850.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
3. By express or overnight mail. You
may send written comments to the
following address only: Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, Attention: CMS–9982–P, Mail
Stop C4–26–05, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
4. By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments before the close

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of the comment period to either of the
following addresses:
a. For delivery in Washington, DC—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Room 445–G, Hubert
H. Humphrey Building, 200
Independence Avenue, SW.,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not
readily available to persons without
Federal government identification,
commenters are encouraged to leave
their comments in the CMS drop slots
located in the main lobby of the
building. A stamp-in clock is available
for persons wishing to retain a proof of
filing by stamping in and retaining an
extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call (410) 786–7195 in advance to
schedule your arrival with one of our
staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
Submission of comments on
paperwork requirements. You may
submit comments on this document’s
paperwork requirements by following
the instructions at the end of the
‘‘Collection of Information
Requirements’’ section in this
document.
Inspection of Public Comments: All
comments received before the close of
the comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received: http://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be available for public inspection as
they are received, generally beginning
approximately three weeks after
publication of a document, at the
headquarters of the Centers for Medicare
& Medicaid Services, 7500 Security
Boulevard, Baltimore, Maryland 21244,
Monday through Friday of each week
from 8:30 a.m. to 4 p.m. EST. To
schedule an appointment to view public
comments, phone 1–800–743–3951.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
Internal Revenue Service. Comments
to the IRS, identified by REG–140038–
10, by one of the following methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: CC:PA:LPD:PR (REG–140038–
10), Room 5205, Internal Revenue
Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
• Hand or courier delivery: Monday
through Friday between the hours of 8
a.m. and 4 p.m. to: CC:PA:LPD:PR
(REG–140038–10), Courier’s Desk,
Internal Revenue Service, 1111
Constitution Avenue, NW., Washington
DC 20224.
All submissions to the IRS will be
open to public inspection and copying
in room 1621, 1111 Constitution
Avenue, NW., Washington, DC from 9
a.m. to 4 p.m.
FOR FURTHER INFORMATION CONTACT:
Amy Turner or Heather Raeburn,
Employee Benefits Security
Administration, Department of Labor, at
(202) 693–8335; Karen Levin, Internal
Revenue Service, Department of the
Treasury, at (202) 622–6080; Jennifer
Libster or Padma Shah, Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, at (301) 492–4252.
Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws may call the EBSA
Toll-Free Hotline at 1–866–444–EBSA
(3272) or visit the Department of Labor’s
Web site (http://www.dol.gov/ebsa). In
addition, information from HHS on
private health insurance for consumers
can be found on the Centers for
Medicare & Medicaid Services (CMS)
Web site (http://www.cms.hhs.gov/
HealthInsReformforConsume/
01_Overview.asp) and information on
health reform can be found at http://
www.healthcare.gov.
SUPPLEMENTARY INFORMATION:

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I. Background
The Patient Protection and Affordable
Care Act, Public Law 111–148, was
enacted on March 23, 2010; the Health
Care and Education Reconciliation Act,
Public Law 111–152, was enacted on
March 30, 2010 (these are collectively
known as the ‘‘Affordable Care Act’’).
The Affordable Care Act reorganizes,
amends, and adds to the provisions of
part A of title XXVII of the Public
Health Service Act (PHS Act) relating to
group health plans and health insurance
issuers in the group and individual
markets. The term ‘‘group health plan’’
includes both insured and self-insured

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group health plans.1 The Affordable
Care Act adds section 715(a)(1) to the
Employee Retirement Income Security
Act (ERISA) and section 9815(a)(1) to
the Internal Revenue Code (the Code) to
incorporate the provisions of part A of
title XXVII of the PHS Act into ERISA
and the Code, and make them
applicable to group health plans, and
health insurance issuers providing
health insurance coverage in connection
with group health plans. The PHS Act
sections incorporated by this reference
are sections 2701 through 2728. PHS
Act sections 2701 through 2719A are
substantially new, though they
incorporate some provisions of prior
law. PHS Act sections 2722 through
2728 are sections of prior law
renumbered, with some, mostly minor,
changes.
Subtitles A and C of title I of the
Affordable Care Act amend the
requirements of title XXVII of the PHS
Act (changes to which are incorporated
into ERISA by section 715). The
preemption provisions of ERISA section
731 and PHS Act section 2724 2
(implemented in 29 CFR 2590.731(a)
and 45 CFR 146.143(a)) apply so that the
requirements of part 7 of ERISA and
title XXVII of the PHS Act, as amended
by the Affordable Care Act, are not to be
‘‘construed to supersede any provision
of State law which establishes,
implements, or continues in effect any
standard or requirement solely relating
to health insurance issuers in
connection with group or individual
health insurance coverage except to the
extent that such standard or
requirement prevents the application of
a requirement’’ of provisions added to
the PHS Act by the Affordable Care Act.
Accordingly, State laws that with
stricter health insurance issuer
requirements than those imposed by the
PHS Act will not be superseded by
those provisions. Preemption and State
flexibility under PHS Act section 2715
are discussed more fully below under
section II.D.
The Departments of Health and
Human Services (HHS), Labor, and the
Treasury (the Departments) are taking a
phased approach to issuing regulations
implementing the revised PHS Act
sections 2701 through 2719A and
related provisions of the Affordable Care
1 The term ‘‘group health plan’’ is used in title
XXVII of the PHS Act, part 7 of ERISA, and chapter
100 of the Code, and is distinct from the term
‘‘health plan,’’ as used in other provisions of title
I of the Affordable Care Act. The term ‘‘health plan’’
does not include self-insured group health plans.
2 Code section 9815 incorporates the preemption
provisions of PHS Act section 2724. Prior to the
Affordable Care Act, there were no express
preemption provisions in chapter 100 of the Code.

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Act. These proposed regulations
propose standards for implementing
PHS Act section 2715. As discussed
more fully below, templates and
instructions for meeting the disclosure
requirements of PHS Act section 2715
are being issued separately in today’s
Federal Register.
II. Overview of the Proposed
Regulations
A. Summary of Benefits and Coverage
1. In General
Section 2715 of the PHS Act, added
by the Affordable Care Act, directs the
Departments to develop standards for
use by a group health plan and a health
insurance issuer in compiling and
providing a summary of benefits and
coverage (SBC) that ‘‘accurately
describes the benefits and coverage
under the applicable plan or coverage.’’
The statute directs the Departments, in
developing such standards, to ‘‘consult
with the National Association of
Insurance Commissioners’’ (referred to
in this preamble as the ‘‘NAIC’’), ‘‘a
working group composed of
representatives of health insurancerelated consumer advocacy
organizations, health insurance issuers,
health care professionals, patient
advocates including those representing
individuals with limited English
proficiency, and other qualified
individuals.’’ The NAIC convened a
working group (NAIC working group)
comprised of a diverse group of
stakeholders. This working group met
frequently each month for over one year
while developing its recommendations.3
Throughout the process, NAIC working
group draft documents and meeting
notes were displayed on the NAIC’s
Web site for public review, and several
interested parties filed formal
comments. In addition to participation
from the NAIC working group members,
conference calls and in-person meetings
were open to other interested parties
3 In developing its recommendations, the NAIC
considered the results of various consumer testing
sponsored by both insurance industry and
consumer associations. Specifically, the draft SBC
template, including the coverage examples, and the
draft uniform glossary underwent consumer testing
to assist in determining adjustments to ensure the
final product was consumer friendly. Summaries of
this testing are available at: http://www.naic.org/
documents/committees_b_consumer_information_
101012_ahip_focus_group_summary.pdf; http://
www.naic.org/documents/committees_b_consumer_
information_110603_ahip_bcbsa_consumer_
testing.pdf; http://www.naic.org/documents/
committees_b_consumer_information_
101014_consumers_union.pdf (a more detailed
summary of which is accessible at: http://
prescriptionforchange.org/pdf/CU_Consumer_
Testing_Report_Dec_2010.pdf); and http://
www.naic.org/documents/committees_b_consumer_
information_110603_consumers_union_testing.pdf.

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and individuals and provided an
opportunity for non-member feedback.
The Departments have received
transmittals from the NAIC that include
a recommended template for the SBC
(with instructions and samples to be
used in completing the template) and a
recommended uniform glossary.4
These regulations generally propose
standards for group health plans (and
their plan administrators), and health
insurance issuers offering group or
individual health insurance coverage,
that will govern who provides an SBC,
who receives an SBC, when the SBC
will be provided, and how it will be
provided. The Departments invite
comment on the standards of the
proposed regulations.
In conjunction with these proposed
regulations, the Departments are
publishing a document today that
provides the proposed template for the
SBC (with proposed instructions and
sample language for completing the
template) and the proposed uniform
glossary that are identical to the
documents that were developed and
agreed to by the entire NAIC working
group and then voted on and approved
by the full NAIC. Instead of proposing
possible changes to the NAIC’s
proposed SBC template and related
materials, the document published
today incorporates all of the NAIC
working group’s recommended
materials (with the exception of a
sample coverage example 5) and invites
public comment. The Departments
recognize that changes to the SBC
template may be appropriate to
accommodate various types of plan and
coverage designs, to provide additional
information to individuals, or to
improve the efficacy of the disclosures
recommended by the NAIC. In addition,
the SBC template and related
4 Information on the NAIC working group,
including drafts of SBC materials and other
supporting documents developed for compliance
with PHS Act section 2715, working group
membership lists, and meeting minutes, is available
at: http://www.naic.org/committees_b_consumer_
information.htm.
5 The Appendices do not include a sample
coverage example calculation for breast cancer in
the individual market that was transmitted by the
NAIC. Upon review, it appeared that some of the
data in the example might be subject to copyright
protection. Moreover, the sample coverage example
provided by NAIC was limited to breast cancer in
the individual market and did not address the other
two coverage examples—maternity coverage and
diabetes. Finally, particular coding information and
pricing information included in the sample would
change annually, which would result in the data
included in the sample becoming outdated
relatively quickly. Accordingly, HHS is publishing
on its Web site (at http://cciio.cms.gov), the coding
and pricing information necessary to perform
coverage example calculations for all three coverage
examples. HHS will update this information
annually.

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documents were drafted by the NAIC
primarily for use by health insurance
issuers.6
In general, the Departments have
heard concerns about the potential
redundancies and additional cost
associated with elements of the SBC
requirement—including the uniform
glossary and the coverage facts labels—
particularly for those plans and group
health insurance issuers that already
provide a Summary Plan Description
(SPD) under 29 CFR 2520.104b–2.
Comments are solicited on whether the
SBC should be allowed to be provided
within an SPD if the SBC is intact and
prominently displayed at the beginning
of the SPD (for example, immediately
after a cover page and table of contents),
and if the timing requirements for
providing the SBC (described in
paragraph (a) of the proposed
regulations) are satisfied. The
Departments also welcome further
comments on ways the SBC might be
coordinated with other group health
plan disclosure materials (e.g.,
application and open season materials)
to communicate effectively with
participants and beneficiaries about
their coverage and make it easy for them
to compare coverage options while also
avoiding undue cost or burden on plans
and group health insurance issuers.
Consistent with the goals of balancing
effective communication and ease of
comparison for individuals with
minimization of cost and duplication,
other sections of this preamble outline
and invite comment on potential
approaches to major elements of the
SBC—the statutorily-required uniform
glossary and the coverage examples—in
the interest of streamlining standards
and making implementation of these
components as helpful and user-friendly
for individuals, and as workable and
efficient as possible.
As discussed below, PHS Act section
2715 generally directs group health
plans and health insurance issuers to
comply with the SBC requirements
beginning on or after March 23, 2012.
Comments are requested regarding
factors that may affect the feasibility of
implementation within this time frame.
After the public comment period on
these documents, the Departments will
finalize the SBC template and
instructions. Consistent with PHS Act
section 2715(c), the Departments will
periodically review and update the
6 National Association of Insurance
Commissioners, Consumer Information Working
Group, December 17, 2010 Letter to the Secretaries.
Available at http://www.naic.org/documents/
committees_b_consumer_information_ppaca_letter_
to_sebelius.pdf.

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documents as appropriate, taking into
account public comments.
2. Providing the SBC
Paragraph (a) of the proposed
regulations implements the general
disclosure requirement and sets forth
the proposed standards for who
provides an SBC, to whom, and when.
PHS Act section 2715 generally sets
forth that an SBC be provided to
applicants, enrollees, and policyholders
or certificate holders. PHS Act section
2715(d)(3) places the responsibility to
provide an SBC on ‘‘(A) a health
insurance issuer (including a group
health plan that is not a self-insured
plan) offering health insurance coverage
within the United States; or (B) in the
case of a self-insured group health plan,
the plan sponsor or designated
administrator of the plan (as such terms
are defined in section 3(16) of
ERISA).’’ 7 Accordingly, these proposed
regulations would interpret PHS Act
section 2715 to apply to both group
health plans and health insurance
issuers offering group or individual
health insurance coverage. In addition,
consistent with the statute, these
proposed regulations would make a
plan administrator of a group health
plan responsible for providing an SBC.
Under the proposed regulations, the
SBC would be provided in writing free
of charge.
In general, the proposed rules direct
that the SBC be provided when a plan
or individual is comparing health
coverage options. If the information in
the SBC changes between the time of
application, when the coverage is
offered, and when a policy is issued
(often the case only for individual
market coverage), the proposal would
require that an updated SBC be
provided. If the information is
unchanged, the SBC does not need to be
provided again, except upon request.
This general approach is explained
more fully below.
a. Provision of the SBC Automatically
by an Issuer to a Plan
Paragraph (a)(1)(i) of the proposed
regulations provides that a health
insurance issuer offering group health
insurance coverage provide the SBC to
a group health plan (including, for this
purpose, its sponsor) upon an
application or request for information
7 ERISA section 3(16) defines an administrator as:
(i) The person specifically designated by the terms
of the instrument under which the plan is operated;
(ii) if an administrator is not so designated, the plan
sponsor; or (iii) in the case of a plan for which an
administrator is not designated and plan sponsor
cannot be identified, such other person as the
Secretary of Labor may by regulation prescribe.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
by the plan about the health coverage
(see section II.A.2.c. of this preamble,
below, for a discussion of this proposal).
Under this proposal, the SBC must be
provided as soon as practicable
following the request, but in no event
later than seven days following the
request. If an SBC is provided upon
request for information about health
coverage and the plan subsequently
applies for health coverage, a second
SBC will be provided automatically
only if the information in the SBC has
changed. If there is a change to the
information in the SBC before the
coverage is offered, or before the first
day of coverage, the issuer must update
and provide a current SBC to the plan
no later than the date of the offer (or no
later than the first day of coverage, as
applicable). The Departments recognize
that often the only change to the SBC is
a final premium quote (usually in the
individual health insurance market or
the small group market). The
Departments request comments on
whether, in such circumstances,
premium information can be provided
in another way that is easily
understandable and useful to plan
sponsors and individuals, other than by
sending a new, full SBC.
An issuer also must provide a new
SBC if and when the policy, certificate,
or contract (for simplicity, referred to
collectively as a ‘‘policy’’ in the
remainder of this preamble) is renewed
or reissued. In the case of renewal or
reissuance, if the issuer requires written
application materials for renewal (in
either paper or electronic form), it must
provide the SBC no later than the date
the materials are distributed. If renewal
or reissuance is automatic, the SBC
must be provided no later than 30 days
prior to the first day of the new policy
year.

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b. Provision of the SBC Automatically
by a Plan or Issuer to Participants and
Beneficiaries
Under paragraph (a)(1)(ii) of the
proposed regulations, a group health
plan (including the plan administrator),
and a health insurance issuer offering
group health insurance coverage, must
provide an SBC to a participant or
beneficiary 8 with respect to each benefit
8 ERISA section 3(7) defines a participant as: Any
employee or former employee of an employer, or
any member or former member of an employee
organization, who is or may become eligible to
receive a benefit of any type from an employee
benefit plan which covers employees or members
of such organization, or whose beneficiaries may be
eligible to receive any such benefit. ERISA section
3(8) defines a beneficiary as: A person designated
by a participant, or by the terms of an employee
benefit plan, who is or may become entitled to a
benefit thereunder.

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package offered for which the
participant or beneficiary is eligible.9
The SBC must be provided as part of
any written application materials that
are distributed by the plan or issuer for
enrollment. If the plan does not
distribute written application materials
for enrollment, the SBC must be
distributed no later than the first date
the participant is eligible to enroll in
coverage for the participant and any
beneficiaries. If there is any change to
the information required to be in the
SBC before the first day of coverage, the
plan or issuer must update and provide
a current SBC to a participant or
beneficiary no later than the first day of
coverage.
The plan or issuer must also provide
the SBC to special enrollees within
seven days of a request for enrollment
pursuant to a special enrollment
period.10 Additionally, the plan or
issuer must provide a new SBC if and
when the coverage is renewed.
Specifically, if written application
materials are required for renewal (in
either paper or electronic form), the SBC
must be provided no later than the date
the materials are distributed. If renewal
is automatic, the proposed rules provide
that the SBC must be provided no later
than 30 days prior to the first day of
coverage in the new plan year.
c. Provision of the SBC Upon Request
The regulations propose that a health
insurance issuer offering group health
insurance coverage provide the SBC to
a group health plan (and a plan or issuer
must provide the SBC to a participant or
beneficiary) upon request, as soon as
practicable, but in no event later than
seven days following the request.
Although PHS Act section 2715 does
not specifically reference furnishing
SBCs on request, PHS Act section
2715(a) authorizes the Departments to
develop standards for providing the SBC
to applicants, enrollees, policyholders,
and certificate holders. The
Departments believe that this provision
recognizes that plans and individuals
9 With respect to insured group health plan
coverage, PHS Act section 2715 generally places the
obligation to provide an SBC on both a plan and
issuer. As discussed below, under section II.A.2.d.,
‘‘Special Rules to Prevent Unnecessary Duplication
With Respect to Group Health Coverage’’, if either
the issuer or the plan provides the SBC, both will
have satisfied their obligations. As they do with
other notices required of both plans and issuers
under Part 7 of ERISA, Title XXVII of the PHS Act,
and Chapter 100 of the Code, the Departments
expect plans and issuers to make contractual
arrangements for sending SBCs. Accordingly, the
remainder of this preamble generally refers to
requirements for plans or issuers.
10 Regulations regarding special enrollment can
be found at 26 CFR 54.9801–6, 29 CFR 2590.701–
6, and 45 CFR 146.117.

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may need or desire the information
provided in the SBC at times other than
those set forth in the statute to ensure
that the plans and individuals have
continuous access to coverage and cost
information to make informed choices
about health coverage.11 In addition,
while the ‘‘upon request’’ provision may
result in some additional administrative
work for plans and issuers, the
Departments have used discretion
elsewhere in these proposed regulations
to create special rules for avoiding
duplication and also propose to reduce
burden by facilitating electronic
transmittal of the SBC, where
appropriate. Accordingly, the
Departments have sought to balance
providing consumer access to SBCs with
minimizing burdens on employers and
insurers.
d. Special Rules To Prevent
Unnecessary Duplication With Respect
to Group Health Coverage
The Departments propose, in
paragraph (a)(1)(iii), three rules to
streamline provision of the SBC and
prevent unnecessary duplication with
respect to group health plan coverage.
First, the requirement to provide an SBC
will be considered satisfied for all
entities if the SBC is provided by any
entity, so long as all timing and content
requirements are also satisfied. For
example, if a health insurance issuer
offering group health insurance
coverage provides a complete, timely
SBC to the plan’s participants and
beneficiaries, the plan’s requirement to
provide the SBC will be satisfied.
Second, if a participant and any
beneficiaries are known to reside at the
same address, providing a single SBC to
that address will satisfy the obligation to
provide the SBC for all individuals
residing at that address. However, if a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC must be
provided to the beneficiary at the
beneficiary’s last known address.
Finally, to further reduce unnecessary
duplication with respect to a group
health plan that offers multiple benefit
packages, in connection with renewal,
the plan and issuer only need to
automatically provide a new SBC with
respect to the benefit package in which
a participant or beneficiary is enrolled.
SBCs are not required to be provided
automatically with respect to benefit
packages in which the participant or
11 Moreover, this provision is consistent with
requirements under ERISA section 104(b)(4), which
requires ERISA-covered group health plans to
provide to participants and beneficiaries, upon
request, copies of the instruments under which the
plan is established or operated.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

beneficiary is not enrolled. However, if
a participant or beneficiary requests an
SBC with respect to another benefit
package for which the participant or
beneficiary is eligible, the SBC must be
provided as soon as practicable, but in
no event later than seven days following
the request.

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e. Provision of the SBC by an Issuer
Offering Individual Market Coverage
Under these regulations, the Secretary
of HHS sets forth proposed standards
applicable to individual health
insurance coverage for who provides an
SBC, to whom, and when. The intent is
to parallel the proposed group market
requirements described above, with
only those changes necessary to reflect
the differences between the two
markets. For example, individual
policyholders and dependents in the
individual market are comparable to
group health plan participants and
beneficiaries. Accordingly, an issuer
offering individual health insurance
coverage must provide an SBC as soon
as practicable after receiving a request
for application or a request for
information, but in no event later than
seven days after receipt of the request.
If an individual later applies for the
same policy, a second SBC is required
to be provided only if the information
in the SBC has changed.
An issuer that makes an offer of
coverage must provide an updated SBC
only if it has modified the terms of
coverage for the individual (including as
a result of medical underwriting) that
are required to be reflected in the SBC.
Similarly, when an individual accepts
the offer of coverage, if any terms are
modified before the first day of
coverage, an updated SBC must again be
provided no later than the first day of
coverage. A health insurance issuer will
provide an SBC annually at renewal, no
later than 30 days before the start of the
new policy year, reflecting any changes
effective for the new policy year.
Finally, similar to the group health
coverage rules, for individual health
insurance coverage that covers more
than one individual (or an application
for coverage that is being made for more
than one individual), if all those
individuals are known to reside at the
same address, a single SBC may be
provided to that address. This single
SBC will satisfy the requirement to
provide the SBC for all individuals
residing at that address. However, if an
individual’s last known address is
different than the last known address of
the individual requesting coverage, the
policyholder, or a dependent of either,
a separate SBC must be provided to that

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individual at the individual’s last
known address.
3. Content
PHS Act section 2715(b)(3) generally
provides that the SBC must include:
a. Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage;
b. A description of the coverage,
including cost sharing, for each category
of benefits identified by the
Departments;
c. The exceptions, reductions, and
limitations on coverage;
d. The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
e. The renewability and continuation
of coverage provisions;
f. A coverage facts label that includes
examples to illustrate common benefits
scenarios (including pregnancy and
serious or chronic medical conditions)
and related cost sharing based on
recognized clinical practice guidelines;
g. A statement about whether the plan
provides minimum essential coverage as
defined under section 5000A(f) of the
Code, and whether the plan’s or
coverage’s share of the total allowed
costs of benefits provided under the
plan or coverage meets applicable
requirements;
h. A statement that the SBC is only a
summary and that the plan document,
policy, or certificate of insurance should
be consulted to determine the governing
contractual provisions of the coverage;
and
i. A contact number to call with
questions and an Internet Web address
where a copy of the actual individual
coverage policy or group certificate of
coverage can be reviewed and obtained.
The proposed regulations generally
parallel the content elements set forth in
the statute. As discussed above, the
Departments are issuing a document
that proposes to use the NAIC’s
recommended SBC template and
instructions to satisfy the SBC content
and appearance requirements of PHS
Act section 2715.
A few of the content elements
included in the NAIC’s
recommendations warrant further
explanation and discussion. The
template developed by the NAIC
working group and transmitted to the
Departments includes four elements not
specified in the statute. Consistent with
the Departments’ approach of including
all of the NAIC’s recommended
materials, the proposed regulations

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include these additional recommended
elements. The four additional elements
are: (1) For plans and issuers that
maintain one or more networks of
providers, an Internet address (or
similar contact information) for
obtaining a list of the network
providers; (2) for plans and issuers that
maintain a prescription drug formulary,
an Internet address where an individual
may find more information about the
prescription drug coverage under the
plan or coverage; (3) an Internet address
where an individual may review and
obtain the uniform glossary; and (4)
premiums (or cost of coverage for selfinsured group health plans).
The Departments have included these
elements in the proposed regulation
consistent with the NAIC’s
recommendations. PHS Act section
2715(a) requires the Departments to
develop regulations for provision of an
SBC that accurately describes benefits
and coverage, which includes the
statutory content elements listed above,
but the Departments believe they are not
limited to them. The statute also
requires the Departments to consult
with the NAIC on the development of
the standards for the SBC, which
includes content. The Departments’
proposal includes all of the NAIC’s
recommendations, including the
additional content, and the Departments
invite comments on this approach and
the four additional SBC content
elements. For example, with respect to
the requirement to include an Internet
address that may be used to obtain a
copy of the uniform glossary, the
Departments invite comments on
whether the SBC also should disclose
the option to receive a paper copy of the
uniform glossary upon request.
The NAIC instructions provide that
the premium generally is the premium
as charged by the issuer (which may be
evidenced in a rate table attached to the
SBC),12 or the cost of coverage in the
case of self-insured plans. The NAIC
instructions further provide that, in the
case of a group health plan, a
participant or beneficiary should
consult the employer for information
regarding the actual cost of coverage net
of any employer subsidy. This raises
issues regarding the ability to compare
premium or cost information between
coverage options. The Departments
request comments regarding whether
the SBC should include premium or
cost information and if so, the extent to
which such information should reflect
12 See page 4 of the NAIC Draft Instruction Guide
for Group Policies (available at http://www.naic.
org/documents/committees_b_consumer_
information_hhs_dol_submission_1107_inst_
grp.pdf).

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the actual cost to an individual net of
any employer contribution, as well as
the extent to which the cost information
should include costs for different tiers
of coverage (for example, self-only,
family). The Departments also request
comments on how this information can
be provided in a way that allows
individuals and plan sponsors to make
meaningful comparisons about the cost
of their coverage options.
With respect to the definitions, the
Departments propose to follow an
approach consistent with the
recommendations received from the
NAIC.13 Specifically, PHS Act section
2715(b)(3)(A) requires plans and issuers
to include in the SBC ‘‘uniform
definitions’’ of common health
insurance terms that are consistent with
the standards developed under section
2715(g). PHS Act section 2715(g) directs
the Departments to ‘‘provide for the
development of standards for the
definitions of terms used in health
insurance coverage,’’ including
specified insurance-related terms and
medical terms, as well as other terms
the Departments determine are
important to define.
The NAIC working group adopted a
two-part approach to the definitions.
First, it drafted a consumer-friendly
uniform glossary, which includes
definitions of health coverage
terminology, to be provided in
connection with the SBC. The NAIC’s
uniform glossary provides simple,
general, descriptive definitions designed
to help consumers understand terms
and concepts commonly used in health
coverage. For example, ‘‘out-of-pocket
limit’’ is defined in the NAIC’s uniform
glossary as:

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The most you pay during a policy period
(usually a year) before your health insurance
or plan begins to pay 100% of the allowed
amount. This limit never includes your
premium, balance-billed charges or health
care your health insurance or plan doesn’t
cover. Some health insurance or plans don’t
count all of your co-payments, deductibles,
co-insurance payments, out-of-network
payments or other expenses toward this
limit.

In these proposed regulations, and as
described more fully below under
section II.C. of this preamble under the
heading ‘‘Uniform Glossary’’, the
Departments propose that the NAIC
uniform glossary be used to satisfy the
requirements of PHS Act 2715(g).
13 National Association of Insurance
Commissioners, Consumer Information Working
Group, December 17, 2010 Letter to the Secretaries.
Available at http://www.naic.org/documents/
committees_b_consumer_information_ppaca_letter_
to_sebelius.pdf.

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At the same time, these generic
glossary definitions, alone, would not
necessarily help consumers understand
what terms mean under a given plan or
policy, nor would they support
meaningful comparison of coverage
options under PHS Act section
2715(b)(3)(A) because the generic terms
used in the glossary are not plan- or
policy-specific and would not enable
consumers to understand what the
terms actually mean in the context of a
specific contract. Therefore, in addition
to the uniform glossary, the NAIC
working group also developed a ‘‘Why
this Matters’’ column for the draft SBC
template (with instructions for plans
and issuers to use in completing the
SBC template).14 The instructions
specify how plans and issuers must
describe each coverage component in
the SBC. For example, the instructions
indicate what information must be
provided about a plan’s out-of-pocket
limit on cost sharing, including whether
copayments, out-of-network
coinsurance, and deductibles are subject
to this limit.
In the Departments’ proposal, the
‘‘Why this Matters’’ column in the SBC
template, together with the instructions
for completing this column, constitute
the definitions required to be provided
under PHS Act section 2715(b)(3)(A).
This approach allows plans and issuers
flexibility in how they design benefits
and coverage features, but proposes that
benefits and features be described in a
consistent way so that individuals and
employers will understand them and
appreciate differences from one plan or
policy to the next.
With respect to the element of the
SBC regarding a statement about
whether a plan or coverage provides
minimum essential coverage (as defined
under section 5000A(f) of the Code) and
whether the plan’s or coverage’s share of
the total allowed costs of benefits
provided under the plan or coverage
meets applicable minimum value
requirements (minimum essential
coverage statement),15 because this
content is not relevant until other
elements of the Affordable Care Act are
implemented, this statement is not in
14 National Association of Insurance
Commissioners, Consumer Information Working
Group, December 17, 2010, Final Package of
Attachments. Available at http://www.naic.org/
documents/committees_b_consumer_information_
ppaca_final_materials.pdf.
15 PHS Act section 2715(b)(3)(G) provides that
this statement must indicate whether the plan or
coverage (1) provides minimum essential coverage
(as defined under section 5000A(f) of the Code) and
(2) ensures that the plan’s or coverage’s share of the
total allowed costs of benefits provided under the
plan or coverage is not less than 60 percent of such
costs.

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52447

the NAIC recommendations. For the
same reason, these proposed regulations
provide that the minimum essential
coverage statement is not required to be
in the SBC until the plan or coverage is
required to provide an SBC with respect
to coverage beginning on or after
January 1, 2014.16
Starting in 2014, certain individuals
who purchase health insurance coverage
through the new Affordable Insurance
Exchanges (‘‘Exchanges’’) may be
eligible for a premium tax credit to help
pay for the cost of that coverage. In
general, individuals offered affordable
minimum essential coverage under an
employer-sponsored plan will not be
eligible to receive a premium tax credit.
Correctly establishing whether an
employer is offering affordable
minimum essential coverage is
important to individuals, employers,
and Exchanges and necessitates the
verification of certain information about
employer coverage, including the
information in the minimum essential
coverage statement. The Departments
are exploring several reporting options
under the Affordable Care Act and other
applicable statutory authorities 17 to
determine how information about
employer-provided coverage can be
provided and verified in a manner that
limits the burden on individuals,
employers, and Exchanges. Because the
statutory SBC elements include the
information in the minimum essential
coverage statement, the Departments
invite comments on how employers
might provide this information to
employees and the Exchanges in a
manner that minimizes duplication and
burden. The Departments also recognize
that some of the plan level information
that is required to be provided in the
SBC is also required to be provided
under section 6056 of the Code
(requiring employers to report to the IRS
specific information related to
employer-sponsored health coverage
16 The minimum essential coverage and
minimum value requirements are part of a larger set
of health coverage reforms that take effect on
January 1, 2014. The Departments’ proposal
recognizes this effective date and the need for
additional guidance with respect to these
requirements and is consistent with the
recommendation in the transmittal letter from the
NAIC. The NAIC will continue to work to develop
a recommendation for this SBC requirement and
will submit it to the Departments at a later date.
17 In addition to section 2715 of the PHS Act,
these authorities include, but are not limited to,
section 6056 of the Code, as added by section 1514
of the Affordable Care Act (requiring employers to
report to the Internal Revenue Service specific
information related to employer-sponsored health
coverage provided to employees); and section 18B
of the Fair Labor Standards Act, as added by section
1512 of the Affordable Care Act (requiring
employers to disclose to employees information
regarding Exchange coverage options).

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provided to employees) and are
coordinating their efforts to determine
how and whether the same data can be
used for multiple purposes. To help
develop a simple, efficient system for
employers, the Treasury Department
and the IRS intend to request comments
on employer information reporting
required under section 6056 of the
Code.
The last SBC content item that merits
further discussion is the coverage facts
label. The statute requires that an SBC
contain a ‘‘coverage facts label.’’ For
ease of reference, the regulations
propose to use ‘‘coverage examples,’’ the
term recommended by the NAIC, in
place of the statutory term. As specified
in the statute, the proposed regulations
provide that the coverage examples
illustrate benefits provided under the
plan or coverage for common benefits
scenarios, including pregnancy and
serious or chronic medical conditions.
The coverage example would estimate
what proportion of expenses under an
illustrative benefits scenario might be
covered by a given plan or policy.
Consumers then could use this
information to compare their share of
the costs of care under different plan or
coverage options to make an informed
purchasing decision.
Under the proposed regulations,
consistent with the recommendations of
the NAIC working group, a benefits
scenario is a hypothetical situation,
consisting of a sample treatment plan
for a specified medical condition during
a specific period of time, based on
recognized clinical practice guidelines
available through the National
Guideline Clearinghouse.18 A benefits
scenario would include the information
needed to simulate how claims would
be processed under the scenario to
generate an estimate of cost sharing a
consumer could expect to pay under the
benefit package. The document
published contemporaneously with
these proposed regulations includes
specific instructions and an HHS Web
site with specific information necessary
to simulate benefits covered under the
plan or policy for specified benefits
scenarios.19
18 The National Guideline Clearinghouse, within
the Agency for Healthcare Research and Quality
(AHRQ), publishes systematically developed
statements to assist practitioner and patient
decisions about appropriate health care for specific
clinical circumstances, available at http://
www.guideline.gov/.
19 A general instruction guide for completing the
coverage examples portion of the SBC, which is
identical to that transmitted by the NAIC, is
included in the document published today by the
Departments. These instructions, together with
specific assumptions for coding data and
reimbursement rates published today on HHS’s

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These proposed regulations provide
that the Departments may identify up to
six coverage examples that may be
required in an SBC. A maximum of six
coverage examples was discussed by the
NAIC working group, so that consumers
may easily read, understand, and
compare how benefits are provided for
different common medical conditions.
In future years, the SBC may include
coverage examples in addition to the
three proposed now. The Departments
propose to limit the number of coverage
examples to no more than six to limit
the burden on plans and issuers and to
ensure that there is adequate space in
the SBC to present coverage examples in
a manner that is easy to read and useful
for individuals. A document published
contemporaneously with these proposed
regulations adopts a phase-in approach
to the coverage examples, and uses the
three coverage examples recommended
by NAIC for inclusion first—having a
baby (normal delivery), treating breast
cancer, and managing diabetes.20
The Departments invite comments on
the proposed coverage examples,
whether additional benefits scenarios
would be helpful and, if so, what those
examples should be. The Departments
also invite comments on the benefits
and costs associated with developing
multiple coverage examples, as well as
how multiple coverage examples might
promote or hinder the ability to
understand and compare terms of
coverage. It is anticipated that any
additional coverage examples will only
be required to be provided
prospectively, and that plans and
issuers will be provided with adequate
time for compliance. Additionally, the
Departments invite comments on
whether and how to phase in the
implementation of the requirement to
provide coverage examples. For
example, one option would provide that
in 2012, coverage examples would only
need to be provided for the SBCs with
respect to a subset of all benefits
packages offered by group health plans
or health insurance issuers, with
coverage examples required to be
provided for all benefits packages in
later years. Comments are invited on
these issues.
Comments are also requested on
whether it would be feasible or
Web site comprise the Departments’ instructions for
completing the coverage examples portion of the
SBC. See http://cciio.cms.gov. http://www.naic.org/
documents/committees_b_consumer_information_
hhs_dol_submission_1107_template_blank.xls. The
coding and reimbursement rate assumptions were
developed by HHS and are also open for public
comment.
20 See http://www.naic.org/documents/
committees_b_consumer_information_final_
coverage_ex.pdf.

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desirable to permit plans and issuers to
input plan- or policy-specific
information into a central Internet
portal, such as the Federal health care
reform Web site (http://
www.healthcare.gov), that would use
the information to generate the coverage
examples for each plan or policy. The
examples would then be available on
the Internet portal for access by
individuals. Alternatively, some have
suggested that plans and issuers might
provide individuals, in a convenient
format in the SBC, the several items of
plan- or policy-specific information
necessary to generate the coverage
examples and a reference to the Internet
portal, so that individuals could input
the information into the Internet portal
to generate the coverage examples for
the plan or policy. The Departments
note that the NAIC considered and
rejected the idea of a ‘‘cost calculator’’
or similar tool. The Departments solicit
comments on the cost and benefits of
these alternatives, including whether
such approaches would provide an
efficient and effective method for
individuals, plans, and issuers to
generate or access the coverage
examples and how any such approaches
could adequately serve individuals who
do not have regular access to the
Internet (for example, by disclosing in
the SBC the option to obtain paper
copies of coverage examples generated
by the plan or issuer).
4. Appearance
Section 2715 of the PHS Act sets forth
the appearance for the SBC.
Specifically, the statute provides that
the SBC is to be presented in a uniform
format, utilizing terminology
understandable by the average plan
enrollee, that does not exceed four pages
in length, and does not include print
smaller than 12-point font. The
proposed regulations, consistent with
the NAIC recommendation, interpret the
four-page limitation as four doublesided pages.21 The Departments’ view is
that this approach will enable group
health plans, participants and
beneficiaries, and individuals in the
individual insurance market to receive
enough information to shop for,
compare, and make informed decisions
21 PHS Act section 2715(b)(1) does not prescribe
whether the four pages are four single-sided pages
or four double-sided pages. The SBC template
transmitted by NAIC exceeded four single-sided
pages. After considering the extent of statutorilyrequired content in PHS Act section 2715(b)(3), as
well as the appearance and language requirements
of PHS Act sections 2715(b)(1) and (2), the
Departments are interpreting four pages to be four
double-sided pages, in order to ensure that this
information is presented in an understandable and
meaningful way.

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regarding various coverage options that
may be available to them.22 The
Departments seek comments on this
approach.
Consistent with the NAIC
recommendations provided to the
Departments,23 under these proposed
regulations, a group health plan or a
health insurance issuer will provide the
SBC as a stand-alone document in the
form authorized by the Departments and
completed in accordance with the
instructions and guidance for
completing the SBC that are authorized
by the Departments. As noted earlier in
this preamble, comments are invited on
whether and how the SBC might best be
coordinated with the SPD and other
group health plan disclosure materials.
5. Form and Manner
a. Group Health Plan Coverage

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To facilitate faster and less
burdensome disclosure of the SBC, and
consistent with PHS Act section
2715(d)(2), the proposed regulations set
forth rules to facilitate electronic
transmittal of the SBC, where
appropriate. Specifically, an SBC
provided by a plan or issuer to a
participant or beneficiary may be
provided in paper form. Alternatively,
for plans and issuers subject to ERISA
or the Code, the SBC may be provided
electronically if the requirements of the
Department of Labor’s electronic
disclosure safe harbor at 29 CFR
2520.104b–1(c) are met.24 For nonFederal governmental plans, the
regulations propose that the SBC may be
provided electronically if either the
substance of the provisions of the
Department of Labor’s electronic
disclosure rule are met, or if the
provisions governing electronic
disclosure in the individual health
insurance market (described below) are
met.
22 PHS Act sections 2715(b)(3)(A) and (g)(2)
clearly reference consumers comparing coverage
and PHS Act section 2715(b)(1) requires a uniform
format, to enable shopping and comparing health
coverage options.
23 National Association of Insurance
Commissioners, Consumer Information Working
Group, December 17, 2010 Letter to the Secretaries.
Available at http://www.naic.org/documents/
committees_b_consumer_information_ppaca_letter_
to_sebelius.pdf.
24 On April 7, 2011, the Department of Labor
published a Request for Information regarding
electronic disclosure at 76 FR 19285. In it, the
Department of Labor stated that it is reviewing the
use of electronic media by employee benefit plans
to furnish information to participants and
beneficiaries covered by employee benefit plans
subject to ERISA. Because these regulations adopt
the ERISA electronic disclosure rules by crossreference, any changes that may be made to 29 CFR
2520.104b–1 in the future would also apply to the
SBC.

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With respect to an SBC provided by
an issuer to a plan, the SBC may be
provided in paper form or electronically
(such as e-mail transmittal or an Internet
posting on the issuer’s Web site or on
http://www.healthcare.gov). For
electronic forms, the format must be
readily accessible by the plan; the SBC
must be provided in paper form free of
charge upon request; and for Internet
postings, the plan must be notified by
paper or e-mail that the documents are
available on the Internet, and given the
Web address. The Departments invite
comments on whether any clarifications
are needed with respect to the ‘‘readily
accessible’’ standard (for example,
whether the requirements for passwords
or special software create a sufficient
burden that the documents are not
‘‘readily accessible’’). The Departments
also invite comment on whether
modifications or adaptations of the SBC
are necessary to facilitate or improve
electronic disclosure.
b. Individual Health Insurance Coverage
With respect to the individual market,
the proposed regulations set forth the
circumstances in which an issuer
offering individual health insurance
coverage may provide an SBC in either
paper or electronic form. Specifically,
under these proposed regulations,
unless specified otherwise by an
individual, an issuer would be required
to provide an SBC (and any subsequent
SBC) in paper form if, upon the
individual’s request for information or
request for an application, the
individual makes the request in person,
by phone or by fax, or by U.S. mail or
courier service; or if, when submitting
an application, the individual completes
the application for coverage by hand, by
phone or by fax, or by U.S. mail or
courier service. As an alternative, the
Departments seek comments on whether
it might be appropriate to allow issuers
to fulfill an individual’s request in
electronic form, unless the individual
requests a paper form.
Under this proposed rule, an issuer
may provide an SBC (and any
subsequent SBC) in electronic form
(such as through an Internet posting or
via electronic mail) if an individual
requests information or requests an
application for coverage electronically;
or, if an individual submits an
application for coverage electronically.
To ensure actual receipt of an SBC
provided in electronic form, these
proposed regulations would set forth
certain safeguards for electronic
disclosure in the individual market.
Under the proposed regulations, an
issuer that provides the SBC
electronically must:

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52449

• Request that an individual
acknowledge receipt of the SBC;
• Make the SBC available in an
electronic format that is readily usable
by the general public;
• If the SBC is posted on the Internet,
display the SBC in a location that is
prominent and readily accessible to the
individual and provide timely notice, in
electronic or non-electronic form, to
each individual who requests
information about, or an application for,
coverage, that apprises the individual
the SBC is available on the Internet and
includes the applicable Internet address;
• Promptly provide a paper copy of
the SBC upon request without charge,
penalty, or the imposition of any other
condition or consequence, and provide
the individual with the ability to request
a paper copy of the SBC both by using
the issuer’s Web site (such as by
clicking on a clearly identified box to
make the request) and by calling a
readily available telephone line, the
number for which is prominently
displayed on the issuer’s Web site,
policy documents, and other marketing
materials related to the policy and
clearly identified as to purpose; and
• Ensure an SBC provided in
electronic form is provided in
accordance with the appearance,
content, and language requirements of
this section.
The Departments welcome comments as
to whether these or other safeguards are
appropriate.
Finally, consistent with the standards
for electronic disclosure, these proposed
regulations seek to reduce the burden of
providing an SBC to individuals
shopping for coverage. Specifically,
these proposed regulations provide that
a health insurance issuer that complies
with the requirements set forth at 45
CFR 159.120 (75 FR 24470) for reporting
to the Federal health care reform
insurance Web portal would be deemed
to comply with the requirement to
provide the SBC to an individual
requesting information about coverage
prior to submitting an application. Any
SBC furnished at the time of application
or subsequently, however, would be
required to be provided in a form and
manner consistent with the rules
described above.
6. Language
PHS Act section 2715(b)(2) provides
that standards shall ensure that the SBC
‘‘is presented in a culturally and
linguistically appropriate manner.’’
These proposed regulations provide
that, to satisfy the requirement to
provide the SBC in a culturally and
linguistically appropriate manner, a

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plan or issuer follows the rules for
providing appeals notices in a culturally
and linguistically appropriate manner
under PHS Act section 2719, and
paragraph (e) of its implementing
regulations.25 In general, those rules
provide that, in specified counties of the
United States, plans and issuers must
provide interpretive services, and must
provide written translations of the SBC
upon request in certain non-English
languages. In addition, in such counties,
English versions of the SBC must
disclose the availability of language
services in the relevant language.26 The
counties in which this must be done are
those in which at least ten percent of the
population residing in the county is
literate only in the same non-English
language, as determined in guidance.
The Departments welcome comments
on whether and how to provide written
translations of the SBC in these nonEnglish languages. (Note, nothing in
these proposed regulations should be
construed as limiting an individual’s
rights under Federal or State civil rights
statutes, such as Title VI of the Civil
Rights Act of 1964 (Title VI) which
prohibits recipients of Federal financial
assistance, including issuers
participating in Medicare Advantage,
from discriminating on the basis of race,
color, or national origin. To ensure nondiscrimination on the basis of national
origin, recipients are required to take
reasonable steps to ensure meaningful
access to their programs and activities
by limited English proficient persons.
For more information, see, ‘‘Guidance to
Federal Financial Assistance Recipients
Regarding Title VI Prohibition Against
National Origin Discrimination
Affecting Limited English Proficient
Persons,’’ available at http://
www.hhs.gov/ocr/civilrights/resources/
specialtopics/lep/
policyguidancedocument.html.)
B. Notice of Modifications
Section 2715(d)(4) of the PHS Act
directs that a group health plan or
health insurance issuer offering group or
individual health insurance coverage to
provide notice of a material
modification if it makes a material
modification (as defined under ERISA
section 102, 29 U.S.C. 1022) in any of
the terms of the plan or coverage
involved that is not reflected in the most
recently provided SBC. The proposed
regulations interpret the statutory
reference to the SBC to mean that only
25 See 75 FR 43330 (July 23, 2010), as amended
by 76 FR 37208 (June 24, 2011).
26 The SBC template, as recommended by the
NAIC, does not include this statement; however,
these proposed regulations would require that plans
and issuers include it.

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a material modification that would
affect the content of the SBC would
require plans and issuers to provide this
notice. In these circumstances, the
notice must be provided to enrollees (or,
in the individual market, policyholders)
no later than 60 days prior to the date
on which such change will become
effective, if it is not reflected in the most
recent SBC provided and occurs other
than in connection with a renewal or
reissuance of coverage. A material
modification, within the meaning of
section 102 of ERISA, includes any
modification to the coverage offered
under a plan or policy that,
independently, or in conjunction with
other contemporaneous modifications or
changes, would be considered by an
average plan participant (or in the case
of individual market coverage, an
average individual covered under a
policy) to be an important change in
covered benefits or other terms of
coverage under the plan or policy.27 A
material modification could be an
enhancement of covered benefits or
services or other more generous plan or
policy terms. It includes, for example,
coverage of previously excluded
benefits or reduced cost-sharing. A
material modification could also be a
material reduction in covered services
or benefits, as defined in 29 CFR
2520.104b–3(d)(3), or more stringent
requirements for receipt of benefits. As
a result, it also includes changes or
modifications that reduce or eliminate
benefits, increase premiums and costsharing, or impose a new referral
requirement.
PHS Act section 2715 and these
proposed regulations describe the
timing for when a notice of material
modification must be provided in
situations other than upon renewal at
the end of a plan or policy year when
a new SBC is provided under the rules
of paragraph (a) of the proposed rules.
To the extent a plan or policy
implements a mid-year change that is a
material modification, that affects the
content of the SBC, and that occurs
other than in connection with a renewal
or reissuance of coverage, paragraph (b)
of the proposed regulations would
require a notice of modifications to be
provided 60 days in advance of the
effective date of the change. This notice
could be satisfied either by a separate
notice describing the material
modification or by providing an
updated SBC reflecting the
modification. For ERISA-covered group
27 See DOL Information Letter, Washington Star/
Washington-Baltimore Newspaper Guild to
Munford Page Hall, II, Baker & McKenzie (February
8, 1985).

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health plans subject to PHS Act section
2715, this notice is in advance of the
timing under the Department of Labor’s
regulations set forth at 29 CFR
2520.104b-3 that require the provision
of a summary of material modification
(SMM) (generally not later than 210
days after the close of the plan year in
which the modification or change was
adopted, or, in the case of a material
reduction in covered services or
benefits, not later than 60 days after the
date of adoption of the modification or
change). In situations where a complete
notice is provided in a timely manner
under PHS Act section 2715(d)(4), of
course, an ERISA-covered plan will also
satisfy the requirement to provide an
SMM under Part 1 of ERISA. The
Departments invite comments on this
expedited notice requirement, including
whether there are any circumstances
where 60-day advance notice might be
difficult. The Departments also solicit
comments on the format of the notice of
modification, particularly for plans and
issuers not subject to ERISA.
C. Uniform Glossary
Section 2715(g)(2) of the PHS Act
directs the Departments to develop
standards for definitions for at least the
following insurance-related terms: coinsurance, co-payment, deductible,
excluded services, grievance and
appeals, non-preferred provider, out-ofnetwork co-payments, out-of-pocket
limit, preferred provider, premium, and
UCR (usual, customary and reasonable)
fees. Section 2715(g)(3) of the PHS Act
directs the Departments to develop
standards for definitions for at least the
following medical terms: durable
medical equipment, emergency medical
transportation, emergency room care,
home health care, hospice services,
hospital outpatient care, hospitalization,
physician services, prescription drug
coverage, rehabilitation services, and
skilled nursing care. Additionally, the
statute directs the Departments to
develop standards for such other terms
that will help consumers understand
and compare the terms of coverage and
the extent of medical benefits (including
any exceptions and limitations).
The NAIC working group
recommended,28 and the Departments
are proposing to adopt for this purpose,
inclusion of the following additional
terms in the uniform glossary: allowed
amount, balance billing, complications
of pregnancy, emergency medical
28 National Association of Insurance
Commissioners, Consumer Information Working
Group, December 17, 2010 Letter to the Secretaries.
Available at http://www.naic.org/documents/
committees_b_consumer_information_ppaca_letter_
to_sebelius.pdf.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
condition, emergency services,
habilitation services, health insurance,
in-network co-insurance, in-network copayment, medically necessary, network,
out-of-network co-insurance, plan,
preauthorization, prescription drugs,
primary care physician, primary care
provider, provider, reconstructive
surgery, specialist, and urgent care. The
uniform glossary proposed by the
Departments is being issued in a
document published elsewhere in
today’s Federal Register.
The Departments invite comments on
the uniform glossary, including the
content of the definitions and whether
there are additional terms that are
important to include in the uniform
glossary so that individuals and
employers may understand and
compare the terms of coverage and the
extent of medical benefits (or exceptions
to those benefits). For example, the
Departments are considering whether
glossary definitions of any of the
following terms would be helpful:
claim, external review, maternity care,
preexisting condition, preexisting
condition exclusion period, or specialty
drug. It is anticipated that any
additional terms would be included in
the uniform glossary prospectively, and
that plans and issuers would be
provided adequate time for compliance.
The proposed regulations direct a
plan or issuer to make the uniform
glossary available upon request within
seven days. The timing of disclosure is
intended to be generally consistent with
the proposed requirement, described in
section II.A.2.c of this preamble. A plan
or issuer may satisfy this disclosure
requirement by providing an Internet
address where an individual may
review and obtain the uniform glossary,
as described in section II.A.3 of this
preamble. This Internet address may be
a place the document can be found on
the plan’s or issuer’s Web site. It may
also be a place the document can be
found on the Web site of either the
Department of Labor or HHS. However,
a plan or issuer must make a paper copy
of the glossary available upon request.
Group health plans and health
insurance issuers will provide the
uniform glossary in the appearance
authorized by the Departments, so that
the glossary is presented in a uniform
format and uses terminology
understandable by the average plan
enrollee or individual covered under an
individual policy.
D. Preemption
Section 2715 of the PHS Act is
incorporated into ERISA section 715,
and Code section 9815, and is subject to
the preemption provisions of ERISA

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section 731 and PHS Act section 2724
(implemented in 29 CFR 2590.731(a)
and 45 CFR 146.143(a)). These
provisions apply so that the
requirements of part 7 of ERISA and
part A of title XXVII of the PHS Act, as
amended by the Affordable Care Act, are
not to be ‘‘construed to supersede any
provision of State law which
establishes, implements, or continues in
effect any standard or requirement
solely relating to health insurance
issuers in connection with group or
individual health insurance coverage
except to the extent that such standard
or requirement prevents the application
of a requirement’’ of part A of title
XXVII of the PHS Act. Accordingly,
State laws that impose on health
insurance issuers requirements that are
stricter than those imposed by the
Affordable Care Act will not be
superseded by the Affordable Care Act.
Moreover, PHS Act section 2715(e)
provides that the standards developed
under PHS Act section 2715(a), ‘‘shall
preempt any related State standards that
require [an SBC] that provides less
information to consumers than that
required to be provided under this
section, as determined by the
[Departments].’’
Reading these two preemption
provisions together, these proposed
regulations would not prevent States
from imposing separate, additional
disclosure requirements on health
insurance issuers. The Departments
recognize the need to balance States’
interest in information disclosure
regarding insurance coverage with the
primary objective of PHS Act section
2715 (as stated in the section title) of
providing for the development and use
of a short, uniform explanation of
coverage document so that consumers
may make apples-to-apples comparisons
of plan and coverage options.
E. Failure To Provide
PHS Act section 2715(f), incorporated
into ERISA section 715 and Code
section 9815, provides that a group
health plan (including its
administrator), and a health insurance
issuer offering group or individual
health insurance coverage, that
‘‘willfully fails to provide the
information required under this section
shall be subject to a fine of not more
than $1,000 for each such failure.’’ In
addition, under PHS Act section 2715(f),
a separate fine may be imposed for each
individual or entity for whom there is
a failure to provide an SBC. Due to the
different enforcement jurisdictions of
the Departments, as well as their
different underlying enforcement
structures, the mechanisms for imposing

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52451

the new penalty may vary slightly, as
discussed below.
1. Department of HHS
Enforcement of Part A of Title XXVII
of the PHS Act, including section 2715,
is generally governed by PHS Act
section 2723 and corresponding
regulations at 45 CFR 150.101 et seq.
Under those provisions, a State has the
discretion to enforce the provisions
against health insurance issuers in the
first instance, and the Secretary of HHS
only enforces a provision after the
Secretary determines that a State has
failed to substantially enforce the
provision. If a State enforces a provision
such as PHS Act section 2715, it uses its
own enforcement mechanisms. If the
Secretary enforces, the statute provides
for penalties of up to $100 per day for
each affected individual.
PHS Act section 2715(f) provides that
an entity that willfully fails to provide
the information required under PHS Act
section 2715 shall be subject to a fine of
not more than $1,000 for each such
failure. Such failure with respect to each
enrollee constitutes a separate offense.
This penalty can only be imposed by the
Secretary.
Paragraph (e) of the regulations
proposed by HHS clarifies that States
have primary enforcement authority
over health insurance issuers for any
violations, whether willful or not, using
their own remedies. These proposed
regulations also clarify that PHS Act
section 2715 does not limit the
Secretary’s authority to impose
penalties for willful violations
regardless of State enforcement.
However, the Secretary intends to use
enforcement discretion if the Secretary
determines that the State is adequately
addressing willful violations.
The Secretary of HHS has direct
enforcement authority for violations by
non-Federal governmental plans, and
will use the appropriate penalty for
violations of section 2715, depending on
whether the violation is willful.
Proposed paragraph (e) of the HHS
regulations cross references the
enforcement regulations at 45 CFR
150.101 et seq., and states that they
relate to any failure, regardless of intent,
by a health insurance issuer or nonFederal governmental plan, to comply
with any requirement of section 2715 of
the PHS Act.
2. Departments of Labor and the
Treasury
The Department of Labor enforces the
requirements of part 7 of ERISA and the
Department of the Treasury enforces the
requirements of chapter 100 of the Code
with respect to group health plans

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maintained by an entity that is not a
governmental entity. Generally the
enforcement authority under these
provisions applies to all
nongovernmental group health plans,
but the Department of Labor does not
enforce the requirements of part 7 of
ERISA with respect to church plans.
On April 21, 1999, pursuant to section
104 of the Health Insurance Portability
and Accountability Act of 1996
(HIPAA), Public Law 104–191, the
Secretaries entered into a memorandum
of understanding 29 that, among other
things, established a mechanism for
coordinating enforcement and avoiding
duplication of effort for shared
jurisdiction. The memorandum of
understanding applies, as appropriate,
to health legislation enacted after April
21, 1999 over which at least two of the
Departments share jurisdiction,
including section 2715 of the PHS Act
as incorporated into ERISA and the
Code. Therefore, in enforcing PHS Act
section 2715, the Departments of Labor
and the Treasury will coordinate to
avoid duplication in the case of group
health plans that are not church plans
and that are not maintained by a
governmental entity.

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a. Department of Labor
The Department of Labor will issue
separate regulations in the future
describing the procedures for
assessment of the civil fine provided
under PHS Act section 2715(f) as
incorporated by section 715 of ERISA.
In accordance with ERISA 502(b)(3), 29
U.S.C. 1132(b)(3), the Secretary of Labor
is not authorized to assess this fine
against a health insurance issuer.
b. Department of the Treasury
If a group health plan (other than a
plan maintained by a governmental
entity) fails to comply with the
requirements of chapter 100 of the Code,
an excise tax is imposed under section
4980D of the Code. The excise tax is
generally $100 per day per individual
for each day that the plan fails to
comply with chapter 100 with respect to
that individual. Numerous rules under
section 4980D reduce the amount of the
excise tax for failures due to reasonable
cause and not to willful neglect. Special
rules apply for church plans. Taxpayers
subject to the excise tax under section
4980D are required to report the failures
under chapter 100 and the amount of
the excise tax on IRS Form 8928. See 26
CFR 54.4980D–1, 54.6011–2, and
54.6151–1.
Section 2715(f) of the PHS Act
subjects a plan sponsor or designated
29 See

64 FR 70164 (December 15, 1999).

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administrator to a fine of not more than
$1,000 for each failure to provide an
SBC. Unless and until future guidance
provides otherwise, group health plans
subject to chapter 100 of the Code
should continue to report the excise tax
of section 4980D on IRS Form 8928 with
respect to failures to comply with PHS
Act section 2715. The Secretaries of
Labor and the Treasury will coordinate
to determine appropriate cases in which
the fine of section 2715(f) should be
imposed on group health plans that are
not maintained by a governmental
entity.
F. Applicability
PHS Act section 2715 directs that the
requirement for group health plans and
health insurance issuers to provide an
SBC ‘‘prior to any enrollment
restriction’’ applies not later than 24
months after the date of enactment (i.e.,
beginning on or after March 23, 2012).30
As noted earlier, the statute also directs
the Departments to consult with the
NAIC in developing the SBC standards.
The Departments are appreciative of the
detailed and valuable work the NAIC
and its working group has performed in
developing recommended standards and
materials, including the NAIC’s
extensive efforts to involve numerous
stakeholder groups in that process for
over a year and to provide drafts of its
evolving materials to the Departments
periodically. Accordingly, as noted, the
Departments are appending to the
document accompanying these
proposed regulations the NAIC’s SBC
work product for public comment.
The NAIC transmitted its final
materials to the Departments on July 29,
2011. In recognition of existing
disclosure requirements under 29 CFR
2520.104b–2 for those group health
plans that already provide SPDs to
participants and concerns raised about
providing SBCs by the statutory
deadline, comments are solicited on
whether and, if so, how practical
considerations might affect the timing of
implementation. In coordination with
the request for comment elsewhere in
this preamble on a potential phase-in of
the implementation of the requirement
to provide coverage examples,
comments are invited also on how any
potential phase-in of those requirements
could or should be coordinated with the
timing of the effectiveness of the general
SBC standards.
The Departments also request
comments on whether any special rules

are necessary to accommodate
expatriate plans. The Departments note
that, in the context of group health plan
coverage, section 4(b)(4) of ERISA
provides that a plan maintained outside
the United States primarily for the
benefit of persons substantially all of
whom are nonresident aliens is exempt
from ERISA title I, including ERISA
section 715. At the same time, in the
Department of HHS’s interim final
regulations relating to medical loss ratio
(MLR) provisions published at 75 FR
74864, a special rule was included for
expatriate insurance policies. The
Departments invite comments on
whether any adjustments are needed
under PHS Act section 2715 for
expatriate plans and, if so, for what
types of coverage.
III. Economic Impact and Paperwork
Burden
A. Executive Orders 12866 and 13563—
Department of Labor and Department of
Health and Human Services
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects; distributive impacts; and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This rule
has been designated a ‘‘significant
regulatory action’’ under section 3(f) of
Executive Order 12866. Accordingly,
the rule has been reviewed by the Office
of Management and Budget.
A regulatory impact analysis (RIA)
must be prepared for major rules with
economically significant effects ($100
million or more in any 1 year). As
discussed below, the Departments have
concluded that these proposed
regulations would not have economic
impacts of $100 million or more in any
one year or otherwise meet the
definition of an ‘‘economically
significant rule’’ under Executive Order
12866. Nonetheless, consistent with
Executive Orders 12866 and 13563, the
Departments have provided an
assessment of the potential benefits and
the costs associated with this proposed
regulation. The Departments invite
comment on this assessment.
1. Current Regulatory Framework

30 Section

2715 is applicable to both
grandfathered and non-grandfathered health plans.
See 26 CFR 54.9815–1251(d), 29 CFR 2590.715–
1251(d), and 45 CFR 147.120(d).

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Health plan sponsors and issuers do
not currently uniformly disclose
information to consumers about benefits

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and coverage in a simple and consistent
way. ERISA-covered group health plan
sponsors are required to describe
important plan information concerning
eligibility, benefits, and participant
rights and responsibilities in a summary
plan description (SPD). But as these
documents have increased in size and
complexity—for example, due to the
insertion of more legalistic language that
is designed to mitigate the employer’s
risk of litigation—they have become
more difficult for participants and
beneficiaries to understand.31 Indeed, a
recent analysis of SPDs from 40
employer health plans from across the
United States (varying based on
geography, firm size, and industry
sector) found that, on average, SPDs are
generally written at a first year college
reading level (with readability ranging
from 9th grade reading level to nearly a
college graduate reading level).32
Moreover, the formats of existing SPDs
are not standardized; for example, while
these documents could be dozens of
pages long, there is no requirement that
they include an executive summary.
Additionally, group health plans not
covered by ERISA, such as plans
sponsored by State and local
governments, are not required to comply
with such disclosure requirements.
In the individual market, health
insurance issuers are subject to various,
diverse State disclosure laws. For
example, States like Massachusetts,33
New York,34 Rhode Island,35 Utah 36
and Vermont 37 have established
minimum standards for disclosure of
health insurance information but even
within such States, consumer
disclosures vary widely with respect to
their required content. Additionally,
some State disclosure laws are limited
to current enrollees, so that individuals
shopping for coverage do not receive
information about health insurance
coverage options. Other State disclosure
31 ERISA Advisory Council. Report of the
Working Group on Health and Welfare Benefit
Plans’ Communication. November 2005. Available
at: http://www.dol.gov/ebsa/publications/
AC_1105c_report.html.
32 ‘‘How Readable Are Summary Plan
Descriptions For Health Care Plans?’’ Employee
Benefit Research Institute (EBRI) Notes. October
2006, Vol. 27, No. 10. Available at: http://
www.ebri.org/pdf/notespdf/EBRI_Notes_1020061.pdf.
33 M.G.L.A. 176Q § 5 (2010).
34 NY Ins. Law § 3217–a (2010).
35 Office of the Health Insurance Commissioner
Regulation 5: Standards for Readability of Health
Insurance Forms, State of Rhode Island and
Providence Plantations, August 21, 2010.
36 Utah Code § 31A–22–613.5 (2010).
37 Division of Health Care Administration, Rule
10.000: Quality Assurance Standards and Consumer
Protections for Managed Care Plans, State of
Vermont, September 20, 1997.

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requirements only extend to managed
care organizations, and not to other
segments of the market.38
2. Need for Regulatory Action
Congress added new PHS Act section
2715 through the Affordable Care Act to
ensure that plans and issuers provide
benefits and coverage information in a
more uniform format that helps
consumers to better understand their
coverage and better compare coverage
options. These proposed regulations are
necessary to provide standards for a
summary of benefits and coverage and
a uniform glossary of terms used in
health coverage. This approach is
consistent with Executive Order 13563,
which directs agencies to ‘‘identify and
consider regulatory approaches that
reduce burdens and maintain flexibility
and freedom of choice for the public.
These approaches include [* * *]
disclosure requirements as well as
provision of information to the public in
a form that is clear and intelligible.’’
The patchwork of consumer
disclosure requirements makes the
process of shopping for coverage an
inefficient, difficult, and timeconsuming task. Consumers incur
significant search costs while trying to
locate reliable cost, coverage and benefit
data.39 Such search costs arise, in part,
due to a lack of uniform information
across the various coverage options,
particularly in the individual market but
also in some large employer plans.
Although not directly comparable, in
Medigap, a market with standardized
benefits, the average per beneficiary
search cost was estimated at $72—far
higher than in other insurance markets,
such as auto insurance.40
38 For example, New York requires Health
Maintenance Organizations to provide to
prospective members, as well as policyholders,
information on cost-sharing, including out-ofnetwork costs, limitations and exclusions on
benefits, prior authorization requirements, and
other disclosures such as appeal rights. NY Ins. Law
§ 3217–a (2010). Utah requires each insurer issuing
a health benefit plan to provide all enrollees, prior
to enrollment in the health benefit plan, written
disclosure of restrictions or limitations on
prescription drugs and biologics, coverage limits
under the plan, and any limitation or exclusion of
coverage. Utah Code § 31A–22–613.5 (2010). Rhode
Island requires all health insurance forms to meet
minimum readability standards. Office of the
Health Insurance Commissioner Regulation 5:
Standards for Readability of Health Insurance
Forms, State of Rhode Island and Providence
Plantations, August 21, 2010.
39 M. Susan Marquis et al., ‘‘Consumer Decision
Making in the Individual Health Insurance Market,’’
25 Health Affairs w.226, w.231-w.232 (May 2006).
Available at: http://content.healthaffairs.org/
content/25/3/w226.full.pdf+html.
40 Nicole Maestas et al., ‘‘Price Variation in
Markets with Homogenous Goods: The Case of
Medigap,’’ National Bureau of Economic Research
(January 2009).

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Given this difficulty in obtaining
relevant information, consumers may
not always make informed purchase
decisions that best meet the health and
financial needs of themselves, their
families, or their employees. Similarly,
workers may overestimate or
underestimate the value of employersponsored health benefits, and thus
their total compensation; and health
insurance issuers and employers may
face less pressure to compete on price,
benefits, and quality, leading to
inefficiency in the health insurance and
labor markets.
Furthermore, research suggests that
many consumers do not understand
how health insurance works.
Oftentimes, health insurance contracts
and benefit descriptions are written in
technical language that requires a
sophisticated level of health insurance
literacy many people do not have.41 One
study found that consumers have
particular difficulty understanding cost
sharing and tend to underestimate their
coverage for mental health, substance
abuse and prescription drug benefits,
while overestimating their coverage for
long-term care.42
3. Summary of Impacts
Table 1 below depicts an accounting
statement summarizing the
Departments’ assessment of potential
benefits, costs, and transfers associated
with this regulatory action. The
Departments have limited the period
covered by the RIA to 2011–2013.
Estimates are not provided for
subsequent years, because there will be
significant changes in the marketplace
in 2014 related to the offering of new
individual and small group plans
through the Affordable Insurance
Exchanges, and the wide-ranging scope
of these changes makes it difficult to
project results for 2014 and beyond.
The direct benefits of these proposed
regulations come from improved
information, which will enable
consumers to better understand the
coverage they have and allow
consumers choosing coverage to more
easily compare coverage options. As a
result, consumers may make better
coverage decisions, which more closely
match their preferences with respect to
benefit design, level of financial
protection, and cost. The Departments
41 For example, as discussed earlier, the average
Summary Plan Description is written at a first-year
college reading level. See Employee Benefit
Research Institute, October 2006.
42 D.W. Garnick, A.M. Hendricks, K.E. Thorpe,
J.P. Newhouse, K. Donelan and R.J. Blendon. ‘‘How
well do Americans understand their health
coverage?’’ Health Affairs, 12(3). 1993:204–12.
Available at: http://content.healthaffairs.org/
content/12/3/204.full.pdf.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

believe that such improvements will
result in a more efficient, competitive
market. These proposed regulations
would also benefit consumers by
reducing the time they spend searching
for and compiling health plan and
coverage information.
Under the proposed regulations,
group health plans and health insurance
issuers would incur costs to compile
and provide the summary of benefits
and coverage disclosures (that includes

coverage examples (CEs)) and a uniform
glossary of health coverage and medical
terms. The Departments estimate that
the annualized cost may be around $50
million, although there is uncertainty
arising from general data limitations and
the degree to which economies of scale
exist for disclosing this information.
The costs estimates employ assumptions
that we believe fully capture expected
issuer and third-party administrator
(TPA) costs, and perhaps overestimate

them if, for example, economies of scale
are achievable.
The Departments anticipate that the
provisions of these proposed regulations
will help consumers make better health
coverage choices and more easily
understand their coverage. In
accordance with Executive Orders
12866 and 13563, the Departments
believe that the benefits of this
regulatory action justify the costs.

TABLE 1—ACCOUNTING TABLE
Benefits
Qualitative: Improved information will enable consumers to more easily and efficiently understand and compare coverage, and as a result, make
better choices.
Costs

Estimate

jlentini on DSK4TPTVN1PROD with PROPOSALS2

Annualized .......................................................................................
Monetized ($ millions/year) ..............................................................

4. Benefits
In developing these proposed
regulations, the Departments carefully
considered their potential effects,
including costs, benefits, and transfers.
Because of data limitations, the
Departments did not attempt to quantify
expected benefits of these proposed
regulations. Nonetheless, the
Departments were able to identify
several benefits, which are discussed
below.
These proposed regulations could
generate significant economic and social
welfare benefits to consumers. Under
these proposed regulations, health
insurance issuers and group health
plans would provide clear and
consistent information to consumers.
Uniform disclosure is anticipated to
benefit individuals shopping for, or
enrolled in, group and individual health
insurance coverage and group health
plans. The direct benefits of these
proposed regulations come from
improved information, which will
enable consumers to better understand
the coverage they have and allow
consumers choosing coverage to more
easily compare options. As a result,
consumers will make better coverage
decisions, which more closely match
their preferences with respect to benefit
design, level of financial protection, and
cost. The Departments believe that such
improvements will result in a more
efficient, competitive market.
These proposed regulations would
also benefit consumers by reducing the
time they spend searching for and
compiling health plan and coverage
information. As stated above, consumers

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Year dollar
$51
$47

in the individual market, as well as
consumers in some large employersponsored plans, have a number of
coverage options and must make a
choice using disclosures and tools that
vary widely in content and format. A
growing body of decision-making
research suggests that the abundance
and complexity of information can
overwhelm consumers and create a
significant non-price barrier to
coverage.43 For example, a RAND study
of California’s individual market found
that reducing barriers to information
about health insurance products would
lead to increases in purchase rates
comparable to modest price subsidies.44
By ensuring consumers have access to
readily available, concise, and
understandable information about their
coverage options, these proposed
regulations could reduce consumers’
cost of obtaining information and may
increase health insurance purchase
rates.
Furthermore, greater transparency in
pricing and benefits information will
allow consumers to make more
informed purchasing decisions,
resulting in cost-savings for some valueconscious consumers who today pay
higher premiums because of imperfect
43 Judith H. Hibbard and Ellen Peters,
‘‘Supporting Informed Consumer Health Care
Decisions: Data Presentation Approaches that
Facilitate the Use of Information in Choice,’’ 24
Annu. Rev. Public Health 413, 416 (2003).
44 M. Susan Marquis et al., ‘‘Consumer Decision
Making in the Individual Health Insurance Market,’’
25 Health Affairs w.226, w.231-w.232 (May 2006).
Available at: http://content.healthaffairs.org/
content/25/3/w226.full.pdf+html.

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Discount rate
percent

2011
2011

Period covered
7
3

2011–2013
2011–2013

information about benefits.45 In
particular, the use of coverage
examples 46 called for by these proposed
regulations would better enable
consumers to understand how key
coverage provisions operate in the
context of recognizable health care
situations and more meaningfully
compare the level of financial protection
offered by a plan or coverage, resulting
in potential cost-savings.47 48 The
Departments therefore expect that
uniform disclosures under these
proposed regulations would enable
consumers to derive more value from
their health coverage and enhance the
ability of plan sponsors, particularly
small businesses, to purchase products
that are appropriate to both their needs
and the health and financial needs of
their employees.
Finally, these proposed regulations
are expected to facilitate consumers’
ability to understand their coverage. As
45 A study of California’s individual market found
that 25 percent of consumers chose products with
premiums that were more than 30 percent higher
than the median price for an actuarially equivalent
product for a similar person. Melinda Beeuwkes
Buntin et al.,’’Trends and Variability In Individual
Insurance Products,’’ Health Affairs w3.449, w3.457
(2003), available at http://content.healthaffairs.org/
content/early/2003/09/24/hlthaff.w3.449.citation.
46 The NAIC recommends that the term ‘‘coverage
examples’’ be used as reference to the statutory term
‘‘coverage facts labels,’’ and the Departments concur
with this recommendation.
47 Shoshanna Sofaer et al., ‘‘Helping Medicare
Beneficiaries Choose Health Insurance: The Illness
Episode Approach, 30 The Gerontologist 308–315
(1990).
48 Michael Schoenbaum et al., ‘‘Health Plan
Choice and Information about Out-of-Pocket Costs:
An Experimental Analysis,’’ 38 Inquiry 35–48
(Spring 2001).

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
stated above, research suggests that
consumers do not understand how
coverage works or the terminology used
in health insurance policies.
Consequently, consumers may face
unexpected medical expenses if they
become seriously ill. They may also
become confused by a coverage or
payment decision made by their plan or
issuer, leading to inefficiency in the
operation of employee benefit plans and
health insurance coverage. By making it
easier for consumers to understand the
key features of their coverage, these
proposed regulations would enhance
consumers’ ability to use their coverage.
Additionally, the uniform format will
make it easier for consumers who
change jobs or insurance coverage to see
how their new plan or coverage benefits
are similar to and different from their
previous coverage.

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5. Costs
Section 2715 of the PHS Act and these
proposed regulations direct group
health plans and health insurance
issuers to compile and provide a
summary of benefits and coverage (SBC)
(that includes coverage examples (CEs))
and a uniform glossary of health
coverage and medical terms. The
Departments have attempted to quantify
one-time start-up costs as well as
maintenance costs. However, there is
uncertainty arising from general data
limitations and the degree to which
economies of scale can be realized to
reduce costs for issuers and TPAs. The
costs estimates employ assumptions that
we believe more than fully capture
expected issuer and third-party
administrator costs, and perhaps
overestimate them if, for example,
economies of scale are achievable. On
the basis of such assumptions, the
Departments estimate that issuers and
TPAs will incur approximately $25
million in costs in 2011, $73 million in
costs in 2012, and $58 million in costs
in 2013. These costs and the
methodology used to estimate them are
discussed below, and presented in
Tables 2–5 below.
General Assumptions
In order to assess the potential
administrative costs relating to these
proposed regulations, the Departments
consulted with industry experts to gain
insight into the tasks and level of
resources required. Based on these
discussions, the Departments estimate
that there will be two categories of
principal costs associated with the
standards in these proposed regulations:
one-time start-up costs and maintenance
costs. The one-time start-up costs
include costs to develop teams to review

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the new standards and costs to
implement workflow and process
changes, particularly the development
of information technology (IT) systems
interfaces that would generate SBC
disclosures through data housed in a
number of different systems. The
maintenance costs include costs to
maintain and update IT systems in
compliance with the proposed
standards; to produce, review,
distribute, and update the SBC
disclosures; 49 to produce and distribute
notices of modifications, and to provide
the glossary in paper form upon request.
With respect to the individual market,
issuers are responsible for generating,
reviewing, updating, and distributing
SBCs. With respect to employersponsored coverage, the Departments
assume fully-insured plans will rely on
health insurance issuers, and selfinsured plans will rely on TPAs, to
perform these functions. While plans
may prepare the SBC disclosures
internally, the Departments make this
simplifying assumption because most
plans appear to rely on issuers and
TPAs for the purpose of administrative
duties such as enrollment and claims
processing.50 Thus, the Departments use
health insurance issuers and TPAs as
the unit of analysis for the purposes of
estimating administrative costs.
As discussed in the Medical Loss
Ratio (MLR) interim final rule (75 FR
74918), the Departments estimate there
are about 440 firms offering
comprehensive coverage in the
individual, small, or large group
markets, and 75 million covered lives
therein.51 The number of covered lives
includes individuals in the individual
market as well as those in insured group
health plans.
With respect to the self-insured
market, the Departments estimate there
are 77 million individuals in selfinsured ERISA-covered plans and
approximately 14 million individuals in
self-insured non-Federal governmental
49 Plans and issuers subject to ERISA or the Code
may provide SBCs electronically only if the
requirements of the Department of Labor’s
electronic disclosure safe harbor at 29 CFR
2520.104b–1 are met. Otherwise, by default, plans
and issuers must use paper versions of SBCs.
50 See, for example, the Department of Labor’s
March 2011 report to Congress on self-insured
health plans, available at http://www.dol.gov/ebsa/
pdf/ACAReportToCongress032811.pdf.
51 The NAIC data actually indicate 442 issuers
and 74,830,101 covered lives. But the Departments
have limited these values to only two significant
figures given general data uncertainty. For example,
the NAIC data do not include issuers regulated by
California’s Department of Managed Health Care
(DMHC) as well as small, single-State issuers that
are not required by State regulators to submit NAIC
annual financial statements.

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52455

plans.52 The Departments note that,
according to 2007 Economic Census
data, there are 2,243 TPAs providing
administrative services for health and/or
welfare funds. However, there is some
uncertainty as to whether all of those
TPAs serve self-insured plans; many
issuers, for example, have subsidiary
lines of business through administrative
services only (ASO) contracts through
which they perform third-party
administrative functions for self-insured
plans.53 Based on conversations with
one national TPA association, the
Departments assume that about onethird of the total number of TPAs, or
about 748 TPAs, are relevant for
purposes of this analysis. However,
given the considerable overlap between
issuers and TPAs, the Departments
recognize there may be fewer affected
TPAs, so these estimates should be
considered an upper bound of burden
estimates. These estimates may be
adjusted proportionally in the final
regulations based upon additional
information about the number of TPAs
serving self-insured plans.
Because the SBC disclosures are
closely related to disclosures that
issuers and TPAs provide today as a
part of their normal operations (e.g.,
information on premiums, covered
benefits, and cost sharing), the
incremental costs of compiling and
providing such readily available
information in the proposed,
standardized format is estimated to be
modest.54 The per-issuer or -TPA cost
will largely be determined by its size
(based on annual premium revenues)
and current practices—most
importantly, whether the issuer or TPA
maintains a robust information
technology infrastructure, including a
plan benefits design database. Moreover,
with regard to issuers, administrative
costs may be related to the number of
markets in which it operates (that is,
52 U.S. Department of Labor, EBSA calculations
using the March 2009 Current Population Survey
Annual Social and Economic Supplement and the
2009 Medical Expenditure Panel Survey; see also
interim final rule for internal claims and appeals
and external review processes (75 FR 43330,
43345).
53 See, for example, the Department of Labor’s
March 2011 report to Congress on self-insured
health plans, available at http://www.dol.gov/ebsa/
pdf/ACAReportToCongress032811.pdf.
54 For example, issuers in the individual and
small group markets already report some of the SBC
information to HHS for display in the plan finder
on the HealthCare.gov Web site. Issuers have been
reporting data to HHS since May 2010 and have
refreshed that data on a quarterly basis. These
reporting entities have demonstrated that they have
the capacity to report information on plan benefit
design. See http://finder.healthcare.gov/. Further,
ERISA-covered plans already report some of the
SBC information in summary plan descriptions
(SPDs).

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

provide better information or data about
any of the following assumptions.
IT Systems and Workflow Process
Changes
The Departments estimate that it
would take a large issuer/TPA about 960
hours to implement IT systems and
workflow process changes, based on
discussions with a large issuer. The
Departments assume that these IT
systems and workflow process changes
would be implemented only by IT
professionals. Furthermore, the
Departments assume that a medium
issuer/TPA would need about 75% of a
large issuer’s/TPA’s time, and a small
issuer would need about 50% of a large
issuer’s/TPA’s time, to implement IT
systems and workflow process changes.
The Departments estimate that it
would take a large issuer/TPA about 160
hours to develop teams to analyze the
new standards in relation to their
current workflow processes. The
Departments assume such teams would
be comprised of IT professionals (45%),
benefits/sales professionals (50%), and
attorneys (5%). We scale down the
burden for medium and small issuers/
TPAs by assuming the same relative
proportion as above (that is, 75 percent
and 50 percent, respectively).
The Departments assume that each
issuer/TPA would incur a maintenance
cost to maintain IT systems and address
changes in regulatory requirements. The
Departments assume the maintenance
cost would equal 15% of the total onetime burden noted above (for example,
TABLE 2—ISSUER AND TPA SIZE
the Departments assume it will take a
CLASSIFICATION
large issuer 15% of 1120 hours, or 168
hours). The Departments further assume
Small
Medium
Large
that the teams to implement the
maintenance tasks would be comprised
Issuers ..
140
230
70
TPAs .....
240
390
120 of IT professionals (55%), benefits/sales
professionals (40%), and attorneys (5%).
The Departments assume that the oneStaffing Assumptions
time and maintenance costs to
Table 6 below summarizes the
implement IT systems changes and to
Departments’ staffing assumptions,
address these regulations would be split
including the estimated number of
between the costs to produce SBCs
hours for each task for a small, medium, (50%) and the costs to produce the CEs
or large issuer/TPA as well as the
(50%).
percentage of time that different
Production and Review of SBCs and
professionals devote to each task. The
CEs
following assumptions are based on the
The Departments estimate that each
best information available to the
issuer/TPA would need 3 hours to
Departments at this time. Particularly,
produce, and 1 hour to review, SBCs
the following series of assumptions are
(not including CEs) for all products. The
based on conversations with industry
Departments assume that the 3 hours
experts, the Departments’ understanding needed to produce the SBCs would be
of the regulated community, and
equally divided between IT
previous analysis in the MLR interim
professionals and benefits/sales
final rule. We welcome comments that
professionals. The Departments assume
that the 1 hour needed to review the
55 The premium revenue data come from the 2009
SBCs would be equally divided between
NAIC financial statements, also known as ‘‘Blanks,’’
financial managers for benefits/sales
where insurers report information about their
professionals and attorneys.
various lines of business.

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individual, small group, or large group
market); the number of policies it offers;
and the number of States and licensed
entities through which it offers
coverage.
To account for variations among
issuers, the Departments classify them
by size as small, medium, and large
issuers based on 2009 premium revenue
for individual, small group, and large
group comprehensive coverage.55
Consistent with the assumptions that
were used in the MLR interim final rule,
small issuers are defined as those
earning up to $50 million in annual
premium revenue; medium issuers as
those earning between $50 million and
$1 billion in annual premium revenue;
and large issuers as those earning more
than $1 billion in annual premium
revenue. Based on these assumptions,
the Departments estimate there are 140
small, 230 medium, and 70 large
issuers.
To account for variations among
TPAs, the Departments applied the
proportions of small, medium, and large
issuers to the estimated 750 TPAs. The
Departments acknowledge that issuers
and TPAs are different and may not
have the same size variation.
Nonetheless, given general data
limitations, the Departments have
adopted this methodology, and, on its
basis, estimate that there are 240 small,
390 medium, and 120 large TPAs. Table
2 below provides a synopsis of the
number of issuers and TPAs.

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In 2012 and 2013, issuers and TPAs
would produce CEs for three benefits
scenarios. The Departments estimate it
will take each issuer/TPA 90 hours to
produce, and 30 hours to review, CEs
for all applicable products. The
Departments assume that the 90 hours
to produce the CEs would be equally
divided between IT professionals and
benefits/sales professionals. The
Departments also assume that the 30
hours to review the CEs would be
equally divided between financial
managers for benefits/sales
professionals and attorneys.
The Departments assume that in 2012
and 2013, respectively, issuers and
TPAs would provide, upon request, a
paper copy of the uniform glossary to
2.5% and 5% of covered individuals
who receive a glossary. The
Departments assume that individuals
who do not request a paper copy of the
glossary will access it electronically
using the Internet address provided in
the SBC.
For each individual who receives the
SBC or uniform glossary in paper form,
the Departments estimate that printing
and distributing the paper disclosures
would take clerical staff about 1 minute
(0.02 hours) in the group markets and
about 2 minutes (0.03 hours) in the
individual market. The Departments
assume that the individual market has
lower economies of scale and, thus,
increased distribution costs.
Labor Cost Assumptions
Table 7 below presents the
Departments’ hourly labor cost
assumptions (stated in 2011 dollars) for
each staff category based on BLS data.
The Departments use mean hourly wage
estimates from the Bureau of Labor
Statistics’ (BLS) May 2009 National
Occupational Employment and Wage
Estimates (accessed at http://
www.bls.gov/oes/current/
oes_nat.htm#00–0000) for computer
systems analysts (Occupation Code 15–
1051), insurance underwriters
(Occupation Code 13–2053), financial
managers (Occupation Code 23–1011),
executive secretaries and administrative
assistants (Occupation Code 43–6011),
and attorneys (Occupation Code 23–
1011) as the basis for estimating labor
costs for 2011 through 2013 and adjust
the hourly wage rate to include a 33%
fringe benefit estimate for private sector
employees.56
Distribution Assumptions
The Departments make the following
assumptions regarding the distribution
56 See the Technical Appendix to the MLR
interim final rule, available at http://cciio.cms.gov.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
of the SBC disclosures (including
CEs).57 These assumptions are based on
the best information available to the
Departments at this time. Particularly,
the following series of assumptions are
based on conversations with industry
experts, the Departments’ understanding
of the regulated community, and
previous analysis in the MLR interim
final rule. The distribution assumptions
are as follows:
• The SBCs would be limited to one
per household for family members
located at the same residence.
According to one large issuer, there are
2.2 covered lives per family.
• The number of individuals who
would receive an SBC before enrolling
in the plan or coverage equals 20% of
the number of enrollees at any point
during the course of a year.58
• In 2013, about 2% of covered
individuals would receive a notice of
modifications.59 Further, the burden
and cost of providing such notices
would be proportional to the combined
burden and cost of providing the SBCs,
including CEs. In 2012, the first year of

implementation, the number of notices
of modifications would be negligible.
• Electronic distribution will account
for 38 percent of all disclosures in the
group market and 70 percent of all
disclosures in the individual market.
The estimate for the group market is
based on the methodology used to
analyze the cost burden for the DOL
claims procedure regulation (OMB
Control Number 1210–0053).60 The
estimate for the individual market is
based on statistics set forth by the
National Telecommunications and
Information Administration, which
indicate that 30% of Americans do not
use the Internet.61
• SBC disclosures would be
distributed with usual marketing and
enrollment materials, thus, costs to mail
the documents will be negligible.
However, notices of modifications
would require mailing and supply costs
as follows: $0.44 postage cost per
mailing and $0.05 supply cost per
mailing.
• Printing costs $0.03 cents per side
of a page. Thus, it would cost $0.18 to

52457

print a complete SBC (which is six sides
of a page based on the length of the
NAIC sample completed SBC) and $0.12
cents to print the uniform glossary
(which is four sides of a page, based on
the length of the NAIC recommended
uniform glossary). This cost burden is in
addition to the 1 minute or 2 minutes
it would take clerical staff to print and
distribute the SBC or glossary.
Cost Estimate
The Tables below present costs and
burden hours for issuers and TPAs
associated the proposed disclosure
requirements of PHS Act section 2715.
Tables 3–5 contain cost estimates for
2011, 2012, and 2013, derived from the
labor hours presented in Table 3 and the
hourly rate estimates presented in Table
7, as well as estimates of non-labor
costs. Labor hour estimates were
developed for each one-time and
maintenance task associated with
analyzing requirements, developing IT
systems, and producing SBCs (that
include CEs).

TABLE 3—2011 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2011 DOLLARS
Number of affected entities
SBC Requirements—Issuers—One Time .......................................................................
SBC Requirements—TPAs—One-Time ..........................................................................
Coverage Example Requirements—Issuers—One Time ................................................
Coverage Example Requirements—TPAs—One-Time ...................................................
Total ..........................................................................................................................

Hour burden

440
750
440
750
............................

88,000
150,000
88,000
150,000
240,000

Equivalent cost
$4,600,000
7,800,000
4,600,000
7,800,000
25,000,000

TABLE 4—2012 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2011 DOLLARS
Number of affected entities

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SBC Requirements—Issuers ...........................
SBC Requirements—TPAs ..............................
Coverage Example Requirements—Issuers ....
Coverage Example Requirements—TPAs ......
Glossary Requests—Issuers ...........................
Glossary Requests—TPAs ..............................
Subtotal .....................................................
Total 2012 Costs ......................................

57 Although CEs are an integral component of
SBCs, the costs associated with CEs are different
from the rest of the SBC, and, thus, are separately
calculated within this analysis.
58 Based on this assumption, the Departments
estimated that small issuers or TPAs have about
180,000 shoppers in a given year, medium issuers
or TPAs have 3,700,000 shoppers in a given year,
and large issuers or TPAs have 11,000,000 shoppers
in a given year.
59 ERISA section 104(b) requires ERISA-covered
plans to furnish participants and beneficiaries with

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Hour burden

440
750
440
750
440
750

Equivalent cost

540,000
660,000
140,000
240,000
11,000
13,000
1,600,000

$18,000,000
23,000,000
7,600,000
13,000,000
330,000
370,000
62,000,000
73,000,000

a Summary of Material Modifications (SMM) no
later than 210 days after the end of the plan year
in which the material change was adopted. As part
of its analysis for the Department of Labor’s SPD/
SMM regulations (29 CFR 2520.104b-(3)), the
Department estimated that about 20 percent of
health plans would need to distribute SMM in a
given year due to plan amendments. However,
almost all of these modification occur between plan
years—not during a plan year; therefore, the
modifications would be required to be disclosed in
a SBC that is distributed upon renewal of coverage.
The Departments, thus, expects that only two

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Cost burden
(non-labor)
$2,900,000
3,700,000
1,500,000
1,800,000
370,000
470,000
11,000,000

Number of disclosures
41,000,000
49,000,000
41,000,000
49,000,000
610,000
770,000
91,000,000

percent of plans will need to issue an updated SBC
mid-year, because mid-year changes that would
result in an update to the SBC are very rare. For
purposes of simplification, the Departments extend
this assumption to the individual market as well.
60 See the ERISA e-disclosure rule at 29 CFR
2520.104b–1.
61 U.S. Department of Commerce, National
Telecommunications and Information
Administration, Digital Nation (February 2010),
available at http://www.ntia.doc.gov/reports/2010/
NTIA_internet_use_report_Feb2010.pdf.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
TABLE 5—2013 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2011 DOLLARS
Number of affected entities

SBC Requirements—Issuers ...........................
SBC Requirements—TPAs ..............................
Coverage Example Requirements—Issuers ....
Coverage Example Requirements—TPAs ......
Notice of Material Modifications—Issuers .......
Notice of Material Modifications—TPAs ..........
Glossary Requests—Issuers ...........................
Glossary Requests—TPAs ..............................
Subtotal .....................................................
Total 2013 Costs ......................................

Hour burden

440
750
440
750
440
750
440
750

Equivalent cost

480,000
560,000
79,000
130,000
10,000
12,000
23,000
26,000
1,300,000

Cost burden
(non-labor)

$15,000,000
17,000,000
4,300,000
7,200,000
320,000
400,000
660,000
750,000
46,000,000
58,000,000

Number of disclosures

$2,900,000
3,700,000
1,500,000
1,800,000
330,000
400,000
700,000
900,000
12,000,000

41,000,000
49,000,000
41,000,000
49,000,000
820,000
1,000,000
1,200,000
1,500,000
95,000,000

TABLE 6—ESTIMATED STAFFING HOURS FOR SMALL, MEDIUM, AND LARGE ISSUERS AND TPAS
Hours
Percent of hours
by task

Staffing hour assumptions

Small issuer/TPA

Medium issuer/
TPA

Large issuer/TPA

IT Development and Workflow Process Change
One-Time Develop Teams/Analyze Requirements (IT, underwriting/sales) ................................................................................
IT Professionals Benefits/Sales ................................................
Professionals ...................................................................................
Attorneys ...................................................................................
Implementing Systems Changes (IT and workflow) ........................
IT Professionals ........................................................................
Maintenance Updating to Address Changes in Requirements .......
IT Professionals Benefits/Sales ................................................
Professionals ...................................................................................
Attorneys ...................................................................................

............................
45
50
5
............................
100
............................
55
40
5

80
36
40
4
480
480
84
46.20
33.60
4.20

120
54
60
6
720
720
126
69.30
50.40
6.30

160
72
80
8
960
960
168
92.40
67.20
8.40

............................
50
50
............................
50
50

3
1.5
1.5
1
0.5
0.5

3
1.5
1.5
1
0.5
0.5

3
1.5
1.5
1
0.5
0.5

100

0.02

0.02

0.02

100

0.03

0.03

0.02

............................
50
50
............................
50

90
45
45
30
15

90
45
45
30
15

90
45
45
30
15

50

15

15

15

SBC Requirement (maintenance)
Producing SBCs ..............................................................................
IT Professionals Benefits/Sales ................................................
Professionals ...................................................................................
Internal Review of SBCs .................................................................
Financial Managers—Benefits/Sales Professionals .................
Attorneys ...................................................................................
Producing and Distributing Paper Version of SBCs (Group Markets).
Clerical Staff .............................................................................
Producing and Distributing Paper Version of SBCs (Individual
Market).
Clerical Staff .............................................................................

CE Requirement (maintenance)
Producing 3 CEs ..............................................................................
IT Professionals Benefits/Sales ................................................
Professionals ...................................................................................
Internal Review of 3 CEs .................................................................
Financial Managers—Benefits/Sales ........................................
Professionals.
Attorneys ...................................................................................

jlentini on DSK4TPTVN1PROD with PROPOSALS2

TABLE 7—ESTIMATED LOADED HOURLY WAGES FOR STAFF CATEGORIES
Loaded hourly
wage
(2011 Dollars)

Staff category

BLS code

IT Professionals ........................................................................
Financial Professionals—Benefits/Sales ..................................
Financial Manager ....................................................................
Attorneys ...................................................................................
Clerical Staff .............................................................................

Computer Systems Analysts (Occupation Code 15–1051) .....
Insurance Underwriters (Occupation Code 13–2053) .............
Financial Managers (Occupation Code 11–3031) ...................
Lawyers (Occupation Code 23–1011) .....................................
Executive Secretaries and Administrative Assistants (Occupation Code 43–6011).

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$53.26
41.94
75.32
85.44
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jlentini on DSK4TPTVN1PROD with PROPOSALS2

Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
6. Regulatory Alternatives
Several provisions in these proposed
regulations involved policy choices. A
first policy choice involved determining
how to minimize the burden of
providing the SBC to individuals and
employers shopping for health
insurance coverage. The Departments
recognize it may be difficult for issuers
to provide accurate information about
the terms of coverage prior to
underwriting. Accordingly, the
proposed regulations provide that
issuers offering health insurance
coverage in connection with the
individual market that make
information for their standard policies
available on the Secretary of HHS’s Web
portal (HealthCare.gov), in compliance
with 45 CFR 159.120, will have satisfied
the requirement to provide an SBC to
individuals who request information
about coverage. The Departments
believe this approach promotes
regulatory efficiency, minimizing the
administrative burden on health
insurance issuers without lessening the
protections under PHS Act section 2715.
A second choice related to whether,
in the case of covered individuals
residing at the same address, one SBC
would satisfy the disclosure
requirement with respect to all such
individuals, or whether multiple SBCs
would be required to be provided.
Under the proposed regulations, the
Departments allow a plan or issuer to
provide a single SBC in circumstances
in which a participant and any
beneficiaries (or, in the individual
market, the primary subscriber and any
covered dependents) are known to
reside at the same address.
In the group market, the proposed
regulations would further limit burden
by requiring a plan or issuer to provide,
at renewal, a new SBC for only the
benefit package in which a participant
or beneficiary is enrolled. That is, if the
plan offers multiple benefits packages,
an SBC is not required for each benefit
package offered under the group health
plan, which the Departments believe
would otherwise create an undue
burden during open season. Participants
and beneficiaries would be able to
receive upon request an SBC for any
benefits package for which they are
eligible. The Departments believe this
balanced approach addresses the needs
of plans, issuers, and consumers, at
renewal.
A third policy choice related to the
interpretation of the PHS Act section
2715(d)(4), which requires notice of any
material modification (as defined for
purposes of section 102 of ERISA) in
any of the terms of the plan or coverage

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that is not reflected in the most recently
provided SBC. The Departments note
that a material modification, within the
meaning of section 102 of ERISA and its
implementing regulations at 29 CFR
2520.104b-3, is broadly defined to
include any modification to the
coverage offered under the plan or
policy, that independently, or in
conjunction with other
contemporaneous modifications or
changes, would be considered by the
average plan participant to be an
important change in covered benefits or
other terms of coverage under the plan
or policy. The proposed regulations
would interpret this provision as
requiring notice only for a material
modification that (1) affects the
information in the SBC; and (2) occurs
other than in connection with renewal
or reissuance of coverage (that is, a midplan or -policy year change). This
approach is consistent with the
language of section 2715(d)(4) and is
more narrowly focused on what we
interpret to be the purpose of that
provision.
B. Regulatory Flexibility Act—
Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (RFA)
requires agencies that issue a regulation
to analyze options for regulatory relief
of small businesses if a proposed rule
has a significant impact on a substantial
number of small entities. The RFA
generally defines a ‘‘small entity’’ as (1)
a proprietary firm meeting the size
standards of the Small Business
Administration (SBA), (2) a nonprofit
organization that is not dominant in its
field, or (3) a small government
jurisdiction with a population of less
than 50,000. (States and individuals are
not included in the definition of ‘‘small
entity.’’) The Departments use as their
measure of significant economic impact
on a substantial number of small entities
a change in revenues of more than 3 to
5 percent.
As discussed in the Web Portal
interim final rule (75 FR 24481), HHS
examined the health insurance industry
in depth in the Regulatory Impact
Analysis we prepared for the proposed
rule on establishment of the Medicare
Advantage program (69 FR 46866,
August 3, 2004). In that analysis, HHS
determined that there were few if any
insurance firms underwriting
comprehensive health insurance
policies (in contrast, for example, to
travel insurance policies or dental
discount policies) that fell below the
size thresholds for ‘‘small’’ business
established by the SBA. Currently, the
SBA size threshold is $7 million in

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52459

annual receipts for both health insurers
(North American Industry Classification
System, or NAICS, Code 524114) and
TPAs (NAICS Code 524292).
Additionally, as discussed in the
Medical Loss Ratio interim final rule (75
FR 74918), HHS used a data set created
from 2009 National Association of
Insurance Commissioners (NAIC) Health
and Life Blank annual financial
statement data to develop an updated
estimate of the number of small entities
that offer comprehensive major medical
coverage in the individual and group
markets. For purposes of that analysis,
HHS used total Accident and Health
(A&H) earned premiums as a proxy for
annual receipts. HHS estimated that
there were 28 small entities with less
than $7 million in A&H earned
premiums offering individual or group
comprehensive major medical coverage;
however, this estimate may overstate the
actual number of small health insurance
issuers offering such coverage, since it
does not include receipts from these
companies’ other lines of business.
These 28 small entities represent about
6.4 percent of the approximately 440
health insurers that are accounted for in
this RIA. Based on this calculation, the
Departments assume that there are an
equal percentage of TPAs that are small
entities. That is, 48 small entities
represent about 6.4 percent of the
approximately 750 TPAs that are
accounted for in this RIA.
The Departments estimate that issuers
and TPAs earning less than $50 million
in annual premium revenue, including
the 76 small entities mentioned above,
would incur costs of approximately
$15,000, $26,000, and $15,000 per
issuer/TPA in 2011, 2012 and 2013,
respectively. Numbers of this magnitude
do not approach the amounts necessary
to be considered a ‘‘significant
economic impact’’ on firms with
revenues in the order of millions of
dollars. Additionally, as discussed
earlier, the Departments believe that
these estimates overstate the number of
small entities that will be affected by the
requirements in this proposed
regulation, as well as the relative impact
of these requirements on these entities,
because the Departments have based
their analysis on the affected entities’
total A&H earned premiums (rather than
their total annual receipts). Accordingly,
the Departments have determined and
certify that these proposed rules will not
have a significant economic impact on
a substantial number of small entities,
and that a regulatory flexibility analysis
is not required.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

jlentini on DSK4TPTVN1PROD with PROPOSALS2

C. Special Analyses—Department of the
Treasury
For purposes of the Department of the
Treasury it has been determined that
this notice of proposed rulemaking is
not a significant regulatory action as
defined in Executive Order 12866.
Therefore, a regulatory assessment is not
required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these proposed regulations.
It is hereby certified that the collections
of information contained in this notice
of proposed rulemaking will not have a
significant impact on a substantial
number of small entities. Accordingly, a
regulatory flexibility analysis under the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Section
54.9815–2715 of the proposed
regulations would require both group
health insurance issuers and group
health plans to distribute an SBC and
notice of any material modifications to
the plan that affect the information
required in the SBC. Under these
proposed regulations, if a health
insurance issuer satisfies the obligations
to distribute an SBC and a notice of
modifications, those obligations are
satisfied not just for the issuer but also
for the group health plan. For group
health plans maintained by small
entities, it is anticipated that the health
insurance issuer will satisfy these
obligations for both the plan and the
issuer in almost all cases. For this
reason, these information collection
requirements will not impose a
significant impact on a substantial
number of small entities. Pursuant to
section 7805(f) of the Code, this
regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
D. Unfunded Mandates Reform Act—
Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded
Mandates Reform Act (UMRA) of 1995
that agencies assess anticipated costs
and benefits before issuing any
proposed rule that includes a Federal
mandate that could result in
expenditure in any one year by State,
local or Tribal governments, in the
aggregate, or by the private sector, of
$100 million in 1995 dollars updated
annually for inflation. In 2011, that
threshold level is approximately $136
million. These proposed regulations
include no mandates on State, local, or
Tribal governments. These proposed
regulations include directions to
produce standardized consumer

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disclosures that will affect private sector
firms (for example, health insurance
issuers offering coverage in the
individual and group markets, and
third-party administrators providing
administrative services to group health
plans), but we tentatively conclude that
these costs will not exceed the $136
million threshold. Thus, we tentatively
conclude that these proposed
regulations do not impose an unfunded
mandate on State, local or Tribal
governments or the private sector.
Regardless, consistent with policy
embodied in UMRA, this notice of
proposed rulemaking has been designed
to be the least burdensome alternative
for State, local and Tribal governments,
and the private sector while achieving
the objectives of the Affordable Care
Act.
E. Paperwork Reduction Act
1. Department of Labor and Department
of the Treasury
Section 2715 of the PHS Act directs
the Departments, in consultation with
the National Association of Insurance
Commissioners (NAIC) and a working
group comprised of stakeholders, to
‘‘develop standards for use by a group
health plan and a health insurance
issuer in compiling and providing to
applicants, enrollees, and policyholders
and certificate holders a summary of
benefits and coverage explanation that
accurately describes the benefits and
coverage under the applicable plan or
coverage.’’ Plans and issuers are
required to begin providing the
disclosure (herein referred to as a
‘‘summary of benefits and coverage’’ or
SBC) no later than March 23, 2012.
To implement this provision,
collection of information requirements
relate to the provision of the following:
• Summary of benefits and coverage.
• Coverage examples (as components
of each SBC).
• A uniform glossary of health
coverage and medical terms (uniform
glossary).
• Notice of modifications.
In developing these collections of
information, the Departments have
incorporated the documents
recommended by the NAIC, including
the SBC template (with instructions,
samples and a guide for coverage
examples calculations to be used in
completing the template) and the
uniform glossary. These collection
instruments were developed over a
period of several months and agreed to
by the entire NAIC working group and
recommended to the Departments by the
NAIC.
Currently, the Departments are
soliciting public comments for 60 days

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concerning these disclosures. The
Departments have submitted a copy of
these interim final regulations to OMB
in accordance with 44 U.S.C. 3507(d) for
review of the information collections.
The Departments and OMB are
particularly interested in comments
that:
• Evaluate whether the collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
• Evaluate the accuracy of the
agency’s estimate of the burden of the
collection of information, including the
validity of the methodology and
assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
for example, by permitting electronic
submission of responses.
Comments should be sent to the Office
of Information and Regulatory Affairs,
Attention: Desk Officer for the
Employee Benefits Security
Administration either by fax to (202)
395–5806 or by e-mail to
[email protected]. A copy
of the ICR may be obtained by
contacting the PRA addressee: G.
Christopher Cosby, Office of Policy and
Research, U.S. Department of Labor,
Employee Benefits Security
Administration, 200 Constitution
Avenue, NW., Room N–5718,
Washington, DC 20210. Telephone:
(202) 693–8410; Fax: (202) 219–4745.
These are not toll-free numbers. E-mail:
[email protected]. ICRs submitted to
OMB also are available at reginfo.gov
(http://www.reginfo.gov/public/do/
PRAMain).
The Departments estimate 858
respondents each year from 2011–2013.
This estimate reflects approximately 220
issuers offering comprehensive major
medical coverage in the small and large
group markets, and approximately 638
third-party administrators (TPAs).62
62 The Departments estimate that there are 440
issuers and 750 TPAs. Because the Department of
Labor and the Department of the Treasury share the
hour and cost burden for issuers and TPAs with the
Department of Health and Human Services, the
burden to produce the SBCs including Coverage
Examples for group health plans is calculated using
half the number of issuers (220) and 85% of the
TPAs (638). While the group health plans could
prepare their own SBCs including coverage
examples, the Departments assume that SBCs

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
To account for variation in firm size,
the Departments estimate a weighted
burden on the basis of issuer’s 2009
total earned premiums for
comprehensive major medical
coverage.63 The Departments define
small issuers as those with total earned
premiums less than $50 million;
medium issuers as those with total
earned premiums between $50 million
and $999 million; and large issuers as
those with total earned premiums of $1
billion or more. Accordingly, the

Departments estimate approximately 70
small, 115 medium, and 35 large
issuers. Similarly, the Departments
estimate approximately 204 small, 332
medium, and 102 large TPAs.
2011 Burden Estimate
While the disclosures in these
proposed regulations are not required
until March 2012, the Departments
estimate a one-time administrative cost
of about $36,000,000 across the industry
and a total of about 680,000 burden
hours to prepare for the provisions of

these proposed regulations. This
calculation is made assuming issuers
and TPAs will need to implement two
principal tasks: (1) Develop teams to
analyze current workflow processes
against the new rules and (2) make
appropriate changes to IT systems and
processes.
With respect to task (1), the
Departments estimate about 97,000
burden hours and an equivalent cost of
about $4,800,000. The Departments
calculate these estimates as follows:64

TASK 1—ANALYZE CURRENT WORKFLOW AND NEW RULES
Small issuer/TPA
Hourly wage
rate
IT Professionals ...........
Benefits/Sales Professionals ......................
Attorneys ......................

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

$53.26

36

$1,900

54

$2,900

72

$3,800

41.94
85.44

40
4

1,700
340

60
6

2,500
510

80
8

3,400
680

Total per issuer/
TPA ...................

80

3,900

120

5,900

160

7,900

Total for all
issuers/TPAs .....

22,000

1,100,000

53,000

2,600,000

22,000

1,100,000

With respect to task (2), the
Departments estimate about 580,000
burden hours and an equivalent cost of

about $31,000,000. The Departments
calculate these estimates as follows:

TASK 2—IT CHANGES
Small issuer/TPA
Hourly wage
rate

jlentini on DSK4TPTVN1PROD with PROPOSALS2

IT Professionals ...........

Equivalent
cost

Hours

$53.26

Medium issuer/TPA

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
Cost

Hours

480

$26,000

720

$38,000

960

$51,000

Total per issuer/
TPA ...................

480

26,000

720

38,000

960

51,000

Total for all
issuers/TPAs .....

130,000

7,100,000

320,000

17,000,000

130,000

7,000,000

The Departments assume the total
one-time administrative burden will be
divided equally between 2011 and 2012.
Thus, in 2011, the Departments estimate
a one-time administrative cost of about
$18,000,000 across the industry and
about 340,000 hours. The Departments
assume issuers and TPAs will incur no
other costs in 2011 related to the
proposed collection of information.

2012 Burden Estimate
The estimate hour and cost burden for
the collections of information in 2012
are as follows:
• The Departments estimate that there
will be about 77,000,000 SBC responses.
• The Departments assume that of the
total number of SBC responses, 38%
would be sent electronically in the
small and large group markets.
Accordingly, the Departments estimate
that about 29,000,000 SBCs would be

electronically distributed, and about
48,000,000 SBCs would be distributed
in paper form. The Departments assume
there are no costs associated with
electronic disclosures; there are costs
only with regard to paper disclosures.
Summary of Benefits and Coverage
(not including coverage examples)—The
estimated hour burden is about 820,000
hours, and the estimated total cost is
about $30,000,000. The Departments
calculate these estimates as follows:

including coverage examples would be prepared by
service providers, i.e., issuers and TPAs.

63 The premium revenue data come from the 2009
NAIC financial statements, also known as ‘‘Blanks,’’
where insurers report information about their
various lines of business.

64 For the purposes of these and other estimates
in this section III.E, the Departments again use the
assumptions outlined above in section III.A.5.

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
TASK 1—EQUIVALENT COSTS FOR PRODUCING SBCS
Small issuer/TPA
Hourly wage
rate

IT Professionals ...........
Benefits/Sales Professionals ......................
Financial Managers ......
Attorneys ......................

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

$53.26

1.5

$80

1.5

$80

1.5

$80

41.94
75.32
85.44

1.5
0.5
0.5

63
38
43

1.5
0.5
0.5

63
38
43

1.5
0.5
0.5

63
38
43

Total per issuer/
TPA ...................

4

220

4

220

4

220

Total for all
issuers/TPAs .....

1100

61,000

1800

100,000

550

31,000

TASK 2—EQUIVALENT COSTS FOR DISTRIBUTING SBCS
Hourly wage
rate

Hours per
SBC

Total number
of SBCs

Total hours

Total equivalent cost

$29.15

0.017

48,000,000

820,000

$24,000,000

Cost per SBC

Total SBCs

Total cost burden

$0.12

48,000,000

$5,800,0000

Clerical Staff .........................................................................

TASK 1—COST BURDEN FOR PRINTING SBCS

Printing Costs ..............................................................................................................................

Task 2: Coverage Examples—The
estimated hour burden is about 100,000
hours, and the estimated total cost is

about $8,700,000. The Departments
calculate these estimates as follows:

TASK 2—EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES
Small issuer/TPA
Hourly wage
rate
IT Professionals ...........
Benefits/Sales Professionals ......................
Financial Managers ......
Attorneys ......................

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

$53.26

45

$2,400

45

$2,400

45

$2,400

41.94
75.32
85.44

45
15
15

1,900
1,100
1,300

45
15
15

1,900
1,100
1,300

45
15
15

1,900
1,100
1,300

Total per issuer/
TPA ...................

120

6,700

120

6,700

120

6,700

Total for all
issuers/TPAs .....

33,000

1,900,000

53,000

3,000,000

16,000

900,000

TASK 2—COST BURDEN FOR PRINTING COVERAGE EXAMPLES

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Printing Costs ..............................................................................................................................

Task 3: Glossary Requests—The
Departments assume that in 2012,
issuers and TPAs will begin responding
to glossary requests to covered
individuals, and that 2.5% of covered
individuals, who receive paper SBCs,

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will request glossaries. The Departments
further estimate that the burden and
cost of providing the notices to be 2.5%
of the burden and cost of distributing
paper SBCs, plus an additional cost
burden of $0.49 for each glossary

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Printing cost
per CE

Total CEs
printed

Total cost
burden

$0.06

48,000,000

$2,900,000

(including $0.44 for first-class postage
and $0.05 for supply costs).
Accordingly, in 2012, the Departments
estimate a total cost of about $1,300,000
and 21,000 burden hours associated
with about 1,200,000 glossary requests.

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52463

Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
Task 4: One-Time Administrative
Costs—As mentioned above, the
Departments estimate a one-time
administrative cost of about $36,000,000
across the industry and a total of about
680,000 burden hours, and assume this
burden will be equally divided between
2011 and 2012. Thus, in 2012, the
Departments estimate a one-time
administrative cost of about $18,000,000
across the industry and about 340,000
burden hours.
The total 2012 burden estimate is
about $58,000,000. The total number of
burden hours is about 1,300,000.
2013 Burden Estimate
Task 1: Summary of Benefits and
Coverage (not including coverage
examples)—The number of SBC
responses is assumed to remain
constant. Thus, in 2013, the
Departments again estimate a total cost
of about $30,000,000 and about 820,000
burden hours for SBCs (not including
coverage examples).

Task 2: Coverage Examples—The
Departments again estimate a total cost
of about $8,700,000 and 100,000 burden
hours for coverage examples.
Task 3: Notices of Modifications—The
Departments assume that in 2013,
issuers and TPAs would send notices of
modifications to covered individuals,
and that 2% of covered individuals
would receive such notice. The
Departments further estimate that the
burden and cost of providing the notices
to be 2% of the combined burden and
cost of the SBCs including the coverage
examples, plus an additional cost
burden for $0.49 for each paper notice
(including $0.44 for first-class postage
and $0.05 for supply costs).
Accordingly, in 2013, the Departments
estimate a total cost of about $1,400,000
and 18,000 burden hours associated
with about 1,500,000 notices of
modification.
Task 4: Glossary Requests—The
Departments assume that in 2013,
issuers and TPAs will again respond to
Small issuer/TPA

Hourly wage
rate

jlentini on DSK4TPTVN1PROD with PROPOSALS2

IT Professionals ...........
Benefits/Sales Professionals ......................
Attorneys ......................

Medium issuer/TPA

Equivalent
cost

Hours

glossary requests to covered individuals,
and that 5% of covered individuals,
who receive paper SBCs, will request
glossaries. The Departments further
estimate that the burden and cost of
providing the glossaries to be 5% of the
burden and cost of distributing paper
SBCs, plus an additional cost burden for
$0.49 for each glossary (including $0.44
for first-class postage and $0.05 for
supply costs). Accordingly, in 2013, the
Departments estimate a total cost of
about $2,700,000 and 41,000 burden
hours associated with 2,400,000
glossary requests.
Task 5: Maintenance Administrative
Costs—In 2013, the Departments assume
that issuers and TPAs will need to make
updates to address changes in
standards, and, thus, incur 15% of the
one-time administrative burden.
Accordingly, the estimated hour burden
is about 100,000 hours, and the
estimated total cost is about $5,400,000.
The Departments calculate these
estimates as follows:
Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

$53.26

46.2

$2,500

69.3

$3,700

92.4

$4,900

41.94
85.44

33.6
4.2

1,800
220

50.4
6.3

2,700
340

67.2
8.4

3,600
450

Total per issuer/
TPA ...................

........................

84

4,500

126

6,700

168

8,900

Total for all
issuers/TPAs .....

........................

23,000

1,200,000

56,000

3,000,000

23,000

1,200,000

The total 2013 cost estimate is about
$48,000,000.The total number of burden
hours is about 1,100,000 hours.
The Departments note that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number.
The 2012–2013 paperwork burden
estimates are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of the Treasury.
Title: Affordable Care Act Uniform
Explanation of Coverage Documents.
OMB Number: XXXX–XXX; XXXX–
XXXX.
Affected Public: Business or other for
profit; not-for-profit institutions.
Total Respondents: 858.
Total Responses: 80,000,000.
Frequency of Response: On-going.

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Estimated Total Annual Burden
Hours: 600,000 hours (Employee
Benefits Security Administration);
600,000 hours (Internal Revenue
Service).
Estimated Total Annual Burden Cost:
$5,100,000 (Employee Benefits Security
Administration); $5,100,000 (Internal
Revenue Service).
2. Department of Health and Human
Services
The Department estimates 333
respondents each year from 2011–2013.
This estimate reflects the approximately
220 issuers offering comprehensive
major medical coverage in the
individual market and to fully-insured
non-Federal governmental plans, and
113 TPAs acting as service providers for
self-insured non-Federal governmental
plans.65
65 The Department estimates that there are 440
issuers and 750 TPAs. Because the Department
shares the hour and cost burden for issuers with the
Department of Labor and the Department of the

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To account for variation in firm size,
the Department estimates a weighted
burden on the basis of issuer’s 2009
total earned premiums for
comprehensive major medical
coverage.66 The Department defines
small issuers as those with total earned
premiums less than $50 million;
medium issuers as those with total
earned premiums between $50 million
and $999 million; and large issuers as
those with total earned premiums of $1
billion or more. Accordingly, the
Treasury, the burden to produce the SBCs including
coverage examples for non-Federal governmental
plans and issuers in the individual market is
calculated using half the number of issuers (221)
and 15% of TPAs (113). While non-Federal
governmental plans could prepare their own SBCs
including Coverage Examples, the Department
assumes that SBCs including coverage examples
would be prepared by service providers, i.e., issuers
and TPAs.
66 The premium revenue data come from the 2009
NAIC financial statements, also known as ‘‘Blanks,’’
where insurers report information about their
various lines of business.

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52464

Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

Department estimates approximately 70
small, 115 medium, and 35 large
issuers. Similarly, the Department
estimates approximately 36 small, 59
medium, and 18 large TPAs.
2011 Burden Estimate
While the disclosures in these
proposed regulations are not required

workflow processes against the new
standards and (2) make appropriate
changes to IT systems and processes.
With respect to task (1), the
Department estimates about 38,000
burden hours, and an equivalent cost of
about $1,900,000. The Department
calculates these estimates as follows: 67

until March 2012, the Department
estimates a one-time administrative cost
of about $14,000,000 across the industry
and 270,000 burden hours to prepare for
the provisions of these proposed
regulations. This calculation is made
assuming issuers and TPAs will need to
implement two principal tasks: (1)
Develop teams to analyze current

TASK 1—ANALYZE CURRENT WORKFLOW AND NEW RULES
Small issuer/TPA
Hourly
wage rate

Medium issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

Large issuer/TPA
Equivalent
cost

Hours

IT Professionals .....................................................
Benefits/Sales Professionals .................................
Attorneys ................................................................

$53.26
41.94
85.44

36
40
4

$1,900
1,700
340

54
60
6

$2,900
2,500
510

72
80
8

$3,800
3,400
680

Total per issuer/TPA .......................................

..................

80

3,900

120

5,900

160

7,900

Total for all issuers/TPAs ...............................

..................

8,500

420,000

21,000

1,000,000

8,500

450,000

With respect to task (2), the
Department estimates 230,000 burden
hours, and an equivalent cost of out

$12,000,000. The Department calculates
these estimates as follows:

TASK 2—IT CHANGES
Small issuer/TPA
Hourly
wage rate

Hours

Medium issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Large issuer/TPA
Hours

Equivalent
cost

IT Professionals .....................................................

$53.26

480

$26,000

720

$38,000

960

$51,000

Total per issuer/TPA .......................................

..................

480

26,000

720

38,000

960

51,000

Total for all issuers/TPAs .......................................

..................

51,000

2,700,000

125,000

6,700,000

51,000

2,700,000

The Department assumes the total
one-time administrative burden will be
divided equally between 2011 and 2012.
Thus, in 2011, the Department estimates
a one-time administrative cost of about
$7,000,000 across the industry and
135,000 burden hours. The Department
assumes issuers and TPAs will incur no
other costs in 2011 related to the
proposed collection of information.

2012 Burden Estimate
The hour and cost burden for the
collections of information are as
follows:
• The Department estimates that there
will be about 13,000,000 SBC responses
in 2012.
• The Department assumes that 38
percent of the SBCs would be sent
electronically in the group market, and
70 percent of the SBCs would be sent
electronically in the individual market.
Accordingly, the Department estimates
that about 5,900,000 SBCs would be

electronically distributed, and about
7,400,000 SBCs would be distributed in
paper form. The Department assumes
there are no costs associated with
electronic disclosures, and there are
costs only with regard to paper
disclosures.
Task 1: Summary of benefits and
coverage (not including coverage
examples)—The estimated hour burden
is about 170,000 hours, and the
estimated total cost is about $5,900,000.
The Department calculates these
estimates as follows:

TASK 1—EQUIVALENT COSTS FOR PRODUCING SBCS

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Small issuer/TPA
Hourly
wage rate
IT Professionals .....................................................
Benefits/Sales Professionals .................................
Financial Managers ................................................

Hours

$53.26
41.94
75.32

Medium issuer/TPA

Equivalent
cost

1.5
1.5
0.5

$80
63
38

Hours

Equivalent
cost

1.5
1.5
0.5

$80
63
38

67 For the purposes of these and other estimates
in this section III.E, the Departments again use the
assumptions outlined above in section III.A.5.

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22AUP2

Large issuer/TPA
Hours
1.5
1.5
0.5

Equivalent
cost
$80
63
38

52465

Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
TASK 1—EQUIVALENT COSTS FOR PRODUCING SBCS—Continued
Small issuer/TPA
Hourly
wage rate

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

Attorneys ................................................................

85.44

0.5

43

0.5

43

0.5

43

Total per issuer/TPA .......................................

..................

4

220

4

220

4

220

Total for all issuers/TPAs ...............................

..................

420

24,000

700

39,000

200

12,000

TASK 1—EQUIVALENT COSTS FOR DISTRIBUTING SBCS
Hourly wage
rate

Hours per
SBC

Total number
of SBCs

Total hours

Total equivalent cost

Clerical Staff, Individual Market ...........................................
Clerical, Group Market .........................................................

$29.15
29.15

0.033
0.017

2,700,000
4,700,000

89,000
80,000

$2,600,000
2,300,000

Total ..............................................................................

........................

........................

7,400,000

170,000

$4,900,000

TASK 1—COST BURDEN FOR PRINTING SBCS

Printing Costs ..............................................................................................................................

Task 2: Coverage Examples—The
estimated hour burden is about 40,000
hours, and the estimated total cost is

Cost per SBC

Total SBCs

Cost burden

$0.12

7,400,000

$890,000

about $2,700,000. The Department
calculates these estimates as follows:

TASK 2—EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES
Small issuer/TPA
Hourly wage
rate
IT Professionals ...........
Benefits/Sales Professionals ......................
Financial Managers ......
Attorneys ......................

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

$53.26

45

$2,400

45

$2,400

45

$2,400

41.94
75.32
85.44

45
15
15

1,900
1,100
1,300

45
15
15

1,900
1,100
1,300

45
15
15

1,900
1,100
1,300

Total per issuer/
TPA ...................

........................

120

6,700

120

6,700

120

6,700

Total for all
issuers/TPAs .....

........................

13,000

710,000

21,000

1,200,000

6,400

350,000

TASK 2—COST BURDEN FOR PRINTING COVERAGE EXAMPLES

jlentini on DSK4TPTVN1PROD with PROPOSALS2

Printing Costs ..............................................................................................................................

Task 3: Glossary Requests—The
Department assumes that in 2012,
issuers and TPAs will begin responding
to glossary requests to covered
individuals, and that 2.5% of covered
individuals, who receive paper SBCs,
will request glossaries. The Departments
further estimate that the burden and
cost of providing the glossaries to be
2.5% of the burden and cost of

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19:36 Aug 19, 2011

Jkt 223001

distributing paper SBCs, plus an
additional cost burden of $0.49 for each
glossary (including $0.44 for first-class
postage and $0.05 for supply costs).
Accordingly, in 2012, the Department
estimates a total cost of about $240,000
and 4,300 burden hours associated with
about 190,000 glossary requests.
Task 4: One-Time Administrative
Costs: As mentioned above, the

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Printing cost
per CE

Total CEs
printed

Total cost
burden

$0.06

7,400,000

$440,000

Department estimates a one-time
administrative cost of about $14,000,000
across the industry and a total of
270,000 burden hours, and assumes this
burden will be equally divided between
2011 and 2012. Thus, in 2012, the
Department estimates a one-time
administrative cost of about $7,000,000
across the industry and 135,000 burden
hours.

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52466

Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

The total 2012 burden estimate is
about $16,000,000. The total number of
burden hours is 350,000.
2013 Burden Estimate
Task 1: Summary of benefits and
coverage (not including coverage
examples)—The number of SBC
responses is assumed to remain
constant. Thus, in 2013, the Department
again estimates a total cost of about
$5,900,000 and 170,000 burden hours
for SBCs (not including coverage
examples).
Task 2: Coverage Examples—In 2013,
the Department again estimates a total
cost of about $2,700,000 and 40,320
burden hours for coverage examples.
Task 3: Notices of Modifications—The
Department assumes that in 2013,
issuers will begin sending notices of
modifications to covered individuals,

and that 2% of covered individuals will
receive such notice. The Department
further estimates that the burden and
cost of providing the notices to be 2%
of the combined burden and cost of the
SBCs including the coverage examples,
plus an additional cost burden for $0.49
for each paper notice (including $0.44
for first-class postage and $0.05 for
supply costs). Accordingly, in 2013, the
Department estimates a total cost of
about $300,000 and 4,200 burden hours
associated with about 260,000 notices of
modification.
Task 4: Glossary Requests—The
Department assumes that in 2013,
issuers and TPAs will again respond to
glossary requests to covered individuals,
and that 5% of covered individuals,
who receive paper SBCs, will request
glossaries. The Department further
estimates that the burden and cost of
Small issuer/TPA

Hourly wage
rate

jlentini on DSK4TPTVN1PROD with PROPOSALS2

IT Professionals ...........
Benefits/Sales Professionals ......................
Attorneys ......................

Medium issuer/TPA

Equivalent
cost

Hours

providing the glossaries to be 5% of the
burden and cost of distributing paper
SBCs, plus an additional cost burden of
$0.49 for each glossary (including $0.44
for first-class postage and $0.05 for
supply costs). Accordingly, in 2013, the
Department estimates a total cost of
$470,000 and 8,500 burden hours
associated with 370,000 glossary
requests.
Task 5: Maintenance Administrative
Costs—In 2013, the Departments assume
that issuers and TPAs will need to make
updates to address changes in
standards, and, thus, incur 15% of the
one-time administrative burden.
Accordingly, the estimated hour burden
is about 40,000 hours, and the estimated
total cost is about $2,000,000. The
Departments calculate these estimates as
follows:
Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

$53.26

46.2

$2,500

69.3

$3,700

92.4

$4,900

41.94
85.44

33.6
4.2

1,800
220

50.4
6.3

2,700
340

67.2
8.4

3,600
450

Total per issuer/
TPA ...................

........................

84

4,500

126

6,700

168

8,900

Total for all
issuers/TPAs .....

........................

8,900

470,000

22,000

1,100,000

8,900

470,000

The total 2013 cost estimate is about
$11,000,000. The total number of
burden hours is about 260,000 hours.
The Department notes that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number.
The 2012–2013 paperwork burden
estimates are summarized as follows:
Type of Review: New collection.
Agency: Department of Health and
Human Services.
Title: Affordable Care Act Uniform
Explanation of Coverage Documents.
OMB Number: 0938–New.
Affected Public: Business; State,
Local, or Tribal Governments.
Total Respondents: 333.
Total Responses: 13,000,000.
Frequency of Response: On-going.
Estimated Total Annual Burden
Hours: 310,000 hours.
Estimated Total Annual Burden Cost:
$1,600,000.
To obtain copies of the supporting
statement and any related forms for the
proposed paperwork collections
referenced above, access CMS’ Web site
at http://www.cms.gov/Paperwork

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ReductionActof1995/PRAL/
list.asp#TopOfPage or e-mail your
request, including your address, phone
number, OMB number, and CMS
document identifier, to
[email protected], or call the
Reports Clearance Office at 410–786–
1326.
If you comment on this information
collection and recordkeeping
requirements, please do either of the
following:
1. Submit your comments
electronically as specified in the
ADDRESSES section of this proposed rule;
or
2. Submit your comments to the
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Attention: CMS Desk Officer,
CMS–9982–P. Fax: 202–395–5806; or Email: [email protected].
E. Federalism Statement—Department
of Labor and Department of Health and
Human Services
Executive Order 13132 outlines
fundamental principles of federalism,
and requires the adherence to specific
criteria by Federal agencies in the

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process of their formulation and
implementation of policies that have
‘‘substantial direct effects’’ on the
States, the relationship between the
national government and States, or on
the distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
federalism implications must consult
with State and local officials and
describe the extent of their consultation
and the nature of the concerns of State
and local officials in the preamble to the
regulation.
In the Departments’ view, these
proposed rules have federalism
implications, because it would have
direct effects on the States, the
relationship between national
governments and States, or on the
distribution of power and
responsibilities among various levels of
government relating to the disclosure of
health insurance coverage information
to consumers. Under these proposed
rules, all group health plans and health
insurance issuers offering group or
individual health insurance coverage,
including self-funded non-Federal

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jlentini on DSK4TPTVN1PROD with PROPOSALS2

Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules
governmental plans as defined in
section 2791 of the PHS Act, would be
required to follow uniform standards for
compiling and providing a summary of
benefits and coverage to consumers.
Such Federal standards developed
under PHS Act section 2715(a) would
preempt any related State standards that
require a summary of benefits and
coverage that provides less information
to consumers than that required to be
provided under PHS Act section
2715(a).
In general, through section 514,
ERISA supersedes State laws to the
extent that they relate to any covered
employee benefit plan, and preserves
State laws that regulate insurance,
banking, or securities. While ERISA
prohibits States from regulating a plan
as an insurance or investment company
or bank, the preemption provisions of
section 731 of ERISA and section 2724
of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a))
apply so that the HIPAA requirements
(including those of the Affordable Care
Act) are not to be ‘‘construed to
supersede any provision of State law
which establishes, implements, or
continues in effect any standard or
requirement solely relating to health
insurance issuers in connection with
group health insurance coverage except
to the extent that such standard or
requirement prevents the application of
a requirement’’ of a Federal standard.
The conference report accompanying
HIPAA indicates that this is intended to
be the ‘‘narrowest’’ preemption of State
laws (See House Conf. Rep. No. 104–
736, at 205, reprinted in 1996 U.S. Code
Cong. & Admin. News 2018). States may
continue to apply State law
requirements except to the extent that
such requirements prevent the
application of the Affordable Care Act
requirements that are the subject of this
rulemaking. Accordingly, States have
significant latitude to impose
requirements on health insurance
issuers that are more restrictive than the
Federal law. However, under these
proposed rules, a State would not be
allowed to impose a requirement that
modifies the summary of benefits and
coverage required to be provided under
PHS Act section 2715(a), because it
would prevent the application of this
proposed rule’s uniform disclosure
requirement.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have federalism implications or limit
the policy making discretion of the
States, the Departments have engaged in
efforts to consult with and work
cooperatively with affected States,

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including consulting with, and
attending conferences of, the National
Association of Insurance Commissioners
and consulting with State insurance
officials on an individual basis. It is
expected that the Departments will act
in a similar fashion in enforcing the
Affordable Care Act, including the
provisions of section 2715 of the PHS
Act. Throughout the process of
developing these proposed regulations,
to the extent feasible within the specific
preemption provisions of HIPAA as it
applies to the Affordable Care Act, the
Departments have attempted to balance
the States’ interests in regulating health
insurance issuers, and Congress’ intent
to provide uniform minimum
protections to consumers in every State.
By doing so, it is the Departments’ view
that they have complied with the
requirements of Executive Order 13132.
Pursuant to the requirements set forth
in section 8(a) of Executive Order
13132, and by the signatures affixed to
this proposed rule, the Departments
certify that the Employee Benefits
Security Administration and the Centers
for Medicare & Medicaid Services have
complied with the requirements of
Executive Order 13132 for the attached
proposed rule in a meaningful and
timely manner.
IV. Statutory Authority
The Department of the Treasury
proposed regulations are proposed to be
adopted pursuant to the authority
contained in sections 7805 and 9833 of
the Code.
The Department of Labor proposed
regulations are proposed to be adopted
pursuant to the authority contained in
29 U.S.C. 1027, 1059, 1135, 1161–1168,
1169, 1181–1183, 1181 note, 1185,
1185a, 1185b, 1185d, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public
Law 104–191, 110 Stat. 1936; sec.
401(b), Public Law 105–200, 112 Stat.
645 (42 U.S.C. 651 note); sec. 512(d),
Public Law 110–343, 122 Stat. 3881; sec.
1001, 1201, and 1562(e), Public Law
111–148, 124 Stat. 119, as amended by
Public Law 111–152, 124 Stat. 1029;
Secretary of Labor’s Order 3–2010, 75
FR 55354 (September 10, 2010).
The Department of Health and Human
Services proposed regulations are
proposed to be adopted pursuant to the
authority contained in sections 2701
through 2763, 2791, and 2792 of the
PHS Act (42 U.S.C. 300gg through
300gg–63, 300gg–91, and 300gg–92), as
amended.

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52467

List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health
insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
45 CFR Part 147
Health care, Health insurance,
Reporting and recordkeeping
requirements, and State regulation of
health insurance.
Sarah Hall Ingram,
Acting Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Signed this 15th day of August, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Dated: July 28, 2011.
Donald Berwick,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: August 9, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR parts 54 and 602
are proposed to be amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for Part 54 is amended by adding an
entry for § 54.9815–2715 in numerical
order to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9815–2715 also issued under 26
U.S.C. 9833.

Par. 2. Section 54.9815–2715 is added
to read as follows:
§ 54.9815–2715 Summary of benefits and
coverage and uniform glossary.

(a) Summary of benefits and
coverage—(1) In general. A group health
plan (and its administrator as defined in
section 3(16)(A) of ERISA), and a health
insurance issuer offering group health
insurance coverage, is required to
provide a written summary of benefits
and coverage (SBC) for each benefit
package without charge to entities and
individuals described in this paragraph

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(a)(1) in accordance with the rules of
this section.
(i) By a group health insurance issuer
to a group health plan—(A) A health
insurance issuer offering group health
insurance coverage must provide the
SBC to a group health plan (or its
sponsor) upon application or request for
information about the health coverage as
soon as practicable following the
request, but in no event later than seven
days following the request. If an SBC is
provided upon request for information
about health coverage and the plan (or
its sponsor) subsequently applies for
health coverage, a second SBC must be
provided under this paragraph
(a)(1)(i)(A) only if the information
required to be in the SBC has changed.
(B) If there is any change in the
information required to be in the SBC
before the coverage is offered, or before
the first day of coverage, the issuer must
update and provide a current SBC to the
plan (or its sponsor) no later than the
date of the offer (or no later than the first
day of coverage, as applicable).
(C) If the issuer renews or reissues the
policy, certificate, or contract of
insurance (for example, for a succeeding
policy year), the issuer must provide a
new SBC when the policy, certificate, or
contract is renewed or reissued.
(1) In the case of renewal or
reissuance, if written application is
required for renewal (in either paper or
electronic form), the SBC must be
provided no later than the date the
materials are distributed.
(2) If renewal or reissuance is
automatic, the SBC must be provided no
later than 30 days prior to the first day
of the new policy year.
(D) If a group health plan (or its
sponsor) requests an SBC from a health
insurance issuer offering group health
insurance coverage, it must be provided
as soon as practicable, but in no event
later than seven days following the
request for an SBC.
(ii) By a group health insurance issuer
and a group health plan to participants
and beneficiaries—(A) A group health
plan (including its administrator, as
defined under section 3(16) of ERISA),
and a health insurance issuer offering
group health insurance coverage, must
provide an SBC to a participant or
beneficiary (as defined under sections
3(7) and 3(8) of ERISA), and consistent
with the rules of paragraph (a)(1)(iii) of
this section) with respect to each benefit
package offered by the plan or issuer for
which the participant or beneficiary is
eligible.
(B) The SBC must be provided as part
of any written application materials that
are distributed by the plan or issuer for
enrollment. If the plan does not

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distribute written application materials
for enrollment, the SBC must be
distributed no later than the first date
the participant is eligible to enroll in
coverage for the participant or any
beneficiaries.
(C) If there is any change to the
information required to be in the SBC
before the first day of coverage, the plan
or issuer must update and provide a
current SBC to a participant or
beneficiary no later than the first day of
coverage.
(D) The plan or issuer must provide
the SBC to special enrollees (as
described in § 54.9801–6) within seven
days of a request for enrollment
pursuant to a special enrollment right.
(E) If the plan or issuer requires
participants or beneficiaries to renew in
order to maintain coverage (for example,
for a succeeding plan year), the plan or
issuer must provide a new SBC when
the coverage is renewed.
(1) If written application is required
for renewal (in either paper or electronic
form), the SBC must be provided no
later than the date the materials are
distributed.
(2) If renewal is automatic, the SBC
must be provided no later than 30 days
prior to the first day of coverage under
the new plan year.
(F) A plan or issuer must provide the
SBC to participants or beneficiaries
upon request, as soon as practicable, but
in no event later than seven days
following the request.
(iii) Special rules to prevent
unnecessary duplication with respect to
group health coverage—(A) An entity
required to provide an SBC under
paragraph (a)(1) of this section with
respect to an individual satisfies that
requirement if another party provides
the SBC, but only to the extent that the
SBC is timely and complete in
accordance with the other rules of this
section. Therefore, for example, in the
case of a group health plan funded
through an insurance policy, the plan
satisfies the requirement to provide an
SBC with respect to an individual if the
issuer provides a timely and complete
SBC to the individual.
(B) If a participant and any
beneficiaries are known to reside at the
same address, and a single SBC is
provided to that address, the
requirement to provide the SBC is
satisfied with respect to all individuals
residing at that address. If a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address.

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(C) With respect to a group health
plan that offers multiple benefit
packages, the plan or issuer is required
to provide a new SBC automatically
upon renewal only with respect to the
benefit package in which a participant
or beneficiary is enrolled; SBCs are not
required to be provided automatically
with respect to benefit packages in
which the participant or beneficiary are
not enrolled. However, if a participant
or beneficiary requests an SBC with
respect to another benefit package (or
more than one other benefit package) for
which the participant or beneficiary is
eligible, the SBC (or SBCs, in the case
of a request for SBCs relating to more
than one benefit package) must be
provided upon request in accordance
with the rules of paragraph (a)(1)(ii) of
this section, which requires the SBC to
be provided as soon as practicable, but
in no event later than seven days
following the request.
(2) Content—(i) In general. The SBC
must include the following:
(A) Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage;
(B) A description of the coverage,
including cost sharing, for each category
of benefits identified by the Secretary in
guidance;
(C) The exceptions, reductions, and
limitations of the coverage;
(D) The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
(E) The renewability and continuation
of coverage provisions;
(F) Coverage examples, in accordance
with the rules of paragraph (a)(2)(ii) of
this section;
(G) With respect to coverage
beginning on or after January 1, 2014, a
statement about whether the plan or
coverage provides minimum essential
coverage as defined under section
5000A(f) and whether the plan’s or
coverage’s share of the total allowed
costs of benefits provided under the
plan or coverage meets applicable
requirements;
(H) A statement that the SBC is only
a summary and that the plan document,
policy, or certificate of insurance should
be consulted to determine the governing
contractual provisions of the coverage;
(I) Contact information for questions
and obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for
customer service and an Internet
address for obtaining a copy of the plan

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document or the insurance policy,
certificate, or contract of insurance);
(J) For plans and issuers that maintain
one or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of
network providers;
(K) For plans and issuers that use a
formulary in providing prescription
drug coverage, an Internet address (or
similar contact information) for
obtaining information on prescription
drug coverage;
(L) An Internet address for obtaining
the uniform glossary, as described in
paragraph (c) of this section; and
(M) Premiums (or in the case of a selfinsured group health plan, cost of
coverage).
(ii) Coverage examples. The SBC must
include coverage examples that
illustrate benefits provided under the
plan or coverage for common benefits
scenarios (including pregnancy and
serious or chronic medical conditions)
that are identified by the Secretary in
accordance with the following:
(A) Number of examples. The
Secretary may identify up to six
coverage examples that may be required
in an SBC.
(B) Benefits scenarios. For purposes of
this section, a benefits scenario is a
hypothetical situation, consisting of a
sample treatment plan for a specified
medical condition during a specific
period of time, based on recognized
clinical practice guidelines available
through the National Guideline
Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary
will specify, in guidance, the types of
services, dates of service, applicable
billing codes, and allowed charges for
each claim in the benefits scenario.
(C) Demonstration of benefit provided.
To demonstrate benefits provided under
the plan or coverage, a plan or issuer
simulates how claims would be
processed under the scenarios provided
by the Secretary to generate an estimate
of cost sharing a consumer could expect
to pay under the benefit package. The
demonstration of benefits will take into
account any cost sharing, excluded
benefits, and other limitations on
coverage, as described by the Secretary
in guidance.
(3) Appearance. A group health plan
and a health insurance issuer must
provide an SBC as a stand-alone
document in the form authorized by the
Secretary and completed in accordance
with the instructions for completing the
SBC that are authorized by the Secretary
in guidance. The SBC must be presented
in a uniform format, use terminology
understandable by the average plan
enrollee, not exceed four double-sided

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pages in length, and not include print
smaller than 12-point font.
(4) Form—(i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may
be provided in paper form.
Alternatively, the SBC may be provided
electronically (such as e-mail or an
Internet posting) if the following three
conditions are satisfied—
(A) The format is readily accessible by
the plan (or its sponsor);
(B) The SBC is provided in paper form
free of charge upon request, and
(C) If the electronic form is an Internet
posting, the issuer timely advises the
plan (or its sponsor) in paper form or email that the documents are available on
the Internet and provides the Internet
address.
(ii) An SBC provided by a plan or
issuer to a participant or beneficiary
may be provided in paper form.
Alternatively, the SBC may be provided
electronically if the requirements of 29
CFR 2520.104b–1 are met.
(5) Language. A group health plan or
health insurance issuer must provide
the SBC in a culturally and
linguistically appropriate manner. For
purposes of this paragraph (a)(5), a plan
or issuer is considered to provide the
SBC in a culturally and linguistically
appropriate manner if the thresholds
and standards of § 54.9815–2719T(e) are
met as applied to the SBC.
(b) Notice of modifications. If a group
health plan, or health insurance issuer
offering group health insurance
coverage, makes any material
modification (as defined under section
102 of ERISA) in any of the terms of the
plan or coverage that would affect the
content of the SBC, that is not reflected
in the most recently provided SBC, and
that occurs other than in connection
with a renewal or reissuance of
coverage, the plan or issuer must
provide notice of the modification to
enrollees not later than 60 days prior to
the date on which such modification
will become effective. The notice of
modification must be provided in a form
that is consistent with the rules of
paragraph (a)(4) of this section.
(c) Uniform glossary—(1) In general.
A group health plan, and a health
insurance issuer offering group health
insurance coverage, must make
available to participants and
beneficiaries the uniform glossary
described in paragraph (c)(2) of this
section in accordance with the
appearance and format requirements of
paragraphs (c)(3) and (c)(4) of this
section.
(2) Health-coverage-related terms and
medical terms. The uniform glossary
must provide uniform definitions,

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52469

specified by the Secretary in guidance,
for the following health-coverage-related
terms and medical terms:
(i) Allowed amount, appeal, balance
billing, co-insurance, complications of
pregnancy, co-payment, deductible,
durable medical equipment, emergency
medical condition, emergency medical
transportation, emergency room care,
emergency services, excluded services,
grievance, habilitation services, health
insurance, home health care, hospice
services, hospitalization, hospital
outpatient care, in-network coinsurance, in-network co-payment,
medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment,
out-of-pocket limit, physician services,
plan, preauthorization, preferred
provider, premium, prescription drug
coverage, prescription drugs, primary
care physician, primary care provider,
provider, reconstructive surgery,
rehabilitation services, skilled nursing
care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary
determines are important to define so
that individuals and employers may
compare and understand the terms of
coverage and medical benefits
(including any exceptions to those
benefits), as specified in guidance.
(3) Appearance. A group health plan,
and a health insurance issuer, must
provide the uniform glossary with the
appearance authorized in guidance,
ensuring that the uniform glossary is
presented in a uniform format and
utilizes terminology understandable by
the average plan enrollee.
(4) Form and manner. A plan or issuer
must make the uniform glossary
described in this paragraph (c) available
upon request, in either paper or
electronic form (as requested), within
seven days of the request. (Under the
rules of paragraph (a) of this section, the
form authorized in guidance for the SBC
will disclose to participants and
beneficiaries their rights to request a
copy of the uniform glossary.)
(d) Preemption. With respect to the
standards for providing an SBC required
under paragraph (a) of this section, State
laws that require a health insurance
issuer to provide an SBC that supplies
less information than required under
paragraph (a) of this section are
preempted.
(e) Failure to provide. A group health
plan or health insurance issuer that
willfully fails to provide information
required under this section to a
participant or beneficiary is subject to a
fine of not more than $1,000 for each
such failure. A failure with respect to
each participant or beneficiary

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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules

insurance coverage, is required to
provide a written summary of benefits
and coverage (SBC) for each benefit
package without charge to entities and
individuals described in this paragraph
(a)(1) in accordance with the rules of
this section.
(i) By a group health insurance issuer
PART 602—OMB CONTROL NUMBERS to a group health plan—(A) A health
UNDER THE PAPERWORK
insurance issuer offering group health
REDUCTION ACT
insurance coverage must provide the
SBC to a group health plan (or its
Par. 3. The authority citation for part
602 continues to read in part as follows: sponsor) upon application or request for
information about the health coverage as
Authority: 26 U.S.C. 7805. * * *
soon as practicable following the
Par. 4. Section 602.101(b) is amended request, but in no event later than seven
by adding the following entry in
days following the request. If an SBC is
numerical order to the table to read as
provided upon request for information
follows:
about health coverage and the plan (or
its sponsor) subsequently applies for
§ 602.101 OMB Control numbers.
health coverage, a second SBC must be
*
*
*
*
*
provided under this paragraph
(b) * * *
(a)(1)(i)(A) only if the information
required to be in the SBC has changed.
CFR part or section where
Current OMB
(B) If there is any change in the
identified and described
control No.
information required to be in the SBC
before the coverage is offered, or before
*
*
*
*
*
the first day of coverage, the issuer must
54.9815–2715 .......................
1545– update and provide a current SBC to the
plan (or its sponsor) no later than the
*
*
*
*
*
date of the offer (or no later than the first
day of coverage, as applicable).
DEPARTMENT OF LABOR
(C) If the issuer renews or reissues the
Employee Benefits Security
policy, certificate, or contract of
Administration
insurance (for example, for a succeeding
policy year), the issuer must provide a
29 CFR Chapter XXV
new SBC when the policy, certificate, or
29 CFR part 2590 is proposed to be
contract is renewed or reissued.
amended as follows:
(1) In the case of renewal or
reissuance, if written application is
PART 2590—RULES AND
required for renewal (in either paper or
REGULATIONS FOR GROUP HEALTH
electronic form), the SBC must be
PLANS
provided no later than the date the
1. The authority citation for part 2590 materials are distributed.
continues to read as follows:
(2) If renewal or reissuance is
automatic, the SBC must be provided no
Authority: 29 U.S.C. 1027, 1059, 1135,
later than 30 days prior to the first day
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1185d, 1191, 1191a,
of the new policy year.
1191b, and 1191c; sec. 101(g), Pub. L.104–
(D) If a group health plan (or its
191, 110 Stat. 1936; sec. 401(b), Pub. L. 105–
sponsor) requests an SBC from a health
200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
insurance issuer offering group health
512(d), Pub. L. 110–343, 122 Stat. 3881; sec.
insurance coverage, it must be provided
1001, 1201, and 1562(e), Pub. L. 111–148,
as soon as practicable, but in no event
124 Stat. 119, as amended by Pub. L. 111–
later than seven days following the
152, 124 Stat. 1029; Secretary of Labor’s
request for an SBC.
Order 3–2010, 75 FR 55354 (September 10,
(ii) By a group health insurance issuer
2010).
and a group health plan to participants
Subpart C—Other Requirements
and beneficiaries—(A) A group health
plan (including its administrator, as
2. Section 2590.715–2715 is added to
defined under section 3(16) of ERISA),
Subpart C to read as follows:
and a health insurance issuer offering
§ 2590.715–2715 Summary of benefits and
group health insurance coverage, must
coverage and uniform glossary.
provide an SBC to a participant or
(a) Summary of benefits and
beneficiary (as defined under sections
coverage—(1) In general. A group health 3(7) and 3(8) of ERISA), and consistent
plan (and its administrator as defined in with the rules of paragraph (a)(1)(iii) of
section 3(16)(A) of ERISA), and a health this section) with respect to each benefit
insurance issuer offering group health
package offered by the plan or issuer for

jlentini on DSK4TPTVN1PROD with PROPOSALS2

constitutes a separate offense for
purposes of this paragraph (e).
(f) Applicability date. This section is
applicable beginning March 23, 2012.
See § 54.9815–1251T(d), providing that
this section applies to grandfathered
health plans.

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which the participant or beneficiary is
eligible.
(B) The SBC must be provided as part
of any written application materials that
are distributed by the plan or issuer for
enrollment. If the plan does not
distribute written application materials
for enrollment, the SBC must be
distributed no later than the first date
the participant is eligible to enroll in
coverage for the participant or any
beneficiaries.
(C) If there is any change to the
information required to be in the SBC
before the first day of coverage, the plan
or issuer must update and provide a
current SBC to a participant or
beneficiary no later than the first day of
coverage.
(D) The plan or issuer must provide
the SBC to special enrollees (as
described in § 2590.701–6 of this Part)
within seven days of a request for
enrollment pursuant to a special
enrollment right.
(E) If the plan or issuer requires
participants or beneficiaries to renew in
order to maintain coverage (for example,
for a succeeding plan year), the plan or
issuer must provide a new SBC when
the coverage is renewed.
(1) If written application is required
for renewal (in either paper or electronic
form), the SBC must be provided no
later than the date the materials are
distributed.
(2) If renewal is automatic, the SBC
must be provided no later than 30 days
prior to the first day of coverage under
the new plan year.
(F) A plan or issuer must provide the
SBC to participants or beneficiaries
upon request, as soon as practicable, but
in no event later than seven days
following the request.
(iii) Special rules to prevent
unnecessary duplication with respect to
group health coverage—(A) An entity
required to provide an SBC under
paragraph (a)(1) of this section with
respect to an individual satisfies that
requirement if another party provides
the SBC, but only to the extent that the
SBC is timely and complete in
accordance with the other rules of this
section. Therefore, for example, in the
case of a group health plan funded
through an insurance policy, the plan
satisfies the requirement to provide an
SBC with respect to an individual if the
issuer provides a timely and complete
SBC to the individual.
(B) If a participant and any
beneficiaries are known to reside at the
same address, and a single SBC is
provided to that address, the
requirement to provide the SBC is
satisfied with respect to all individuals
residing at that address. If a

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beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address.
(C) With respect to a group health
plan that offers multiple benefit
packages, the plan or issuer is required
to provide a new SBC automatically
upon renewal only with respect to the
benefit package in which a participant
or beneficiary is enrolled; SBCs are not
required to be provided automatically
with respect to benefit packages in
which the participant or beneficiary are
not enrolled. However, if a participant
or beneficiary requests an SBC with
respect to another benefit package (or
more than one other benefit package) for
which the participant or beneficiary is
eligible, the SBC (or SBCs, in the case
of a request for SBCs relating to more
than one benefit package) must be
provided upon request in accordance
with the rules of paragraph (a)(1)(ii) of
this section, which requires the SBC to
be provided as soon as practicable, but
in no event later than seven days
following the request.
(2) Content—(i) In general. The SBC
must include the following:
(A) Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage;
(B) A description of the coverage,
including cost sharing, for each category
of benefits identified by the Secretary in
guidance;
(C) The exceptions, reductions, and
limitations of the coverage;
(D) The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
(E) The renewability and continuation
of coverage provisions;
(F) Coverage examples, in accordance
with the rules of paragraph (a)(2)(ii) of
this section;
(G) With respect to coverage
beginning on or after January 1, 2014, a
statement about whether the plan or
coverage provides minimum essential
coverage as defined under section
5000A(f) of the Internal Revenue Code
and whether the plan’s or coverage’s
share of the total allowed costs of
benefits provided under the plan or
coverage meets applicable requirements;
(H) A statement that the SBC is only
a summary and that the plan document,
policy, or certificate of insurance should
be consulted to determine the governing
contractual provisions of the coverage;
(I) Contact information for questions
and obtaining a copy of the plan

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document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for
customer service and an Internet
address for obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance);
(J) For plans and issuers that maintain
one or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of
network providers;
(K) For plans and issuers that use a
formulary in providing prescription
drug coverage, an Internet address (or
similar contact information) for
obtaining information on prescription
drug coverage;
(L) An Internet address for obtaining
the uniform glossary, as described in
paragraph (c) of this section; and
(M) Premiums (or in the case of a selfinsured group health plan, cost of
coverage).
(ii) Coverage examples. The SBC must
include coverage examples that
illustrate benefits provided under the
plan or coverage for common benefits
scenarios (including pregnancy and
serious or chronic medical conditions)
that are identified by the Secretary in
accordance with the following:
(A) Number of examples. The
Secretary may identify up to six
coverage examples that may be required
in an SBC.
(B) Benefits scenarios. For purposes of
this section, a benefits scenario is a
hypothetical situation, consisting of a
sample treatment plan for a specified
medical condition during a specific
period of time, based on recognized
clinical practice guidelines available
through the National Guideline
Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary
will specify, in guidance, the types of
services, dates of service, applicable
billing codes, and allowed charges for
each claim in the benefits scenario.
(C) Demonstration of benefit provided.
To demonstrate benefits provided under
the plan or coverage, a plan or issuer
simulates how claims would be
processed under the scenarios provided
by the Secretary to generate an estimate
of cost sharing a consumer could expect
to pay under the benefit package. The
demonstration of benefits will take into
account any cost sharing, excluded
benefits, and other limitations on
coverage, as described by the Secretary
in guidance.
(3) Appearance. A group health plan
and a health insurance issuer must
provide an SBC as a stand-alone
document in the form authorized by the
Secretary and completed in accordance
with the instructions for completing the

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52471

SBC that are authorized by the Secretary
in guidance. The SBC must be presented
in a uniform format, use terminology
understandable by the average plan
enrollee, not exceed four double-sided
pages in length, and not include print
smaller than 12-point font.
(4) Form—(i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may
be provided in paper form.
Alternatively, the SBC may be provided
electronically (such as e-mail or an
Internet posting) if the following three
conditions are satisfied—
(A) The format is readily accessible by
the plan (or its sponsor);
(B) The SBC is provided in paper form
free of charge upon request, and
(C) If the electronic form is an Internet
posting, the issuer timely advises the
plan (or its sponsor) in paper form or email that the documents are available on
the Internet and provides the Internet
address.
(ii) An SBC provided by a plan or
issuer to a participant or beneficiary
may be provided in paper form.
Alternatively, the SBC may be provided
electronically if the requirements of 29
CFR 2520.104b–1 are met.
(5) Language. A group health plan or
health insurance issuer must provide
the SBC in a culturally and
linguistically appropriate manner. For
purposes of this paragraph (a)(5), a plan
or issuer is considered to provide the
SBC in a culturally and linguistically
appropriate manner if the thresholds
and standards of § 2590.715–2719(e) of
this Part are met as applied to the SBC.
(b) Notice of modifications. If a group
health plan, or health insurance issuer
offering group health insurance
coverage, makes any material
modification (as defined under section
102 of ERISA) in any of the terms of the
plan or coverage that would affect the
content of the SBC, that is not reflected
in the most recently provided SBC, and
that occurs other than in connection
with a renewal or reissuance of
coverage, the plan or issuer must
provide notice of the modification to
enrollees not later than 60 days prior to
the date on which such modification
will become effective. The notice of
modification must be provided in a form
that is consistent with the rules of
paragraph (a)(4) of this section.
(c) Uniform glossary—(1) In general.
A group health plan, and a health
insurance issuer offering group health
insurance coverage, must make
available to participants and
beneficiaries the uniform glossary
described in paragraph (c)(2) of this
section in accordance with the
appearance and format requirements of

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paragraphs (c)(3) and (c)(4) of this
section.
(2) Health-coverage-related terms and
medical terms. The uniform glossary
must provide uniform definitions,
specified by the Secretary in guidance,
for the following health-coverage-related
terms and medical terms:
(i) Allowed amount, appeal, balance
billing, co-insurance, complications of
pregnancy, co-payment, deductible,
durable medical equipment, emergency
medical condition, emergency medical
transportation, emergency room care,
emergency services, excluded services,
grievance, habilitation services, health
insurance, home health care, hospice
services, hospitalization, hospital
outpatient care, in-network coinsurance, in-network co-payment,
medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment,
out-of-pocket limit, physician services,
plan, preauthorization, preferred
provider, premium, prescription drug
coverage, prescription drugs, primary
care physician, primary care provider,
provider, reconstructive surgery,
rehabilitation services, skilled nursing
care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary
determines are important to define so
that individuals and employers may
compare and understand the terms of
coverage and medical benefits
(including any exceptions to those
benefits), as specified in guidance.
(3) Appearance. A group health plan,
and a health insurance issuer, must
provide the uniform glossary with the
appearance authorized in guidance,
ensuring that the uniform glossary is
presented in a uniform format and
utilizes terminology understandable by
the average plan enrollee.
(4) Form and manner. A plan or issuer
must make the uniform glossary
described in this paragraph (c) available
upon request, in either paper or
electronic form (as requested), within
seven days of the request. (Under the
rules of paragraph (a) of this section, the
form authorized in guidance for the SBC
will disclose to participants and
beneficiaries their rights to request a
copy of the uniform glossary.)
(d) Preemption. See § 2590.731 of this
Part. In addition, with respect to the
standards for providing an SBC required
under paragraph (a) of this section, State
laws that require a health insurance
issuer to provide an SBC that supplies
less information than required under
paragraph (a) of this section are
preempted.
(e) Failure to provide. A group health
plan that willfully fails to provide

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information required under this section
to a participant or beneficiary is subject
to a fine of not more than $1,000 for
each such failure. A failure with respect
to each participant or beneficiary
constitutes a separate offense for
purposes of this paragraph (e).
(f) Applicability date. This section is
applicable beginning March 23, 2012.
See § 2590.715–1251(d) of this Part,
providing that this section applies to
grandfathered health plans.
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Subtitle A
The Department of Health and Human
Services proposes to amend 45 CFR part
147 as follows:
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP AND INDIVIDUAL HEALTH
INSURANCE MARKETS
1. The authority citation for part 147
continues to read as follows:
Authority: Sections 2710 through 2763,
2791, and 2792 of the Public Health Service
Act (42 U.S.C. 300gg through 300gg–63,
300gg–91, and 300gg–92), as amended.

2. Add § 147.200 to read as follows:
§ 147.200 Summary of benefits and
coverage and uniform glossary.

(a) Summary of benefits and
coverage—(1) In general. A group health
plan (and its administrator as defined in
section 3(16)(A) of ERISA), and a health
insurance issuer offering group or
individual health insurance coverage, is
required to provide a written summary
of benefits and coverage (SBC) for each
benefit package without charge to
entities and individuals described in
this paragraph (a)(1) in accordance with
the rules of this section.
(i) By a group health insurance issuer
to a group health plan—(A) A health
insurance issuer offering group health
insurance coverage must provide the
SBC to a group health plan (or its
sponsor) upon application or request for
information about the health coverage as
soon as practicable following the
request, but in no event later than seven
days following the request. If an SBC is
provided upon request for information
about health coverage and the plan (or
its sponsor) subsequently applies for
health coverage, a second SBC must be
provided under this paragraph
(a)(1)(i)(A) only if the information
required to be in the SBC has changed.
(B) If there is any change in the
information required to be in the SBC
before the coverage is offered, or before
the first day of coverage, the issuer must
update and provide a current SBC to the

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plan (or its sponsor) no later than the
date of the offer (or no later than the first
day of coverage, as applicable).
(C) If the issuer renews or reissues the
policy, certificate, or contract of
insurance (for example, for a succeeding
policy year), the issuer must provide a
new SBC when the policy, certificate, or
contract is renewed or reissued.
(1) In the case of renewal or
reissuance, if written application is
required for renewal (in either paper or
electronic form), the SBC must be
provided no later than the date the
materials are distributed.
(2) If renewal or reissuance is
automatic, the SBC must be provided no
later than 30 days prior to the first day
of the new policy year.
(D) If a group health plan (or its
sponsor) requests an SBC from a health
insurance issuer offering group health
insurance coverage, it must be provided
as soon as practicable, but in no event
later than seven days following the
request for an SBC.
(ii) By a group health insurance issuer
and a group health plan to participants
and beneficiaries—(A) A group health
plan (including its administrator, as
defined under section 3(16) of ERISA),
and a health insurance issuer offering
group health insurance coverage, must
provide an SBC to a participant or
beneficiary (as defined under sections
3(7) and 3(8) of ERISA), and consistent
with the rules of paragraph (a)(1)(iii) of
this section) with respect to each benefit
package offered by the plan or issuer for
which the participant or beneficiary is
eligible.
(B) The SBC must be provided as part
of any written application materials that
are distributed by the plan or issuer for
enrollment. If the plan does not
distribute written application materials
for enrollment, the SBC must be
distributed no later than the first date
the participant is eligible to enroll in
coverage for the participant or any
beneficiaries.
(C) If there is any change to the
information required to be in the SBC
before the first day of coverage, the plan
or issuer must update and provide a
current SBC to a participant or
beneficiary no later than the first day of
coverage.
(D) The plan or issuer must provide
the SBC to special enrollees (as
described in 45 CFR 146.117) within
seven days of a request for enrollment
pursuant to a special enrollment right.
(E) If the plan or issuer requires
participants or beneficiaries to renew in
order to maintain coverage (for example,
for a succeeding plan year), the plan or
issuer must provide a new SBC when
the coverage is renewed.

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(1) If written application is required
for renewal (in either paper or electronic
form), the SBC must be provided no
later than the date the materials are
distributed.
(2) If renewal is automatic, the SBC
must be provided no later than 30 days
prior to the first day of coverage under
the new plan year.
(F) A plan or issuer must provide the
SBC to participants or beneficiaries
upon request, as soon as practicable, but
in no event later than seven days
following the request.
(iii) Special rules to prevent
unnecessary duplication with respect to
group health coverage—(A) An entity
required to provide an SBC under
paragraph (a)(1) of this section with
respect to an individual satisfies that
requirement if another party provides
the SBC, but only to the extent that the
SBC is timely and complete in
accordance with the other rules of this
section. Therefore, for example, in the
case of a group health plan funded
through an insurance policy, the plan
satisfies the requirement to provide an
SBC with respect to an individual if the
issuer provides a timely and complete
SBC to the individual.
(B) If a participant and any
beneficiaries are known to reside at the
same address, and a single SBC is
provided to that address, the
requirement to provide the SBC is
satisfied with respect to all individuals
residing at that address. If a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address.
(C) With respect to a group health
plan that offers multiple benefit
packages, the plan or issuer is required
to provide a new SBC automatically
upon renewal only with respect to the
benefit package in which a participant
or beneficiary is enrolled; SBCs are not
required to be provided automatically
with respect to benefit packages in
which the participant or beneficiary are
not enrolled. However, if a participant
or beneficiary requests an SBC with
respect to another benefit package (or
more than one other benefit package) for
which the participant or beneficiary is
eligible, the SBC (or SBCs, in the case
of a request for SBCs relating to more
than one benefit package) must be
provided upon request in accordance
with the rules of paragraph (a)(1)(ii) of
this section, which requires the SBC to
be provided as soon as practicable, but
in no event later than seven days
following the request.

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(iv) By a health insurance issuer
offering individual health insurance
coverage—(A) Individuals prior to
coverage. A health insurance issuer
offering individual health insurance
coverage must provide an SBC to an
individual upon receiving an
application for, or a request for
information about, any health insurance
policy, as soon as practicable following
the application or request, but in no
event later than seven days following
the application or request.
(1) If an SBC is provided upon request
for information about a particular health
insurance policy and the individual
subsequently submits an application for
the same policy, a second SBC must be
provided under this paragraph
(a)(1)(iv)(A) only if the information
required to be in the SBC has changed.
(2) If the issuer modifies the terms of
coverage after receiving an application
for any health insurance policy
(including modifications as a result of
medical underwriting) so that the
information required to be in the SBC
has changed, the issuer must provide an
updated SBC that reflects these changes
to the terms of coverage to the applicant,
for each policy for which an application
was received, as soon as practicable, but
in no event later than the date on which
the offer of coverage is made.
(B) Individuals covered under
individual health insurance coverage—
(1) A health insurance issuer offering
individual health insurance coverage
must generally provide an SBC to an
individual who accepts an offer of
coverage no later than the first day of
coverage. However, if the SBC is
provided upon request for information
about health insurance coverage or at
the time that an offer of coverage is
made under paragraph (a)(1)(iv)(A) of
this section, the SBC must be provided
under this paragraph (a)(1)(iv)(B) only if
the information required to be in the
SBC has changed.
(2) The issuer must provide the SBC
to policyholders annually at renewal, no
later than 30 days prior to the first day
of coverage under the new policy year.
The SBC must reflect any modified
policy terms that would be effective on
the first day of the new policy year.
(C) Upon request. A health insurance
issuer offering individual health
insurance coverage must provide an
SBC to any policyholder or covered
dependent, upon request, as soon as
practicable, but in no event later than
seven days following the request.
(v) Special rule to prevent
unnecessary duplication with respect to
individual health insurance coverage. If
the policy covers more than one
individual (or if an application for

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52473

coverage is being made for more than
one individual); all those individuals
are known to reside at the same address;
and a single SBC is provided to that
address, then the requirement to
provide the SBC is satisfied with respect
to all individuals residing at that
address. If an individual’s last known
address is different than the last known
address of the policyholder, the issuer is
required to provide an SBC to the
individual at the individual’s last
known address.
(2) Content—(i) In general. The SBC
must include the following:
(A) Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage;
(B) A description of the coverage,
including cost sharing, for each category
of benefits identified by the Secretary in
guidance;
(C) The exceptions, reductions, and
limitations of the coverage;
(D) The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
(E) The renewability and continuation
of coverage provisions;
(F) Coverage examples, in accordance
with the rules of paragraph (a)(2)(ii) of
this section;
(G) With respect to coverage
beginning on or after January 1, 2014, a
statement about whether the plan or
coverage provides minimum essential
coverage as defined under section
5000A(f) of the Internal Revenue Code
and whether the plan’s or coverage’s
share of the total allowed costs of
benefits provided under the plan or
coverage meets applicable requirements;
(H) A statement that the SBC is only
a summary and that the plan document,
policy, or certificate of insurance should
be consulted to determine the governing
contractual provisions of the coverage;
(I) Contact information for questions
and obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for
customer service and an Internet
address for obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance);
(J) For plans and issuers that maintain
one or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of
network providers;
(K) For plans and issuers that use a
formulary in providing prescription
drug coverage, an Internet address (or
similar contact information) for

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obtaining information on prescription
drug coverage;
(L) An Internet address for obtaining
the uniform glossary, as described in
paragraph (c) of this section; and
(M) Premiums (or in the case of a selfinsured group health plan, cost of
coverage).
(ii) Coverage examples. The SBC must
include coverage examples that
illustrate benefits provided under the
plan or coverage for common benefits
scenarios (including pregnancy and
serious or chronic medical conditions)
that are identified by the Secretary in
accordance with the following:
(A) Number of examples. The
Secretary may identify up to six
coverage examples that may be required
in an SBC.
(B) Benefits scenarios. For purposes of
this section, a benefits scenario is a
hypothetical situation, consisting of a
sample treatment plan for a specified
medical condition during a specific
period of time, based on recognized
clinical practice guidelines available
through the National Guideline
Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary
will specify, in guidance, the types of
services, dates of service, applicable
billing codes, and allowed charges for
each claim in the benefits scenario.
(C) Demonstration of benefit provided.
To demonstrate benefits provided under
the plan or coverage, a plan or issuer
simulates how claims would be
processed under the scenarios provided
by the Secretary to generate an estimate
of cost sharing a consumer could expect
to pay under the benefit package. The
demonstration of benefits will take into
account any cost sharing, excluded
benefits, and other limitations on
coverage, as described by the Secretary
in guidance.
(3) Appearance. A group health plan
and a health insurance issuer must
provide an SBC as a stand-alone
document in the form authorized by the
Secretary and completed in accordance
with the instructions for completing the
SBC that are authorized by the Secretary
in guidance. The SBC must be presented
in a uniform format, use terminology
understandable by the average plan
enrollee (or, in the case of individual
market coverage, the average individual
covered a health insurance policy), not
exceed four double-sided pages in
length, and not include print smaller
than 12-point font.
(4) Form—(i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may
be provided in paper form.
Alternatively, the SBC may be provided
electronically (such as e-mail or an

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Internet posting) if the following three
conditions are satisfied—
(A) The format is readily accessible by
the plan (or its sponsor);
(B) The SBC is provided in paper form
free of charge upon request, and
(C) If the electronic form is an Internet
posting, the issuer timely advises the
plan (or its sponsor) in paper form or email that the documents are available on
the Internet and provides the Internet
address.
(ii) An SBC provided by a plan or
issuer to a participant or beneficiary
may be provided in paper form.
Alternatively, for non-Federal
governmental plans, the SBC may be
provided electronically if the plan
conforms to either the substance of the
ERISA provisions at 29 CFR 2520.104b–
1, or the provisions governing electronic
disclosure for individual health
insurance issuers set forth in paragraph
(a)(4)(iii)(B) of this section.
(iii) With respect to an SBC provided
by an issuer offering individual health
insurance coverage, the SBC may be
provided in either electronic or paper
form.
(A) Paper disclosure. Unless specified
otherwise by an individual, an issuer
must provide an SBC (and any
subsequent SBC) in paper form if:
(1) Upon the individual’s request for
information or request for an
application for coverage, the individual
makes the request in person, by phone,
or by mail; or
(2) When submitting an application
for coverage, the individual completes
the application by phone or mail.
(B) Electronic disclosure—(1) An
issuer may provide an SBC (and any
SBC provided thereafter) in electronic
form (such as through an Internet
posting or via electronic mail) if:
(i) Upon an individual’s request for
information or request for an
application for coverage, the individual
makes a request electronically; or
(ii) When submitting an application,
an individual completes an application
for coverage electronically.
(2) If an issuer provides an SBC in
electronic form, the issuer must:
(i) Request that an individual
acknowledge receipt of the SBC;
(ii) Make the SBC available in an
electronic format that is readily usable
by the general public;
(iii) If the SBC is posted on the
Internet, display the SBC in a location
that is prominent and readily accessible
to the individual and provide timely
notice, in electronic or non-electronic
form, to each individual who requests
information or applies for coverage that
apprises the individual the SBC is

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available on the Internet and includes
the applicable Internet address;
(iv) Promptly provide in accordance
with the rules of paragraph (iii), without
charge, penalty, or the imposition of any
other condition or consequence, a paper
copy of the SBC upon request. An issuer
must provide an individual with the
ability to request a paper copy of the
SBC both by using the issuer’s Web site
(such as by clicking on a clearly
identified box to make the request) and
by calling a readily available telephone
line, the number for which is
prominently displayed on the issuer’s
Web site, policy documents, and other
marketing materials related to the policy
and clearly identified as to purpose; and
(v) Ensure an SBC provided in
electronic form is provided in
accordance with the appearance,
content, and language requirements of
this section.
(C) Deemed compliance. A health
insurance issuer offering individual
health insurance coverage that complies
with the requirements set forth at 45
CFR § 159.120 (relating to the Federal
health reform Web portal) is deemed to
comply with the requirement to provide
the SBC to an individual requesting
information prior to applying for
coverage. However, an issuer must
provide any SBC provided at the time of
application or subsequently in a form
and manner compliant with the
requirements of paragraphs (a)(4)(iii)(A)
and (a)(4)(iii)(B) of this section.
(5) Language. A group health plan or
health insurance issuer must provide
the SBC in a culturally and
linguistically appropriate manner. For
purposes of this paragraph (a)(5), a plan
or issuer is considered to provide the
SBC in a culturally and linguistically
appropriate manner if the thresholds
and standards of § 147.136(e) of this
chapter are met as applied to the SBC.
(b) Notice of modifications. If a group
health plan, or health insurance issuer
offering group or individual health
insurance coverage, makes any material
modification (as defined under section
102 of ERISA, 29 U.S.C. 1022) in any of
the terms of the plan or coverage that
would affect the content of the SBC, that
is not reflected in the most recently
provided SBC, and that occurs other
than in connection with a renewal or
reissuance of coverage, the plan or
issuer must provide notice of the
modification to enrollees (or, in the case
of individual market coverage, an
individual covered a health insurance
policy), not later than 60 days prior to
the date on which such modification
will become effective. The notice of
modification must be provided in a form

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that is consistent with the rules of
paragraph (a)(4) of this section.
(c) Uniform glossary—(1) In general.
A group health plan, and a health
insurance issuer offering group health
insurance coverage, must make
available to participants and
beneficiaries, and a health insurance
issuer offering individual health
insurance coverage must make available
to applicants, policyholders, and
covered dependents, the uniform
glossary described in paragraph (c)(2) of
this section in accordance with the
appearance and format requirements of
paragraphs (c)(3) and (c)(4) of this
section.
(2) Health-coverage-related terms and
medical terms. The uniform glossary
must provide uniform definitions,
specified by the Secretary in guidance,
for the following health-coverage-related
terms and medical terms:
(i) Allowed amount, appeal, balance
billing, co-insurance, complications of
pregnancy, co-payment, deductible,
durable medical equipment, emergency
medical condition, emergency medical
transportation, emergency room care,
emergency services, excluded services,
grievance, habilitation services, health
insurance, home health care, hospice
services, hospitalization, hospital
outpatient care, in-network coinsurance, in-network co-payment,
medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment,
out-of-pocket limit, physician services,
plan, preauthorization, preferred
provider, premium, prescription drug
coverage, prescription drugs, primary
care physician, primary care provider,
provider, reconstructive surgery,
rehabilitation services, skilled nursing
care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary
determines are important to define so
that individuals and employers may
compare and understand the terms of
coverage and medical benefits
(including any exceptions to those
benefits), as specified in guidance.
(3) Appearance. A group health plan,
and a health insurance issuer, must
provide the uniform glossary with the
appearance authorized in guidance,
ensuring that the uniform glossary is
presented in a uniform format and
utilizes terminology understandable by
the average plan enrollee (or, in the case
of individual market coverage, an
average individual covered under a
health insurance policy).
(4) Form and manner. A plan or issuer
must make the uniform glossary
described in this paragraph (c) available
upon request, in either paper or

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electronic form (as requested), within
seven days of the request. (Under the
rules of paragraph (a) of this section, the
form authorized in guidance for the SBC
will disclose to participants,
beneficiaries, and individuals covered
under an individual policy their rights
to request a copy of the uniform
glossary.)
(d) Preemption. For purposes of this
section, the provisions of section 2724
of the PHS Act continue to apply with
respect to preemption of State law. In
addition, with respect to the standards
for providing an SBC required under
paragraph (a) of this section, State laws
that require a health insurance issuer to
provide an SBC that supplies less
information than required under
paragraph (a) of this section are
preempted.
(e) Failure to provide. A health
insurance issuer or a non-Federal
governmental health plan that willfully
fails to provide information required
under this section is subject to a fine of
not more than $1,000 for each such
failure. A failure with respect to each
covered individual constitutes a
separate offense for purposes of this
paragraph (e). HHS will enforce these
provisions in a manner consistent with
45 CFR 150.101 through 150.465.
(f) Applicability date. This section is
applicable beginning March 23, 2012.
See § 147.140(d) of this chapter,
providing that this section applies to
grandfathered health plans.
[FR Doc. 2011–21193 Filed 8–17–11; 11:15 am]
BILLING CODE 4120–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
[CMS–9982–NC]

45 CFR Part 147
Summary of Benefits and Coverage
and Uniform Glossary—Templates,
Instructions, and Related Materials
Under the Public Health Service Act
Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,

AGENCY:

PO 00000

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52475

Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Solicitation of comments.
The Departments of the
Health and Human Services, Labor, and
the Treasury (the Departments) are
simultaneously publishing in the
Federal Register this document and
proposed regulations (2011 proposed
regulations) under the Patient Protection
and Affordable Care Act to implement
the disclosure for group health plans
and health insurance issuers of the
summary of benefits and coverage (SBC)
and the uniform glossary. This
document proposes a template for an
SBC; instructions, sample language, and
a guide for coverage examples
calculations to be used in completing
the template; and a uniform glossary
that would satisfy the disclosure
requirements under section 2715 of the
Public Health Service (PHS) Act.
Comments are invited on these
materials.

SUMMARY:

Comment Dates: Comments are
due on or before October 21, 2011.
ADDRESSES: Written comments may be
submitted to any of the addresses
specified below. Any comment that is
submitted to any Department will be
shared with the other Departments.
Please do not submit duplicates.
All comments will be made available
to the public. Warning: Do not include
any personally identifiable information
(such as name, address, or other contact
information) or confidential business
information that you do not want
publicly disclosed. All comments are
posted on the Internet exactly as
received, and can be retrieved by most
Internet search engines. No deletions,
modifications, or redactions will be
made to the comments received, as they
are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to
the Department of Labor, identified by
RIN 1210–AB52, by one of the following
methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail: E–OHPSCA2715.EBSA
@dol.gov.
• Mail or Hand Delivery: Office of
Health Plan Standards and Compliance
Assistance, Employee Benefits Security
Administration, Room N–5653, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210,
Attention: RIN 1210–AB52.
Comments received by the
Department of Labor will be posted
DATES:

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