8668 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 54 and 602 

[TD 9575] 

RIN 1545–BJ94 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB52 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

[CMS–9982–F] 

45 CFR Part 147 

RIN 0938–AQ73 

Summary of Benefits and Coverage 

and Uniform Glossary 

AGENCIES: 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: Final rule. 

SUMMARY: This document contains final 

regulations regarding 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 under section 

2715 of the Public Health Service Act to 

help plans and individuals better 

understand their health coverage, as 

well as other coverage options. A 

guidance document published 

elsewhere in this issue of the Federal 

Register provides further guidance 

regarding compliance. 

DATES: Effective date. These final 

regulations are effective April 16, 2012. 

Applicability date. The requirements 

to provide an SBC, notice of 

modification, and uniform glossary 

under PHS Act section 2715 and these 

final regulations apply for disclosures to 

participants and beneficiaries who 

enroll or re-enroll in group health 

coverage through an open enrollment 

period (including re-enrollees and late 

enrollees) beginning on the first day of 

the first open enrollment period that 

begins on or after September 23, 2012. 

For disclosures to participants and 

beneficiaries who enroll in group health 

plan coverage other than through an 

open enrollment period (including 

individuals who are newly eligible for 

coverage and special enrollees), the 

requirements under PHS Act section 

2715 and these final regulations apply 

beginning on the first day of the first 

plan year that begins on or after 

September 23, 2012. For disclosures to 

plans, and to individuals and 

dependents in the individual market, 

these requirements are applicable to 

health insurance issuers beginning on 

September 23, 2012. 

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) 492–4222. 

SUPPLEMENTARY INFORMATION: 

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. 

I. Executive Summary 

A. Purpose of the Regulatory Action 

1. Need for Regulatory Action 

Under section 2715 of the Public 

Health Service Act (PHS Act), as added 

by the Patient Protection and Affordable 

Care Act (Affordable Care Act), the 

Departments of Health and Human 

Services, Labor, and the Treasury (the 

Departments) are to develop standards 

for use by group health plans and health 

insurance issuers offering group or 

individual health insurance coverage in 

compiling and providing a summary of 

benefits and coverage (SBC) that 

‘‘accurately describes the benefits and 

coverage under the applicable plan or 

coverage.’’ PHS Act section 2715 also 

calls for the ‘‘development of standards 

for the definitions of terms used in 

health insurance coverage.’’ 

This regulation establishes the 

standards required to be met under PHS 

Act section 2715. Among other things, 

these standards ensure this information 

is presented in clear language and in a 

uniform format that helps consumers to 

better understand their coverage and 

better compare coverage options. The 

current patchwork of non-uniform 

consumer disclosure requirements 

makes shopping for coverage inefficient, 

difficult, and time-consuming, 

particularly in the individual and small 

group market, but also in some large 

employer plans in which workers may 

be confused about the value of their 

health benefits as part of their total 

compensation. As a result of this 

confusion, health insurance issuers and 

employers may face less pressure to 

compete on price, benefits, and quality, 

contributing to inefficiency in the health 

insurance and labor markets. 

The statute is detailed but not selfimplementing, contains ambiguities, 

and specifically requires the 

Departments to develop standards, 

consult with the National Association of 

Insurance Commissioners, and issue 

regulations. Therefore these consumer 

protections cannot be established 

without this regulation. 

2. Legal Authority 

The substantive authority for this 

regulation is generally PHS Act section 

2715, which is incorporated by 

reference into Employee Retirement 

Income Security Act (ERISA) section 

715 and the Internal Revenue Code 

(Code) section 9815. PHS Act section 

2792, ERISA section 734, and Code 

section 9833 also provide rulemaking 

authority. (For a fuller discussion of the 

Departments’ legal authority, see section 

V. of this preamble.) 

B. Summary of the Major Provisions of 

This Regulatory Action 

Paragraph (a) of the final regulations 

implements the general disclosure 

requirement and sets forth the standards 

for who provides an SBC, to whom, and 

when. The regulations outline three 

different scenarios under which an SBC 

will be provided: (1) By a group health 

insurance issuer to a group health plan; 

(2) by a group health insurance issuer 

and a group health plan to participants 

and beneficiaries; and (3) by a health 

insurance issuer to individuals and 

dependents in the individual market. 

For each scenario, an SBC must be 

provided in several different 

circumstances, such as upon application 

for coverage, by the first day of coverage 

(if information in the SBC has changed), 

upon renewal or reissuance, and upon 

request. The final regulations also 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8669 

1The 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. 

2Code 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. 

include special rules to prevent 

unnecessary duplication in the 

provision of an SBC with respect to 

group health coverage and individual 

health insurance coverage. 

The final regulations set forth a list of 

requirements for the SBC that generally 

mirror those set forth in the statute. 

There are a total of 12 required content 

elements under the regulations, 

including uniform standard definitions 

of medical and health coverage terms, 

which will help consumers better 

understand their coverage; a description 

of the coverage including the cost 

sharing requirements such as 

deductibles, coinsurance, and copayments; and information regarding 

any exceptions, reductions, or 

limitations under the coverage. The 

final regulations also require inclusion 

of coverage examples, which illustrate 

benefits provided under the plan or 

coverage for common benefits scenarios. 

In addition, the regulations specify 

requirements related to the appearance 

of the SBC, which generally must be 

presented in a uniform format, cannot 

exceed four double-sided pages in 

length, and must not include print 

smaller than 12-point font. These 

requirements are detailed further in a 

Notice published elsewhere in today’s 

Federal Register providing additional 

guidance related to PHS Act section 

2715 and these final regulations. 

PHS Act section 2715 and the final 

regulations also require that plans and 

issuers provide notice of modification in 

any of the terms of the plan or coverage 

involved 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. 

Finally, the statute directs the 

Departments to develop standards for 

definitions for certain insurance-related 

and medical terms, as well as other 

terms that will help consumers 

understand and compare the terms of 

coverage and the extent of medical 

benefits (including any exceptions and 

limitations). Group health plans and 

health insurance issuers must provide 

the uniform glossary in the appearance 

specified 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. A guidance document 

published elsewhere in today’s Federal 

Register provides further guidance with 

respect to the uniform glossary. 

The requirements to provide an SBC, 

notice of modification, and uniform 

glossary under PHS Act section 2715 

and these final regulations apply for 

disclosures with respect to participants 

and beneficiaries who enroll or re-enroll 

in group health coverage through an 

open enrollment period (including reenrollees and late enrollees), beginning 

on the first day of the first open 

enrollment period that begins on or after 

September 23, 2012. For disclosures to 

participants and beneficiaries who 

enroll in group health plan coverage 

other than through an open enrollment 

period (including individuals who are 

newly eligible for coverage and special 

enrollees), the requirements under PHS 

Act section 2715 and these final 

regulations apply beginning on the first 

day of the first plan year that begins on 

or after September 23, 2012. For 

disclosures to plans, and to individuals 

and dependents in the individual 

market, these requirements apply to 

health insurance issuers beginning on 

September 23, 2012. 

C. Costs and Benefits 

The direct benefits of these final 

regulations come from improved 

information, which will enable 

consumers, both individuals and 

employers, to better understand the 

coverage they have and make better 

coverage decisions, based on 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 

final regulations will also benefit 

consumers by reducing the time they 

spend searching for and compiling 

health plan and coverage information. 

Under the final regulations, group 

health plans and health insurance 

issuers will incur costs to compile and 

provide the summary of benefits and 

coverage and uniform glossary of health 

coverage and medical terms. The 

Departments estimate that the 

annualized cost may be around $73 

million. As is common with regulations 

implementing new policies, there is 

considerable uncertainty arising from 

general data limitations and the degree 

to which economies of scale exist for 

disclosing this information. 

Nonetheless, the Departments believe 

that these final regulations lower overall 

administrative costs from the proposed 

regulations because of several policy 

changes, notably flexibility in the 

instructions for completing the SBC, the 

omission of premium (or cost of 

coverage) information from the SBC, the 

reduction in the number of coverage 

examples required from three to two, 

and provisions allowing greater 

flexibility for electronic disclosure. 

In accordance with Executive Orders 

12866 and 13563, the Departments 

believe that the benefits of this 

regulatory action justify the costs. 

II. Background 

The Patient Protection and Affordable 

Care Act, Pub. L. 111–148, was enacted 

on March 23, 2010; the Health Care and 

Education Reconciliation Act, Pub. L. 

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 

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 

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8670 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

3The 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. In developing its 

recommendations, the NAIC considered the results 

of various consumer testing sponsored by both 

insurance industry and consumer associations. 

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 and 

individuals and provided an opportunity for nonmember feedback. See www.naic.org/ 

committees_b_consumer_information.htm. 

4ERISA 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. 

5See Code section 106(c)(2). 

6See IRS Notice 2002–45, 2002–2 C.B. 93. 

7See Code section 223. 

8See 26 CFR 54.9831–1(c), 29 CFR 2590.732(c), 

45 CFR 146.145(c). 

requirement prevents the application of 

a requirement’’ of provisions added to 

the PHS Act by the Affordable Care Act. 

Accordingly, State laws 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 III.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 

Act. These final regulations are being 

published to implement the disclosure 

requirements under PHS Act section 

2715. As discussed more fully below, a 

document containing further guidance 

for compliance is published elsewhere 

in this issue of the Federal Register. 

III. Overview of the Final 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 offering group or 

individual health insurance coverage in 

compiling and providing a summary of 

benefits and coverage (SBC) that 

‘‘accurately describes the benefits and 

coverage under the applicable plan or 

coverage.’’ PHS Act section 2715 also 

calls for the ‘‘development of standards 

for the definitions of terms used in 

health insurance coverage.’’ 

The statute directs the Departments, 

in developing such standards, to 

‘‘consult with the National Association 

of Insurance Commissioners’’ (referred 

to in this document 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.’’ 3 On July 29, 2011, the 

NAIC provided its final 

recommendations to the Departments 

regarding the SBC. On August 22, 2011, 

the Departments published in the 

Federal Register proposed regulations 

(76 FR 52442) and an accompanying 

document with templates, instructions, 

and related materials (76 FR 52475) for 

implementing the disclosure provisions 

under PHS Act section 2715. The 

proposed regulations and accompanying 

document adhered to the 

recommendations of the NAIC. After 

consideration of all the comments 

received on the proposed regulations 

and accompanying document, the 

Departments are publishing these final 

regulations. In conjunction with these 

final regulations, the Departments are 

also publishing a guidance document 

elsewhere in this issue of the Federal 

Register that contains further guidance 

for compliance, including information 

on how to obtain the SBC template 

(with instructions and sample language 

for completing the template) and the 

uniform glossary. All of these items are 

displayed at www.dol.gov/ebsa/ 

healthreform and www.cciio.cms.gov. 

2. Providing the SBC 

Paragraph (a) of the final regulations 

implements the general disclosure 

requirement and sets forth the standards 

for who provides an SBC, to whom, and 

when. PHS Act section 2715 generally 

requires 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).’’ 4 Accordingly, the final 

regulations 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, the final regulations hold the 

plan administrator of a group health 

plan responsible for providing an SBC. 

Under the final regulations, the SBC 

must be provided in writing and free of 

charge. 

Several commenters argued that large 

group health plans or self-insured group 

health plans should be exempt from the 

requirement to provide the SBC. Many 

of these commenters noted that such 

plans already provide a wealth of useful 

information, including a summary plan 

description and open season materials 

that accurately describe the plan and 

any coverage options. However, the 

statute includes no such exemption for 

large or self-insured plans. Moreover, 

the Departments believe that the SBC’s 

uniform format and appearance 

requirements will allow individuals to 

easily compare coverage options across 

different types of plans and insurance 

products, including those offered 

through Affordable Insurance Exchanges 

(Exchanges) beginning in 2014. 

Several commenters asked whether 

the SBC is required to be provided with 

respect to all group health plans, 

including certain account-type 

arrangements such as health flexible 

spending arrangements (health FSAs) 5, 

health reimbursement arrangements 

(HRAs) 6, and health savings accounts 

(HSAs) 7. An SBC need not be provided 

for plans, policies, or benefit packages 

that constitute excepted benefits. Thus, 

for example, an SBC need not be 

provided for stand-alone dental or 

vision plans or health FSAs if they 

constitute excepted benefits under the 

Departments’ regulations.8 If benefits 

under a health FSA do not constitute 

excepted benefits, the health FSA is a 

group health plan generally subject to 

the SBC requirements. For a health FSA 

that does not meet the criteria for 

excepted benefits and that is integrated 

with other major medical coverage, the 

SBC is prepared for the other major 

medical coverage, and the effects of the 

health FSA can be denoted in the 

appropriate spaces on the SBC for 

deductibles, copayments, coinsurance, 

and benefits otherwise not covered by 

the major medical coverage. A standalone health FSA must satisfy the SBC 

requirements independently. 

An HRA is a group health plan. 

Benefits under an HRA generally do not 

constitute excepted benefits, and thus 

HRAs are generally subject to the SBC 

requirements. A stand-alone HRA 

generally must satisfy the SBC 

requirements (though many of the 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8671 

9ERISA 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 of such 

employers 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. 

10With 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 III.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. 

limitations that apply under traditional 

fee-for-service or network plans do not 

apply under stand-alone HRAs). An 

HRA integrated with other major 

medical coverage need not separately 

satisfy the SBC requirements; the SBC is 

prepared for the other major medical 

coverage, and the effects of employer 

allocations to an account under the HRA 

can be denoted in the appropriate 

spaces on the SBC for deductibles, 

copayments, coinsurance, and benefits 

otherwise not covered by the other 

major medical coverage. 

HSAs generally are not group health 

plans and thus generally are not subject 

to the SBC requirements. Nevertheless, 

an SBC prepared for a high deductible 

health plan associated with an HSA can 

mention the effects of employer 

contributions to HSAs in the 

appropriate spaces on the SBC for 

deductibles, copayments, coinsurance, 

and benefits otherwise not covered by 

the high deductible health plan. 

There are three general scenarios 

under which an SBC will be provided: 

(1) By a group health insurance issuer 

to a group health plan; (2) by a group 

health insurance issuer and a group 

health plan to participants and 

beneficiaries; and (3) by a health 

insurance issuer to individuals and 

dependents in the individual market. In 

general, the proposed regulations 

directed that, in each of these scenarios, 

the SBC be provided when an employer 

or individual is comparing health 

coverage options, including prior to 

purchasing or enrolling in a particular 

plan or policy. 

Some commenters asserted that 

certain timing requirements in the 

proposed regulations could be 

administratively difficult for plans and 

issuers to meet under certain 

conditions, such as when negotiations 

of policy terms are ongoing less than 30 

days before renewal, making the 

proposed timeframe for providing the 

SBC difficult or impossible to achieve. 

In response to public comments, the 

final regulations streamline and 

harmonize the rules for providing the 

SBC, while ensuring that individuals 

and employers have timely and 

complete information under all three 

scenarios in which an SBC might be 

provided. Moreover, in certain 

circumstances, the final regulations 

provide plans and issuers with 

additional time to provide the SBC. For 

example, under the proposed 

regulations, an SBC would have been 

required to be provided as soon as 

practicable following an application for 

health coverage or a request for an SBC, 

but in no event later than seven days 

following the application or request. For 

all three scenarios under which an SBC 

might be provided, the final regulations 

substitute a seven business day period 

for the seven calendar day period in the 

proposed regulations in each place it 

appeared. 

The Departments also received 

comments regarding issuance of an SBC 

at renewal or reissuance of coverage. 

The proposed regulations would have 

required that, if written application 

materials are required for renewal, the 

SBC must be provided no later than the 

date on which the materials are 

distributed. This requirement has been 

retained without change in the final 

regulations. In addition, upon an 

automatic renewal of coverage (that is, 

when written application materials are 

not required for renewal), the proposed 

regulations would have required a new 

SBC to be provided no later than 30 

days prior to the first day of coverage 

under the new plan or policy year. The 

final regulations require that, in general, 

if renewal or reissuance of coverage is 

automatic, the SBC must be provided no 

later than 30 days prior to the first day 

of the new plan or policy year. 

However, with respect to insured 

coverage, in situations in which the SBC 

cannot be provided within this 

timeframe because, for instance, the 

issuer and the purchaser have not yet 

finalized the terms of coverage for the 

new policy year, the final regulations 

provide an exception. Under that 

circumstance, the SBC must be provided 

as soon as practicable, but in no event 

later than seven business days after the 

issuance of the policy, certificate, or 

contract of insurance (for simplicity, 

referred to collectively as a ‘‘policy’’ in 

the remainder of this preamble), or the 

receipt of written confirmation of intent 

to renew, whichever is earlier. The 

regulations provide this flexibility only 

when the terms of coverage are finalized 

in fewer than 30 days in advance of the 

new policy year; otherwise, the SBC 

must be provided upon automatic 

renewal no later than 30 days prior to 

the first day of coverage under the new 

plan or policy year. 

a. Provision of the SBC by an Issuer to 

a Plan 

Paragraph (a)(1)(i) of the final 

regulations requires a health insurance 

issuer offering group health insurance 

coverage to provide an SBC to a group 

health plan (including, for this purpose, 

its sponsor) upon an application by the 

plan for health coverage. The SBC must 

be provided as soon as practicable 

following receipt of the application, but 

in no event later than seven business 

days following receipt of the 

application. If there is any change to the 

information required to be in the SBC 

before the first day of coverage, the 

issuer must update and provide a 

current SBC to the plan no later than the 

first day of coverage. If the information 

is unchanged, the SBC does not need to 

be provided again in connection with 

coverage for that plan year, except upon 

request. As noted later in this preamble, 

the final regulations, in contrast to the 

proposed regulations, do not include 

premium or cost of coverage 

information as a required element of the 

SBC. In many cases, the only change to 

the information the proposed 

regulations required to be in the SBC 

between application for coverage and 

the first day of coverage is the premium 

or cost of coverage information. Because 

these final regulations eliminate the 

requirement to include premium or cost 

of coverage information in the SBC, the 

Departments anticipate that the number 

of circumstances in which issuers will 

have to provide a second SBC will be 

significantly fewer under the final 

regulations than they would have been 

under the proposed regulations. 

b. Provision of the SBC by a Plan or 

Issuer to Participants and Beneficiaries 

Under paragraph (a)(1)(ii) of the final 

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 9

with respect to each benefit package 

offered by the plan or issuer for which 

the participant or beneficiary is 

eligible.10 Some commenters stated that 

SBCs should only be provided to 

participants, not beneficiaries, or that 

the SBC should only be provided to 

beneficiaries upon request. The 

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8672 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

11Regulations regarding special enrollment are 

available at 26 CFR 54.9801–6, 29 CFR 2590.701– 

6, and 45 CFR 146.117. 

statutory language, which refers to 

‘‘applicants’’ and ‘‘enrollees,’’ could be 

interpreted to support either 

interpretation. These final regulations 

retain the requirement that the SBC be 

provided to both participants and 

beneficiaries. However, as described 

below, the final regulations include an 

anti-duplication rule under which a 

single SBC may be provided to a family 

unless any beneficiaries are known to 

reside at a different address. 

Accordingly, separate SBCs need to be 

provided to beneficiaries only in limited 

circumstances. 

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. If there is any change to 

the information required to be in the 

SBC between the application for 

coverage and 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. 

Under the final regulations, the plan 

or issuer must also provide the SBC to 

special enrollees.11 The proposed 

regulations would have required that 

the SBC be provided within seven 

calendar days of a request for special 

enrollment. One commenter stated that 

special enrollees should not be 

distinguished from other enrollees with 

such expedited disclosure, particularly 

since they have already enrolled in 

coverage and are no longer comparing 

coverage options. The final rule 

provides that special enrollees must be 

provided the SBC no later than when a 

summary plan description is required to 

be provided under the timeframe set 

forth in ERISA section 104(b)(1)(A) and 

its implementing regulations, which is 

90 days from enrollment. The revised 

timing requirement related to providing 

an SBC in connection with special 

enrollment is expected to reduce 

administrative costs for providing SBCs 

to these individuals, who have already 

chosen the plan, policy, or benefit 

package in which to enroll. To the 

extent individuals who are eligible for 

special enrollment and are 

contemplating their coverage options 

would like to receive SBCs earlier, they 

may always request an SBC with respect 

to any particular plan, policy, or benefit 

package and the SBC is required to be 

provided as soon as practicable, but in 

no event later than seven business days 

following receipt of the request (as 

discussed more fully below). 

c. Provision of the SBC Upon Request in 

Group Health Coverage 

As discussed earlier in this preamble, 

a health insurance issuer offering group 

health insurance coverage must provide 

the SBC to a group health plan (and a 

plan or issuer must provide the SBC to 

a participant or beneficiary) upon 

request for an SBC or summary 

information about the health coverage, 

as soon as practicable, but in no event 

later than seven business days following 

receipt of the request. The Departments 

received several comments addressing 

the requirement to provide the SBC 

upon request. Many comments were 

supportive of this approach, especially 

with regards to participants and 

beneficiaries needing information about 

their coverage in the middle of a plan 

year after life changes. Other comments 

suggested that providing SBCs to 

employers and individuals who are only 

‘‘shopping’’ for coverage and not yet 

enrolled is unnecessary and will require 

multiple SBCs to be provided as 

employers and individuals go through 

underwriting. 

The final regulations retain the 

requirement that the SBC be provided 

upon request to participants, 

beneficiaries and employers, including 

prior to submitting an application for 

coverage, because the SBC provides 

information that not only helps 

consumers understand their coverage, 

but also helps consumers compare 

coverage options prior to selecting 

coverage. The Departments believe it is 

essential for employers, participants, 

and beneficiaries to have this 

information to help make informed 

coverage decisions and believe that the 

modifications to the SBC template, 

including the removal of premium 

information, adequately addresses the 

concerns that health insurance issuers 

will have to provide multiple SBCs to 

employers and individuals prior to 

underwriting. 

Health insurance issuers offering 

individual market coverage must also 

provide the SBC to individuals upon 

request, to allow consumers reviewing 

coverage options the same ability to 

compare coverage options in the 

individual market, as well in the 

Exchanges and the group markets. 

d. Special Rules to Prevent Unnecessary 

Duplication With Respect to Group 

Health Coverage 

The proposed regulations provided 

three rules to streamline provision of 

the SBC and prevent unnecessary 

duplication with respect to group health 

plan coverage. Paragraph (a)(1)(iii) of 

the final regulations retains these 

special rules, with some modifications. 

The first states that the requirement to 

provide an SBC generally will be 

considered satisfied for all entities if it 

is provided by any entity, so long as all 

timing and content requirements are 

satisfied. The second states that a single 

SBC may be provided to a participant 

and any beneficiaries at the participant’s 

last known address. However, 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. Finally, under the 

special rule providing that SBCs are not 

required to be provided automatically 

upon renewal for benefit packages in 

which the participant or beneficiary is 

not enrolled, a plan or issuer generally 

has up to seven business days (rather 

than seven calendar days, as specified 

in the proposed regulation) to respond 

to a request to provide the SBC with 

respect to another benefit package for 

which the participant or beneficiary is 

eligible. 

Many commenters pointed out the 

potential duplication and confusion that 

can result with carve-out arrangements, 

which is generally when a plan or issuer 

contracts with an administrative service 

provider (such as a pharmacy benefit 

manager or managed behavioral health 

organization) to manage prescribed 

functions such as managed care and 

utilization review. Plans and issuers 

should coordinate with their service 

providers, and with each other, to 

ensure that the SBCs they provide are 

accurate. 

e. Provision of the SBC by an Issuer 

Offering Individual Market Coverage 

Under these final regulations, the 

Secretary of HHS sets forth standards 

applicable to individual health 

insurance coverage about who provides 

an SBC, to whom, and when. The 

provisions of the final regulations for 

individual market coverage parallel the 

group market requirements described 

above, with only those changes 

necessary to reflect the differences 

between the two markets, and the 

provisions of the final regulations are 

intended to more clearly reflect the 

similarity between the two sets of rules. 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8673 

12As noted elsewhere in this preamble, the final 

regulations, in contrast to the proposed regulations, 

do not include premium information as a required 

element of the SBC. Because, in many cases, the 

only change to the information required to be in the 

SBC before the first day of coverage is the premium, 

the Departments anticipate that the number of 

circumstances in which issuers will have to provide 

a second SBC before the first day of coverage will 

significantly decrease under the final regulation. 

13See Code section 36B(c)(2)(C)(i)(II), as added by 

section 1401 of the Affordable Care Act. 

14Providing information in the SBC for 

individuals relating to Exchanges and the premium 

tax credit is addressed in the document containing 

further compliance guidance that is published 

elsewhere in this issue of the Federal Register. 

For example, individuals 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 to an individual 

or dependent upon receiving an 

application for any health insurance 

policy, as soon as practicable following 

receipt of the application, but in no 

event later than seven business days 

following receipt of the application. If 

there is any change in the information 

required to be in the SBC between the 

application for coverage and the first 

day of coverage, the issuer must update 

and provide a current SBC to an 

individual or dependent no later than 

the first day of coverage.12 Additionally, 

an issuer must provide the SBC to any 

individual or dependent upon request 

for an SBC or summary information 

about a health insurance product as 

soon as practicable, but in no event later 

than seven business days following the 

request. Similar to the group market, a 

request for an SBC or summary 

information includes a request made at 

any time, including prior to applying for 

coverage. 

The final regulations retain the 

individual market anti-duplication rule, 

similar to the group health coverage 

anti-duplication rule, 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). In 

that case, as under the proposed 

regulations, a single SBC may generally 

be provided to one address, unless any 

dependents are known to reside at a 

different 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 

mirrored the content elements set forth 

in the statute, with four additional 

elements recommended by the NAIC: (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 self-insured group health 

plans). The proposed regulations 

solicited comments on these additional 

four content elements. In addition, the 

proposed regulations solicited 

comments on whether the SBC should 

include a disclosure informing 

individuals of their right to receive a 

paper copy of the glossary upon request. 

These final regulations retain the first 

two proposed additional content 

elements without change, modify the 

third, and delete the fourth. The final 

regulations retain: (1) The inclusion of 

an Internet address (or other contact 

information) for obtaining a list of the 

network providers, and (2) the inclusion 

of an Internet address (or similar contact 

information) where an individual may 

find more information about the 

prescription drug coverage under the 

plan or coverage. The final regulations 

also retain the requirement of the 

inclusion of an Internet address where 

an individual may review and obtain 

the uniform glossary, with a 

modification. The Departments received 

several comments regarding the 

inclusion of information concerning the 

uniform glossary including a suggestion 

that individuals be informed of their 

right to request a paper copy of the 

uniform glossary. Commenters noted 

that the omission of such a disclosure 

would deny important information to 

some individuals who are most in need 

of this information. After review and 

consideration of the comments, the final 

regulations require information for 

obtaining copies of the uniform 

glossary, which includes an Internet 

address where an individual may 

review the uniform glossary, a contact 

phone number to obtain a paper copy of 

the uniform glossary, and a disclosure 

that paper copies of the uniform 

glossary are available. It is important to 

note that the definitions in the glossary 

are solely for the purpose of these 

regulations; they do not, for example, 

apply to Medicare coverage policy nor 

the Secretary of Health and Human 

Services’ definition of essential health 

benefits. 

The final regulations do not require 

the SBC to include premium or cost of 

coverage information. The Departments 

received numerous comments on this 

issue. Comments supporting the 

inclusion of premium information 

stated that this information was 

essential for consumers to make 

meaningful coverage comparisons, and 

it was necessary for consumers to make 

coverage comparisons and understand 

their total financial exposure, as well as 

useful to encourage competition in the 

markets on both price and value. One 

comment stated that employees also 

need this information to know if the 

coverage offered by an employer meets 

the Affordable Care Act’s affordability 

test,13 which determines the eligibility 

of employees for premium tax credits 

with respect to qualified health plans 

purchased on an Exchange.14 Comments 

opposing this additional content 

requirement stated that this requirement 

would be administratively burdensome 

in the group market, where health 

insurance issuers do not have 

information on employer contributions, 

and would not be able to provide 

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8674 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

15Established pursuant to 45 CFR 159.120 (75 FR 

24470). 

16National 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. 

17PHS 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. 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. 

18 In the Notice providing compliance guidance 

published separately in today’s Federal Register, 

the Departments state that the SBC template (with 

instructions, samples, and a guide for coverage 

example calculations to be used in completing the 

SBC template) does not provide language to comply 

with these requirements because the Notice 

authorizes these documents only with respect to the 

first year of applicability. Information on the 

minimum essential coverage statement and the 

minimum value statement will be provided in 

future guidance. 

19The Departments are making one technical 

change in these final regulations. The proposed 

regulations stated that the underlying benefits 

scenario for a coverage example must be based on 

recognized clinical practice guidelines ‘‘available 

through’’ the National Guideline Clearinghouse 

(NGC), Agency for Healthcare Research and Quality. 

The Departments believe that the proposed 

regulations would have inadvertently excluded 

recognized clinical practice guidelines available 

through other sources, such as the National 

Comprehensive Cancer Network. Accordingly, these 

final regulations provide that a benefits scenario 

must be based on recognized clinical guidelines ‘‘as 

defined by’’ the NGC. Currently, the NGC uses a 

definition set forth by the Institute of Medicine. The 

current definition of clinical practice guidelines 

adopted by NGC is available at http:// 

www.guideline.gov/about/inclusion-criteria.aspx. 

20A summary of the focus group testing done by 

America’s Health Insurance Plans is available at: 

http://www.naic.org/documents/committees_

b_consumer_information_101012_ahip_focus_

group_summary.pdf, a summary of the focus group 

testing done by Consumers Union on the coverage 

examples is available at: http:// 

prescriptionforchange.org/wordpress/wp-content/ 

uploads/2011/08/A_New_Way_of_

Comparing_Health_Insurance.pdf. 

accurate cost of coverage information to 

employees. In addition, some comments 

noted that it would not be possible to 

provide an accurate premium estimate 

prior to medical underwriting. Some 

comments recommended that premium 

information be provided in a separate 

document, for example, a premium 

table. 

After considering all of the comments, 

the final regulations do not require the 

SBC to include premium or cost of 

coverage information. The Departments 

understand that it is administratively 

and logistically complex to convey this 

information to individuals in an SBC in 

divergent circumstances in both the 

individual and group markets, 

including, for example, when premiums 

differ based on family size and when, in 

the group market, employer 

contributions impact cost of coverage. 

The Departments recognize that the 

inclusion of premium information in the 

SBC could result in numerous SBCs 

being required to be provided to 

individuals. However, if premium 

information is not required, only a 

single SBC might be necessary. The 

Departments believe that premium 

information can be more efficiently and 

effectively provided by means other 

than the SBC. For example, in the 

individual market, the Departments note 

that some of this information may be 

available through the Federal health 

care reform Web portal, 

HealthCare.gov,15 to individuals 

shopping for coverage. Furthermore, the 

Departments anticipate that premium 

information for qualified health plans 

will be made widely available through 

Exchanges for coverage effective 

beginning in 2014. 

With respect to the uniform 

definitions required by the statute, the 

Departments proposed to follow the 

NAIC’s recommended two-part 

approach, requiring provision of—(1) a 

uniform glossary, which includes 

definitions of health coverage 

terminology, to be provided in 

connection with the SBC, and (2) a 

‘‘Why this Matters’’ column for the SBC 

template (with instructions for plans 

and issuers to use in completing the 

SBC template).16 The Departments 

retain this approach in the final 

regulations. The guidance document 

published elsewhere in today’s Federal 

Register addresses comments received 

on the SBC and related materials 

(including the uniform glossary) and 

details the changes from the initial 

proposal. 

The statute also directs that the SBC 

include a statement about whether a 

plan or coverage provides minimum 

essential coverage, as defined under 

section 5000A(f) of the Code, (minimum 

essential coverage statement) 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 value 

statement).17 However, this content is 

not relevant until other elements of the 

Affordable Care Act are implemented. 

Therefore, the final regulations require 

the minimum essential coverage and 

minimum value statements to be 

included in SBCs with respect to 

coverage beginning on or after January 

1, 2014.18 Future guidance will address 

the minimum essential coverage and 

minimum value statements. 

The statute also requires that an SBC 

contain a ‘‘coverage facts label.’’ For 

ease of reference, the proposed 

regulations used the term ‘‘coverage 

examples’’ in place of the statutory 

term. The Departments received many 

comments regarding the coverage 

examples. Some comments supported 

the general approach in the proposed 

regulations and indicated that coverage 

examples would be a valuable 

comparison tool for consumers. Other 

comments expressed concerns that the 

coverage examples would cause 

confusion for consumers, as the 

examples do not represent the actual 

treatment plan for any particular 

individual, or might not represent the 

actual costs that an individual might 

incur for a similar cost of treatment. 

Some such comments urged the 

Departments to take a different 

approach to the coverage examples, 

such as providing an actual cost 

calculator. The Departments also 

received comments on the number of 

coverage examples that should be 

required, as well as which benefit 

scenarios should be included in the 

final regulations. Comments varied with 

regards to the number of recommended 

coverage examples, ranging from one to 

more than six. 

These final regulations retain the 

general approach to the coverage 

examples that was proposed.19

Consumer testing performed on behalf 

of the NAIC20 demonstrated that the 

coverage examples facilitated 

individuals’ understanding of the 

benefits and limitations of a plan or 

policy and helped them make more 

informed choices about their options. 

Such testing also showed that 

individuals were able to comprehend 

that the examples were only illustrative. 

Additionally, while some plans provide 

very useful coverage calculators to their 

enrollees to help them make health care 

decisions, they are not uniform across 

all plans and most are not available to 

individuals prior to enrollment, making 

it difficult for individuals and 

employers to make coverage 

comparisons. Nonetheless, as discussed 

in the guidance document issued 

elsewhere in this issue of the Federal 

Register, the Departments are taking a 

phased approach to implementing the 

coverage examples and intend to 

consider additional feedback from 

consumer testing in the future. 

To the extent a plan’s terms that are 

required to be in the SBC template 

cannot reasonably be described in a 

manner consistent with the template 

and instructions, the plan or issuer must 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8675 

21The 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. 

22PHS 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. 

accurately describe the relevant plan 

terms while using its best efforts to do 

so in a manner that is still consistent 

with the instructions and template 

format as reasonably possible. Such 

situations may occur, for example, if a 

plan provides a different structure for 

provider network tiers or drug tiers than 

is contemplated by the template and 

these instructions, if a plan provides 

different benefits based on facility type 

(such as hospital inpatient versus nonhospital inpatient), in a case where the 

effects of a health FSA or an HRA are 

being described, or if a plan provides 

different cost sharing based on 

participation in a wellness program. 

Finally, the Departments solicited 

comments on whether any special rules 

are necessary to accommodate 

expatriate plans and received comments 

related to adjustments needed for 

expatriate plan coverage. Some 

commenters noted that PHS Act section 

2715(d)(3) refers to a health insurance 

issuer ‘‘offering health insurance 

coverage within the United States.’’ 21

Other commenters suggested that 

coverage information that is particularly 

important to expatriates (such as 

medical evacuation, repatriation 

benefits, and country-appropriate care) 

be exempt from the requirements under 

PHS Act section 2715. These final 

regulations include a special provision 

that provides that, in lieu of 

summarizing coverage for items and 

services provided outside the United 

States, a plan or issuer may provide an 

Internet address (or similar contact 

information) for obtaining information 

about benefits and coverage provided 

outside the United States. Also, to the 

extent the plan or policy provides 

coverage available within the United 

States, the plan or issuer is still required 

to provide an SBC in accordance with 

PHS Act section 2715 that accurately 

summarizes benefits and coverage 

available within the United States. 

4. Appearance 

PHS Act section 2715 sets forth 

standards related to the appearance of 

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 final regulations retain the 

interpretation from the proposed 

regulations that the four-page limitation 

is four double-sided pages.22

The proposed regulations requested 

comments regarding the requirement to 

provide the SBC as a stand-alone 

document. Specifically, comments were 

requested about whether the SBC 

should be allowed to be included in a 

summary plan description (SPD) if it is 

intact and prominently displayed and 

the timing requirements for delivery of 

the SBC are met. The Departments 

received many comments in response to 

this request. Some comments opposed 

allowing the SBC to be included 

alongside or within an SPD, noting that 

SPDs tend to be lengthy documents and 

allowing this would be contrary to the 

purpose of requiring a short summary 

document. However, many comments 

supported this approach, indicating that 

permitting this option would reduce 

burdens and costs associated with 

printing and disseminating the SBC 

documents. 

Paragraph (a)(3) of these final 

regulations requires plans and issuers to 

provide the SBC in the form specified 

by the Secretaries in guidance and 

completed in accordance with the 

instructions for completing the SBC that 

are specified by the Secretaries in 

guidance. A guidance document 

published elsewhere in this issue of the 

Federal Register provides such 

guidance. The Notice specifies that 

SBCs provided in connection with 

group health plan coverage may be 

provided either as a stand-alone 

document or in combination with other 

summary materials (for example, an 

SPD), if the SBC information is intact 

and prominently displayed at the 

beginning of the materials (such as 

immediately after the Table of Contents 

in an SPD) and in accordance with the 

timing requirements for providing an 

SBC. For health insurance coverage 

offered in the individual market, the 

SBC must be provided as a stand-alone 

document, but HHS notes that it can be 

included in the same mailing as other 

plan materials. This guidance regarding 

appearance may be modified for years 

after the first year of applicability. 

5. Form 

a. Group Health Plan Coverage 

To facilitate faster and less 

burdensome disclosure of the SBC, and 

to be consistent with PHS Act section 

2715(d)(2), which permits disclosure in 

either paper or electronic form, the 

proposed regulations set forth rules to 

permit greater use of electronic 

transmittal of the SBC. Those proposed 

regulations generally permitted issuers 

to provide the SBC to plans 

electronically (such as an email or 

Internet posting) if certain conditions 

were met, and required plans and 

issuers providing the SBC to 

participants and beneficiaries to comply 

with the Department of Labor’s 

electronic disclosure safe harbor 

requirements at 29 CFR 2520.104b–1(c). 

In all circumstances, the proposed 

regulations permitted plans and issuers 

to provide SBCs in paper form. 

Comments generally supported 

permitting provision of the SBC 

electronically; however, some 

comments also asked for more flexibility 

with regard to electronic provision to 

participants and beneficiaries. These 

comments generally requested the rule 

for provision to participants and 

beneficiaries mirror the rule for 

provision to plans, and suggested this 

change would reduce costs and burdens 

associated with delivery. Other 

comments raised concerns about 

decreased consumer protection if the 

rules for providing an electronic SBC 

are too flexible. Some commenters also 

asked to extend to the group market the 

option available to individual market 

issuers to provide information to 

HealthCare.gov to be in compliance 

with the requirement to provide the SBC 

upon request for information about 

coverage prior to submitting an 

application. 

After taking into account all of the 

comments, these final regulations 

generally retain the approach from the 

proposed regulations with respect to an 

SBC provided electronically by an 

issuer to a plan. For SBCs provided 

electronically by a plan or issuer to 

participants and beneficiaries, these 

final regulations make a distinction 

between a participant or beneficiary 

who is already covered under the group 

health plan, and a participant or 

beneficiary who is eligible for coverage 

but not enrolled in a group health plan. 

This distinction should provide new 

flexibility in some circumstances, while 

also ensuring adequate consumer 

protections where necessary. For 

participants and beneficiaries who are 

already covered under the group health 

plan, these final regulations permit 

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8676 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

23On 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. 

provision of the SBC electronically if 

the requirements of the Department of 

Labor’s regulations at 29 CFR 

2520.104b–1 are met. (Paragraph (c) of 

those regulations includes an electronic 

disclosure safe harbor.23) For 

participants and beneficiaries who are 

eligible for but not enrolled in coverage, 

these final regulations permit the SBC to 

be provided electronically if the format 

is readily accessible and a paper copy is 

provided free of charge upon request. 

Additionally, if the electronic form is an 

Internet posting, the plan or issuer must 

timely advise the individual in paper 

form (such as a postcard) or email that 

the documents are available on the 

Internet, provide the Internet address, 

and notify the individual that the 

documents are available in paper form 

upon request. The Departments note 

that the rules for participants and 

beneficiaries who are eligible for but not 

enrolled in coverage are substantially 

similar to the requirements for an issuer 

providing an electronic SBC to a plan. 

Finally, as in the proposed regulations, 

plans, and participants and beneficiaries 

(both covered, and eligible but not 

enrolled) have the right to receive an 

SBC in paper format, free of charge, 

upon request. 

b. Individual Health Insurance Coverage 

The Departments received several 

comments on the proposed regulations, 

which generally required paper delivery 

of the SBC and set forth certain 

circumstances in which electronic 

disclosure is permissible. Some 

comments recommended the SBC for 

individual market coverage be provided 

in paper form by default, unless the 

individual explicitly elects electronic 

delivery. These comments cautioned 

against assuming individuals have 

regular access to a computer or a 

requisite level of computer literacy 

simply because an individual submits a 

request online. Instead, they argued 

individuals should be able to specify the 

form in which they prefer to receive the 

SBC. 

Other comments recommended 

greater flexibility for electronic delivery 

to reduce the costs of compliance, 

including eliminating the requirement 

to acknowledge receipt of an SBC 

provided through electronic delivery 

methods. These comments urged the 

Departments to adopt broader standards 

that reflect the current state of 

technology. Specifically, they 

recommended extending the electronic 

delivery rules that apply to disclosure 

from the issuer to the plan in paragraph 

(a)(4)(i) of the final regulations, to 

disclosure in the individual market. 

Some comments also suggested that 

plans provide in their enrollment 

materials a notice of the individual’s 

right to receive a paper copy of the SBC 

upon request, and a telephone number 

or other contact information for making 

such request. 

The Departments determined it is 

appropriate to amend the individual 

market standards in the proposed 

regulations related to the form and 

manner of delivery. Rather than 

specifying the circumstances making 

paper or electronic appropriate, these 

final regulations establish the general 

standard that an issuer offering 

individual health insurance coverage 

must provide the SBC in a manner that 

can reasonably be expected to provide 

actual notice regardless of the format. 

These final regulations provide several 

examples of methods of delivery that 

may satisfy this requirement. For 

instance, an issuer may reasonably 

expect an individual or dependent to 

receive actual notice if the issuer 

provides the SBC by email to an 

individual who has agreed to receive the 

SBC (or other electronic disclosures) by 

email from the issuer and who has 

provided an email address for that 

purpose. Or, if the SBC is posted on the 

Internet, an individual may reasonably 

be expected to receive actual notice if 

the issuer timely advises the individual 

in paper form (such as a postcard) that 

the documents are available on the 

Internet and includes the applicable 

Internet address. 

These final regulations substantially 

retain the safeguards for electronic 

disclosure in the proposed regulations. 

Under these final regulations, an issuer 

providing the SBC electronically must 

ensure that the format is readily 

accessible; the SBC is placed in a 

location that is prominent and readily 

accessible; the SBC is provided in an 

electronic form that is consistent with 

the appearance, content, and language 

requirements of these final regulations; 

and that the issuer notifies the 

individual or dependent that the SBC is 

available from the issuer in paper form 

without charge upon request. These 

final regulations remove the 

‘‘acknowledge receipt’’ requirement. 

However, the regulations also require 

that the SBC be provided in an 

electronic form which can be 

electronically retained and printed. 

These final regulations provide 

standards for the form and manner of 

providing the SBC that balance the 

objective of protecting consumers by 

providing accessible information with 

the goal of simplifying information 

collection burdens on issuers. 

Finally, the final regulations clarify 

the provision that would deem health 

insurance issuers in the individual 

market to be in compliance with the 

requirement to provide the SBC to an 

individual requesting information about 

coverage prior to submitting an 

application if the issuer provides the 

information to HealthCare.gov. The final 

regulations clarify that a health 

insurance issuer offering individual 

health insurance coverage must provide 

all of the content required under 

paragraph (a)(2), as specified in 

guidance by the Secretary, to 

HealthCare.gov to be deemed compliant 

with the requirement to provide an SBC 

to an individual requesting summary 

information prior to submitting an 

application for coverage. The final 

regulations further clarify that any SBC 

furnished pursuant to a request for an 

SBC, at the time of application or 

subsequently, would be required to be 

provided in a form and manner 

consistent with the rules described 

above. The Departments determined 

that this provision is consistent with the 

standards for electronic disclosure and 

reduces the burden of providing an SBC 

to individuals shopping for individual 

health insurance coverage. 

The Departments received comments 

in support of this approach which stated 

HealthCare.gov provides useful 

summary information about health 

insurance products that are available to 

both individuals and small employers 

shopping for coverage and 

recommended the final regulations 

similarly extend the ‘‘deemed 

compliance’’ provision to the small 

group market. At this time, the 

Departments are reviewing comments 

requesting that the regulations extend 

the deemed compliance provision to the 

small group market and may issue 

future guidance on this issue. 

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.’’ The 

final regulations retain the approach of 

the proposed regulations and provide 

that, to satisfy the requirement to 

provide the SBC in a culturally and 

linguistically appropriate manner, a 

plan or issuer follows the rules for 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8677 

24See 75 FR 43330 (July 23, 2010), as amended 

by 76 FR 37208 (June 24, 2011). 

25See DOL Information Letter, Washington Star/ 

Washington-Baltimore Newspaper Guild to 

Munford Page Hall, II, Baker & McKenzie (February 

8, 1985). 

26See, e.g., Ward v. Maloney, 386 F.Supp.2d 607, 

612 (M.D.N.C. 2005), which discusses judicial 

interpretations of when an amendment is and is not 

a material modification. 

providing notices with respect to claims 

and appeals in a culturally and 

linguistically appropriate manner under 

PHS Act section 2719, and paragraph (e) 

of its implementing regulations.24 Note, 

nothing in these final 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 origins. To ensure 

non-discrimination 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. While 

the Departments received several 

comments regarding the thresholds set 

forth in the claims and appeals 

regulations, the Departments are not 

making any changes to those standards 

through these final regulations. Any 

changes suggested will be considered as 

part of future rulemakings related to the 

regulations under PHS Act section 2719, 

so that the two rules remain consistent. 

B. Notice of Modification 

PHS Act section 2715(d)(4) directs 

that a group health plan or health 

insurance issuer offering group or 

individual health insurance coverage 

must provide notice of any material 

modification if it makes a material 

modification (as defined under ERISA 

section 102) in any of the terms of the 

plan or coverage involved that is not 

reflected in the most recently provided 

SBC. The comments generally 

supported the standards regarding the 

notice of modification in the proposed 

regulations, which are adopted as final 

regulations without change. 

However, some comments requested 

clarification concerning the requirement 

to provide a notice of modification. For 

example, several comments requested 

clarification on what changes in the 

terms of coverage would rise to the level 

of a material modification. For purposes 

of PHS Act section 2715, the proposed 

and final regulations interpret the 

statutory reference to the SBC to mean 

that only a material modification in 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 would trigger the notice. In 

these circumstances, the notice would 

be required to be provided to enrollees 

(or, in the individual market, covered 

individuals) no later than 60 days prior 

to the date on which such change will 

become effective. 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.25 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) of the Department of 

Labor’ regulations, or more stringent 

requirements for receipt of benefits. As 

a result, it also includes changes or 

modifications that reduce or eliminate 

benefits, increase cost-sharing, or 

impose a new referral requirement.26

(However, changes to the information in 

the SBC resulting from changes in the 

regulatory requirements for an SBC are 

not changes to the plan or policy 

requiring the mid-year provision of a 

notice of modification, unless specified 

in such new requirements.) 

The Departments also received 

comments seeking clarification on when 

a notice of modification must be 

provided. Several comments suggested 

that this notice must also be provided 

for modifications effective for new plan 

or policy years. The final regulations 

require that this notice be provided only 

for changes other than in connection 

with a renewal or reissuance of 

coverage. At renewal, plans and issuers 

must provide an updated SBC in 

accordance with the requirements 

otherwise applicable to SBCs. PHS Act 

section 2715 and paragraph (b) of the 

final regulations specify the timing for 

providing a notice of modification in 

situations other than in connection with 

a renewal or reissuance of coverage. 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, the final regulations require 

a notice of modification to be provided 

60 days in advance of the effective date 

of the change. Comments generally 

supported the flexibility provided in the 

proposed regulations, which permitted 

plans and issuers to either provide an 

updated SBC reflecting the 

modifications or provide a separate 

notice describing the material 

modifications. Plans and issuers 

continue to have this flexibility under 

these final regulations. 

For ERISA-covered group health plans 

subject to PHS Act section 2715, this 

notice is required in advance of the 

timing requirements under the 

Department of Labor’s regulations at 29 

CFR 2520.104b–3 for providing 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), an 

ERISA-covered plan will also satisfy the 

requirement to provide an SMM under 

Part 1 of 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 

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8678 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

27A summary of the focus group testing done by 

America’s Health Insurance Plans is available at: 

http://www.naic.org/documents/committees_b_

consumer_information_101012_ahip_focus_group_

summary.pdf, a summary of the focus group testing 

done by Consumers Union on the SBC template and 

the uniform glossary is available at: http://www.

commonwealthfund.org/Publications/Issue-Briefs/

2011/Feb/Making-Health-Insurance-Cost-SharingClear.aspx. 

develop standards for such other terms 

as will help consumers understand and 

compare the terms of coverage and the 

extent of medical benefits (including 

any exceptions and limitations). 

The final regulations adopt the 

approach of the proposed regulations 

with respect to the uniform glossary. 

This includes the adoption of the NAIC 

recommendation to include the 

following additional terms in the 

uniform glossary: Allowed amount, 

balance billing, complications of 

pregnancy, emergency medical 

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 Departments received a number 

of comments on the proposed uniform 

glossary. Several comments 

recommended that the final glossary 

include additional terms. In general, 

these comments recommended 

additional terms to provide consumers 

with additional information to help 

them better understand their coverage 

and the content of the SBC. These 

comments suggested the glossary 

include additional terms that may 

appear in the SBC and that may cause 

confusion, including specialty drugs, 

mental health services and behavioral 

health, cosmetic surgery, and preventive 

care. In addition, some commenters 

recommended including definitions for 

complex or potentially confusing 

insurance terms, including explanations 

of plan types (such as health 

maintenance organizations or ERISA 

plans) and terms such as actuarial value 

and cost-sharing. Other commenters 

warned against making the uniform 

glossary too long. 

Some commenters recommended 

modifications to certain definitions in 

the uniform glossary. For example, 

several comments recommended 

modification to the term ‘‘medical 

necessity.’’ In developing the final 

uniform glossary, the Departments were 

very cognizant of the consumer testing 

performed by the NAIC with respect to 

the uniform glossary included in the 

proposed regulations and the need to 

convey in concise, easy-to-understand 

language basic medical and coverage 

terms.27 Accordingly, very minor 

changes were made in the final uniform 

glossary, and it continues to include a 

disclaimer that the terms and 

definitions of terms in particular plans 

or policies may differ from those 

contained in the glossary, together with 

information on how to get a copy of the 

actual policy or plan document. 

Some commenters requested 

flexibility to use their own, planspecific or policy-specific terms in the 

glossary. PHS Act section 2715(g) is 

titled ‘‘Development of Standard 

Definitions.’’ The NAIC developed the 

uniform glossary to provide generalized, 

plain-English definitions for common 

coverage and medical terms. The 

document was intended to help 

consumers understand the basics of 

insurance. At the same time, the 

document specifically cautions that it is 

intended to be a general educational 

tool and that individual plan terms may 

differ (and refers consumers to the SBC 

for information on how to get an 

accurate description of their actual plan 

or policy terms). A guidance document 

published elsewhere in this issue of the 

Federal Register announces the 

availability of the final uniform 

glossary. The SBC may be used by plans 

and issuers to convey more accurate 

descriptions, where appropriate. 

Like the proposed regulations, the 

final regulations direct a plan or issuer 

to make the uniform glossary available 

upon request within seven business 

days. A plan or issuer satisfies this 

requirement by complying with the 

content requirement described in 

paragraph (a)(2)(i)(L) of the final 

regulations, which requires that the SBC 

include an Internet address where an 

individual may review and obtain the 

uniform glossary, a contact phone 

number to obtain a paper copy of the 

uniform glossary, and a disclosure that 

paper copies are available upon request. 

The Internet address may be a place 

where the document can be found on 

the plan’s or issuer’s Web site, or 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 within seven business days 

upon request. Group health plans and 

health insurance issuers must provide 

the uniform glossary in the appearance 

specified 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 

section 731 and PHS Act section 2724 

(implemented in 29 CFR 2590.731(a) 

and 45 CFR 146.143(a)). Under these 

provisions, 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 

requirements on health insurance 

issuers 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, the final regulations 

do not prevent States from imposing 

separate, additional disclosure 

requirements on health insurance 

issuers. 

The Departments received several 

comments seeking clarification on the 

preemption of State disclosure 

standards. These comments indicate 

that many States have existing 

disclosure requirements that may be 

duplicative and noted consumers could 

be confused by multiple disclosures. 

These final regulations retain the 

preemption standard as stated in the 

proposed regulations. However, the 

Departments take note of the concerns 

about the potential for consumer 

confusion, and encourage States to take 

steps to harmonize existing State 

requirements with these Federal 

consumer disclosure requirements. The 

Departments will work with States to 

clarify the requirements, potential 

differences, and options. 

In addition, some comments 

requested clarification that States may 

not require the modification of the SBC 

or uniform glossary in their own 

disclosure standards. Comments stated 

that any State modifications to these 

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28See 64 FR 70164 (December 15, 1999). 

documents would defeat the purpose of 

having an SBC template and uniform 

glossary, and one comment requested 

that any State law modifications to these 

documents be preempted, and that any 

additional content required by State law 

be limited to an addendum to the SBC. 

If States require health insurance issuers 

to provide information not contained in 

the SBC or uniform glossary, then they 

may require issuers to provide that 

information only if it is provided in a 

document that is separate from the SBC. 

This separate document can, however, 

be provided at the same time as the 

SBC. 

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 

the new penalty 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 constitutes a 

separate offense with respect to each 

enrollee. This penalty can only be 

imposed by the Secretary. 

Paragraph (e) of the final regulations 

clarifies that States have primary 

enforcement authority over health 

insurance issuers for any violations, 

whether willful or not, using their own 

remedies and 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. 

Paragraph (e) of the HHS final 

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 PHS Act 

section 2715. 

2. Departments of Labor and the 

Treasury 

The Department of Labor enforces the 

requirements of part 7 of ERISA with 

respect to ERISA-covered group health 

plans (generally, plans other than 

church plans or plans maintained by a 

governmental entity) and the 

Department of the Treasury enforces the 

requirements of chapter 100 of the Code 

with respect to group health plans 

maintained by an entity that is not a 

governmental entity. 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 28 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 PHS Act section 2715 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. 

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 section 

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 

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 PHS Act section 2715(f) 

should be imposed on group health 

plans that are in the jurisdiction of both 

Departments. 

F. Applicability 

PHS Act section 2715 provides that 

the requirement for group health plans 

and health insurance issuers to provide 

an SBC applies not later than 24 months 

after the date of enactment of the 

Affordable Care Act (which is March 23, 

2012). PHS Act section 2715 also 

provides that group health plans and 

health insurance issuers shall provide 

the SBC pursuant to standards 

developed by the Departments. The 

proposed regulations proposed an 

applicability date beginning March 23, 

2012. At the same time, the Departments 

invited comments generally, as well as 

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8680 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

29See FAQs About Affordable Care Act 

Implementation Part VII and Mental Health Parity 

Implementation, available at www.dol.gov/ebsa/ 

faqs/faq-aca7.html and cciio.cms.gov/resources/ 

factsheets/aca_implementation_faqs7.html. 

30ERISA 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. 

on a range of discrete issues, including 

the timing of the application of the SBC 

requirement. On November 17, 2011, 

the Departments issued guidance 29

providing that, until final regulations 

are issued and applicable, plans and 

issuers are not required to comply with 

PHS Act section 2715. 

The Departments received numerous 

comments on the applicability date of 

the regulations. Several comments 

stated plans and issuers would need 

time to make changes to their systems 

and workflow processes and could not 

come into compliance by March 23, 

2012 without incurring significant cost 

and administrative challenges. Some 

comments recommend delaying 

applicability for 12 months, noting that 

PHS Act section 2715 contemplates that 

plans and issuers would have 12 

months from the date the Secretary 

develops standards to begin providing 

the SBC, while others recommended 

delaying applicability for 18 to 24 

months to allow sufficient time for 

group health plans to revise and 

coordinate service vendor agreements. 

Other comments stated the requirements 

should apply beginning with a plan’s 

open enrollment period to avoid 

disruption during the plan year. Still 

others recommended phasing in the 

requirements by market segment, 

starting with the individual market 

initially and broadening over time to 

include the group market. These 

commenters emphasized the complexity 

in the group market of coordinating 

between the plan and the issuer (and 

perhaps across multiple issuers and/or 

service providers) and the greater need 

for standardized information in the 

individual market (where there are no 

other Federal requirements to provide 

summary information). Finally, some 

comments expressed support for the 

proposed March 23, 2012 applicability 

date, arguing individuals and employers 

should receive the consumer protections 

of PHS Act section 2715 no later than 

the date intended by statute. 

Following review of the comments 

submitted on this issue and further 

consideration of the administrative and 

systems changes required to implement 

these requirements, the Departments 

have determined it would not be 

feasible to require plans and issuers to 

comply with the standards in the final 

regulations beginning March 23, 2012 

and have delayed the applicability date 

for six months from that which was 

proposed to provide sufficient time for 

plans and issuers to come into 

compliance with these provisions. The 

Departments agree that implementing 

these provisions to coincide with 

employers’ typical open enrollment 

processes in the group market will 

reduce confusion for current enrollees 

who typically make enrollment 

decisions during annual open 

enrollment periods and will avoid 

unnecessary cost to group health plan 

sponsors of producing these materials 

off-cycle. The final regulations provide 

that the requirements to provide an 

SBC, notice of modification, and 

uniform glossary under PHS Act section 

2715 and these final regulations apply 

for disclosures with respect to 

participants and beneficiaries who 

enroll or re-enroll in group health 

coverage through an open enrollment 

period (including re-enrollees and late 

enrollees), beginning on the first day of 

the first open enrollment period that 

begins on or after September 23, 2012. 

For administrative simplicity, with 

respect to disclosures to participants 

and beneficiaries who enroll in group 

health plan coverage other than through 

an open enrollment period (including 

individuals who are newly eligible for 

coverage and special enrollees), PHS 

Act section 2715 and these final 

regulations apply on the first day of the 

first plan year that begins on or after 

September 23, 2012. For disclosures to 

plans, and to individuals and 

dependents in the individual market, 

these requirements are applicable to 

health insurance issuers beginning 

September 23, 2012. 

IV. 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 final 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 final regulation. 

The Departments have updated the 

cost estimates from what was presented 

in the proposed regulations. Since 

publication of the proposed regulations, 

the Departments have continued to 

refine assumptions and estimates to take 

into account policy decisions made in 

the final regulations and to incorporate 

better data. The estimates presented in 

this rule are a result of those efforts and 

represent the Departments’ best 

estimate. Discussion of the public 

comments and the updates to the 

Departments’ estimates are included in 

the relevant sections of the impact 

analysis. While the Departments believe 

the estimates in these final regulations 

represent the Departments’ best 

estimate, the Departments emphasize 

there is considerable uncertainty, as is 

common with regulations implementing 

new policies, and the discussion 

throughout the impact analysis reflects 

this. 

1. Current Regulatory Framework 

Health plan sponsors and issuers do 

not currently uniformly disclose 

information to consumers about benefits 

and coverage in a simple and consistent 

way. ERISA-covered group health plans 

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.30 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 

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31 ‘‘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_10-20061.pdf. 

32M.G.L.A. 176Q § 5 (2010). 

33NY Ins. Law § 3217-a (2010). 

34Office of the Health Insurance Commissioner 

Regulation 5: Standards for Readability of Health 

Insurance Forms, State of Rhode Island and 

Providence Plantations, August 21, 2010. 

35Utah Code § 31A–22–613.5 (2010). 

36 Division of Health Care Administration, Rule 

10.000: Quality Assurance Standards and Consumer 

Protections for Managed care Plans, State of 

Vermont, September 20, 1997. 

37For 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 

section 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 section 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. 

38M. 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. 

39Nicole Maestas et al., ‘‘Price Variation in 

Markets with Homogenous Goods: The Case of 

Medigap,’’ National Bureau of Economic Research 

(January 2009). 

40Cebul, Randall D., James B. Rebitzer, Lowell J. 

Taylor, and Mark E. Votruba. 2011. ‘‘Unhealthy 

Insurance Markets: Search Frictions and the Cost 

and Quality of Health Insurance.’’ American 

Economic Review, 101 (August 2011): 1842–1871. 

41For 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. 

from a 9th grade reading level to nearly 

a college graduate reading level).31

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,32

New York,33 Rhode Island,34 Utah 35

and Vermont 36 have established 

minimum standards for disclosure of 

health insurance information. However, 

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 

requirements only extend to managed 

care organizations, and not to other 

segments of the market.37

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 final regulations are 

necessary to provide standards for a 

summary of benefits and coverage (SBC) 

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 current 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.38 Such search costs arise, in part, 

due to a lack of uniform information 

across the various coverage options, 

particularly in the individual and small 

group markets, but also in large 

employer plans. Although not directly 

comparable, in Medigap, a market with 

standardized benefits, the average perbeneficiary search cost was estimated at 

$72—far higher than in other insurance 

markets, such as auto insurance.39

In addition to individual consumers, 

employers, especially small business 

employers, also face a daunting search 

process when they shop for health 

coverage. A 2011 study of the 

commercial health insurance market 

found that many employers, especially 

small businesses, lack the necessary 

knowledge, sophistication, and 

information to efficiently choose 

appropriate health plans to purchase on 

behalf of their employees. This lack of 

knowledge, sophistication, and 

information requires health insurers to 

spend more money on marketing to 

target small business employers. Health 

insurers then pass the extra marketing 

costs on to employers in the form of 

higher premiums. The study determined 

that in 1997, this inefficiency cost 

consumers in the fully insured market 

$34.4 billion. Employers’ lack of 

knowledge, sophistication, and 

information also produces incentives for 

health insurers to charge different prices 

for identical products to different 

customers, depending upon the 

customer’s negotiating skills. This price 

variability causes 64 percent more 

turnover in plan membership, than 

would otherwise occur. High levels of 

turnover discourage health insurers 

from promoting healthy lifestyles and 

investing in the future health of their 

policyholders.40

Given this difficulty in obtaining 

comparable information across and 

within health insurance markets, 

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 employer-sponsored 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 coverage works. Oftentimes, 

contracts and benefit descriptions are 

written in technical language that 

requires a sophisticated level of literacy 

that 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 2012–2013. 

Estimates are not provided for 

subsequent years, because there will be 

significant changes in the marketplace 

in 2014, including those related to the 

offering of new individual and small 

group plans through the Affordable 

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43See FAQs About Affordable Care Act 

Implementation Part VII and Mental Health Parity 

Implementation, available at www.dol.gov/ebsa/ 

faqs/faq-aca7.html and cciio.cms.gov/resources/

factsheets/aca_implementation_faqs7.html. 

44 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). 

45M. 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. 

Insurance Exchanges, and new market 

reforms outside of the new Exchanges, 

and the wide-ranging scope of these 

changes makes it difficult to project 

results for 2014 and beyond. 

The direct benefits of these final 

regulations come from improved 

information, which will enable 

consumers, both individuals and 

employers, 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 

believe that such improvements will 

result in a more efficient, competitive 

market. These final regulations would 

also benefit consumers by reducing the 

time they spend searching for and 

compiling health plan and coverage 

information. 

Under the final regulations, group 

health plans and health insurance 

issuers would incur costs to compile 

and provide the summary of benefits 

and coverage disclosures and a uniform 

glossary of health coverage and medical 

terms. The Departments estimate that 

the annualized cost may be around $73 

million, although there is considerable 

uncertainty arising from general data 

limitations and the degree to which 

economies of scale exist for disclosing 

this information. The Departments’ 

annualized cost estimates for the final 

regulation are higher than the estimated 

annualized cost of $50 million, which 

was set forth in the proposed 

regulations, because, among other 

things, the Departments now have 

narrowed the cost estimate period from 

2011–2013 to 2012–2013. This change 

reflects the fact that the Departments 

issued guidance on November 17, 2011 

providing that, until final regulations 

are issued and applicable, plans and 

issuers are not required to comply with 

PHS Act section 2715, and the fact that 

these final regulations are being 

published in 2012.43 Nonetheless, these 

final regulations lower overall 

administrative costs compared to the 

proposed regulations because of several 

policy changes, notably the omission of 

premium or cost of coverage 

information from SBCs, the provision of 

only two coverage examples, and 

provisions allowing greater flexibility 

for electronic disclosures prior to 

enrollment in coverage. 

The Departments anticipate that the 

provisions of these final regulations will 

help consumers, including employers, 

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, including applicants, enrollees, and policyholders, to more easily and efficiently understand and 

compare coverage, and as a result, make better choices. 

Costs Estimate Year dollar Discount rate 

percent 

Period 

covered 

Annualized Monetized ($ millions/year) ........................................................... $73 2012 7 2012–2013 

73 2012 3 2012–2013 

4. Benefits 

In developing these final 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 final regulations. Nonetheless, the 

Departments were able to identify 

several benefits, which are discussed 

below. 

These final regulations could generate 

significant economic and social welfare 

benefits to consumers. Under these final 

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 final 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 final regulations would also 

benefit consumers by reducing the time 

they spend searching for and compiling 

health plan and coverage information. 

As stated above, consumers in the 

individual market, as well as consumers 

in some large employer-sponsored 

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.44 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.45 By ensuring 

consumers have access to readily 

available, concise, and understandable 

information about their coverage 

options, these final regulations could 

reduce consumers’ cost of obtaining 

information and may increase health 

insurance purchase rates and 

satisfaction with the plan purchased. 

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 

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46A 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. 

47Shoshanna Sofaer et al., ‘‘Helping Medicare 

Beneficiaries Choose Health Insurance: The Illness 

Episode Approach, 30 The Gerontologist 308–315 

(1990). 

48Michael Schoenbaum et al., ‘‘Health Plan 

Choice and Information about Out-of-Pocket Costs: 

An Experimental Analysis,’’ 38 Inquiry 35–48 

(Spring 2001). 

49See, 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. 

50The 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. 

51U.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). 

information about benefits.46 In 

particular, the use of coverage examples 

called for by these final 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 costsavings.47 48 The Departments therefore 

expect that uniform disclosures under 

these final regulations will 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 final regulations are 

expected to facilitate consumers’ ability 

to understand their coverage. As 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 final 

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. 

5. Costs 

Section 2715 of the PHS Act and these 

final regulations direct group health 

plans and health insurance issuers to 

compile and provide an SBC 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 

associated with these requirements. 

However, there is considerable 

uncertainty arising from general data 

limitations and the degree to which 

economies of scale can be realized to 

reduce costs for issuers and third party 

administrators (TPAs). 

In the proposed regulations, the 

Departments estimated total 

administrative costs to be $25 million in 

2011, $73 million in 2012, and $58 

million in 2013. The Departments now 

estimate that issuers and TPAs will 

incur approximately $90 million in onetime costs and maintenance costs in 

2012, and $55 in maintenance costs in 

2013. These costs and the methodology 

used to estimate them are discussed 

below, and presented in Tables 2–6 

below. 

General Assumptions 

In order to assess the potential 

administrative costs relating to these 

final regulations, the Departments 

consulted with several industry experts, 

including individuals at large health 

insurance issuers and representing a 

TPA association, individuals who 

formerly worked at health insurance 

companies, and insurance market 

researchers, to gain insight into the tasks 

and level of resources required. The 

discussions focused on estimating the 

costs that would be start-up versus 

maintenance, and determining which 

functions or departments of an 

insurance company or TPA would be 

involved in implementing the provision. 

In addition, we reviewed the analyses of 

other Affordable Care Act regulations 

that impose new requirements on health 

insurance issuers and TPAs, to 

determine appropriate work levels and 

categories for this regulation. 

Particularly, we analyzed the Medical 

Loss Ratio (MLR) interim final rule (75 

FR 74918). Based on these discussions, 

the Departments estimate that there will 

be two categories of principal costs 

associated with the standards in these 

final regulations: one-time start-up costs 

and ongoing maintenance costs. The 

one-time start-up costs include costs to 

develop teams to review 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 final standards; to 

produce, review, distribute, and update 

the SBC disclosures; 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 that fully-insured plans will rely 

on health insurance issuers, and selfinsured plans will rely on TPAs, to 

perform these functions. Some 

commenters stated that some employers 

internally prepare plan materials and do 

not rely on TPAs. While the 

Departments acknowledge that some 

plans may internally prepare the SBC 

disclosures, the Departments do not 

have sufficient data to develop separate 

estimates for such plans. Therefore, the 

Departments continue to 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.49 Thus, the Departments 

have used health insurance issuers and 

TPAs as the units of analysis for the 

purposes of estimating administrative 

costs in this regulatory impact analysis. 

As discussed in the MLR interim final 

rule, 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.50 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 

plans.51 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 

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52See, 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. 

53For 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). 

54See December 13, 2011 news release for 

HighRoads Pulse Study, available at http:// 

newsroom.highroads.com/hr-complianceconnection/highroads-study-shows-employers-willnot-eliminate-benefits-coverage-due-to-health-carereform. Among other things, the study’s author 

noted, ‘‘SBCs have not caused a great concern 

among organizations. * * * This is partly a 

reflection of current communications practices— 

many employers are already providing a level of 

communication close to that required by the SBC 

regulations—and partly a reflection of HR 

departments embracing technology. By using 

automation to leverage existing data, they are better 

able to respond to required changes. That will 

enable timely compliance once the new deadline is 

determined.’’ 

55The premium revenue data come from the 2009 

NAIC financial statements, also known as ‘‘Blanks,’’ 

where insurers report information about their 

various lines of business. 

56A 10 percent is a conservative estimate of the 

reduction in administrative burden. A national 

association of insurance companies informed the 

Departments that premium information alone may 

account for 10 percent of compliance costs. Given 

that the omission of premium information from 

SBCs is one of several policy changes in these final 

regulations, we conclude that there could be, at a 

minimum, a 10 percent reduction in administrative 

burden. 

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.52 Based on conversations with a 

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. 

Because the SBC disclosures are 

closely related to disclosures that 

issuers and TPAs provide today as a 

part of their normal operations (for 

example, covered benefits and cost 

sharing), the Departments estimate that 

the incremental costs of compiling and 

providing such readily available 

information in the final, standardized 

format is estimated to be modest.53 The 

regulated community has taken 

exception to this assumption, and it has 

stated in written comments, and 

discussions with the Departments, that 

information will need to be pulled from 

multiple sources. However, an opposite 

conclusion appears to have been 

reached by a November 2011 survey 

related to the regulated community’s 

preparedness for SBCs. Particularly, the 

survey noted that existing 

communications practices and 

technology would allow affected entities 

to be in compliance even by the 

statutory compliance date of March 23, 

2012.54 The results of this survey are 

also consistent with comments 

indicating that timely compliance is 

feasible. 

The per-issuer or per-TPA cost will 

largely be determined by 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 a company operates (that is, 

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 summarizes the estimated 

number of issuers and TPAs. 

TABLE 2—ISSUER AND TPA SIZE

CLASSIFICATION

Small Medium Large 

Issuers ........ 140 230 70 

TPAs ........... 240 390 120 

Staffing Assumptions 

Table 5 below summarizes the 

Departments’ staffing assumptions, 

including the estimated number of 

hours for each task for a small, medium, 

or large issuer/TPA as well as the 

percentage of time that different 

professionals devote to each task. The 

following 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. 

IT Systems and Workflow Process 

Changes 

In the proposed regulations, the 

Departments estimated 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. These final 

regulations incorporate policy changes 

designed to reduce administrative 

burden. The Departments estimate that 

the administrative burden to implement 

IT systems and workflow process 

changes would be reduced, at least, by 

about 10 percent.56 Accordingly, the 

Departments are reducing the 960 hours 

time burden downward, by 10 percent, 

to 864 hours. The Departments continue 

to assume that IT systems and workflow 

process changes would be implemented 

only by IT professionals. Furthermore, 

the Departments continue to assume 

that a medium issuer/TPA would need 

about 75 percent of a large issuer’s/ 

TPA’s time, and a small issuer would 

need about 50 percent of a large 

issuer’s/TPA’s time, to implement IT 

systems and workflow process changes. 

These estimates are based on the 

assumption that medium and smaller 

issuers and TPA’s have fewer products/ 

clients that need to come into 

compliance. 

In the proposed regulations, the 

Departments estimated 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. These final 

regulations incorporate policy changes 

designed to reduce administrative 

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57See the Technical Appendix to the MLR 

interim final rule, available at http://cciio.cms.gov. 

58Although 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. 

59Based on this assumption, the Departments 

make the following estimate. Prior to enrollment in 

a given year, 180,000 individuals would receive 

SBCs from small issuers or TPAs; 3,700,000 

individuals would receive SBCs from medium 

issuers or TPAs; 11,000,000 individuals would 

receive SBCs from large issuers or TPAs. 

60ERISA section 104(b) requires ERISA-covered 

plans to furnish participants and beneficiaries with 

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 or in the 

case of a material reduction in covered services or 

benefits, no later than 60 days after adoption of the 

modification or change. 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 

modifications occur between plan years—not 

during a plan year; therefore, the modifications 

Continued 

burden. The Departments estimate that 

the administrative burden to develop 

teams would be reduced by about 10 

percent. Accordingly, the Departments 

are revising the 160 hours time burden 

downward, by 10 percent, to 144 hours. 

The Departments continue to assume 

teams would be comprised of IT 

professionals (45 percent), benefits/sales 

professionals (50 percent), and attorneys 

(5 percent), based on technical analysis 

presented in the MLR interim final rule. 

The Departments also continue to 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). 

In the proposed regulations, the 

Departments assumed that, in 2013, 

each issuer/TPA would incur a separate 

maintenance cost to maintain IT 

systems and address changes in 

regulatory provisions. The Departments 

assumed the maintenance cost would 

equal 15% of the total one-time burden 

noted above (for example, the 

Departments assumed it will take a large 

issuer 15% of 1008 hours, or 151 hours). 

The Departments further assumed that 

the teams to implement the 

maintenance tasks would be comprised 

of IT professionals (55%), benefits/sales 

professionals (40%), and attorneys (5%). 

The Departments maintain these 

assumptions in these final regulations. 

The Departments continue to assume 

that the one-time and maintenance costs 

to implement IT systems changes and 

address regulatory requirements would 

be split between the costs to produce 

SBCs and the costs to produce the 

coverage examples (CEs). 

Production and Review of SBCs and CEs 

In the proposed regulations, the 

Departments estimated that each issuer/ 

TPA would need 3 hours to produce, 

and 1 hour to review, SBCs (not 

including CEs) for all products. Some 

commenters thought this time burden 

was an underestimate. However, these 

commenters did not provide data that 

could allow the Departments to adjust 

their estimates. Accordingly, in these 

final regulations, the Departments are 

retaining their original estimates. The 

Departments also continue to assume 

that the 3 hours needed to produce 

SBCs would be equally divided between 

IT professionals and benefits/sales 

professionals. The Departments also 

continue to assume that the 1 hour 

needed to review SBCs would be 

equally divided between financial 

managers for benefits/sales 

professionals and attorneys, based on 

previous analyses related to the MLR 

regulation. 

In the proposed regulations, the 

Departments estimated it would take 

each issuer/TPA about 90 hours to 

produce, and about 30 hours to review, 

CEs related to three benefits scenarios 

for all applicable products, based on the 

MLR regulation. However, under the 

guidance document published 

elsewhere in this issue of the Federal 

Register, issuers and TPAs will need to 

produce a CE related to only two 

benefits scenarios in 2012 and 2013. 

Accordingly, in these final regulations, 

the Departments are adjusting the time 

burden downward by one-third. The 

Departments now estimate that each 

issuer/TPA would need about 60 hours 

to produce, and about 20 hours to 

review, two CEs for all products. The 

Departments continue to assume that 

the 60 hours to produce the two CEs 

would be equally divided between IT 

professionals and benefits/sales 

professionals. The Departments also 

continue to assume that the 20 hours to 

review the two CEs would be equally 

divided between financial managers and 

attorneys. 

For each individual who receives the 

SBC 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 2012 dollars) for 

each staff category based on Bureau of 

Labor Statistics (BLS) data. The 

Departments use mean hourly wage 

estimates from the BLS May 2010 

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– 

1121), 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 2012 through 2013 and adjust 

the hourly wage rate to include a 33 

percent fringe benefit estimate for 

private sector employees.57

Distribution Assumptions 

The Departments make the following 

assumptions regarding the distribution 

of the SBC disclosures (including 

CEs).58 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 

percent of the number of enrollees at 

any point during the course of a year.59

• In 2012 and 2013, respectively, 

about 2.5 percent and 5 percent of 

covered individuals who receive a paper 

SBC would receive a paper glossary 

from issuers and TPAs. The 

Departments assume that the burden 

and cost of providing paper glossaries 

would be proportional to the burden 

and cost of providing papers SBCs, 

excluding coverage examples. The 

Departments also 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. These 

assumptions, presented here in these 

final regulations, have not changed from 

the proposed regulations. 

• In 2013, about 2 percent of covered 

individuals would receive a notice of 

modifications.60 Further, the burden 

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would be required to be disclosed in a SBC that is 

distributed upon renewal of coverage. The 

Departments, thus, expect that only two percent of 

plans will need to issue a notice of modification in 

the middle of a plan year, because mid-year changes 

that would result in an update to the SBC are very 

rare, based on the Department of Labor’s experience 

with ERISA plans. For purposes of simplification, 

the Departments extend this assumption to the 

individual market as well. 

61See the ERISA e-disclosure rule at 29 CFR 

2520.104b–1. 

62U.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. 

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. 

• In the proposed regulations, the 

Departments estimated that electronic 

distribution would 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 was based on the 

methodology used to analyze the cost 

burden for the Department of Labor’s 

claims procedure regulation (OMB 

Control Number 1210–0053).61

• In these final regulations, the 

Departments are revising upward their 

estimate of electronic distribution in the 

group market to 50 percent for preenrollment disclosures. This upward 

revision is justified, because, for 

participants and beneficiaries who are 

eligible but not enrolled for coverage, 

these final regulations permit the SBC to 

be provided electronically if the format 

is readily accessible and a paper copy is 

provided free of charge upon request. 

• The estimate for the group market 

remains the same for post-enrollment 

disclosures. The estimate for the 

individual market also remains the 

same, and is based on statistics set forth 

by the National Telecommunications 

and Information Administration, which 

indicate that 30 percent of Americans 

do not use the Internet.62

• SBC disclosures would be 

distributed with usual marketing and 

enrollment materials, thus, costs to mail 

the documents will be negligible. 

However, paper glossaries and notices 

of modifications would require mailing 

and supply costs as follows: $0.45 

postage cost per mailing and $0.05 

supply cost per mailing. The postage 

costs have increased by $0.01 from the 

$0.44, as set forth in the proposed 

regulations, to reflect new first-class 

postage rates effective January 22, 2012. 

• Printing costs $0.03 per side of a 

page. The Departments estimate that it 

would cost $0.18 to print a complete 

SBC (which is six sides of a page based 

on the length of the NAIC sample 

completed SBC) and $0.12 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 time 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 with the final disclosure 

requirements of PHS Act section 2715. 

Tables 3–4 contain cost estimates for 

2012 and 2013, derived from the labor 

hours presented in Table 5 and the 

hourly rate estimates presented in Table 

6, 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—2012 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2012 DOLLARS

Number of affected entities Hour burden Equivalent 

cost 

Cost burden 

(non-labor) 

Number of 

disclosures 

SBC Requirements—Issuers ............................................... 440 570,000 $21,000,000 $2,700,000 570,000 

SBC Requirements—TPAs .................................................. 750 760,000 30,000,000 3,600,000 60,000 

Coverage Example Requirements—Issuers ........................ 440 193,000 10,500,000 1,400,000 193,000 

Coverage Example Requirements—TPAs .......................... 750 330,000 17,900,000 1,800,000 330,000 

Glossary Requests—Issuers ............................................... 440 10,000 310,000 350,000 10,000 

Glossary Requests—TPAs .................................................. 750 12,000 380,000 460,000 12,000 

Subtotal ......................................................................... ........................ 1,900,000 80,000,000 10,000,000 1,900,000 

Total 2012 Costs ................................................... ........................ ........................ 90,000,000 ........................ ........................

TABLE 4—2013 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2012 DOLLARS

Number of affected entities Hour burden Equivalent 

cost 

Cost burden 

(non-labor) 

Number of 

disclosures 

SBC Requirements—Issuers ............................................... 440 430,000 $14,000,000 $2,700,000 41,000,000 

SBC Requirements—TPAs .................................................. 750 540,000 18,000,000 3,600,000 49,000,000 

Coverage Example Requirements—Issuers ........................ 440 59,000 3,300,000 1,400,000 41,000,000 

Coverage Example Requirements—TPAs .......................... 750 100,000 5,600,000 1,800,000 49,000,000 

Notice of Material Modifications—Issuers ........................... 440 8,900 290,000 310,000 820,000 

Notice of Material Modifications—TPAs .............................. 750 11,000 380,000 400,000 990,000 

Glossary Requests—Issuers ............................................... 440 20,000 630,000 710,000 1,100,000 

Glossary Requests—TPAs .................................................. 750 25,000 760,000 920,000 1,500,000 

Subtotal ......................................................................... ........................ 1,200,000 43,000,000 12,000,000 94,000,000 

Total 2013 Costs ................................................... ........................ ........................ 55,000,000 ........................ ........................

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TABLE 5—ESTIMATED STAFFING HOURS FOR SMALL, MEDIUM, AND LARGE ISSUERS AND TPAS

Staffing hour assumptions Percent of 

hours by task 

Hours 

Small 

issuer/TPA 

Medium 

issuer/TPA 

Large 

issuer/TPA 

IT Development and Workflow Process Change: 

One-Time Develop Teams/Analyze Requirements (IT, underwriting/ 

sales) ............................................................................................... ........................ 72 108 144 

IT Professionals Benefits/Sales .......................................................... 45 32 49 65 

Professionals ...................................................................................... 50 36 54 72 

Attorneys ............................................................................................. 5 4 5 7 

Implementing Systems Changes (IT and workflow) ........................... ........................ 432 648 864 

IT Professionals .................................................................................. 100 432 648 864 

Maintenance: 

Updating to Address Changes in Requirements ................................ ........................ 76 113 151 

IT Professionals .................................................................................. 55 42 62 83 

Benefits/Sales Professionals .............................................................. 40 30 45 60 

Attorneys ............................................................................................. 5 4 6 8 

SBC Requirement (maintenance): 

Producing SBCs ................................................................................. ........................ 3 3 3 

IT Professionals .................................................................................. 50 1 .5 1 .5 1 .5 

Benefits/Sales Professionals .............................................................. 50 1 .5 1 .5 1 .5 

Internal Review of SBCs .................................................................... ........................ 1 1 1 

Financial Managers—Benefits/Sales Professionals ........................... 50 0 .5 0 .5 0 .5 

Attorneys ............................................................................................. 50 0 .5 0 .5 0 .5 

Producing and Distributing Paper Version of SBCs (Group Markets): 

Clerical Staff ....................................................................................... 100 0 .02 0 .02 0 .02 

Producing and Distributing Paper Version of SBCs (Individual Market): 

Clerical Staff ....................................................................................... 100 0 .03 0 .03 0 .03 

CE Requirement (maintenance): 

Producing CEs .................................................................................... ........................ 60 60 60 

IT Professionals .................................................................................. 50 30 30 30 

Benefits/Sales Professionals .............................................................. 50 30 30 30 

Internal Review of CEs ....................................................................... ........................ 20 20 20 

Financial Managers—Benefits/Sales Professionals ........................... 50 10 10 10 

Attorneys ............................................................................................. 50 10 10 10 

TABLE 6—ESTIMATED LOADED HOURLY WAGES FOR STAFF CATEGORIES

Staff category BLS Code 

Loaded 

hourly wage 

(2012 dollars) 

IT Professionals ........................................ Computer Systems Analysts (Occupation Code 15–1121) ......................................... $54.52 

Financial Professionals—Benefits/Sales .. Insurance Underwriters (Occupation Code 13–2053) ................................................. 43.76 

Financial Manager .................................... Financial Managers (Occupation Code 11–3031) ....................................................... 78.50 

Attorneys ................................................... Lawyers (Occupation Code 23–1011) ......................................................................... 86.86 

Clerical Staff ............................................. Executive Secretaries and Administrative Assistants (Occupation Code 43–6011) ... 30.78 

The Departments received many 

comments stating that the preliminary 

cost analysis underestimated the onetime start-up costs as well as 

maintenance costs. For example, one 

commenter did a survey of its members 

(hereinafter ‘‘regulated community 

survey’’), wherein 36 member 

companies responded to questions 

regarding implementation and 

maintenance costs. The commenter 

extrapolated the survey results to all 

enrollees with coverage in the United 

States. Accordingly, the commenter 

projected that one-time implementation 

costs would be $188 million and 

maintenance costs would be $194 

million per year. The commenter stated 

that a significant cost driver was the 

March 23, 2012 deadline to switch from 

current benefit descriptions to the new 

uniform SBCs. Accordingly, the 

commenter estimated that there could 

be a savings of 23 percent with an 18- 

month extension of the implementation 

timeline. The commenter also stated 

that additional factors affecting costs 

were, among other things, the proposed 

regulations’ requirement to provide 

premium information; the number and 

complexity of coverage examples; the 

renewal process and timeframe to 

provide SBCs; the number of variations 

of SBCs to be delivered to each 

applicant or enrollee; paper delivery of 

SBCs to most group enrollees; and 

insufficient flexibility in the SBC 

template. As discussed elsewhere in this 

preamble, the Departments have taken 

steps to ease administrative burden 

related to most of these factors, and 

therefore believe that these estimates do 

not reflect the policies in the final rule. 

Because the regulated community 

survey, as well other commenters’ cost 

estimates, did not provide specific, 

detailed cost information, it is difficult 

for the Department to acquire more than 

a general understanding of the 

differences between the Departments’ 

cost estimates and the commenters’ cost 

estimates. Accordingly, the Departments 

continue to believe that there is 

considerable uncertainty arising from 

general data limitations and the degree 

to which economies of scale are 

achievable. 

Even if the Departments were to 

utilize the regulated community survey, 

or other commenters’ cost estimates, it 

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would be necessary for the Departments 

to discount those projected costs to 

account for policy changes in these final 

regulations. Particularly, these final 

regulations now omit premium or cost 

of coverage information from SBCs, 

provide for only two coverage examples, 

and allow greater flexibility for 

electronic disclosures prior to 

enrollment in coverage. 

6. Regulatory Alternatives 

Several provisions in these final 

regulations involved policy choices. A 

first policy choice involved the 

applicability date of these final 

regulations. The Departments received 

many comments indicating that the 

proposed March 23, 2012 applicability 

date was not practical for compliance. 

Accordingly, in these final regulations, 

the Departments are delaying the 

applicability of these provisions by six 

months to provide plans and issuers 

additional time to comply. As discussed 

elsewhere in this preamble, for 

disclosures to plans, and to individuals 

and dependents in the individual 

market, these final regulations apply to 

health insurance issuers beginning 

September 23, 2012. Similarly, for the 

group market, for disclosures with 

respect to participants and beneficiaries 

who enroll or re-enroll through an open 

enrollment period (including reenrollees and late enrollees), these final 

regulations apply beginning on the first 

day of the first open enrollment period 

that begins on or after September 23, 

2012. For disclosures with respect to 

participants and beneficiaries who 

enroll other than through an open 

enrollment period (including 

individuals who are newly eligible for 

coverage and special enrollees), these 

final regulations apply on the first day 

of the first plan year that begins on or 

after September 23, 2012. This approach 

to implementation should lessen 

administrative burden on the regulated 

community. 

A second policy choice involved 

whether to include premium or cost of 

coverage information in the SBC. The 

Departments received many comments 

that expressed concerns about the 

complexity of conveying such 

information in both the individual and 

group markets. As noted above in the 

preamble to these final regulations, the 

Departments believe that premium 

information can be more efficiently and 

effectively provided in documentation 

other than the SBC. Therefore, the 

Departments are not requiring plans and 

issuers to include premium or cost of 

coverage information in the SBC. 

Accordingly, this policy choice should 

also lessen administrative burden on the 

regulated community. 

A third policy choice involved the 

number of coverage examples that plans 

issuers must provide in the SBC. The 

Departments received a number of 

comments about the potential cost and 

burden associated with providing 

coverage examples. To address these 

concerns, the guidance document 

published elsewhere in this issue of the 

Federal Register clarifies that for the 

first year of applicability, the SBC will 

include only two coverage examples— 

having a baby (normal delivery) and 

routine maintenance of well-controlled 

type 2 diabetes. Additional coverage 

examples will be added in later years. 

This policy choice should also lessen 

administrative burden on the regulated 

community. 

A fourth policy choice involved 

determining how to minimize the 

burden of providing the SBC to 

individuals 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, these final 

regulations provide that if individual 

health insurance issuers provide the 

information required by these final 

regulations and as specified in guidance 

published by the Secretary to the HHS 

Secretary’s Web portal (HealthCare.gov), 

as established by 45 CFR 159.120, then 

they will be deemed to have satisfied 

the requirement to provide an SBC to 

individuals who request summary 

information about coverage prior to 

submitting an application. The 

Departments determined this approach 

promotes regulatory efficiency, 

minimizing the administrative burden 

on health insurance issuers without 

significantly lessening the protections 

under PHS Act section 2715. 

A fifth policy choice related to 

electronic distribution of SBCs. The 

Departments received comments about 

the electronic transmission of SBCs to 

participants and beneficiaries in the 

group market. Specifically, some 

comments requested that plans and 

issuers be permitted to provide SBCs to 

participants and beneficiaries in a 

manner other than those set forth by the 

Department of Labor’s electronic 

disclosure safe harbor requirements at 

29 CFR 2520.104b-1(c). These final 

regulations retain the proposed 

requirements, but make a distinction 

between a participant or beneficiary 

who is already covered under the group 

health plan, and a participant or 

beneficiary who is eligible for coverage 

but not enrolled in a group health plan. 

This distinction should provide new 

flexibility in some circumstances, while 

also ensuring adequate consumer 

protections where necessary, and will 

help reduce the burden of providing the 

SBC to participants and beneficiaries 

prior to enrollment. 

A sixth policy 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 these final regulations, 

a single SBC may be provided to a 

family unless any individuals are 

known to reside at a different address. 

Separate SBCs will therefore need to be 

provided only in limited circumstances. 

A seventh policy choice related to 

how many SBCs a participant or 

beneficiary would automatically receive 

from a group health plan at renewal. 

The final 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. 

An eighth policy choice related to the 

interpretation of the PHS Act section 

2715(d)(4), which requires notice of any 

material modification in any of the 

terms of the plan or coverage 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 final regulations interpret 

this provision as requiring notice only 

for a material modification 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 renewal or reissuance 

of coverage (that is, a mid-plan or 

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policy-year change). This approach is 

consistent with the language of PHS Act 

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 final 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 that HHS prepared for the final 

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 

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 

$33,000 and $10,000 per issuer/TPA in 

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 final 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 final regulations will 

not have a significant economic impact 

on a substantial number of small 

entities, and that a regulatory flexibility 

analysis is not required. 

C. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury it has been determined that 

this Treasury decision 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 final regulations. It is hereby 

certified that the collections of 

information contained in this Treasury 

decision 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 final regulations requires 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 final 

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, the notice 

of proposed rulemaking preceding these 

regulations was 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 final 

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 final 

regulations include no mandates on 

State, local, or Tribal governments. 

These final regulations include 

directions to produce standardized 

consumer 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 conclude that these costs 

will not exceed the $136 million 

threshold. Thus, we conclude that these 

final 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 final 

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 

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8690 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

63The 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 percent of 

the TPAs (638). While the group health plans could 

prepare their own SBCs, the Departments assume 

that SBCs would be prepared by service providers, 

i.e., issuers and TPAs. 

64The premium revenue data come from the 2009 

NAIC financial statements, also known as ‘‘Blanks,’’ 

where insurers report information about their 

various lines of business. 

65For the purposes of these and other estimates 

in this section IV.E, the Departments again use the 

assumptions outlined above in section IV.A.5. 

‘‘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.’’ For disclosures to plans, and 

to individuals and dependents in the 

individual market, these final 

regulations apply to health insurance 

issuers beginning September 23, 2012. 

Similarly, for the group market, for 

disclosures with respect to participants 

and beneficiaries who enroll or re-enroll 

through an open enrollment period 

(including re-enrollees and late 

enrollees), these final regulations apply 

beginning on the first day of the first 

open enrollment period that begins on 

or after September 23, 2012. For 

disclosures with respect to participants 

and beneficiaries who enroll other than 

through an open enrollment period 

(including individuals who are newly 

eligible for coverage and special 

enrollees), these final regulations apply 

on the first day of the first plan year that 

begins on or after September 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. 

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. Email: 

ebsa.opr@dol.gov. 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 2012–2013. 

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).63

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.64 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. 

2012 Burden Estimate 

In 2012, the Departments estimate a 

one-time administrative burden of about 

620,000 hours with an equivalent cost of 

about $34,000,000 across the industry to 

prepare for the provisions of these final 

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 88,000 burden hours 

with an equivalent cost of about 

$4,500,000. The Departments calculate 

these estimates as follows: 65

TASK 1—ANALYZE CURRENT WORKFLOW AND NEW RULES

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 32 $1,800 49 $2,600 65 $3,500 

Benefits/Sales Professionals ................... 43.76 36 1,600 54 2,400 72 3,200 

Attorneys .................................................. 86.86 4 310 5 500 7 630 

Total per issuer/TPA ......................... .................... 72 3,700 108 5,500 144 7,300 

Total for all issuers/TPAs .......... .................... 20,000 1,000,000 48,000 2,500,000 20,000 1,000,000 

With respect to task (2), the 

Departments estimate about 530,000 

burden hours with an equivalent cost of 

about $29,000,000. The Departments 

calculate these estimates as follows: 

TASK 2—IT CHANGES

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 432 $24,000 648 $35,000 864 $47,000 

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TASK 2—IT CHANGES—Continued 

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

Total per issuer/TPA ......................... .................... 432 24,000 648 35,000 864 47,000 

Total for all issuers/TPAs .......... .................... 120,000 6,600,000 290,000 16,000,000 120,000 6,400,000 

In addition to the one-time 

administrative costs mentioned above, 

the Departments assume that plans and 

issuers will incur additional 

administrative burden. With regard to 

this administrative burden, the 

estimated 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 SBCs. 

• The Departments assume 50 percent 

of the total number of SBCs would be 

sent electronically prior to enrollment, 

and 38 percent would be sent 

electronically after enrollment, in the 

small and large group markets. 

Accordingly, the Departments estimate 

that about 31,000,000 SBCs would be 

electronically distributed, and about 

46,000,000 SBCs would be distributed 

in paper form. The Departments assume 

there are costs only for paper 

disclosures, but no costs for electronic 

disclosures. 

Task 3: SBCs—The estimated hour 

burden for preparing the SBCs is about 

780,000 hours with an equivalent cost of 

about $24,000,000, and a cost burden of 

about $5,500,000. The Departments 

calculate these estimates as follows: 

TASK 3: EQUIVALENT COSTS FOR PRODUCING SBCS

[Except coverage examples] 

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 1.5 $82 1.5 $82 1.5 $82 

Benefits/Sales Professionals ................... 43.76 1.5 66 1.5 66 1.5 66 

Financial Managers .................................. 78.50 0.5 39 0.5 39 0.5 39 

Attorneys .................................................. 86.86 0.5 43 0.5 43 0.5 43 

Total per issuer/TPA ......................... .................... 4 230 4 230 4 230 

Total for all issuers/TPAs ................. .................... 1,100 63,000 1,800 100,000 500 32,000 

TASK 3: EQUIVALENT COSTS FOR DISTRIBUTING SBCS

Hourly wage 

rate 

Hours per 

SBC 

Total number 

of SBCs Total hours Total equivalent cost 

Clerical staff ......................................................................... $30.78 0.017 46,000,000 780,000 $24,000,000 

TASK 3: COST BURDEN FOR PRINTING SBCS

Cost per SBCs Total number 

of SBCs 

Total cost 

burden 

Printing Costs .............................................................................................................................. $0.12 46,000,000 $5,500,000 

Task 4: Two Coverage Examples—The 

estimated hour burden for producing 

and printing coverage examples is about 

69,000 hours with an equivalent cost of 

about $4 million, and a cost burden of 

about $2,800,000. The Departments 

calculate these estimates as follows: 

TASK 4: EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 30 $1,640 30 $1,640 30 $1,640 

Benefits/Sales Professionals ................... 43.76 30 1,310 30 1,310 30 1,310 

Financial Managers .................................. 78.50 10 780 10 780 10 780 

Attorneys .................................................. 86.86 10 870 10 870 10 870 

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TASK 4: EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES—Continued 

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

Total per issuer/TPA ......................... .................... 80 4,600 80 4,600 80 4,600 

Total for all issuers/TPAs ................. .................... 21,900 1,260,000 36,000 2,100,000 11,000 630,000 

TASK 4: COST BURDEN FOR PRINTING COVERAGE EXAMPLES

Printing cost 

per CE set 

Total CE sets 

printed 

Total cost 

burden 

Printing Costs .............................................................................................................................. $0.06 46,000,000 $2,800,000 

Task 5: Glossary Requests—The 

Departments assume that, in 2012, 

issuers and TPAs will begin responding 

to glossary requests from covered 

individuals, and that 2.5 percent of 

covered individuals, who receive paper 

SBCs, will request glossaries in paper 

form. The Departments estimate that the 

hour and cost burden of providing the 

notices to be 2.5 percent of the hour and 

cost burden of distributing paper SBCs, 

plus an additional cost burden of $0.50 

for each glossary (including $0.45 for 

first-class postage and $0.05 for supply 

costs). Accordingly, in 2012, the 

Departments estimate an hour burden of 

about 24,000 hours with an equivalent 

cost of about $740,000 and a cost 

burden of about $740,000 associated 

with about 1,200,000 glossary requests. 

The total 2012 burden estimate is 

about 1,500,000 hours with an 

equivalent cost of about $63,000,000 

and cost burden of about $9,000,000. 

2013 Burden Estimate 

Task 1: SBCs—The number of 

disclosures is assumed to remain 

constant at about 77,000,000. 

Accordingly, in 2013, the Departments 

again estimate a burden of about 

780,000 hours with an equivalent cost of 

about $5,500,000 and a cost burden of 

about $24,000,000 for preparing and 

distributing SBCs. 

Task 2: Two Coverage Examples—The 

Departments again estimate about 

69,000 hours with an equivalent cost of 

about $4,000,000 and a cost burden of 

about $2,800,000 for producing and 

printing 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 two percent of covered 

individuals would receive such notice. 

The Departments estimate that the hour 

and cost burden of providing the notices 

to be two percent of the combined hour 

and cost burden of providing the SBCs 

including the coverage examples, plus 

an additional cost burden of $0.50 for 

each paper notice (including $0.45 for 

first-class postage and $0.05 for supply 

costs). Accordingly, in 2013, the 

Departments estimate an hour burden of 

about 17,000 hours with an equivalent 

cost of $570,000 and a cost burden of 

about $630,000 associated with 

preparing and distributing about 

1,500,000 notices of modification. 

Task 4: Glossary Requests—The 

Departments assume that, in 2013, 

issuers and TPAs will again respond to 

glossary requests from covered 

individuals, and that five percent of 

covered individuals, who receive paper 

SBCs, will request glossaries in paper 

form. The Departments estimate that the 

burden and cost of providing the 

glossaries to be five percent of the hour 

and cost burden of distributing paper 

SBCs, plus an additional cost burden for 

$0.50 for each glossary (including $0.45 

for first-class postage and $0.05 for 

supply costs). Accordingly, in 2013, the 

Departments estimate an hour burden of 

about 39,000 hours with an equivalent 

cost of about $1,200,000 and a cost 

burden of about $1,400,000 associated 

with 2,300,000 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 percent of 

the one-time administrative burden. 

Accordingly, the estimated hour burden 

is about 93,000 hours, with an 

equivalent cost of about $4,800,000. The 

Departments calculate these estimates as 

follows: 

Hourly wage 

rate 

Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 42 $2,300 62 $3,400 83 $4,500 

Benefits/Sales Professionals ................... 43.76 30 1,300 45 2,000 60 2,600 

Attorneys .................................................. 86.86 4 350 6 520 8 690 

Total per issuer/TPA ......................... .................... 76 4,000 113 5,900 151 7,800 

Total for all issuers/TPAs ................. .................... 21,000 1,100,000 51,000 2,600,000 21,000 1,100,000 

The total 2013 burden estimate is 

about 1,000,000 hours with an 

equivalent cost of nearly $35,000,000 

and a cost burden of $10,000,000. 

Estimates are not provided for 

subsequent years, because there will be 

significant changes in the marketplace 

in 2014, including those related to the 

offering of new individual and small 

group plans through the Affordable 

Insurance Exchanges, and new market 

reforms outside of the new Exchanges, 

and the wide-ranging scope of these 

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66The 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 

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, 

the Department assumes that SBCs would be 

prepared by service providers, i.e., issuers and 

TPAs. 

67The premium revenue data come from the 2009 

NAIC financial statements, also known as ‘‘Blanks,’’ 

where insurers report information about their 

various lines of business 

68For the purposes of these and other estimates 

in this section IV.E, the Department again use the 

assumptions outlined above in section IV.A.5. 

changes makes it difficult to project 

results for 2014 and beyond. 

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: 1210–0147; 1545– 

2229. 

Affected Public: Business or other for 

profit; not-for-profit institutions. 

Total Respondents: 858. 

Total Responses: 79,500,000. 

Frequency of Response: On-going. 

Estimated Total Annual Burden 

Hours (two year average): 620,000 hours 

(Employee Benefits Security 

Administration); 620,000 hours (Internal 

Revenue Service). 

Estimated Total Annual Cost Burden 

(two year average): $4,800,000 

(Employee Benefits Security 

Administration); $4,800,000 (Internal 

Revenue Service). 

2. Department of Health and Human 

Services 

ICRs Related to the Summary of Benefits 

and Uniform Glossary (45 CFR 147.200) 

The Department estimates 333 

respondents each year from 2012–2013. 

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.66

To account for variation in firm size, 

the Department estimates a weighted 

burden on the basis of issuers’ 2009 

total earned premiums for 

comprehensive major medical 

coverage.67 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 

Department estimates approximately 70 

small, 115 medium, and 35 large 

issuers. Similarly, the Department 

estimates approximately 36 small, 59 

medium, and 18 large TPAs. 

2012 Burden Estimate 

In 2012, the Department estimates a 

one-time administrative burden of about 

230,000 hours with an equivalent cost of 

about $13,000,000 across the industry to 

prepare for the provisions of these final 

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 

standards and (2) make appropriate 

changes to IT systems and processes. 

With respect to task (1), the 

Department estimates about 34,000 

burden hours with an equivalent cost of 

about $1,800,000. The Department 

calculates these estimates as follows:68

TASK 1: ANALYZE CURRENT WORKFLOW AND NEW RULES

Hourly 

Wage Rate 

Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA 

Hours Equivalent 

Cost Hours Equivalent Cost Hours Equivalent Cost 

IT Professionals ....................................... $54.52 32 $1,800 49 $2,600 65 $3,500 

Benefits/Sales Professionals ................... 43.76 36 1,600 54 2,400 72 3,200 

Attorneys .................................................. 86.86 4 310 5 500 7 600 

Total per issuer/TPA ......................... .................... 72 3,700 108 6,000 144 7,000 

Total for all issuers/TPAs ................. .................... 7,600 390,000 19,000 1,000,000 7,600 370,000 

With respect to task (2), the 

Department estimates about 200,000 

burden hours with an equivalent cost of 

about $11,000,000. The Department 

calculates these estimates as follows: 

TASK 2: IT CHANGES

Hourly 

Wage Rate 

Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA 

Hours Equivalent 

Cost Hours Equivalent Cost Hours Equivalent Cost 

IT Professionals ....................................... $54.52 432 $24,000 648 $35,000 864 $50,000 

Total per issuer/TPA ......................... .................... 432 24,000 648 35,000 864 50,000 

Total for all issuers/TPAs ................. .................... 46,000 2,500,000 110,000 6,100,000 46,000 2,700,000 

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In addition to the one-time 

administrative costs mentioned above, 

the Department assumes that plans and 

issuers will incur additional 

administrative burden. With regard to 

this administrative burden, the 

estimated hour and cost burden for the 

collections of information in 2012 are as 

follows: 

• The Department estimates that there 

will be about 13,000,000 SBCs. 

• The Department assumes 50 percent 

of the total number of SBCs would be 

sent electronically prior to enrollment, 

and 38 percent would be sent 

electronically after enrollment, in the 

small and large group markets. The 

Department further assumes 70 percent 

of SBCs would be sent electronically in 

the individual market. Accordingly, the 

Department estimates that about 

7,100,000 disclosures would be 

electronically distributed, and about 

6,200,000 disclosures would be 

distributed in paper form. The 

Department assumes there are costs only 

for paper disclosures, but no costs for 

electronic disclosures 

Task 3: SBCs—The estimated hour 

burden is about 130,000 hours with an 

equivalent cost of about $4,200,000, and 

a cost burden of about $740,000. The 

Department calculates these estimates as 

follows: 

TASK 3—EQUIVALENT COSTS FOR PRODUCING SBCS (EXCEPT COVERAGE EXAMPLES) 

Hourly wage 

rate 

Small Issuer Medium Issuer Large Issuer 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 1.5 $82 1.5 $82 1.5 $82 

Benefits/Sales Professionals ................... 43.76 1.5 66 1.5 66 1.5 66 

Financial Managers .................................. 78.50 0.5 39 0.5 39 0.5 39 

Attorneys .................................................. 86.86 0.5 43 0.5 43 0.5 43 

Total per issuer ................................. .................... 4 230 4 230 4 230 

Total for all issuers ........................... .................... 420 24,000 700 40,000 210 12,000 

TASK 3—EQUIVALENT COSTS FOR DISTRIBUTING SBCS (INCLUDING COVERAGE EXAMPLES) 

Hourly wage 

rate 

Hours per 

SBC 

Total number of SBCs Total hours Total equivalent cost 

Clerical Staff, Individual Market ............................................................... $30.78 0.033 1,700,000 56,000 $1,700,000 

Clerical Staff, Group Market .................................................................... 30.78 0.017 4,500,000 77,000 2,400,000 

Total .................................................................................................. .................... .................... 6,200,000 130,000 4,100,000 

TASK 3—COST BURDEN FOR PRINTING SBCS (EXCEPT COVERAGE EXAMPLES) 

Cost per SBC Total SBCs Cost burden 

Printing Costs .............................................................................................................................. $0.12 6,200,000 $740,000 

Task 4: Two Coverage Examples—The 

estimated hour burden for producing 

and printing coverage examples is about 

27,000 hours with an equivalent cost of 

about $1,500,000, and a cost burden of 

about $370,000. The Department 

calculates these estimates as follows: 

TASK 4—EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES

Hourly wage 

rate 

Small Issuer/TPA Medium Issuer/TPA Large Issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 30 $1,640 30 $1,640 30 $1,640 

Benefits/Sales Professionals ................... 43.76 30 1,310 30 1,310 30 1,310 

Financial Managers .................................. 78.50 10 780 10 780 10 780 

Attorneys .................................................. 86.86 10 870 10 870 10 870 

Total per issuer/TPA ......................... .................... 80 4,600 80 4,600 80 4,600 

Total for all issuers/TPAs ................. .................... 8,500 490,000 14,000 800,000 4,200 240,000 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8695 

TASK 4—COST BURDEN FOR PRINTING COVERAGE EXAMPLES

Printing cost 

per CE set 

Total CE sets 

printed 

Total cost burden 

Printing Costs .............................................................................................................................. $0.06 6,200,000 $370,000 

Task 5: Glossary Requests—The 

Department assumes that, in 2012, 

issuers and TPAs will begin responding 

to glossary requests from covered 

individuals, and that 2.5 percent of 

covered individuals, who receive paper 

SBCs, will request glossaries in paper 

form. The Department assumes that the 

hour and cost burden of providing the 

glossaries to be 2.5 percent of the hour 

and cost burden of distributing paper 

SBCs, plus an additional cost burden of 

$0.50 for each glossary (including $0.45 

for first-class postage and $0.05 for 

supply costs). Accordingly, in 2012, the 

Department estimates an hour burden of 

about 2,700 hours with an equivalent 

cost of about $82,000 and a cost burden 

of about $99,000 associated with about 

160,000 glossary requests. 

The total 2012 burden estimate is 

about 390,000 hours, or 1,200 hours per 

respondent, with an equivalent cost of 

about $19,000,000, or $57,000 per 

respondent, and cost burden of about 

$1,200,000, or $3,600 per respondent. 

2013 Burden Estimate 

Task 1: SBCs—The number of 

disclosures is assumed to remain 

constant at 13,000,000. Thus, in 2013, 

the Department again estimates an hour 

burden of about 130,000 hours with an 

equivalent cost of about $4,200,000 and 

cost burden of about $740,000. 

Task 2: Two Coverage Examples—The 

Department again estimates an hour 

burden of about 27,000 hours with an 

equivalent cost of about $1,500,000 and 

cost burden of about $370,000 for 

producing and printing 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 two percent of covered 

individuals would receive such notice. 

The Department estimates that the hour 

and cost burden of providing the notices 

to be two percent of the combined hour 

and cost burden of providing the SBCs 

including the coverage examples, plus 

an additional cost burden of $0.50 for 

each paper notice (including $0.45 for 

first-class postage and $0.05 for supply 

costs). Accordingly, in 2013, the 

Department estimates an hour burden of 

about 3,100 hours with an equivalent 

cost of about $118,000 and a cost 

burden of about $22,000 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 from covered 

individuals, and that five percent of 

covered individuals, who receive paper 

SBCs, will request glossaries in paper 

form. The Department estimates that the 

hour and cost burden of providing the 

glossaries to be 5 percent of the hour 

and cost burden of distributing paper 

SBCs, plus an additional cost burden of 

$0.50 for each glossary (including $0.45 

for first-class postage and $0.05 for 

supply costs). Accordingly, in 2013, the 

Department estimates an hour burden of 

about 5,300 hours with an equivalent 

cost of $160,000 and a cost burden of 

about $190,000 associated with 310,000 

glossary requests. 

Task 5: Maintenance Administrative 

Costs—In 2013, the Department assumes 

that issuers and TPAs will need to make 

updates to address changes in 

standards, and, thus, incur 15 percent of 

the one-time administrative burden. 

Accordingly, the estimated hour burden 

is about 36,000 hours with an 

equivalent cost of about $1,800,000. The 

Department calculates these estimates as 

follows: 

Hourly wage 

rate 

Small issuer/TPA Medium issuer/TPA Large issuer/TPA 

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ....................................... $54.52 42 $2,300 62 $3,400 83 $4,500 

Benefits/Sales Professionals ................... 43.76 30 1,300 45 2,000 60 2,600 

Attorneys .................................................. 86.86 4 350 6 520 8 690 

Total per issuer/TPA ......................... .................... 76 4,000 113 5,900 151 7,800 

Total for all issuers/TPAs ................. .................... 8,100 420,000 20,000 1,000,000 8,000 410,000 

The total 2013 burden estimate is 

about 200,000 hours, or about 600 hours 

per respondent, with an equivalent cost 

of about $7,800,000, or $23,000 per 

respondent, and cost burden of about 

$1,400,000, or $4,200 per respondent. 

Estimates are not provided for 

subsequent years, because there will be 

significant changes in the marketplace 

in 2014, including those related to the 

offering of new individual and small 

group plans through the Affordable 

Insurance Exchanges, and new market 

reforms outside of the new Exchanges, 

and the wide-ranging scope of these 

changes makes it difficult to project 

results for 2014 and beyond. 

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 

(Request for a new OMB Control 

Number). 

Agency: Department of Health and 

Human Services. 

Title: Affordable Care Act Uniform 

Explanation of Coverage Documents 

CMS Identifier (OMB Control 

Number): CMS–10407 (0938–1146). 

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 (two year average): 300,000 

hours. 

Estimated Total Annual Cost Burden 

(two year average): $1,300,000. 

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8696 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

ICRs Related to Deemed Compliance 

Reporting (45 CFR 147.200(a)(4)(iii)(C)) 

Under 45 CFR 147.200(a)(4)(iii)(C), if 

individual health insurance issuers 

provide information required by these 

final regulations to the HHS Secretary’s 

Web portal (HealthCare.gov), as 

established by 45 CFR 159.120, then 

they will be deemed to have satisfied 

the requirement to provide an SBC to 

individuals who request information 

about coverage prior to submitting an 

application for coverage. Individual 

health insurance issuers already provide 

most SBC content elements to 

HealthCare.gov, except for five data 

elements related to patient 

responsibility for each coverage 

example: deductibles, co-payments, coinsurance, limits or exclusions, and the 

total of all four cost-sharing amounts. 

Accordingly, the additional burden 

associated with the requirements under 

§ 147.200(a)(4)(iii)(C) is the time and 

effort it would take each of the 220 

issuers in the individual market to enter 

the five additional data elements into an 

Excel spreadsheet. We estimate that it 

will take these issuers about 110 hours, 

at a total estimated cost of about $3,300, 

for each coverage example. For two 

coverage examples, the burden and cost 

would be about 220 hours at a cost of 

about $6,600. 

In deriving these figures, we used the 

following hourly labor rates and 

estimated the time to complete each 

task: $ 30.78/hr and 0.5 hr/issuer for 

clerical staff to enter data into an Excel 

spreadsheet, or about $15 per 

respondent per coverage example. 

This information collection 

requirement reflects the clarification in 

these final regulations that issuers must 

provide all content required in the SBC, 

including the information necessary for 

coverage examples, to Healthcare.gov to 

be deemed compliant. The 

aforementioned burden estimates will 

be submitted for OMB review and 

approval as a revision to the information 

collection request currently approved 

under OMB control number 0938–1086. 

To obtain copies of the supporting 

statement and any related forms for the 

final paperwork collections referenced 

above, access CMS’ Web site at http:// 

www.cms.gov/PaperworkReduction

Actof1995/PRAL/list.asp#TopOfPage or 

email your request, including your 

address, phone number, OMB number, 

and CMS document identifier, to 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office at 410–786– 

1326. 

F. 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 

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 final 

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 final rules, 

all group health plans and health 

insurance issuers offering group or 

individual health insurance coverage, 

including self-funded non-federal 

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 final 

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 final 

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, 

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 final 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 final 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 

final rule in a meaningful and timely 

manner. 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8697 

G. Congressional Review Act 

This regulation is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 

(5 U.S.C. 801 et seq.), which specifies 

that before a rule can take effect, the 

Federal agency promulgating the rule 

shall submit to each House of the 

Congress and to the Comptroller General 

a report containing a copy of the rule 

along with other specified information, 

and has been transmitted to Congress 

and the Comptroller General for review. 

V. Statutory Authority 

The Department of the Treasury 

regulations are adopted pursuant to the 

authority contained in sections 7805 

and 9833 of the Code. 

The Department of Labor regulations 

are 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 

Law104–191, 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 regulations are 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. 

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. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Approved: February 7, 2012. 

Emily S. McMahon, 

Acting Assistant Secretary of the Treasury 

(Tax Policy). 

Signed this 7th day of February, 2012. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: February 6, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Dated: February 6, 2012. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Department of the Treasury 

Internal Revenue Service 

26 CFR Chapter 1 

Accordingly, the Internal Revenue 

Service amends 26 CFR parts 54 and 

602 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 

(a)(1) in accordance with the rules of 

this section. 

(i) SBC provided by a group health 

insurance issuer to a group health 

plan—(A) Upon application. A health 

insurance issuer offering group health 

insurance coverage must provide the 

SBC to a group health plan (or its 

sponsor) upon application for health 

coverage, as soon as practicable 

following receipt of the application, but 

in no event later than seven business 

days following receipt of the 

application. 

(B) By first day of coverage (if there 

are changes). If there is any change in 

the information required to be in the 

SBC that was provided upon application 

and 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 first day of coverage. 

(C) Upon renewal. 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 as follows: 

(1) If written application is required 

(in either paper or electronic form) for 

renewal or reissuance, the SBC must be 

provided no later than the date the 

written application 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 plan or policy year; however, 

with respect to an insured plan, if the 

policy, certificate, or contract of 

insurance has not been issued or 

renewed before such 30-day period, the 

SBC must be provided as soon as 

practicable but in no event later than 

seven business days after issuance of the 

new policy, certificate, or contract of 

insurance, or the receipt of written 

confirmation of intent to renew, 

whichever is earlier. 

(D) Upon request. If a group health 

plan (or its sponsor) requests an SBC or 

summary information about a health 

insurance product from a health 

insurance issuer offering group health 

insurance coverage, an SBC must be 

provided as soon as practicable, but in 

no event later than seven business days 

following receipt of the request. 

(ii) SBC provided by a group health 

insurance issuer and a group health 

plan to participants and beneficiaries— 

(A) In general. 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 

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) Upon application. 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 or issuer does 

not distribute written application 

materials for enrollment, the SBC must 

be distributed no later than the first date 

on which the participant is eligible to 

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8698 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

enroll in coverage for the participant or 

any beneficiaries. 

(C) By first day of coverage (if there 

are changes). If there is any change to 

the information required to be in the 

SBC that was provided upon application 

and 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) Special enrollees. The plan or 

issuer must provide the SBC to special 

enrollees (as described in § 54.9801–6) 

no later than the date by which a 

summary plan description is required to 

be provided under the timeframe set 

forth in ERISA section 104(b)(1)(A) and 

its implementing regulations, which is 

90 days from enrollment. 

(E) Upon renewal. 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, as 

follows: 

(1) If written application is required 

for renewal (in either paper or electronic 

form), the SBC must be provided no 

later than the date on which the written 

application materials are distributed. 

(2) If renewal is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of the new plan or 

policy year; however, with respect to an 

insured plan, if the policy, certificate, or 

contract of insurance has not been 

issued or renewed before such 30-day 

period, the SBC must be provided as 

soon as practicable but in no event later 

than seven business days after issuance 

of the new policy, certificate, or contract 

of insurance, or the receipt of written 

confirmation of intent to renew, 

whichever is earlier. 

(F) Upon request. A plan or issuer 

must provide the SBC to participants or 

beneficiaries upon request for an SBC or 

summary information about the health 

coverage, as soon as practicable, but in 

no event later than seven business days 

following receipt of the request. 

(iii) Special rules to prevent 

unnecessary duplication with respect to 

group health coverage—(A) An entity 

required to provide an SBC under this 

paragraph (a)(1) 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 single SBC is provided to a 

participant and any beneficiaries at the 

participant’s last known address, then 

the requirement to provide the SBC to 

the participant and any beneficiaries is 

generally satisfied. However, 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 

upon renewal with respect to benefit 

packages in which the participant or 

beneficiary is 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 as soon as 

practicable, but in no event later than 

seven business days following receipt of 

the request. 

(2) Content—(i) In general. Subject to 

paragraph (a)(2)(iii) of this section, 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, in 

accordance with guidance as specified 

by the Secretary; 

(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 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, certificate, or contract 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 

obtaining information on prescription 

drug coverage; and 

(L) An Internet address for obtaining 

the uniform glossary, as described in 

paragraph (c) of this section, as well as 

a contact phone number to obtain a 

paper copy of the uniform glossary, and 

a disclosure that paper copies are 

available. 

(ii) Coverage examples. The SBC must 

include coverage examples specified by 

the Secretary in guidance that illustrate 

benefits provided under the plan or 

coverage for common benefits scenarios 

(including pregnancy and serious or 

chronic medical conditions) in 

accordance with this paragraph 

(a)(2)(ii). 

(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 paragraph (a)(2)(ii), 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 

as defined by the National Guideline 

Clearinghouse, Agency for Healthcare 

Research and Quality. The Secretary 

will specify, in guidance, the 

assumptions, including the relevant 

items and services and reimbursement 

information, for each claim in the 

benefits scenario. 

(C) Illustration of benefit provided. 

For purposes of this paragraph (a)(2)(ii), 

to illustrate benefits provided under the 

plan or coverage for a particular benefits 

scenario, a plan or issuer simulates 

claims processing in accordance with 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8699 

guidance issued by the Secretary to 

generate an estimate of what an 

individual might expect to pay under 

the plan, policy, or benefit package. The 

illustration of benefits provided will 

take into account any cost sharing, 

excluded benefits, and other limitations 

on coverage, as specified by the 

Secretary in guidance. 

(iii) Coverage provided outside the 

United States. In lieu of summarizing 

coverage for items and services 

provided outside the United States, a 

plan or issuer may provide an Internet 

address (or similar contact information) 

for obtaining information about benefits 

and coverage provided outside the 

United States. In any case, the plan or 

issuer must provide an SBC in 

accordance with this section that 

accurately summarizes benefits and 

coverage available under the plan or 

coverage within the United States. 

(3) Appearance. A group health plan 

and a health insurance issuer must 

provide an SBC in the form, and in 

accordance with the instructions for 

completing the SBC, that are specified 

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 by email 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 group 

health plan or health insurance issuer to 

a participant or beneficiary may be 

provided in paper form. Alternatively, 

the SBC may be provided electronically 

(such as by email or an Internet posting) 

if the requirements of this paragraph 

(a)(4)(ii) are met. 

(A) With respect to participants and 

beneficiaries covered under the plan, 

the SBC may be provided electronically 

if the requirements of 29 CFR 

2520.104b–1 are met. 

(B) With respect to participants and 

beneficiaries who are eligible but not 

enrolled for coverage, the SBC may be 

provided electronically if— 

(1) The format is readily accessible; 

(2) The SBC is provided in paper form 

free of charge upon request; and 

(3) In a case in which the electronic 

form is an Internet posting, the plan or 

issuer timely notifies the individual in 

paper form (such as a postcard) or email 

that the documents are available on the 

Internet, provides the Internet address, 

and notifies the individual that the 

documents are available in paper form 

upon request. 

(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 modification. 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 the modification will 

become effective. The notice of 

modification must be provided in a form 

that is consistent with 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 the form and manner 

requirements of paragraphs (c)(3) and 

(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, 

of 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 specified by the Secretary in 

guidance to ensure the uniform glossary 

is presented in a uniform format and 

uses 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 business days after receipt of the 

request. 

(d) Preemption. 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 

constitutes a separate offense for 

purposes of this paragraph (e). 

(f) Effective/Applicability date—(1) 

This section is applicable to group 

health plans and group health insurance 

issuers in accordance with this 

paragraph (f). (See § 54.9815–1251T(d), 

providing that this section applies to 

grandfathered health plans.) 

(i) For disclosures with respect to 

participants and beneficiaries who 

enroll or re-enroll through an open 

enrollment period (including reenrollees and late enrollees), this 

section applies beginning on the first 

day of the first open enrollment period 

that begins on or after September 23, 

2012; and 

(ii) For disclosures with respect to 

participants and beneficiaries who 

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8700 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

enroll in coverage other than through an 

open enrollment period (including 

individuals who are newly eligible for 

coverage and special enrollees), this 

section applies beginning on the first 

day of the first plan year that begins on 

or after September 23, 2012. 

(2) For disclosures with respect to 

plans, this section is applicable to 

health insurance issuers beginning 

September 23, 2012. 

PART 602—OMB CONTROL NUMBERS 

UNDER THE PAPERWORK 

REDUCTION ACT 

■ Par. 3. The authority citation for part 

602 continues to read in part as follows: 

Authority: 26 U.S.C. 7805. * * * 

■ Par. 4. Section 602.101(b) is amended 

by adding the following entry in 

numerical order to the table to read as 

follows: 

§ 602.101 OMB Control numbers. 

* * * * * 

(b) * * * 

CFR part or section where 

identified and described 

Current OMB 

control No. 

* * * * * 

54.9815–2715 ....................... 1545–2229 

* * * * * 

Department of Labor 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons stated in the 

preamble, the Employee Benefits 

Security Administration amends 29 CFR 

part 2590 as follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for part 2590 

continues to read as follows: 

Authority: 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), Pub. L. 104– 

191, 110 Stat. 1936; sec. 401(b), Pub. L. 105– 

200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 

512(d), Pub. L. 110–343, 122 Stat. 3881; sec. 

1001, 1201, and 1562(e), Pub. L. 111–148, 

124 Stat. 119, as amended by Pub. L. 111– 

152, 124 Stat. 1029; Secretary of Labor’s 

Order 3–2010, 75 FR 55354 (September 10, 

2010). 

Subpart C—Other Requirements 

■ 2. Section 2590.715–2715 is added to 

subpart C to read as follows: 

§ 2590.715–2715 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 

(a)(1) in accordance with the rules of 

this section. 

(i) SBC provided by a group health 

insurance issuer to a group health 

plan—(A) Upon application. A health 

insurance issuer offering group health 

insurance coverage must provide the 

SBC to a group health plan (or its 

sponsor) upon application for health 

coverage, as soon as practicable 

following receipt of the application, but 

in no event later than seven business 

days following receipt of the 

application. 

(B) By first day of coverage (if there 

are changes). If there is any change in 

the information required to be in the 

SBC that was provided upon application 

and 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 first day of coverage. 

(C) Upon renewal. 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 as follows: 

(1) If written application is required 

(in either paper or electronic form) for 

renewal or reissuance, the SBC must be 

provided no later than the date the 

written application 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 plan or policy year; however, 

with respect to an insured plan, if the 

policy, certificate, or contract of 

insurance has not been issued or 

renewed before such 30-day period, the 

SBC must be provided as soon as 

practicable but in no event later than 

seven business days after issuance of the 

new policy, certificate, or contract of 

insurance, or the receipt of written 

confirmation of intent to renew, 

whichever is earlier. 

(D) Upon request. If a group health 

plan (or its sponsor) requests an SBC or 

summary information about a health 

insurance product from a health 

insurance issuer offering group health 

insurance coverage, an SBC must be 

provided as soon as practicable, but in 

no event later than seven business days 

following receipt of the request. 

(ii) SBC provided by a group health 

insurance issuer and a group health 

plan to participants and beneficiaries— 

(A) In general. 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 

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) Upon application. 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 or issuer does 

not distribute written application 

materials for enrollment, the SBC must 

be distributed no later than the first date 

on which the participant is eligible to 

enroll in coverage for the participant or 

any beneficiaries. 

(C) By first day of coverage (if there 

are changes). If there is any change to 

the information required to be in the 

SBC that was provided upon application 

and 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) Special enrollees. The plan or 

issuer must provide the SBC to special 

enrollees (as described in § 2590.701–6 

of this Part) no later than the date by 

which a summary plan description is 

required to be provided under the 

timeframe set forth in ERISA section 

104(b)(1)(A) and its implementing 

regulations, which is 90 days from 

enrollment. 

(E) Upon renewal. 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, as 

follows: 

(1) If written application is required 

for renewal (in either paper or electronic 

form), the SBC must be provided no 

later than the date on which the written 

application materials are distributed. 

(2) If renewal is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of the new plan or 

policy year; however, with respect to an 

insured plan, if the policy, certificate, or 

contract of insurance has not been 

issued or renewed before such 30-day 

period, the SBC must be provided as 

soon as practicable but in no event later 

than seven business days after issuance 

of the new policy, certificate, or contract 

of insurance, or the receipt of written 

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confirmation of intent to renew, 

whichever is earlier. 

(F) Upon request. A plan or issuer 

must provide the SBC to participants or 

beneficiaries upon request for an SBC or 

summary information about the health 

coverage, as soon as practicable, but in 

no event later than seven business days 

following receipt of the request. 

(iii) Special rules to prevent 

unnecessary duplication with respect to 

group health coverage—(A) An entity 

required to provide an SBC under this 

paragraph (a)(1) 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 single SBC is provided to a 

participant and any beneficiaries at the 

participant’s last known address, then 

the requirement to provide the SBC to 

the participant and any beneficiaries is 

generally satisfied. However, 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 

upon renewal with respect to benefit 

packages in which the participant or 

beneficiary is 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 as soon as 

practicable, but in no event later than 

seven business days following receipt of 

the request. 

(2) Content—(i) In general. Subject to 

paragraph (a)(2)(iii) of this section, 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, in 

accordance with guidance as specified 

by the Secretary; 

(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 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, certificate, or contract 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 

obtaining information on prescription 

drug coverage; and 

(L) An Internet address for obtaining 

the uniform glossary, as described in 

paragraph (c) of this section, as well as 

a contact phone number to obtain a 

paper copy of the uniform glossary, and 

a disclosure that paper copies are 

available. 

(ii) Coverage examples. The SBC must 

include coverage examples specified by 

the Secretary in guidance that illustrate 

benefits provided under the plan or 

coverage for common benefits scenarios 

(including pregnancy and serious or 

chronic medical conditions) in 

accordance with this paragraph 

(a)(2)(ii). 

(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 paragraph (a)(2)(ii), 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 

as defined by the National Guideline 

Clearinghouse, Agency for Healthcare 

Research and Quality. The Secretary 

will specify, in guidance, the 

assumptions, including the relevant 

items and services and reimbursement 

information, for each claim in the 

benefits scenario. 

(C) Illustration of benefit provided. 

For purposes of this paragraph (a)(2)(ii), 

to illustrate benefits provided under the 

plan or coverage for a particular benefits 

scenario, a plan or issuer simulates 

claims processing in accordance with 

guidance issued by the Secretary to 

generate an estimate of what an 

individual might expect to pay under 

the plan, policy, or benefit package. The 

illustration of benefits provided will 

take into account any cost sharing, 

excluded benefits, and other limitations 

on coverage, as specified by the 

Secretary in guidance. 

(iii) Coverage provided outside the 

United States. In lieu of summarizing 

coverage for items and services 

provided outside the United States, a 

plan or issuer may provide an Internet 

address (or similar contact information) 

for obtaining information about benefits 

and coverage provided outside the 

United States. In any case, the plan or 

issuer must provide an SBC in 

accordance with this section that 

accurately summarizes benefits and 

coverage available under the plan or 

coverage within the United States. 

(3) Appearance. A group health plan 

and a health insurance issuer must 

provide an SBC in the form, and in 

accordance with the instructions for 

completing the SBC, that are specified 

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 by email or an 

Internet posting) if the following three 

conditions are satisfied— 

(A) The format is readily accessible by 

the plan (or its sponsor); 

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8702 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

(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 group 

health plan or health insurance issuer to 

a participant or beneficiary may be 

provided in paper form. Alternatively, 

the SBC may be provided electronically 

(such as by email or an Internet posting) 

if the requirements of this paragraph 

(a)(4)(ii) are met. 

(A) With respect to participants and 

beneficiaries covered under the plan, 

the SBC may be provided electronically 

if the requirements of 29 CFR 

2520.104b–1 are met. 

(B) With respect to participants and 

beneficiaries who are eligible but not 

enrolled for coverage, the SBC may be 

provided electronically if: 

(1) The format is readily accessible; 

(2) The SBC is provided in paper form 

free of charge upon request; and 

(3) In a case in which the electronic 

form is an Internet posting, the plan or 

issuer timely notifies the individual in 

paper form (such as a postcard) or email 

that the documents are available on the 

Internet, provides the Internet address, 

and notifies the individual that the 

documents are available in paper form 

upon request. 

(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 modification. 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 the modification will 

become effective. The notice of 

modification must be provided in a form 

that is consistent with 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 form and manner 

requirements of paragraphs (c)(3) and 

(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, 

of 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 specified by the Secretary in 

guidance to ensure the uniform glossary 

is presented in a uniform format and 

uses 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 business days after receipt of the 

request. 

(d) Preemption. See § 2590.731 of this 

part. In addition, 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 

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—(1) This section 

is applicable to group health plans and 

group health insurance issuers in 

accordance with this paragraph (f). (See 

§ 2590.715–1251(d), providing that this 

section applies to grandfathered health 

plans.) 

(i) For disclosures with respect to 

participants and beneficiaries who 

enroll or re-enroll through an open 

enrollment period (including reenrollees and late enrollees), this 

section applies beginning on the first 

day of the first open enrollment period 

that begins on or after September 23, 

2012; and 

(ii) For disclosures with respect to 

participants and beneficiaries who 

enroll in coverage other than through an 

open enrollment period (including 

individuals who are newly eligible for 

coverage and special enrollees), this 

section applies beginning on the first 

day of the first plan year that begins on 

or after September 23, 2012. 

(2) For disclosures with respect to 

plans, this section is applicable to 

health insurance issuers beginning 

September 23, 2012. 

Department of Health and Human 

Services 

45 CFR Subtitle A 

For the reasons stated in the 

preamble, the Department of Health and 

Human Services amends 45 CFR part 

147 as follows: 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 2. The authority citation for part 147 

continues to read as follows: 

Authority: Sections 2701 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. 

■ 3. 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 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8703 

entities and individuals described in 

this paragraph (a)(1) in accordance with 

the rules of this section. 

(i) SBC provided by a group health 

insurance issuer to a group health 

plan—(A) Upon application. A health 

insurance issuer offering group health 

insurance coverage must provide the 

SBC to a group health plan (or its 

sponsor) upon application for health 

coverage, as soon as practicable 

following receipt of the application, but 

in no event later than seven business 

days following receipt of the 

application. 

(B) By first day of coverage (if there 

are changes). If there is any change in 

the information required to be in the 

SBC that was provided upon application 

and 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 first day of coverage. 

(C) Upon renewal. 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 as follows: 

(1) If written application is required 

(in either paper or electronic form) for 

renewal or reissuance, the SBC must be 

provided no later than the date the 

written application 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 plan or policy year; however, 

with respect to an insured plan, if the 

policy, certificate, or contract of 

insurance has not been issued or 

renewed before such 30-day period, the 

SBC must be provided as soon as 

practicable but in no event later than 

seven business days after issuance of the 

new policy, certificate, or contract of 

insurance, or the receipt of written 

confirmation of intent to renew, 

whichever is earlier. 

(D) Upon request. If a group health 

plan (or its sponsor) requests an SBC or 

summary information about a health 

insurance product from a health 

insurance issuer offering group health 

insurance coverage, an SBC must be 

provided as soon as practicable, but in 

no event later than seven business days 

following receipt of the request. 

(ii) SBC provided by a group health 

insurance issuer and a group health 

plan to participants and beneficiaries— 

(A) In general. 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 

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) Upon application. 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 or issuer does 

not distribute written application 

materials for enrollment, the SBC must 

be distributed no later than the first date 

on which the participant is eligible to 

enroll in coverage for the participant or 

any beneficiaries. 

(C) By first day of coverage (if there 

are changes). If there is any change to 

the information required to be in the 

SBC that was provided upon application 

and 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) Special enrollees. The plan or 

issuer must provide the SBC to special 

enrollees (as described in 45 CFR 

146.117) no later than the date by which 

a summary plan description is required 

to be provided under the timeframe set 

forth in ERISA section 104(b)(1)(A) and 

its implementing regulations, which is 

90 days from enrollment. 

(E) Upon renewal. 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, as 

follows: 

(1) If written application is required 

for renewal (in either paper or electronic 

form), the SBC must be provided no 

later than the date on which the written 

application materials are distributed. 

(2) If renewal is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of the new plan or 

policy year; however, with respect to an 

insured plan, if the policy, certificate, or 

contract of insurance has not been 

issued or renewed before such 30-day 

period, the SBC must be provided as 

soon as practicable but in no event later 

than seven business days after issuance 

of the new policy, certificate, or contract 

of insurance, or the receipt of written 

confirmation of intent to renew, 

whichever is earlier. 

(F) Upon request. A plan or issuer 

must provide the SBC to participants or 

beneficiaries upon request for an SBC or 

summary information about the health 

coverage, as soon as practicable, but in 

no event later than seven business days 

following receipt of the request. 

(iii) Special rules to prevent 

unnecessary duplication with respect to 

group health coverage—(A) An entity 

required to provide an SBC under this 

paragraph (a)(1) 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 single SBC is provided to a 

participant and any beneficiaries at the 

participant’s last known address then 

the requirement to provide the SBC to 

the participant and any beneficiaries is 

generally satisfied. However, 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 

upon renewal with respect to benefit 

packages in which the participant or 

beneficiary is 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 as soon as 

practicable, but in no event later than 

seven business days following receipt of 

the request. 

(iv) SBC provided by a health 

insurance issuer offering individual 

health insurance coverage—(A) Upon 

application. A health insurance issuer 

offering individual health insurance 

coverage must provide an SBC to an 

individual covered under the policy 

(including every dependent) upon 

receiving an application for any health 

insurance policy, as soon as practicable 

following receipt of the application, but 

in no event later than seven business 

days following receipt of the 

application. 

(B) By first day of coverage (if there 

are changes). If there is any change in 

the information required to be in the 

SBC that was provided upon application 

and before the first day of coverage, the 

issuer must update and provide a 

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8704 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

current SBC to the individual no later 

than the first day of coverage. 

(C) Upon renewal. The issuer must 

provide the SBC to policyholders 

annually at renewal. The SBC must 

reflect any modified policy terms that 

would be effective on the first day of the 

new policy year. The SBC must be 

provided as follows: 

(1) If written application is required 

(in either paper or electronic form) for 

renewal or reissuance, the SBC must be 

provided no later than the date on 

which the written application 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; however, if the 

policy, certificate, or contract of 

insurance has not been issued or 

renewed before such 30-day period, the 

SBC must be provided as soon as 

practicable but in no event later than 

seven business days after issuance of the 

new policy, certificate, or contract of 

insurance, or the receipt of written 

confirmation of intent to renew, 

whichever is earlier. 

(D) Upon request. A health insurance 

issuer offering individual health 

insurance coverage must provide an 

SBC to any individual or dependent 

anytime an individual requests an SBC 

or summary information about a health 

insurance product as soon as 

practicable, but in no event later than 

seven business days following receipt of 

the request. For purposes of this 

paragraph (a)(1)(iv)(D), a request for an 

SBC or summary information about a 

health insurance product includes a 

request made both before and after an 

individual submits an application for 

coverage. 

(v) Special rule to prevent 

unnecessary duplication with respect to 

individual health insurance coverage. If 

a single SBC is provided to an 

individual and any dependents at the 

individual’s last known address, then 

the requirement to provide the SBC to 

the individual and any dependents is 

generally satisfied. However, if a 

dependent’s last known address is 

different than the individual’s last 

known address, a separate SBC is 

required to be provided to the 

dependent at the dependents’ last 

known address. 

(2) Content—(i) In general. Subject to 

paragraph (a)(2)(iii) of this section, 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, in 

accordance with guidance as specified 

by the Secretary; 

(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 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, certificate, or contract 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 

obtaining information on prescription 

drug coverage; and 

(L) An Internet address for obtaining 

the uniform glossary, as described in 

paragraph (c) of this section, as well as 

a contact phone number to obtain a 

paper copy of the uniform glossary, and 

a disclosure that paper copies are 

available. 

(ii) Coverage examples. The SBC must 

include coverage examples specified by 

the Secretary in guidance that illustrate 

benefits provided under the plan or 

coverage for common benefits scenarios 

(including pregnancy and serious or 

chronic medical conditions) in 

accordance with this paragraph 

(a)(2)(ii). 

(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 paragraph (a)(2)(ii), 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 

as defined by the National Guideline 

Clearinghouse, Agency for Healthcare 

Research and Quality. The Secretary 

will specify, in guidance, the 

assumptions, including the relevant 

items and services and reimbursement 

information, for each claim in the 

benefits scenario. 

(C) Illustration of benefit provided. 

For purposes of this paragraph (a)(2)(ii), 

to illustrate benefits provided under the 

plan or coverage for a particular benefits 

scenario, a plan or issuer simulates 

claims processing in accordance with 

guidance issued by the Secretary to 

generate an estimate of what an 

individual might expect to pay under 

the plan, policy, or benefit package. The 

illustration of benefits provided will 

take into account any cost sharing, 

excluded benefits, and other limitations 

on coverage, as specified by the 

Secretary in guidance. 

(iii) Coverage provided outside the 

United States. In lieu of summarizing 

coverage for items and services 

provided outside the United States, a 

plan or issuer may provide an Internet 

address (or similar contact information) 

for obtaining information about benefits 

and coverage provided outside the 

United States. In any case, the plan or 

issuer must provide an SBC in 

accordance with this section that 

accurately summarizes benefits and 

coverage available under the plan or 

coverage within the United States. 

(3) Appearance. A group health plan 

and a health insurance issuer must 

provide an SBC in the form, and in 

accordance with the instructions for 

completing the SBC, that are specified 

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 under a health 

insurance policy), not exceed four 

double-sided pages in length, and not 

include print smaller than 12-point font. 

A health insurance issuer offering 

individual health insurance coverage 

must provide the SBC as a stand-alone 

document. 

(4) Form—(i) An SBC provided by an 

issuer offering group health insurance 

coverage to a plan (or its sponsor), may 

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 8705 

be provided in paper form. 

Alternatively, the SBC may be provided 

electronically (such as by email 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 group 

health plan or health insurance 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 2590.715–2715(a)(4)(ii), or the 

provisions governing electronic 

disclosure for individual health 

insurance issuers set forth in paragraph 

(a)(4)(iii) of this section. 

(iii) An issuer offering individual 

health insurance coverage must provide 

an SBC in a manner that can reasonably 

be expected to provide actual notice in 

paper or electronic form. 

(A) An issuer satisfies the 

requirements of this paragraph (a)(4)(iii) 

if the issuer: 

(1) Hand-delivers a printed copy of 

the SBC to the individual or dependent; 

(2) Mails a printed copy of the SBC to 

the mailing address provided to the 

issuer by the individual or dependent; 

(3) Provides the SBC by email after 

obtaining the individual’s or 

dependent’s agreement to receive the 

SBC or other electronic disclosures by 

email; 

(4) Posts the SBC on the Internet and 

advises the individual or dependent in 

paper or electronic form, in a manner 

compliant with paragraphs 

(a)(4)(iii)(A)(1) through (3), that the SBC 

is available on the Internet and includes 

the applicable Internet address; or 

(5) Provides the SBC by any other 

method that can reasonably be expected 

to provide actual notice. 

(B) An SBC may not be provided 

electronically unless: 

(1) The format is readily accessible; 

(2) The SBC is placed in a location 

that is prominent and readily accessible; 

(3) The SBC is provided in an 

electronic form which can be 

electronically retained and printed; 

(4) The SBC is consistent with the 

appearance, content, and language 

requirements of this section; 

(5) The issuer notifies the individual 

or dependent that the SBC is available 

in paper form without charge upon 

request and provides it upon request. 

(C) Deemed compliance. A health 

insurance issuer offering individual 

health insurance coverage that provides 

the content required under paragraph 

(a)(2) of this section, as specified in 

guidance published by the Secretary, to 

the federal health reform Web portal 

described in 45 CFR 159.120 will be 

deemed to satisfy the requirements of 

paragraph (a)(1)(iv)(D) of this section 

with respect to a request for summary 

information about a health insurance 

product made prior to an application for 

coverage. However, nothing in this 

paragraph should be construed as 

otherwise limiting such issuer’s 

obligations under 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 modification. 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) 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 

under a health insurance policy) not 

later than 60 days prior to the date on 

which the modification will become 

effective. The notice of modification 

must be provided in a form that is 

consistent with 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 form and manner 

requirements of paragraphs (c)(3) and 

(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, 

of 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 specified by the Secretary in 

guidance to ensure the uniform glossary 

is presented in a uniform format and 

uses 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 

electronic form (as requested), within 

seven business days after receipt of the 

request. 

(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, 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 

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8706 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations 

1The Affordable Care Act also 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. 

2A summary of the NAIC’s work can be found at 

76 FR 52476–77, August 22, 2011. 

3 76 FR 52442, August 22, 2011. 

4 76 FR 52475, August 22, 2011. 

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—(1) This section 

is applicable to group health plans and 

group health insurance issuers in 

accordance with this paragraph (f). (See 

§ 147.140(d), providing that this section 

applies to grandfathered health plans.) 

(i) For disclosures with respect to 

participants and beneficiaries who 

enroll or re-enroll through an open 

enrollment period (including reenrollees and late enrollees), this 

section applies beginning on the first 

day of the first open enrollment period 

that begins on or after September 23, 

2012; and 

(ii) For disclosures with respect to 

participants and beneficiaries who 

enroll in coverage other than through an 

open enrollment period (including 

individuals who are newly eligible for 

coverage and special enrollees), this 

section applies beginning on the first 

day of the first plan year that begins on 

or after September 23, 2012. 

(2) For disclosures with respect to 

plans, and to individuals and 

dependents in the individual market, 

this section is applicable to health 

insurance issuers beginning September 

23, 2012. 

[FR Doc. 2012–3228 Filed 2–9–12; 11:15 am] 

BILLING CODE 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–FN] 

45 CFR Part 147 

Summary of Benefits and Coverage 

and Uniform Glossary—Templates, 

Instructions, and Related Materials; 

and Guidance for Compliance 

AGENCIES: 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: Guidance for compliance and 

notice of availability of templates, 

instructions, and related materials. 

SUMMARY: The Departments of Health 

and Human Services, Labor, and the 

Treasury are simultaneously publishing 

in the Federal Register this guidance 

document and final 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), notice of modifications, 

and the uniform glossary. This guidance 

document provides guidance for 

compliance with section 2715 of the 

Public Health Service Act and the 

Departments’ final regulations, 

including a template for the SBC, 

instructions, sample language, a guide 

for coverage example calculations, and 

the uniform glossary. 

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) 492–4222. 

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: 

I. Introduction 

The Departments of Health and 

Human Services (HHS), Labor, and the 

Treasury (the Departments) are taking a 

phased approach to issuing regulations 

and guidance implementing the revised 

Public Health Service Act (PHS Act) 

sections 2701 through 2719A and 

related provisions of the Patient 

Protection and Affordable Care Act 

(Affordable Care Act).1 Section 2715 of 

the PHS 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.’’ Section 2715 of the PHS 

Act also directs the Departments to 

provide for the development of 

‘‘standards for the definitions of terms 

used in health insurance coverage.’’ The 

statute directs the Departments, in 

developing such standards, to ‘‘consult 

with the National Association of 

Insurance Commissioners’’ (referred to 

in this guidance document 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.’’ 

After consultation with the NAIC,2 on 

August 22, 2011, the Departments 

published proposed regulations to 

implement PHS Act section 2715,3 as 

well as a companion document that 

proposed an SBC template (with 

instructions, sample language, and a 

guide for coverage examples 

calculations to be used in completing 

the SBC template) and a uniform 

glossary.4 HHS also published on its 

Web site (at http://cciio.cms.gov, and 

accessible via hyperlink from 

www.dol.gov/ebsa/healthreform) the 

coding and pricing information 

necessary to perform calculations for the 

three proposed coverage examples. 

Comments were solicited on these 

materials. 

Final regulations under PHS Act 

section 2715 are being published 

elsewhere in this issue of the Federal 

Register (final regulations). This 

guidance document provides guidance 

for compliance with PHS Act section 

2715 and the final regulations, 

including information on how to obtain 

the SBC template (with instructions and 

sample language for completing the 

template) and the uniform glossary. 

These items are displayed at 

www.dol.gov/ebsa/healthreform and 

www.cciio.cms.gov. 

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