52442 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 54 and 602 

[REG–140038–10] 

RIN 1545–BJ94 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB52 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 147 

[CMS–9982–P] 

RIN 0938–AQ73 

Summary of Benefits and Coverage 

and the Uniform Glossary 

AGENCY: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations regarding 

disclosure of the summary of benefits 

and coverage and the uniform glossary 

for group health plans and health 

insurance coverage in the group and 

individual markets under the Patient 

Protection and Affordable Care Act. 

This document implements the 

disclosure requirements to help plans 

and individuals better understand their 

health coverage, as well as other 

coverage options. The templates and 

instructions to be used in making these 

disclosures are being issued separately 

in today’s Federal Register. 

DATES: Comment date. Comments are 

due on or before October 21, 2011. 

ADDRESSES: Written comments may be 

submitted to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Please do not submit duplicates. 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments are 

posted on the Internet exactly as 

received, and can be retrieved by most 

Internet search engines. No deletions, 

modifications, or redactions will be 

made to the comments received, as they 

are public records. Comments may be 

submitted anonymously. 

Department of Labor. Comments to 

the Department of Labor, identified by 

RIN 1210–AB52, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: EOHPSCA2715.EBSA@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: RIN 1210–AB52. 

Comments received by the 

Department of Labor will be posted 

without change to http:// 

www.regulations.gov and http:// 

www.dol.gov/ebsa, and available for 

public inspection at the Public 

Disclosure Room, N–1513, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Washington, 

DC 20210. 

Department of Health and Human 

Services. In commenting, please refer to 

file code CMS–9982–P. Because of staff 

and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services,Department of Health 

and Human Services,Attention: CMS– 

9982–P, P.O. Box 8016, Baltimore, MD 

21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–9982–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately three weeks after 

publication of a document, at the 

headquarters of the Centers for Medicare 

& Medicaid Services, 7500 Security 

Boulevard, Baltimore, Maryland 21244, 

Monday through Friday of each week 

from 8:30 a.m. to 4 p.m. EST. To 

schedule an appointment to view public 

comments, phone 1–800–743–3951. 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52443 

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. 

3 In developing its recommendations, the NAIC 

considered the results of various consumer testing 

sponsored by both insurance industry and 

consumer associations. Specifically, the draft SBC 

template, including the coverage examples, and the 

draft uniform glossary underwent consumer testing 

to assist in determining adjustments to ensure the 

final product was consumer friendly. Summaries of 

this testing are available at: http://www.naic.org/

documents/committees_b_consumer_information_

101012_ahip_focus_group_summary.pdf; http:// 

www.naic.org/documents/committees_b_consumer_

information_110603_ahip_bcbsa_consumer_

testing.pdf; http://www.naic.org/documents/

committees_b_consumer_information_

101014_consumers_union.pdf (a more detailed 

summary of which is accessible at: http:// 

prescriptionforchange.org/pdf/CU_Consumer_

Testing_Report_Dec_2010.pdf); and http:// 

www.naic.org/documents/committees_b_consumer_

information_110603_consumers_union_testing.pdf. 

Internal Revenue Service. Comments 

to the IRS, identified by REG–140038– 

10, by one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: CC:PA:LPD:PR (REG–140038– 

10), Room 5205, Internal Revenue 

Service, P.O. Box 7604, Ben Franklin 

Station, Washington, DC 20044. 

• Hand or courier delivery: Monday 

through Friday between the hours of 8 

a.m. and 4 p.m. to: CC:PA:LPD:PR 

(REG–140038–10), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington 

DC 20224. 

All submissions to the IRS will be 

open to public inspection and copying 

in room 1621, 1111 Constitution 

Avenue, NW., Washington, DC from 9 

a.m. to 4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Heather Raeburn, 

Employee Benefits Security 

Administration, Department of Labor, at 

(202) 693–8335; Karen Levin, Internal 

Revenue Service, Department of the 

Treasury, at (202) 622–6080; Jennifer 

Libster or Padma Shah, Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, at (301) 492–4252. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (http://www.dol.gov/ebsa). In 

addition, information from HHS on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

Web site (http://www.cms.hhs.gov/ 

HealthInsReformforConsume/ 

01_Overview.asp) and information on 

health reform can be found at http:// 

www.healthcare.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Patient Protection and Affordable 

Care Act, Public Law 111–148, was 

enacted on March 23, 2010; the Health 

Care and Education Reconciliation Act, 

Public Law 111–152, was enacted on 

March 30, 2010 (these are collectively 

known as the ‘‘Affordable Care Act’’). 

The Affordable Care Act reorganizes, 

amends, and adds to the provisions of 

part A of title XXVII of the Public 

Health Service Act (PHS Act) relating to 

group health plans and health insurance 

issuers in the group and individual 

markets. The term ‘‘group health plan’’ 

includes both insured and self-insured 

group health plans.1 The Affordable 

Care Act adds section 715(a)(1) to the 

Employee Retirement Income Security 

Act (ERISA) and section 9815(a)(1) to 

the Internal Revenue Code (the Code) to 

incorporate the provisions of part A of 

title XXVII of the PHS Act into ERISA 

and the Code, and make them 

applicable to group health plans, and 

health insurance issuers providing 

health insurance coverage in connection 

with group health plans. The PHS Act 

sections incorporated by this reference 

are sections 2701 through 2728. PHS 

Act sections 2701 through 2719A are 

substantially new, though they 

incorporate some provisions of prior 

law. PHS Act sections 2722 through 

2728 are sections of prior law 

renumbered, with some, mostly minor, 

changes. 

Subtitles A and C of title I of the 

Affordable Care Act amend the 

requirements of title XXVII of the PHS 

Act (changes to which are incorporated 

into ERISA by section 715). The 

preemption provisions of ERISA section 

731 and PHS Act section 2724 2

(implemented in 29 CFR 2590.731(a) 

and 45 CFR 146.143(a)) apply so that the 

requirements of part 7 of ERISA and 

title XXVII of the PHS Act, as amended 

by the Affordable Care Act, are not to be 

‘‘construed to supersede any provision 

of State law which establishes, 

implements, or continues in effect any 

standard or requirement solely relating 

to health insurance issuers in 

connection with group or individual 

health insurance coverage except to the 

extent that such standard or 

requirement prevents the application of 

a requirement’’ of provisions added to 

the PHS Act by the Affordable Care Act. 

Accordingly, State laws that with 

stricter health insurance issuer 

requirements than those imposed by the 

PHS Act will not be superseded by 

those provisions. Preemption and State 

flexibility under PHS Act section 2715 

are discussed more fully below under 

section II.D. 

The Departments of Health and 

Human Services (HHS), Labor, and the 

Treasury (the Departments) are taking a 

phased approach to issuing regulations 

implementing the revised PHS Act 

sections 2701 through 2719A and 

related provisions of the Affordable Care 

Act. These proposed regulations 

propose standards for implementing 

PHS Act section 2715. As discussed 

more fully below, templates and 

instructions for meeting the disclosure 

requirements of PHS Act section 2715 

are being issued separately in today’s 

Federal Register. 

II. Overview of the Proposed 

Regulations 

A. Summary of Benefits and Coverage 

1. In General 

Section 2715 of the PHS Act, added 

by the Affordable Care Act, directs the 

Departments to develop standards for 

use by a group health plan and a health 

insurance issuer in compiling and 

providing a summary of benefits and 

coverage (SBC) that ‘‘accurately 

describes the benefits and coverage 

under the applicable plan or coverage.’’ 

The statute directs the Departments, in 

developing such standards, to ‘‘consult 

with the National Association of 

Insurance Commissioners’’ (referred to 

in this preamble as the ‘‘NAIC’’), ‘‘a 

working group composed of 

representatives of health insurancerelated consumer advocacy 

organizations, health insurance issuers, 

health care professionals, patient 

advocates including those representing 

individuals with limited English 

proficiency, and other qualified 

individuals.’’ The NAIC convened a 

working group (NAIC working group) 

comprised of a diverse group of 

stakeholders. This working group met 

frequently each month for over one year 

while developing its recommendations.3

Throughout the process, NAIC working 

group draft documents and meeting 

notes were displayed on the NAIC’s 

Web site for public review, and several 

interested parties filed formal 

comments. In addition to participation 

from the NAIC working group members, 

conference calls and in-person meetings 

were open to other interested parties 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52444 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

4 Information on the NAIC working group, 

including drafts of SBC materials and other 

supporting documents developed for compliance 

with PHS Act section 2715, working group 

membership lists, and meeting minutes, is available 

at: http://www.naic.org/committees_b_consumer_

information.htm. 

5The Appendices do not include a sample 

coverage example calculation for breast cancer in 

the individual market that was transmitted by the 

NAIC. Upon review, it appeared that some of the 

data in the example might be subject to copyright 

protection. Moreover, the sample coverage example 

provided by NAIC was limited to breast cancer in 

the individual market and did not address the other 

two coverage examples—maternity coverage and 

diabetes. Finally, particular coding information and 

pricing information included in the sample would 

change annually, which would result in the data 

included in the sample becoming outdated 

relatively quickly. Accordingly, HHS is publishing 

on its Web site (at http://cciio.cms.gov), the coding 

and pricing information necessary to perform 

coverage example calculations for all three coverage 

examples. HHS will update this information 

annually. 

6National Association of Insurance 

Commissioners, Consumer Information Working 

Group, December 17, 2010 Letter to the Secretaries. 

Available at http://www.naic.org/documents/

committees_b_consumer_information_ppaca_letter_

to_sebelius.pdf. 

7ERISA 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. 

and individuals and provided an 

opportunity for non-member feedback. 

The Departments have received 

transmittals from the NAIC that include 

a recommended template for the SBC 

(with instructions and samples to be 

used in completing the template) and a 

recommended uniform glossary.4

These regulations generally propose 

standards for group health plans (and 

their plan administrators), and health 

insurance issuers offering group or 

individual health insurance coverage, 

that will govern who provides an SBC, 

who receives an SBC, when the SBC 

will be provided, and how it will be 

provided. The Departments invite 

comment on the standards of the 

proposed regulations. 

In conjunction with these proposed 

regulations, the Departments are 

publishing a document today that 

provides the proposed template for the 

SBC (with proposed instructions and 

sample language for completing the 

template) and the proposed uniform 

glossary that are identical to the 

documents that were developed and 

agreed to by the entire NAIC working 

group and then voted on and approved 

by the full NAIC. Instead of proposing 

possible changes to the NAIC’s 

proposed SBC template and related 

materials, the document published 

today incorporates all of the NAIC 

working group’s recommended 

materials (with the exception of a 

sample coverage example 5) and invites 

public comment. The Departments 

recognize that changes to the SBC 

template may be appropriate to 

accommodate various types of plan and 

coverage designs, to provide additional 

information to individuals, or to 

improve the efficacy of the disclosures 

recommended by the NAIC. In addition, 

the SBC template and related 

documents were drafted by the NAIC 

primarily for use by health insurance 

issuers.6

In general, the Departments have 

heard concerns about the potential 

redundancies and additional cost 

associated with elements of the SBC 

requirement—including the uniform 

glossary and the coverage facts labels— 

particularly for those plans and group 

health insurance issuers that already 

provide a Summary Plan Description 

(SPD) under 29 CFR 2520.104b–2. 

Comments are solicited on whether the 

SBC should be allowed to be provided 

within an SPD if the SBC is intact and 

prominently displayed at the beginning 

of the SPD (for example, immediately 

after a cover page and table of contents), 

and if the timing requirements for 

providing the SBC (described in 

paragraph (a) of the proposed 

regulations) are satisfied. The 

Departments also welcome further 

comments on ways the SBC might be 

coordinated with other group health 

plan disclosure materials (e.g., 

application and open season materials) 

to communicate effectively with 

participants and beneficiaries about 

their coverage and make it easy for them 

to compare coverage options while also 

avoiding undue cost or burden on plans 

and group health insurance issuers. 

Consistent with the goals of balancing 

effective communication and ease of 

comparison for individuals with 

minimization of cost and duplication, 

other sections of this preamble outline 

and invite comment on potential 

approaches to major elements of the 

SBC—the statutorily-required uniform 

glossary and the coverage examples—in 

the interest of streamlining standards 

and making implementation of these 

components as helpful and user-friendly 

for individuals, and as workable and 

efficient as possible. 

As discussed below, PHS Act section 

2715 generally directs group health 

plans and health insurance issuers to 

comply with the SBC requirements 

beginning on or after March 23, 2012. 

Comments are requested regarding 

factors that may affect the feasibility of 

implementation within this time frame. 

After the public comment period on 

these documents, the Departments will 

finalize the SBC template and 

instructions. Consistent with PHS Act 

section 2715(c), the Departments will 

periodically review and update the 

documents as appropriate, taking into 

account public comments. 

2. Providing the SBC 

Paragraph (a) of the proposed 

regulations implements the general 

disclosure requirement and sets forth 

the proposed standards for who 

provides an SBC, to whom, and when. 

PHS Act section 2715 generally sets 

forth that an SBC be provided to 

applicants, enrollees, and policyholders 

or certificate holders. PHS Act section 

2715(d)(3) places the responsibility to 

provide an SBC on ‘‘(A) a health 

insurance issuer (including a group 

health plan that is not a self-insured 

plan) offering health insurance coverage 

within the United States; or (B) in the 

case of a self-insured group health plan, 

the plan sponsor or designated 

administrator of the plan (as such terms 

are defined in section 3(16) of 

ERISA).’’ 7 Accordingly, these proposed 

regulations would interpret PHS Act 

section 2715 to apply to both group 

health plans and health insurance 

issuers offering group or individual 

health insurance coverage. In addition, 

consistent with the statute, these 

proposed regulations would make a 

plan administrator of a group health 

plan responsible for providing an SBC. 

Under the proposed regulations, the 

SBC would be provided in writing free 

of charge. 

In general, the proposed rules direct 

that the SBC be provided when a plan 

or individual is comparing health 

coverage options. If the information in 

the SBC changes between the time of 

application, when the coverage is 

offered, and when a policy is issued 

(often the case only for individual 

market coverage), the proposal would 

require that an updated SBC be 

provided. If the information is 

unchanged, the SBC does not need to be 

provided again, except upon request. 

This general approach is explained 

more fully below. 

a. Provision of the SBC Automatically 

by an Issuer to a Plan 

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

regulations provides that a health 

insurance issuer offering group health 

insurance coverage provide the SBC to 

a group health plan (including, for this 

purpose, its sponsor) upon an 

application or request for information 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52445 

8ERISA section 3(7) defines a participant as: Any 

employee or former employee of an employer, or 

any member or former member of an employee 

organization, who is or may become eligible to 

receive a benefit of any type from an employee 

benefit plan which covers employees or members 

of such organization, or whose beneficiaries may be 

eligible to receive any such benefit. ERISA section 

3(8) defines a beneficiary as: A person designated 

by a participant, or by the terms of an employee 

benefit plan, who is or may become entitled to a 

benefit thereunder. 

9With respect to insured group health plan 

coverage, PHS Act section 2715 generally places the 

obligation to provide an SBC on both a plan and 

issuer. As discussed below, under section II.A.2.d., 

‘‘Special Rules to Prevent Unnecessary Duplication 

With Respect to Group Health Coverage’’, if either 

the issuer or the plan provides the SBC, both will 

have satisfied their obligations. As they do with 

other notices required of both plans and issuers 

under Part 7 of ERISA, Title XXVII of the PHS Act, 

and Chapter 100 of the Code, the Departments 

expect plans and issuers to make contractual 

arrangements for sending SBCs. Accordingly, the 

remainder of this preamble generally refers to 

requirements for plans or issuers. 

10Regulations regarding special enrollment can 

be found at 26 CFR 54.9801–6, 29 CFR 2590.701– 

6, and 45 CFR 146.117. 

11Moreover, this provision is consistent with 

requirements under ERISA section 104(b)(4), which 

requires ERISA-covered group health plans to 

provide to participants and beneficiaries, upon 

request, copies of the instruments under which the 

plan is established or operated. 

by the plan about the health coverage 

(see section II.A.2.c. of this preamble, 

below, for a discussion of this proposal). 

Under this proposal, the SBC must be 

provided as soon as practicable 

following the request, but in no event 

later than seven days following the 

request. If an SBC is provided upon 

request for information about health 

coverage and the plan subsequently 

applies for health coverage, a second 

SBC will be provided automatically 

only if the information in the SBC has 

changed. If there is a change to the 

information in the SBC before the 

coverage is offered, or before the first 

day of coverage, the issuer must update 

and provide a current SBC to the plan 

no later than the date of the offer (or no 

later than the first day of coverage, as 

applicable). The Departments recognize 

that often the only change to the SBC is 

a final premium quote (usually in the 

individual health insurance market or 

the small group market). The 

Departments request comments on 

whether, in such circumstances, 

premium information can be provided 

in another way that is easily 

understandable and useful to plan 

sponsors and individuals, other than by 

sending a new, full SBC. 

An issuer also must provide a new 

SBC if and when the policy, certificate, 

or contract (for simplicity, referred to 

collectively as a ‘‘policy’’ in the 

remainder of this preamble) is renewed 

or reissued. In the case of renewal or 

reissuance, if the issuer requires written 

application materials for renewal (in 

either paper or electronic form), it must 

provide the SBC no later than the date 

the materials are distributed. If renewal 

or reissuance is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of the new policy 

year. 

b. Provision of the SBC Automatically 

by a Plan or Issuer to Participants and 

Beneficiaries 

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

proposed regulations, a group health 

plan (including the plan administrator), 

and a health insurance issuer offering 

group health insurance coverage, must 

provide an SBC to a participant or 

beneficiary 8 with respect to each benefit 

package offered for which the 

participant or beneficiary is eligible.9

The SBC must be provided as part of 

any written application materials that 

are distributed by the plan or issuer for 

enrollment. If the plan does not 

distribute written application materials 

for enrollment, the SBC must be 

distributed no later than the first date 

the participant is eligible to enroll in 

coverage for the participant and any 

beneficiaries. If there is any change to 

the information required to be in the 

SBC before the first day of coverage, the 

plan or issuer must update and provide 

a current SBC to a participant or 

beneficiary no later than the first day of 

coverage. 

The plan or issuer must also provide 

the SBC to special enrollees within 

seven days of a request for enrollment 

pursuant to a special enrollment 

period.10 Additionally, the plan or 

issuer must provide a new SBC if and 

when the coverage is renewed. 

Specifically, if written application 

materials are required for renewal (in 

either paper or electronic form), the SBC 

must be provided no later than the date 

the materials are distributed. If renewal 

is automatic, the proposed rules provide 

that the SBC must be provided no later 

than 30 days prior to the first day of 

coverage in the new plan year. 

c. Provision of the SBC Upon Request 

The regulations propose that a health 

insurance issuer offering group health 

insurance coverage provide the SBC to 

a group health plan (and a plan or issuer 

must provide the SBC to a participant or 

beneficiary) upon request, as soon as 

practicable, but in no event later than 

seven days following the request. 

Although PHS Act section 2715 does 

not specifically reference furnishing 

SBCs on request, PHS Act section 

2715(a) authorizes the Departments to 

develop standards for providing the SBC 

to applicants, enrollees, policyholders, 

and certificate holders. The 

Departments believe that this provision 

recognizes that plans and individuals 

may need or desire the information 

provided in the SBC at times other than 

those set forth in the statute to ensure 

that the plans and individuals have 

continuous access to coverage and cost 

information to make informed choices 

about health coverage.11 In addition, 

while the ‘‘upon request’’ provision may 

result in some additional administrative 

work for plans and issuers, the 

Departments have used discretion 

elsewhere in these proposed regulations 

to create special rules for avoiding 

duplication and also propose to reduce 

burden by facilitating electronic 

transmittal of the SBC, where 

appropriate. Accordingly, the 

Departments have sought to balance 

providing consumer access to SBCs with 

minimizing burdens on employers and 

insurers. 

d. Special Rules To Prevent 

Unnecessary Duplication With Respect 

to Group Health Coverage 

The Departments propose, in 

paragraph (a)(1)(iii), three rules to 

streamline provision of the SBC and 

prevent unnecessary duplication with 

respect to group health plan coverage. 

First, the requirement to provide an SBC 

will be considered satisfied for all 

entities if the SBC is provided by any 

entity, so long as all timing and content 

requirements are also satisfied. For 

example, if a health insurance issuer 

offering group health insurance 

coverage provides a complete, timely 

SBC to the plan’s participants and 

beneficiaries, the plan’s requirement to 

provide the SBC will be satisfied. 

Second, if a participant and any 

beneficiaries are known to reside at the 

same address, providing a single SBC to 

that address will satisfy the obligation to 

provide the SBC for all individuals 

residing at that address. However, if a 

beneficiary’s last known address is 

different than the participant’s last 

known address, a separate SBC must be 

provided to the beneficiary at the 

beneficiary’s last known address. 

Finally, to further reduce unnecessary 

duplication with respect to a group 

health plan that offers multiple benefit 

packages, in connection with renewal, 

the plan and issuer only need to 

automatically provide a new SBC with 

respect to the benefit package in which 

a participant or beneficiary is enrolled. 

SBCs are not required to be provided 

automatically with respect to benefit 

packages in which the participant or 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52446 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

12See page 4 of the NAIC Draft Instruction Guide 

for Group Policies (available at http://www.naic.

org/documents/committees_b_consumer_

information_hhs_dol_submission_1107_inst_

grp.pdf). 

beneficiary is not enrolled. However, if 

a participant or beneficiary requests an 

SBC with respect to another benefit 

package for which the participant or 

beneficiary is eligible, the SBC must be 

provided as soon as practicable, but in 

no event later than seven days following 

the request. 

e. Provision of the SBC by an Issuer 

Offering Individual Market Coverage 

Under these regulations, the Secretary 

of HHS sets forth proposed standards 

applicable to individual health 

insurance coverage for who provides an 

SBC, to whom, and when. The intent is 

to parallel the proposed group market 

requirements described above, with 

only those changes necessary to reflect 

the differences between the two 

markets. For example, individual 

policyholders and dependents in the 

individual market are comparable to 

group health plan participants and 

beneficiaries. Accordingly, an issuer 

offering individual health insurance 

coverage must provide an SBC as soon 

as practicable after receiving a request 

for application or a request for 

information, but in no event later than 

seven days after receipt of the request. 

If an individual later applies for the 

same policy, a second SBC is required 

to be provided only if the information 

in the SBC has changed. 

An issuer that makes an offer of 

coverage must provide an updated SBC 

only if it has modified the terms of 

coverage for the individual (including as 

a result of medical underwriting) that 

are required to be reflected in the SBC. 

Similarly, when an individual accepts 

the offer of coverage, if any terms are 

modified before the first day of 

coverage, an updated SBC must again be 

provided no later than the first day of 

coverage. A health insurance issuer will 

provide an SBC annually at renewal, no 

later than 30 days before the start of the 

new policy year, reflecting any changes 

effective for the new policy year. 

Finally, similar to the group health 

coverage rules, for individual health 

insurance coverage that covers more 

than one individual (or an application 

for coverage that is being made for more 

than one individual), if all those 

individuals are known to reside at the 

same address, a single SBC may be 

provided to that address. This single 

SBC will satisfy the requirement to 

provide the SBC for all individuals 

residing at that address. However, if an 

individual’s last known address is 

different than the last known address of 

the individual requesting coverage, the 

policyholder, or a dependent of either, 

a separate SBC must be provided to that 

individual at the individual’s last 

known address. 

3. Content 

PHS Act section 2715(b)(3) generally 

provides that the SBC must include: 

a. Uniform definitions of standard 

insurance terms and medical terms so 

that consumers may compare health 

coverage and understand the terms of 

(or exceptions to) their coverage; 

b. A description of the coverage, 

including cost sharing, for each category 

of benefits identified by the 

Departments; 

c. The exceptions, reductions, and 

limitations on coverage; 

d. The cost-sharing provisions of the 

coverage, including deductible, 

coinsurance, and copayment 

obligations; 

e. The renewability and continuation 

of coverage provisions; 

f. A coverage facts label that includes 

examples to illustrate common benefits 

scenarios (including pregnancy and 

serious or chronic medical conditions) 

and related cost sharing based on 

recognized clinical practice guidelines; 

g. A statement about whether the plan 

provides minimum essential coverage as 

defined under section 5000A(f) of the 

Code, and whether the plan’s or 

coverage’s share of the total allowed 

costs of benefits provided under the 

plan or coverage meets applicable 

requirements; 

h. A statement that the SBC is only a 

summary and that the plan document, 

policy, or certificate of insurance should 

be consulted to determine the governing 

contractual provisions of the coverage; 

and 

i. A contact number to call with 

questions and an Internet Web address 

where a copy of the actual individual 

coverage policy or group certificate of 

coverage can be reviewed and obtained. 

The proposed regulations generally 

parallel the content elements set forth in 

the statute. As discussed above, the 

Departments are issuing a document 

that proposes to use the NAIC’s 

recommended SBC template and 

instructions to satisfy the SBC content 

and appearance requirements of PHS 

Act section 2715. 

A few of the content elements 

included in the NAIC’s 

recommendations warrant further 

explanation and discussion. The 

template developed by the NAIC 

working group and transmitted to the 

Departments includes four elements not 

specified in the statute. Consistent with 

the Departments’ approach of including 

all of the NAIC’s recommended 

materials, the proposed regulations 

include these additional recommended 

elements. The four additional elements 

are: (1) For plans and issuers that 

maintain one or more networks of 

providers, an Internet address (or 

similar contact information) for 

obtaining a list of the network 

providers; (2) for plans and issuers that 

maintain a prescription drug formulary, 

an Internet address where an individual 

may find more information about the 

prescription drug coverage under the 

plan or coverage; (3) an Internet address 

where an individual may review and 

obtain the uniform glossary; and (4) 

premiums (or cost of coverage for selfinsured group health plans). 

The Departments have included these 

elements in the proposed regulation 

consistent with the NAIC’s 

recommendations. PHS Act section 

2715(a) requires the Departments to 

develop regulations for provision of an 

SBC that accurately describes benefits 

and coverage, which includes the 

statutory content elements listed above, 

but the Departments believe they are not 

limited to them. The statute also 

requires the Departments to consult 

with the NAIC on the development of 

the standards for the SBC, which 

includes content. The Departments’ 

proposal includes all of the NAIC’s 

recommendations, including the 

additional content, and the Departments 

invite comments on this approach and 

the four additional SBC content 

elements. For example, with respect to 

the requirement to include an Internet 

address that may be used to obtain a 

copy of the uniform glossary, the 

Departments invite comments on 

whether the SBC also should disclose 

the option to receive a paper copy of the 

uniform glossary upon request. 

The NAIC instructions provide that 

the premium generally is the premium 

as charged by the issuer (which may be 

evidenced in a rate table attached to the 

SBC),12 or the cost of coverage in the 

case of self-insured plans. The NAIC 

instructions further provide that, in the 

case of a group health plan, a 

participant or beneficiary should 

consult the employer for information 

regarding the actual cost of coverage net 

of any employer subsidy. This raises 

issues regarding the ability to compare 

premium or cost information between 

coverage options. The Departments 

request comments regarding whether 

the SBC should include premium or 

cost information and if so, the extent to 

which such information should reflect 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52447 

13National Association of Insurance 

Commissioners, Consumer Information Working 

Group, December 17, 2010 Letter to the Secretaries. 

Available at http://www.naic.org/documents/

committees_b_consumer_information_ppaca_letter_

to_sebelius.pdf. 

14National 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. 

15PHS 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. 

16The minimum essential coverage and 

minimum value requirements are part of a larger set 

of health coverage reforms that take effect on 

January 1, 2014. The Departments’ proposal 

recognizes this effective date and the need for 

additional guidance with respect to these 

requirements and is consistent with the 

recommendation in the transmittal letter from the 

NAIC. The NAIC will continue to work to develop 

a recommendation for this SBC requirement and 

will submit it to the Departments at a later date. 

17 In addition to section 2715 of the PHS Act, 

these authorities include, but are not limited to, 

section 6056 of the Code, as added by section 1514 

of the Affordable Care Act (requiring employers to 

report to the Internal Revenue Service specific 

information related to employer-sponsored health 

coverage provided to employees); and section 18B 

of the Fair Labor Standards Act, as added by section 

1512 of the Affordable Care Act (requiring 

employers to disclose to employees information 

regarding Exchange coverage options). 

the actual cost to an individual net of 

any employer contribution, as well as 

the extent to which the cost information 

should include costs for different tiers 

of coverage (for example, self-only, 

family). The Departments also request 

comments on how this information can 

be provided in a way that allows 

individuals and plan sponsors to make 

meaningful comparisons about the cost 

of their coverage options. 

With respect to the definitions, the 

Departments propose to follow an 

approach consistent with the 

recommendations received from the 

NAIC.13 Specifically, PHS Act section 

2715(b)(3)(A) requires plans and issuers 

to include in the SBC ‘‘uniform 

definitions’’ of common health 

insurance terms that are consistent with 

the standards developed under section 

2715(g). PHS Act section 2715(g) directs 

the Departments to ‘‘provide for the 

development of standards for the 

definitions of terms used in health 

insurance coverage,’’ including 

specified insurance-related terms and 

medical terms, as well as other terms 

the Departments determine are 

important to define. 

The NAIC working group adopted a 

two-part approach to the definitions. 

First, it drafted a consumer-friendly 

uniform glossary, which includes 

definitions of health coverage 

terminology, to be provided in 

connection with the SBC. The NAIC’s 

uniform glossary provides simple, 

general, descriptive definitions designed 

to help consumers understand terms 

and concepts commonly used in health 

coverage. For example, ‘‘out-of-pocket 

limit’’ is defined in the NAIC’s uniform 

glossary as: 

The most you pay during a policy period 

(usually a year) before your health insurance 

or plan begins to pay 100% of the allowed 

amount. This limit never includes your 

premium, balance-billed charges or health 

care your health insurance or plan doesn’t 

cover. Some health insurance or plans don’t 

count all of your co-payments, deductibles, 

co-insurance payments, out-of-network 

payments or other expenses toward this 

limit. 

In these proposed regulations, and as 

described more fully below under 

section II.C. of this preamble under the 

heading ‘‘Uniform Glossary’’, the 

Departments propose that the NAIC 

uniform glossary be used to satisfy the 

requirements of PHS Act 2715(g). 

At the same time, these generic 

glossary definitions, alone, would not 

necessarily help consumers understand 

what terms mean under a given plan or 

policy, nor would they support 

meaningful comparison of coverage 

options under PHS Act section 

2715(b)(3)(A) because the generic terms 

used in the glossary are not plan- or 

policy-specific and would not enable 

consumers to understand what the 

terms actually mean in the context of a 

specific contract. Therefore, in addition 

to the uniform glossary, the NAIC 

working group also developed a ‘‘Why 

this Matters’’ column for the draft SBC 

template (with instructions for plans 

and issuers to use in completing the 

SBC template).14 The instructions 

specify how plans and issuers must 

describe each coverage component in 

the SBC. For example, the instructions 

indicate what information must be 

provided about a plan’s out-of-pocket 

limit on cost sharing, including whether 

copayments, out-of-network 

coinsurance, and deductibles are subject 

to this limit. 

In the Departments’ proposal, the 

‘‘Why this Matters’’ column in the SBC 

template, together with the instructions 

for completing this column, constitute 

the definitions required to be provided 

under PHS Act section 2715(b)(3)(A). 

This approach allows plans and issuers 

flexibility in how they design benefits 

and coverage features, but proposes that 

benefits and features be described in a 

consistent way so that individuals and 

employers will understand them and 

appreciate differences from one plan or 

policy to the next. 

With respect to the element of the 

SBC regarding a statement about 

whether a plan or coverage provides 

minimum essential coverage (as defined 

under section 5000A(f) of the Code) and 

whether the plan’s or coverage’s share of 

the total allowed costs of benefits 

provided under the plan or coverage 

meets applicable minimum value 

requirements (minimum essential 

coverage statement),15 because this 

content is not relevant until other 

elements of the Affordable Care Act are 

implemented, this statement is not in 

the NAIC recommendations. For the 

same reason, these proposed regulations 

provide that the minimum essential 

coverage statement is not required to be 

in the SBC until the plan or coverage is 

required to provide an SBC with respect 

to coverage beginning on or after 

January 1, 2014.16

Starting in 2014, certain individuals 

who purchase health insurance coverage 

through the new Affordable Insurance 

Exchanges (‘‘Exchanges’’) may be 

eligible for a premium tax credit to help 

pay for the cost of that coverage. In 

general, individuals offered affordable 

minimum essential coverage under an 

employer-sponsored plan will not be 

eligible to receive a premium tax credit. 

Correctly establishing whether an 

employer is offering affordable 

minimum essential coverage is 

important to individuals, employers, 

and Exchanges and necessitates the 

verification of certain information about 

employer coverage, including the 

information in the minimum essential 

coverage statement. The Departments 

are exploring several reporting options 

under the Affordable Care Act and other 

applicable statutory authorities 17 to 

determine how information about 

employer-provided coverage can be 

provided and verified in a manner that 

limits the burden on individuals, 

employers, and Exchanges. Because the 

statutory SBC elements include the 

information in the minimum essential 

coverage statement, the Departments 

invite comments on how employers 

might provide this information to 

employees and the Exchanges in a 

manner that minimizes duplication and 

burden. The Departments also recognize 

that some of the plan level information 

that is required to be provided in the 

SBC is also required to be provided 

under section 6056 of the Code 

(requiring employers to report to the IRS 

specific information related to 

employer-sponsored health coverage 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52448 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

18The National Guideline Clearinghouse, within 

the Agency for Healthcare Research and Quality 

(AHRQ), publishes systematically developed 

statements to assist practitioner and patient 

decisions about appropriate health care for specific 

clinical circumstances, available at http:// 

www.guideline.gov/. 

19A general instruction guide for completing the 

coverage examples portion of the SBC, which is 

identical to that transmitted by the NAIC, is 

included in the document published today by the 

Departments. These instructions, together with 

specific assumptions for coding data and 

reimbursement rates published today on HHS’s 

Web site comprise the Departments’ instructions for 

completing the coverage examples portion of the 

SBC. See http://cciio.cms.gov. http://www.naic.org/ 

documents/committees_b_consumer_information_

hhs_dol_submission_1107_template_blank.xls. The 

coding and reimbursement rate assumptions were 

developed by HHS and are also open for public 

comment. 

20See http://www.naic.org/documents/

committees_b_consumer_information_final_

coverage_ex.pdf. 

21PHS 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. 

provided to employees) and are 

coordinating their efforts to determine 

how and whether the same data can be 

used for multiple purposes. To help 

develop a simple, efficient system for 

employers, the Treasury Department 

and the IRS intend to request comments 

on employer information reporting 

required under section 6056 of the 

Code. 

The last SBC content item that merits 

further discussion is the coverage facts 

label. The statute requires that an SBC 

contain a ‘‘coverage facts label.’’ For 

ease of reference, the regulations 

propose to use ‘‘coverage examples,’’ the 

term recommended by the NAIC, in 

place of the statutory term. As specified 

in the statute, the proposed regulations 

provide that the coverage examples 

illustrate benefits provided under the 

plan or coverage for common benefits 

scenarios, including pregnancy and 

serious or chronic medical conditions. 

The coverage example would estimate 

what proportion of expenses under an 

illustrative benefits scenario might be 

covered by a given plan or policy. 

Consumers then could use this 

information to compare their share of 

the costs of care under different plan or 

coverage options to make an informed 

purchasing decision. 

Under the proposed regulations, 

consistent with the recommendations of 

the NAIC working group, a benefits 

scenario is a hypothetical situation, 

consisting of a sample treatment plan 

for a specified medical condition during 

a specific period of time, based on 

recognized clinical practice guidelines 

available through the National 

Guideline Clearinghouse.18 A benefits 

scenario would include the information 

needed to simulate how claims would 

be processed under the scenario to 

generate an estimate of cost sharing a 

consumer could expect to pay under the 

benefit package. The document 

published contemporaneously with 

these proposed regulations includes 

specific instructions and an HHS Web 

site with specific information necessary 

to simulate benefits covered under the 

plan or policy for specified benefits 

scenarios.19

These proposed regulations provide 

that the Departments may identify up to 

six coverage examples that may be 

required in an SBC. A maximum of six 

coverage examples was discussed by the 

NAIC working group, so that consumers 

may easily read, understand, and 

compare how benefits are provided for 

different common medical conditions. 

In future years, the SBC may include 

coverage examples in addition to the 

three proposed now. The Departments 

propose to limit the number of coverage 

examples to no more than six to limit 

the burden on plans and issuers and to 

ensure that there is adequate space in 

the SBC to present coverage examples in 

a manner that is easy to read and useful 

for individuals. A document published 

contemporaneously with these proposed 

regulations adopts a phase-in approach 

to the coverage examples, and uses the 

three coverage examples recommended 

by NAIC for inclusion first—having a 

baby (normal delivery), treating breast 

cancer, and managing diabetes.20

The Departments invite comments on 

the proposed coverage examples, 

whether additional benefits scenarios 

would be helpful and, if so, what those 

examples should be. The Departments 

also invite comments on the benefits 

and costs associated with developing 

multiple coverage examples, as well as 

how multiple coverage examples might 

promote or hinder the ability to 

understand and compare terms of 

coverage. It is anticipated that any 

additional coverage examples will only 

be required to be provided 

prospectively, and that plans and 

issuers will be provided with adequate 

time for compliance. Additionally, the 

Departments invite comments on 

whether and how to phase in the 

implementation of the requirement to 

provide coverage examples. For 

example, one option would provide that 

in 2012, coverage examples would only 

need to be provided for the SBCs with 

respect to a subset of all benefits 

packages offered by group health plans 

or health insurance issuers, with 

coverage examples required to be 

provided for all benefits packages in 

later years. Comments are invited on 

these issues. 

Comments are also requested on 

whether it would be feasible or 

desirable to permit plans and issuers to 

input plan- or policy-specific 

information into a central Internet 

portal, such as the Federal health care 

reform Web site (http:// 

www.healthcare.gov), that would use 

the information to generate the coverage 

examples for each plan or policy. The 

examples would then be available on 

the Internet portal for access by 

individuals. Alternatively, some have 

suggested that plans and issuers might 

provide individuals, in a convenient 

format in the SBC, the several items of 

plan- or policy-specific information 

necessary to generate the coverage 

examples and a reference to the Internet 

portal, so that individuals could input 

the information into the Internet portal 

to generate the coverage examples for 

the plan or policy. The Departments 

note that the NAIC considered and 

rejected the idea of a ‘‘cost calculator’’ 

or similar tool. The Departments solicit 

comments on the cost and benefits of 

these alternatives, including whether 

such approaches would provide an 

efficient and effective method for 

individuals, plans, and issuers to 

generate or access the coverage 

examples and how any such approaches 

could adequately serve individuals who 

do not have regular access to the 

Internet (for example, by disclosing in 

the SBC the option to obtain paper 

copies of coverage examples generated 

by the plan or issuer). 

4. Appearance 

Section 2715 of the PHS Act sets forth 

the appearance for the SBC. 

Specifically, the statute provides that 

the SBC is to be presented in a uniform 

format, utilizing terminology 

understandable by the average plan 

enrollee, that does not exceed four pages 

in length, and does not include print 

smaller than 12-point font. The 

proposed regulations, consistent with 

the NAIC recommendation, interpret the 

four-page limitation as four doublesided pages.21 The Departments’ view is 

that this approach will enable group 

health plans, participants and 

beneficiaries, and individuals in the 

individual insurance market to receive 

enough information to shop for, 

compare, and make informed decisions 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52449 

22PHS Act sections 2715(b)(3)(A) and (g)(2) 

clearly reference consumers comparing coverage 

and PHS Act section 2715(b)(1) requires a uniform 

format, to enable shopping and comparing health 

coverage options. 

23National Association of Insurance 

Commissioners, Consumer Information Working 

Group, December 17, 2010 Letter to the Secretaries. 

Available at http://www.naic.org/documents/

committees_b_consumer_information_ppaca_letter_

to_sebelius.pdf. 

24On 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. 

regarding various coverage options that 

may be available to them.22 The 

Departments seek comments on this 

approach. 

Consistent with the NAIC 

recommendations provided to the 

Departments,23 under these proposed 

regulations, a group health plan or a 

health insurance issuer will provide the 

SBC as a stand-alone document in the 

form authorized by the Departments and 

completed in accordance with the 

instructions and guidance for 

completing the SBC that are authorized 

by the Departments. As noted earlier in 

this preamble, comments are invited on 

whether and how the SBC might best be 

coordinated with the SPD and other 

group health plan disclosure materials. 

5. Form and Manner 

a. Group Health Plan Coverage 

To facilitate faster and less 

burdensome disclosure of the SBC, and 

consistent with PHS Act section 

2715(d)(2), the proposed regulations set 

forth rules to facilitate electronic 

transmittal of the SBC, where 

appropriate. Specifically, an SBC 

provided by a plan or issuer to a 

participant or beneficiary may be 

provided in paper form. Alternatively, 

for plans and issuers subject to ERISA 

or the Code, the SBC may be provided 

electronically if the requirements of the 

Department of Labor’s electronic 

disclosure safe harbor at 29 CFR 

2520.104b–1(c) are met.24 For nonFederal governmental plans, the 

regulations propose that the SBC may be 

provided electronically if either the 

substance of the provisions of the 

Department of Labor’s electronic 

disclosure rule are met, or if the 

provisions governing electronic 

disclosure in the individual health 

insurance market (described below) are 

met. 

With respect to an SBC provided by 

an issuer to a plan, the SBC may be 

provided in paper form or electronically 

(such as e-mail transmittal or an Internet 

posting on the issuer’s Web site or on 

http://www.healthcare.gov). For 

electronic forms, the format must be 

readily accessible by the plan; the SBC 

must be provided in paper form free of 

charge upon request; and for Internet 

postings, the plan must be notified by 

paper or e-mail that the documents are 

available on the Internet, and given the 

Web address. The Departments invite 

comments on whether any clarifications 

are needed with respect to the ‘‘readily 

accessible’’ standard (for example, 

whether the requirements for passwords 

or special software create a sufficient 

burden that the documents are not 

‘‘readily accessible’’). The Departments 

also invite comment on whether 

modifications or adaptations of the SBC 

are necessary to facilitate or improve 

electronic disclosure. 

b. Individual Health Insurance Coverage 

With respect to the individual market, 

the proposed regulations set forth the 

circumstances in which an issuer 

offering individual health insurance 

coverage may provide an SBC in either 

paper or electronic form. Specifically, 

under these proposed regulations, 

unless specified otherwise by an 

individual, an issuer would be required 

to provide an SBC (and any subsequent 

SBC) in paper form if, upon the 

individual’s request for information or 

request for an application, the 

individual makes the request in person, 

by phone or by fax, or by U.S. mail or 

courier service; or if, when submitting 

an application, the individual completes 

the application for coverage by hand, by 

phone or by fax, or by U.S. mail or 

courier service. As an alternative, the 

Departments seek comments on whether 

it might be appropriate to allow issuers 

to fulfill an individual’s request in 

electronic form, unless the individual 

requests a paper form. 

Under this proposed rule, an issuer 

may provide an SBC (and any 

subsequent SBC) in electronic form 

(such as through an Internet posting or 

via electronic mail) if an individual 

requests information or requests an 

application for coverage electronically; 

or, if an individual submits an 

application for coverage electronically. 

To ensure actual receipt of an SBC 

provided in electronic form, these 

proposed regulations would set forth 

certain safeguards for electronic 

disclosure in the individual market. 

Under the proposed regulations, an 

issuer that provides the SBC 

electronically must: 

• Request that an individual 

acknowledge receipt of the SBC; 

• Make the SBC available in an 

electronic format that is readily usable 

by the general public; 

• If the SBC is posted on the Internet, 

display the SBC in a location that is 

prominent and readily accessible to the 

individual and provide timely notice, in 

electronic or non-electronic form, to 

each individual who requests 

information about, or an application for, 

coverage, that apprises the individual 

the SBC is available on the Internet and 

includes the applicable Internet address; 

• Promptly provide a paper copy of 

the SBC upon request without charge, 

penalty, or the imposition of any other 

condition or consequence, and provide 

the individual with the ability to request 

a paper copy of the SBC both by using 

the issuer’s Web site (such as by 

clicking on a clearly identified box to 

make the request) and by calling a 

readily available telephone line, the 

number for which is prominently 

displayed on the issuer’s Web site, 

policy documents, and other marketing 

materials related to the policy and 

clearly identified as to purpose; and 

• Ensure an SBC provided in 

electronic form is provided in 

accordance with the appearance, 

content, and language requirements of 

this section. 

The Departments welcome comments as 

to whether these or other safeguards are 

appropriate. 

Finally, consistent with the standards 

for electronic disclosure, these proposed 

regulations seek to reduce the burden of 

providing an SBC to individuals 

shopping for coverage. Specifically, 

these proposed regulations provide that 

a health insurance issuer that complies 

with the requirements set forth at 45 

CFR 159.120 (75 FR 24470) for reporting 

to the Federal health care reform 

insurance Web portal would be deemed 

to comply with the requirement to 

provide the SBC to an individual 

requesting information about coverage 

prior to submitting an application. Any 

SBC furnished at the time of application 

or subsequently, however, would be 

required to be provided in a form and 

manner consistent with the rules 

described above. 

6. Language 

PHS Act section 2715(b)(2) provides 

that standards shall ensure that the SBC 

‘‘is presented in a culturally and 

linguistically appropriate manner.’’ 

These proposed regulations provide 

that, to satisfy the requirement to 

provide the SBC in a culturally and 

linguistically appropriate manner, a 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52450 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

25See 75 FR 43330 (July 23, 2010), as amended 

by 76 FR 37208 (June 24, 2011). 

26The SBC template, as recommended by the 

NAIC, does not include this statement; however, 

these proposed regulations would require that plans 

and issuers include it. 

27See DOL Information Letter, Washington Star/ 

Washington-Baltimore Newspaper Guild to 

Munford Page Hall, II, Baker & McKenzie (February 

8, 1985). 

28National Association of Insurance 

Commissioners, Consumer Information Working 

Group, December 17, 2010 Letter to the Secretaries. 

Available at http://www.naic.org/documents/

committees_b_consumer_information_ppaca_letter_

to_sebelius.pdf. 

plan or issuer follows the rules for 

providing appeals notices in a culturally 

and linguistically appropriate manner 

under PHS Act section 2719, and 

paragraph (e) of its implementing 

regulations.25 In general, those rules 

provide that, in specified counties of the 

United States, plans and issuers must 

provide interpretive services, and must 

provide written translations of the SBC 

upon request in certain non-English 

languages. In addition, in such counties, 

English versions of the SBC must 

disclose the availability of language 

services in the relevant language.26 The 

counties in which this must be done are 

those in which at least ten percent of the 

population residing in the county is 

literate only in the same non-English 

language, as determined in guidance. 

The Departments welcome comments 

on whether and how to provide written 

translations of the SBC in these nonEnglish languages. (Note, nothing in 

these proposed regulations should be 

construed as limiting an individual’s 

rights under Federal or State civil rights 

statutes, such as Title VI of the Civil 

Rights Act of 1964 (Title VI) which 

prohibits recipients of Federal financial 

assistance, including issuers 

participating in Medicare Advantage, 

from discriminating on the basis of race, 

color, or national origin. To ensure nondiscrimination on the basis of national 

origin, recipients are required to take 

reasonable steps to ensure meaningful 

access to their programs and activities 

by limited English proficient persons. 

For more information, see, ‘‘Guidance to 

Federal Financial Assistance Recipients 

Regarding Title VI Prohibition Against 

National Origin Discrimination 

Affecting Limited English Proficient 

Persons,’’ available at http:// 

www.hhs.gov/ocr/civilrights/resources/ 

specialtopics/lep/ 

policyguidancedocument.html.) 

B. Notice of Modifications 

Section 2715(d)(4) of the PHS Act 

directs that a group health plan or 

health insurance issuer offering group or 

individual health insurance coverage to 

provide notice of a material 

modification if it makes a material 

modification (as defined under ERISA 

section 102, 29 U.S.C. 1022) in any of 

the terms of the plan or coverage 

involved that is not reflected in the most 

recently provided SBC. The proposed 

regulations interpret the statutory 

reference to the SBC to mean that only 

a material modification that would 

affect the content of the SBC would 

require plans and issuers to provide this 

notice. In these circumstances, the 

notice must be provided to enrollees (or, 

in the individual market, policyholders) 

no later than 60 days prior to the date 

on which such change will become 

effective, if it is not reflected in the most 

recent SBC provided and occurs other 

than in connection with a renewal or 

reissuance of coverage. A material 

modification, within the meaning of 

section 102 of ERISA, includes any 

modification to the coverage offered 

under a plan or policy that, 

independently, or in conjunction with 

other contemporaneous modifications or 

changes, would be considered by an 

average plan participant (or in the case 

of individual market coverage, an 

average individual covered under a 

policy) to be an important change in 

covered benefits or other terms of 

coverage under the plan or policy.27 A 

material modification could be an 

enhancement of covered benefits or 

services or other more generous plan or 

policy terms. It includes, for example, 

coverage of previously excluded 

benefits or reduced cost-sharing. A 

material modification could also be a 

material reduction in covered services 

or benefits, as defined in 29 CFR 

2520.104b–3(d)(3), or more stringent 

requirements for receipt of benefits. As 

a result, it also includes changes or 

modifications that reduce or eliminate 

benefits, increase premiums and costsharing, or impose a new referral 

requirement. 

PHS Act section 2715 and these 

proposed regulations describe the 

timing for when a notice of material 

modification must be provided in 

situations other than upon renewal at 

the end of a plan or policy year when 

a new SBC is provided under the rules 

of paragraph (a) of the proposed rules. 

To the extent a plan or policy 

implements a mid-year change that is a 

material modification, that affects the 

content of the SBC, and that occurs 

other than in connection with a renewal 

or reissuance of coverage, paragraph (b) 

of the proposed regulations would 

require a notice of modifications to be 

provided 60 days in advance of the 

effective date of the change. This notice 

could be satisfied either by a separate 

notice describing the material 

modification or by providing an 

updated SBC reflecting the 

modification. For ERISA-covered group 

health plans subject to PHS Act section 

2715, this notice is in advance of the 

timing under the Department of Labor’s 

regulations set forth at 29 CFR 

2520.104b-3 that require the provision 

of a summary of material modification 

(SMM) (generally not later than 210 

days after the close of the plan year in 

which the modification or change was 

adopted, or, in the case of a material 

reduction in covered services or 

benefits, not later than 60 days after the 

date of adoption of the modification or 

change). In situations where a complete 

notice is provided in a timely manner 

under PHS Act section 2715(d)(4), of 

course, an ERISA-covered plan will also 

satisfy the requirement to provide an 

SMM under Part 1 of ERISA. The 

Departments invite comments on this 

expedited notice requirement, including 

whether there are any circumstances 

where 60-day advance notice might be 

difficult. The Departments also solicit 

comments on the format of the notice of 

modification, particularly for plans and 

issuers not subject to ERISA. 

C. Uniform Glossary 

Section 2715(g)(2) of the PHS Act 

directs the Departments to develop 

standards for definitions for at least the 

following insurance-related terms: coinsurance, co-payment, deductible, 

excluded services, grievance and 

appeals, non-preferred provider, out-ofnetwork co-payments, out-of-pocket 

limit, preferred provider, premium, and 

UCR (usual, customary and reasonable) 

fees. Section 2715(g)(3) of the PHS Act 

directs the Departments to develop 

standards for definitions for at least the 

following medical terms: durable 

medical equipment, emergency medical 

transportation, emergency room care, 

home health care, hospice services, 

hospital outpatient care, hospitalization, 

physician services, prescription drug 

coverage, rehabilitation services, and 

skilled nursing care. Additionally, the 

statute directs the Departments to 

develop standards for such other terms 

that will help consumers understand 

and compare the terms of coverage and 

the extent of medical benefits (including 

any exceptions and limitations). 

The NAIC working group 

recommended,28 and the Departments 

are proposing to adopt for this purpose, 

inclusion of the following additional 

terms in the uniform glossary: allowed 

amount, balance billing, complications 

of pregnancy, emergency medical 


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condition, emergency services, 

habilitation services, health insurance, 

in-network co-insurance, in-network copayment, medically necessary, network, 

out-of-network co-insurance, plan, 

preauthorization, prescription drugs, 

primary care physician, primary care 

provider, provider, reconstructive 

surgery, specialist, and urgent care. The 

uniform glossary proposed by the 

Departments is being issued in a 

document published elsewhere in 

today’s Federal Register. 

The Departments invite comments on 

the uniform glossary, including the 

content of the definitions and whether 

there are additional terms that are 

important to include in the uniform 

glossary so that individuals and 

employers may understand and 

compare the terms of coverage and the 

extent of medical benefits (or exceptions 

to those benefits). For example, the 

Departments are considering whether 

glossary definitions of any of the 

following terms would be helpful: 

claim, external review, maternity care, 

preexisting condition, preexisting 

condition exclusion period, or specialty 

drug. It is anticipated that any 

additional terms would be included in 

the uniform glossary prospectively, and 

that plans and issuers would be 

provided adequate time for compliance. 

The proposed regulations direct a 

plan or issuer to make the uniform 

glossary available upon request within 

seven days. The timing of disclosure is 

intended to be generally consistent with 

the proposed requirement, described in 

section II.A.2.c of this preamble. A plan 

or issuer may satisfy this disclosure 

requirement by providing an Internet 

address where an individual may 

review and obtain the uniform glossary, 

as described in section II.A.3 of this 

preamble. This Internet address may be 

a place the document can be found on 

the plan’s or issuer’s Web site. It may 

also be a place the document can be 

found on the Web site of either the 

Department of Labor or HHS. However, 

a plan or issuer must make a paper copy 

of the glossary available upon request. 

Group health plans and health 

insurance issuers will provide the 

uniform glossary in the appearance 

authorized by the Departments, so that 

the glossary is presented in a uniform 

format and uses terminology 

understandable by the average plan 

enrollee or individual covered under an 

individual policy. 

D. Preemption 

Section 2715 of the PHS Act is 

incorporated into ERISA section 715, 

and Code section 9815, and is subject to 

the preemption provisions of ERISA 

section 731 and PHS Act section 2724 

(implemented in 29 CFR 2590.731(a) 

and 45 CFR 146.143(a)). These 

provisions apply so that the 

requirements of part 7 of ERISA and 

part A of title XXVII of the PHS Act, as 

amended by the Affordable Care Act, are 

not to be ‘‘construed to supersede any 

provision of State law which 

establishes, implements, or continues in 

effect any standard or requirement 

solely relating to health insurance 

issuers in connection with group or 

individual health insurance coverage 

except to the extent that such standard 

or requirement prevents the application 

of a requirement’’ of part A of title 

XXVII of the PHS Act. Accordingly, 

State laws that impose on health 

insurance issuers requirements that are 

stricter than those imposed by the 

Affordable Care Act will not be 

superseded by the Affordable Care Act. 

Moreover, PHS Act section 2715(e) 

provides that the standards developed 

under PHS Act section 2715(a), ‘‘shall 

preempt any related State standards that 

require [an SBC] that provides less 

information to consumers than that 

required to be provided under this 

section, as determined by the 

[Departments].’’ 

Reading these two preemption 

provisions together, these proposed 

regulations would not prevent States 

from imposing separate, additional 

disclosure requirements on health 

insurance issuers. The Departments 

recognize the need to balance States’ 

interest in information disclosure 

regarding insurance coverage with the 

primary objective of PHS Act section 

2715 (as stated in the section title) of 

providing for the development and use 

of a short, uniform explanation of 

coverage document so that consumers 

may make apples-to-apples comparisons 

of plan and coverage options. 

E. Failure To Provide 

PHS Act section 2715(f), incorporated 

into ERISA section 715 and Code 

section 9815, provides that a group 

health plan (including its 

administrator), and a health insurance 

issuer offering group or individual 

health insurance coverage, that 

‘‘willfully fails to provide the 

information required under this section 

shall be subject to a fine of not more 

than $1,000 for each such failure.’’ In 

addition, under PHS Act section 2715(f), 

a separate fine may be imposed for each 

individual or entity for whom there is 

a failure to provide an SBC. Due to the 

different enforcement jurisdictions of 

the Departments, as well as their 

different underlying enforcement 

structures, the mechanisms for imposing 

the new penalty may vary slightly, as 

discussed below. 

1. Department of HHS 

Enforcement of Part A of Title XXVII 

of the PHS Act, including section 2715, 

is generally governed by PHS Act 

section 2723 and corresponding 

regulations at 45 CFR 150.101 et seq. 

Under those provisions, a State has the 

discretion to enforce the provisions 

against health insurance issuers in the 

first instance, and the Secretary of HHS 

only enforces a provision after the 

Secretary determines that a State has 

failed to substantially enforce the 

provision. If a State enforces a provision 

such as PHS Act section 2715, it uses its 

own enforcement mechanisms. If the 

Secretary enforces, the statute provides 

for penalties of up to $100 per day for 

each affected individual. 

PHS Act section 2715(f) provides that 

an entity that willfully fails to provide 

the information required under PHS Act 

section 2715 shall be subject to a fine of 

not more than $1,000 for each such 

failure. Such failure with respect to each 

enrollee constitutes a separate offense. 

This penalty can only be imposed by the 

Secretary. 

Paragraph (e) of the regulations 

proposed by HHS clarifies that States 

have primary enforcement authority 

over health insurance issuers for any 

violations, whether willful or not, using 

their own remedies. These proposed 

regulations also clarify that PHS Act 

section 2715 does not limit the 

Secretary’s authority to impose 

penalties for willful violations 

regardless of State enforcement. 

However, the Secretary intends to use 

enforcement discretion if the Secretary 

determines that the State is adequately 

addressing willful violations. 

The Secretary of HHS has direct 

enforcement authority for violations by 

non-Federal governmental plans, and 

will use the appropriate penalty for 

violations of section 2715, depending on 

whether the violation is willful. 

Proposed paragraph (e) of the HHS 

regulations cross references the 

enforcement regulations at 45 CFR 

150.101 et seq., and states that they 

relate to any failure, regardless of intent, 

by a health insurance issuer or nonFederal governmental plan, to comply 

with any requirement of section 2715 of 

the PHS Act. 

2. Departments of Labor and the 

Treasury 

The Department of Labor enforces the 

requirements of part 7 of ERISA and the 

Department of the Treasury enforces the 

requirements of chapter 100 of the Code 

with respect to group health plans 


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29See 64 FR 70164 (December 15, 1999). 

30Section 2715 is applicable to both 

grandfathered and non-grandfathered health plans. 

See 26 CFR 54.9815–1251(d), 29 CFR 2590.715– 

1251(d), and 45 CFR 147.120(d). 

maintained by an entity that is not a 

governmental entity. Generally the 

enforcement authority under these 

provisions applies to all 

nongovernmental group health plans, 

but the Department of Labor does not 

enforce the requirements of part 7 of 

ERISA with respect to church plans. 

On April 21, 1999, pursuant to section 

104 of the Health Insurance Portability 

and Accountability Act of 1996 

(HIPAA), Public Law 104–191, the 

Secretaries entered into a memorandum 

of understanding 29 that, among other 

things, established a mechanism for 

coordinating enforcement and avoiding 

duplication of effort for shared 

jurisdiction. The memorandum of 

understanding applies, as appropriate, 

to health legislation enacted after April 

21, 1999 over which at least two of the 

Departments share jurisdiction, 

including section 2715 of the PHS Act 

as incorporated into ERISA and the 

Code. Therefore, in enforcing PHS Act 

section 2715, the Departments of Labor 

and the Treasury will coordinate to 

avoid duplication in the case of group 

health plans that are not church plans 

and that are not maintained by a 

governmental entity. 

a. Department of Labor 

The Department of Labor will issue 

separate regulations in the future 

describing the procedures for 

assessment of the civil fine provided 

under PHS Act section 2715(f) as 

incorporated by section 715 of ERISA. 

In accordance with ERISA 502(b)(3), 29 

U.S.C. 1132(b)(3), the Secretary of Labor 

is not authorized to assess this fine 

against a health insurance issuer. 

b. Department of the Treasury 

If a group health plan (other than a 

plan maintained by a governmental 

entity) fails to comply with the 

requirements of chapter 100 of the Code, 

an excise tax is imposed under section 

4980D of the Code. The excise tax is 

generally $100 per day per individual 

for each day that the plan fails to 

comply with chapter 100 with respect to 

that individual. Numerous rules under 

section 4980D reduce the amount of the 

excise tax for failures due to reasonable 

cause and not to willful neglect. Special 

rules apply for church plans. Taxpayers 

subject to the excise tax under section 

4980D are required to report the failures 

under chapter 100 and the amount of 

the excise tax on IRS Form 8928. See 26 

CFR 54.4980D–1, 54.6011–2, and 

54.6151–1. 

Section 2715(f) of the PHS Act 

subjects a plan sponsor or designated 

administrator to a fine of not more than 

$1,000 for each failure to provide an 

SBC. Unless and until future guidance 

provides otherwise, group health plans 

subject to chapter 100 of the Code 

should continue to report the excise tax 

of section 4980D on IRS Form 8928 with 

respect to failures to comply with PHS 

Act section 2715. The Secretaries of 

Labor and the Treasury will coordinate 

to determine appropriate cases in which 

the fine of section 2715(f) should be 

imposed on group health plans that are 

not maintained by a governmental 

entity. 

F. Applicability 

PHS Act section 2715 directs that the 

requirement for group health plans and 

health insurance issuers to provide an 

SBC ‘‘prior to any enrollment 

restriction’’ applies not later than 24 

months after the date of enactment (i.e., 

beginning on or after March 23, 2012).30

As noted earlier, the statute also directs 

the Departments to consult with the 

NAIC in developing the SBC standards. 

The Departments are appreciative of the 

detailed and valuable work the NAIC 

and its working group has performed in 

developing recommended standards and 

materials, including the NAIC’s 

extensive efforts to involve numerous 

stakeholder groups in that process for 

over a year and to provide drafts of its 

evolving materials to the Departments 

periodically. Accordingly, as noted, the 

Departments are appending to the 

document accompanying these 

proposed regulations the NAIC’s SBC 

work product for public comment. 

The NAIC transmitted its final 

materials to the Departments on July 29, 

2011. In recognition of existing 

disclosure requirements under 29 CFR 

2520.104b–2 for those group health 

plans that already provide SPDs to 

participants and concerns raised about 

providing SBCs by the statutory 

deadline, comments are solicited on 

whether and, if so, how practical 

considerations might affect the timing of 

implementation. In coordination with 

the request for comment elsewhere in 

this preamble on a potential phase-in of 

the implementation of the requirement 

to provide coverage examples, 

comments are invited also on how any 

potential phase-in of those requirements 

could or should be coordinated with the 

timing of the effectiveness of the general 

SBC standards. 

The Departments also request 

comments on whether any special rules 

are necessary to accommodate 

expatriate plans. The Departments note 

that, in the context of group health plan 

coverage, section 4(b)(4) of ERISA 

provides that a plan maintained outside 

the United States primarily for the 

benefit of persons substantially all of 

whom are nonresident aliens is exempt 

from ERISA title I, including ERISA 

section 715. At the same time, in the 

Department of HHS’s interim final 

regulations relating to medical loss ratio 

(MLR) provisions published at 75 FR 

74864, a special rule was included for 

expatriate insurance policies. The 

Departments invite comments on 

whether any adjustments are needed 

under PHS Act section 2715 for 

expatriate plans and, if so, for what 

types of coverage. 

III. Economic Impact and Paperwork 

Burden 

A. Executive Orders 12866 and 13563— 

Department of Labor and Department of 

Health and Human Services 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects; distributive impacts; and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866. Accordingly, 

the rule has been reviewed by the Office 

of Management and Budget. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). As 

discussed below, the Departments have 

concluded that these proposed 

regulations would not have economic 

impacts of $100 million or more in any 

one year or otherwise meet the 

definition of an ‘‘economically 

significant rule’’ under Executive Order 

12866. Nonetheless, consistent with 

Executive Orders 12866 and 13563, the 

Departments have provided an 

assessment of the potential benefits and 

the costs associated with this proposed 

regulation. The Departments invite 

comment on this assessment. 

1. Current Regulatory Framework 

Health plan sponsors and issuers do 

not currently uniformly disclose 

information to consumers about benefits 


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31ERISA Advisory Council. Report of the 

Working Group on Health and Welfare Benefit 

Plans’ Communication. November 2005. Available 

at: http://www.dol.gov/ebsa/publications/ 

AC_1105c_report.html. 

32 ‘‘How Readable Are Summary Plan 

Descriptions For Health Care Plans?’’ Employee 

Benefit Research Institute (EBRI) Notes. October 

2006, Vol. 27, No. 10. Available at: http:// 

www.ebri.org/pdf/notespdf/EBRI_Notes_10- 

20061.pdf. 

33M.G.L.A. 176Q § 5 (2010). 

34NY Ins. Law § 3217–a (2010). 

35Office of the Health Insurance Commissioner 

Regulation 5: Standards for Readability of Health 

Insurance Forms, State of Rhode Island and 

Providence Plantations, August 21, 2010. 

36Utah Code § 31A–22–613.5 (2010). 

37 Division of Health Care Administration, Rule 

10.000: Quality Assurance Standards and Consumer 

Protections for Managed Care Plans, State of 

Vermont, September 20, 1997. 

38For example, New York requires Health 

Maintenance Organizations to provide to 

prospective members, as well as policyholders, 

information on cost-sharing, including out-ofnetwork costs, limitations and exclusions on 

benefits, prior authorization requirements, and 

other disclosures such as appeal rights. NY Ins. Law 

§ 3217–a (2010). Utah requires each insurer issuing 

a health benefit plan to provide all enrollees, prior 

to enrollment in the health benefit plan, written 

disclosure of restrictions or limitations on 

prescription drugs and biologics, coverage limits 

under the plan, and any limitation or exclusion of 

coverage. Utah Code § 31A–22–613.5 (2010). Rhode 

Island requires all health insurance forms to meet 

minimum readability standards. Office of the 

Health Insurance Commissioner Regulation 5: 

Standards for Readability of Health Insurance 

Forms, State of Rhode Island and Providence 

Plantations, August 21, 2010. 

39M. 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. 

40Nicole Maestas et al., ‘‘Price Variation in 

Markets with Homogenous Goods: The Case of 

Medigap,’’ National Bureau of Economic Research 

(January 2009). 

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. 

and coverage in a simple and consistent 

way. ERISA-covered group health plan 

sponsors are required to describe 

important plan information concerning 

eligibility, benefits, and participant 

rights and responsibilities in a summary 

plan description (SPD). But as these 

documents have increased in size and 

complexity—for example, due to the 

insertion of more legalistic language that 

is designed to mitigate the employer’s 

risk of litigation—they have become 

more difficult for participants and 

beneficiaries to understand.31 Indeed, a 

recent analysis of SPDs from 40 

employer health plans from across the 

United States (varying based on 

geography, firm size, and industry 

sector) found that, on average, SPDs are 

generally written at a first year college 

reading level (with readability ranging 

from 9th grade reading level to nearly a 

college graduate reading level).32

Moreover, the formats of existing SPDs 

are not standardized; for example, while 

these documents could be dozens of 

pages long, there is no requirement that 

they include an executive summary. 

Additionally, group health plans not 

covered by ERISA, such as plans 

sponsored by State and local 

governments, are not required to comply 

with such disclosure requirements. 

In the individual market, health 

insurance issuers are subject to various, 

diverse State disclosure laws. For 

example, States like Massachusetts,33

New York,34 Rhode Island,35 Utah 36

and Vermont 37 have established 

minimum standards for disclosure of 

health insurance information but even 

within such States, consumer 

disclosures vary widely with respect to 

their required content. Additionally, 

some State disclosure laws are limited 

to current enrollees, so that individuals 

shopping for coverage do not receive 

information about health insurance 

coverage options. Other State disclosure 

requirements only extend to managed 

care organizations, and not to other 

segments of the market.38

2. Need for Regulatory Action 

Congress added new PHS Act section 

2715 through the Affordable Care Act to 

ensure that plans and issuers provide 

benefits and coverage information in a 

more uniform format that helps 

consumers to better understand their 

coverage and better compare coverage 

options. These proposed regulations are 

necessary to provide standards for a 

summary of benefits and coverage and 

a uniform glossary of terms used in 

health coverage. This approach is 

consistent with Executive Order 13563, 

which directs agencies to ‘‘identify and 

consider regulatory approaches that 

reduce burdens and maintain flexibility 

and freedom of choice for the public. 

These approaches include [* * *] 

disclosure requirements as well as 

provision of information to the public in 

a form that is clear and intelligible.’’ 

The patchwork of consumer 

disclosure requirements makes the 

process of shopping for coverage an 

inefficient, difficult, and timeconsuming task. Consumers incur 

significant search costs while trying to 

locate reliable cost, coverage and benefit 

data.39 Such search costs arise, in part, 

due to a lack of uniform information 

across the various coverage options, 

particularly in the individual market but 

also in some large employer plans. 

Although not directly comparable, in 

Medigap, a market with standardized 

benefits, the average per beneficiary 

search cost was estimated at $72—far 

higher than in other insurance markets, 

such as auto insurance.40

Given this difficulty in obtaining 

relevant information, consumers may 

not always make informed purchase 

decisions that best meet the health and 

financial needs of themselves, their 

families, or their employees. Similarly, 

workers may overestimate or 

underestimate the value of employersponsored health benefits, and thus 

their total compensation; and health 

insurance issuers and employers may 

face less pressure to compete on price, 

benefits, and quality, leading to 

inefficiency in the health insurance and 

labor markets. 

Furthermore, research suggests that 

many consumers do not understand 

how health insurance works. 

Oftentimes, health insurance contracts 

and benefit descriptions are written in 

technical language that requires a 

sophisticated level of health insurance 

literacy many people do not have.41 One 

study found that consumers have 

particular difficulty understanding cost 

sharing and tend to underestimate their 

coverage for mental health, substance 

abuse and prescription drug benefits, 

while overestimating their coverage for 

long-term care.42

3. Summary of Impacts 

Table 1 below depicts an accounting 

statement summarizing the 

Departments’ assessment of potential 

benefits, costs, and transfers associated 

with this regulatory action. The 

Departments have limited the period 

covered by the RIA to 2011–2013. 

Estimates are not provided for 

subsequent years, because there will be 

significant changes in the marketplace 

in 2014 related to the offering of new 

individual and small group plans 

through the Affordable Insurance 

Exchanges, and the wide-ranging scope 

of these changes makes it difficult to 

project results for 2014 and beyond. 

The direct benefits of these proposed 

regulations come from improved 

information, which will enable 

consumers to better understand the 

coverage they have and allow 

consumers choosing coverage to more 

easily compare coverage options. As a 

result, consumers may make better 

coverage decisions, which more closely 

match their preferences with respect to 

benefit design, level of financial 

protection, and cost. The Departments 


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43 Judith H. Hibbard and Ellen Peters, 

‘‘Supporting Informed Consumer Health Care 

Decisions: Data Presentation Approaches that 

Facilitate the Use of Information in Choice,’’ 24 

Annu. Rev. Public Health 413, 416 (2003). 

44M. 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. 

45A 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. 

46The NAIC recommends that the term ‘‘coverage 

examples’’ be used as reference to the statutory term 

‘‘coverage facts labels,’’ and the Departments concur 

with this recommendation. 

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). 

believe that such improvements will 

result in a more efficient, competitive 

market. These proposed regulations 

would also benefit consumers by 

reducing the time they spend searching 

for and compiling health plan and 

coverage information. 

Under the proposed regulations, 

group health plans and health insurance 

issuers would incur costs to compile 

and provide the summary of benefits 

and coverage disclosures (that includes 

coverage examples (CEs)) and a uniform 

glossary of health coverage and medical 

terms. The Departments estimate that 

the annualized cost may be around $50 

million, although there is uncertainty 

arising from general data limitations and 

the degree to which economies of scale 

exist for disclosing this information. 

The costs estimates employ assumptions 

that we believe fully capture expected 

issuer and third-party administrator 

(TPA) costs, and perhaps overestimate 

them if, for example, economies of scale 

are achievable. 

The Departments anticipate that the 

provisions of these proposed regulations 

will help consumers make better health 

coverage choices and more easily 

understand their coverage. In 

accordance with Executive Orders 

12866 and 13563, the Departments 

believe that the benefits of this 

regulatory action justify the costs. 

TABLE 1—ACCOUNTING TABLE

Benefits 

Qualitative: Improved information will enable consumers to more easily and efficiently understand and compare coverage, and as a result, make 

better choices. 

Costs Estimate Year dollar Discount rate 

percent 

Period covered 

Annualized ....................................................................................... $51 2011 7 2011–2013 

Monetized ($ millions/year) .............................................................. $47 2011 3 2011–2013 

4. Benefits 

In developing these proposed 

regulations, the Departments carefully 

considered their potential effects, 

including costs, benefits, and transfers. 

Because of data limitations, the 

Departments did not attempt to quantify 

expected benefits of these proposed 

regulations. Nonetheless, the 

Departments were able to identify 

several benefits, which are discussed 

below. 

These proposed regulations could 

generate significant economic and social 

welfare benefits to consumers. Under 

these proposed regulations, health 

insurance issuers and group health 

plans would provide clear and 

consistent information to consumers. 

Uniform disclosure is anticipated to 

benefit individuals shopping for, or 

enrolled in, group and individual health 

insurance coverage and group health 

plans. The direct benefits of these 

proposed regulations come from 

improved information, which will 

enable consumers to better understand 

the coverage they have and allow 

consumers choosing coverage to more 

easily compare options. As a result, 

consumers will make better coverage 

decisions, which more closely match 

their preferences with respect to benefit 

design, level of financial protection, and 

cost. The Departments believe that such 

improvements will result in a more 

efficient, competitive market. 

These proposed regulations would 

also benefit consumers by reducing the 

time they spend searching for and 

compiling health plan and coverage 

information. As stated above, consumers 

in the individual market, as well as 

consumers in some large employersponsored plans, have a number of 

coverage options and must make a 

choice using disclosures and tools that 

vary widely in content and format. A 

growing body of decision-making 

research suggests that the abundance 

and complexity of information can 

overwhelm consumers and create a 

significant non-price barrier to 

coverage.43 For example, a RAND study 

of California’s individual market found 

that reducing barriers to information 

about health insurance products would 

lead to increases in purchase rates 

comparable to modest price subsidies.44

By ensuring consumers have access to 

readily available, concise, and 

understandable information about their 

coverage options, these proposed 

regulations could reduce consumers’ 

cost of obtaining information and may 

increase health insurance purchase 

rates. 

Furthermore, greater transparency in 

pricing and benefits information will 

allow consumers to make more 

informed purchasing decisions, 

resulting in cost-savings for some valueconscious consumers who today pay 

higher premiums because of imperfect 

information about benefits.45 In 

particular, the use of coverage 

examples 46 called for by these proposed 

regulations would better enable 

consumers to understand how key 

coverage provisions operate in the 

context of recognizable health care 

situations and more meaningfully 

compare the level of financial protection 

offered by a plan or coverage, resulting 

in potential cost-savings.47 48 The 

Departments therefore expect that 

uniform disclosures under these 

proposed regulations would enable 

consumers to derive more value from 

their health coverage and enhance the 

ability of plan sponsors, particularly 

small businesses, to purchase products 

that are appropriate to both their needs 

and the health and financial needs of 

their employees. 

Finally, these proposed regulations 

are expected to facilitate consumers’ 

ability to understand their coverage. As 


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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52455 

49Plans and issuers subject to ERISA or the Code 

may provide SBCs electronically only if the 

requirements of the Department of Labor’s 

electronic disclosure safe harbor at 29 CFR 

2520.104b–1 are met. Otherwise, by default, plans 

and issuers must use paper versions of SBCs. 

50See, 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. 

51The 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. 

52U.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). 

53See, 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. 

54For 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). 

stated above, research suggests that 

consumers do not understand how 

coverage works or the terminology used 

in health insurance policies. 

Consequently, consumers may face 

unexpected medical expenses if they 

become seriously ill. They may also 

become confused by a coverage or 

payment decision made by their plan or 

issuer, leading to inefficiency in the 

operation of employee benefit plans and 

health insurance coverage. By making it 

easier for consumers to understand the 

key features of their coverage, these 

proposed regulations would enhance 

consumers’ ability to use their coverage. 

Additionally, the uniform format will 

make it easier for consumers who 

change jobs or insurance coverage to see 

how their new plan or coverage benefits 

are similar to and different from their 

previous coverage. 

5. Costs 

Section 2715 of the PHS Act and these 

proposed regulations direct group 

health plans and health insurance 

issuers to compile and provide a 

summary of benefits and coverage (SBC) 

(that includes coverage examples (CEs)) 

and a uniform glossary of health 

coverage and medical terms. The 

Departments have attempted to quantify 

one-time start-up costs as well as 

maintenance costs. However, there is 

uncertainty arising from general data 

limitations and the degree to which 

economies of scale can be realized to 

reduce costs for issuers and TPAs. The 

costs estimates employ assumptions that 

we believe more than fully capture 

expected issuer and third-party 

administrator costs, and perhaps 

overestimate them if, for example, 

economies of scale are achievable. On 

the basis of such assumptions, the 

Departments estimate that issuers and 

TPAs will incur approximately $25 

million in costs in 2011, $73 million in 

costs in 2012, and $58 million in costs 

in 2013. These costs and the 

methodology used to estimate them are 

discussed below, and presented in 

Tables 2–5 below. 

General Assumptions 

In order to assess the potential 

administrative costs relating to these 

proposed regulations, the Departments 

consulted with industry experts to gain 

insight into the tasks and level of 

resources required. Based on these 

discussions, the Departments estimate 

that there will be two categories of 

principal costs associated with the 

standards in these proposed regulations: 

one-time start-up costs and maintenance 

costs. The one-time start-up costs 

include costs to develop teams to review 

the new standards and costs to 

implement workflow and process 

changes, particularly the development 

of information technology (IT) systems 

interfaces that would generate SBC 

disclosures through data housed in a 

number of different systems. The 

maintenance costs include costs to 

maintain and update IT systems in 

compliance with the proposed 

standards; to produce, review, 

distribute, and update the SBC 

disclosures; 49 to produce and distribute 

notices of modifications, and to provide 

the glossary in paper form upon request. 

With respect to the individual market, 

issuers are responsible for generating, 

reviewing, updating, and distributing 

SBCs. With respect to employersponsored coverage, the Departments 

assume fully-insured plans will rely on 

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

perform these functions. While plans 

may prepare the SBC disclosures 

internally, the Departments make this 

simplifying assumption because most 

plans appear to rely on issuers and 

TPAs for the purpose of administrative 

duties such as enrollment and claims 

processing.50 Thus, the Departments use 

health insurance issuers and TPAs as 

the unit of analysis for the purposes of 

estimating administrative costs. 

As discussed in the Medical Loss 

Ratio (MLR) interim final rule (75 FR 

74918), the Departments estimate there 

are about 440 firms offering 

comprehensive coverage in the 

individual, small, or large group 

markets, and 75 million covered lives 

therein.51 The number of covered lives 

includes individuals in the individual 

market as well as those in insured group 

health plans. 

With respect to the self-insured 

market, the Departments estimate there 

are 77 million individuals in selfinsured ERISA-covered plans and 

approximately 14 million individuals in 

self-insured non-Federal governmental 

plans.52 The Departments note that, 

according to 2007 Economic Census 

data, there are 2,243 TPAs providing 

administrative services for health and/or 

welfare funds. However, there is some 

uncertainty as to whether all of those 

TPAs serve self-insured plans; many 

issuers, for example, have subsidiary 

lines of business through administrative 

services only (ASO) contracts through 

which they perform third-party 

administrative functions for self-insured 

plans.53 Based on conversations with 

one national TPA association, the 

Departments assume that about onethird of the total number of TPAs, or 

about 748 TPAs, are relevant for 

purposes of this analysis. However, 

given the considerable overlap between 

issuers and TPAs, the Departments 

recognize there may be fewer affected 

TPAs, so these estimates should be 

considered an upper bound of burden 

estimates. These estimates may be 

adjusted proportionally in the final 

regulations based upon additional 

information about the number of TPAs 

serving self-insured plans. 

Because the SBC disclosures are 

closely related to disclosures that 

issuers and TPAs provide today as a 

part of their normal operations (e.g., 

information on premiums, covered 

benefits, and cost sharing), the 

incremental costs of compiling and 

providing such readily available 

information in the proposed, 

standardized format is estimated to be 

modest.54 The per-issuer or -TPA cost 

will largely be determined by its size 

(based on annual premium revenues) 

and current practices—most 

importantly, whether the issuer or TPA 

maintains a robust information 

technology infrastructure, including a 

plan benefits design database. Moreover, 

with regard to issuers, administrative 

costs may be related to the number of 

markets in which it operates (that is, 


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52456 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

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. 

56See the Technical Appendix to the MLR 

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

individual, small group, or large group 

market); the number of policies it offers; 

and the number of States and licensed 

entities through which it offers 

coverage. 

To account for variations among 

issuers, the Departments classify them 

by size as small, medium, and large 

issuers based on 2009 premium revenue 

for individual, small group, and large 

group comprehensive coverage.55

Consistent with the assumptions that 

were used in the MLR interim final rule, 

small issuers are defined as those 

earning up to $50 million in annual 

premium revenue; medium issuers as 

those earning between $50 million and 

$1 billion in annual premium revenue; 

and large issuers as those earning more 

than $1 billion in annual premium 

revenue. Based on these assumptions, 

the Departments estimate there are 140 

small, 230 medium, and 70 large 

issuers. 

To account for variations among 

TPAs, the Departments applied the 

proportions of small, medium, and large 

issuers to the estimated 750 TPAs. The 

Departments acknowledge that issuers 

and TPAs are different and may not 

have the same size variation. 

Nonetheless, given general data 

limitations, the Departments have 

adopted this methodology, and, on its 

basis, estimate that there are 240 small, 

390 medium, and 120 large TPAs. Table 

2 below provides a synopsis of the 

number of issuers and TPAs. 

TABLE 2—ISSUER AND TPA SIZE

CLASSIFICATION

Small Medium Large 

Issuers .. 140 230 70 

TPAs ..... 240 390 120 

Staffing Assumptions 

Table 6 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. We welcome comments that 

provide better information or data about 

any of the following assumptions. 

IT Systems and Workflow Process 

Changes 

The Departments estimate that it 

would take a large issuer/TPA about 960 

hours to implement IT systems and 

workflow process changes, based on 

discussions with a large issuer. The 

Departments assume that these IT 

systems and workflow process changes 

would be implemented only by IT 

professionals. Furthermore, the 

Departments assume that a medium 

issuer/TPA would need about 75% of a 

large issuer’s/TPA’s time, and a small 

issuer would need about 50% of a large 

issuer’s/TPA’s time, to implement IT 

systems and workflow process changes. 

The Departments estimate that it 

would take a large issuer/TPA about 160 

hours to develop teams to analyze the 

new standards in relation to their 

current workflow processes. The 

Departments assume such teams would 

be comprised of IT professionals (45%), 

benefits/sales professionals (50%), and 

attorneys (5%). We scale down the 

burden for medium and small issuers/ 

TPAs by assuming the same relative 

proportion as above (that is, 75 percent 

and 50 percent, respectively). 

The Departments assume that each 

issuer/TPA would incur a maintenance 

cost to maintain IT systems and address 

changes in regulatory requirements. The 

Departments assume the maintenance 

cost would equal 15% of the total onetime burden noted above (for example, 

the Departments assume it will take a 

large issuer 15% of 1120 hours, or 168 

hours). The Departments further assume 

that the teams to implement the 

maintenance tasks would be comprised 

of IT professionals (55%), benefits/sales 

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

The Departments assume that the onetime and maintenance costs to 

implement IT systems changes and to 

address these regulations would be split 

between the costs to produce SBCs 

(50%) and the costs to produce the CEs 

(50%). 

Production and Review of SBCs and 

CEs 

The Departments estimate that each 

issuer/TPA would need 3 hours to 

produce, and 1 hour to review, SBCs 

(not including CEs) for all products. The 

Departments assume that the 3 hours 

needed to produce the SBCs would be 

equally divided between IT 

professionals and benefits/sales 

professionals. The Departments assume 

that the 1 hour needed to review the 

SBCs would be equally divided between 

financial managers for benefits/sales 

professionals and attorneys. 

In 2012 and 2013, issuers and TPAs 

would produce CEs for three benefits 

scenarios. The Departments estimate it 

will take each issuer/TPA 90 hours to 

produce, and 30 hours to review, CEs 

for all applicable products. The 

Departments assume that the 90 hours 

to produce the CEs would be equally 

divided between IT professionals and 

benefits/sales professionals. The 

Departments also assume that the 30 

hours to review the CEs would be 

equally divided between financial 

managers for benefits/sales 

professionals and attorneys. 

The Departments assume that in 2012 

and 2013, respectively, issuers and 

TPAs would provide, upon request, a 

paper copy of the uniform glossary to 

2.5% and 5% of covered individuals 

who receive a glossary. The 

Departments assume that individuals 

who do not request a paper copy of the 

glossary will access it electronically 

using the Internet address provided in 

the SBC. 

For each individual who receives the 

SBC or uniform glossary in paper form, 

the Departments estimate that printing 

and distributing the paper disclosures 

would take clerical staff about 1 minute 

(0.02 hours) in the group markets and 

about 2 minutes (0.03 hours) in the 

individual market. The Departments 

assume that the individual market has 

lower economies of scale and, thus, 

increased distribution costs. 

Labor Cost Assumptions 

Table 7 below presents the 

Departments’ hourly labor cost 

assumptions (stated in 2011 dollars) for 

each staff category based on BLS data. 

The Departments use mean hourly wage 

estimates from the Bureau of Labor 

Statistics’ (BLS) May 2009 National 

Occupational Employment and Wage 

Estimates (accessed at http:// 

www.bls.gov/oes/current/ 

oes_nat.htm#00–0000) for computer 

systems analysts (Occupation Code 15– 

1051), insurance underwriters 

(Occupation Code 13–2053), financial 

managers (Occupation Code 23–1011), 

executive secretaries and administrative 

assistants (Occupation Code 43–6011), 

and attorneys (Occupation Code 23– 

1011) as the basis for estimating labor 

costs for 2011 through 2013 and adjust 

the hourly wage rate to include a 33% 

fringe benefit estimate for private sector 

employees.56

Distribution Assumptions 

The Departments make the following 

assumptions regarding the distribution 


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57Although 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. 

58Based on this assumption, the Departments 

estimated that small issuers or TPAs have about 

180,000 shoppers in a given year, medium issuers 

or TPAs have 3,700,000 shoppers in a given year, 

and large issuers or TPAs have 11,000,000 shoppers 

in a given year. 

59ERISA 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. As part 

of its analysis for the Department of Labor’s SPD/ 

SMM regulations (29 CFR 2520.104b-(3)), the 

Department estimated that about 20 percent of 

health plans would need to distribute SMM in a 

given year due to plan amendments. However, 

almost all of these modification occur between plan 

years—not during a plan year; therefore, the 

modifications would be required to be disclosed in 

a SBC that is distributed upon renewal of coverage. 

The Departments, thus, expects that only two 

percent of plans will need to issue an updated SBC 

mid-year, because mid-year changes that would 

result in an update to the SBC are very rare. For 

purposes of simplification, the Departments extend 

this assumption to the individual market as well. 

60See the ERISA e-disclosure rule at 29 CFR 

2520.104b–1. 

61U.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. 

of the SBC disclosures (including 

CEs).57 These assumptions are based on 

the best information available to the 

Departments at this time. Particularly, 

the following series of assumptions are 

based on conversations with industry 

experts, the Departments’ understanding 

of the regulated community, and 

previous analysis in the MLR interim 

final rule. The distribution assumptions 

are as follows: 

• The SBCs would be limited to one 

per household for family members 

located at the same residence. 

According to one large issuer, there are 

2.2 covered lives per family. 

• The number of individuals who 

would receive an SBC before enrolling 

in the plan or coverage equals 20% of 

the number of enrollees at any point 

during the course of a year.58

• In 2013, about 2% of covered 

individuals would receive a notice of 

modifications.59 Further, the burden 

and cost of providing such notices 

would be proportional to the combined 

burden and cost of providing the SBCs, 

including CEs. In 2012, the first year of 

implementation, the number of notices 

of modifications would be negligible. 

• Electronic distribution will account 

for 38 percent of all disclosures in the 

group market and 70 percent of all 

disclosures in the individual market. 

The estimate for the group market is 

based on the methodology used to 

analyze the cost burden for the DOL 

claims procedure regulation (OMB 

Control Number 1210–0053).60 The 

estimate for the individual market is 

based on statistics set forth by the 

National Telecommunications and 

Information Administration, which 

indicate that 30% of Americans do not 

use the Internet.61

• SBC disclosures would be 

distributed with usual marketing and 

enrollment materials, thus, costs to mail 

the documents will be negligible. 

However, notices of modifications 

would require mailing and supply costs 

as follows: $0.44 postage cost per 

mailing and $0.05 supply cost per 

mailing. 

• Printing costs $0.03 cents per side 

of a page. Thus, it would cost $0.18 to 

print a complete SBC (which is six sides 

of a page based on the length of the 

NAIC sample completed SBC) and $0.12 

cents to print the uniform glossary 

(which is four sides of a page, based on 

the length of the NAIC recommended 

uniform glossary). This cost burden is in 

addition to the 1 minute or 2 minutes 

it would take clerical staff to print and 

distribute the SBC or glossary. 

Cost Estimate 

The Tables below present costs and 

burden hours for issuers and TPAs 

associated the proposed disclosure 

requirements of PHS Act section 2715. 

Tables 3–5 contain cost estimates for 

2011, 2012, and 2013, derived from the 

labor hours presented in Table 3 and the 

hourly rate estimates presented in Table 

7, as well as estimates of non-labor 

costs. Labor hour estimates were 

developed for each one-time and 

maintenance task associated with 

analyzing requirements, developing IT 

systems, and producing SBCs (that 

include CEs). 

TABLE 3—2011 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2011 DOLLARS

Number of affected entities Hour burden Equivalent cost 

SBC Requirements—Issuers—One Time ....................................................................... 440 88,000 $4,600,000 

SBC Requirements—TPAs—One-Time .......................................................................... 750 150,000 7,800,000 

Coverage Example Requirements—Issuers—One Time ................................................ 440 88,000 4,600,000 

Coverage Example Requirements—TPAs—One-Time ................................................... 750 150,000 7,800,000 

Total .......................................................................................................................... ............................ 240,000 25,000,000 

TABLE 4—2012 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2011 DOLLARS

Number of affected entities Hour burden Equivalent cost Cost burden 

(non-labor) 

Number of disclosures 

SBC Requirements—Issuers ........................... 440 540,000 $18,000,000 $2,900,000 41,000,000 

SBC Requirements—TPAs .............................. 750 660,000 23,000,000 3,700,000 49,000,000 

Coverage Example Requirements—Issuers .... 440 140,000 7,600,000 1,500,000 41,000,000 

Coverage Example Requirements—TPAs ...... 750 240,000 13,000,000 1,800,000 49,000,000 

Glossary Requests—Issuers ........................... 440 11,000 330,000 370,000 610,000 

Glossary Requests—TPAs .............................. 750 13,000 370,000 470,000 770,000 

Subtotal ..................................................... 1,600,000 62,000,000 11,000,000 91,000,000 

Total 2012 Costs ...................................... 73,000,000 


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52458 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

TABLE 5—2013 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2011 DOLLARS

Number of affected entities Hour burden Equivalent cost Cost burden 

(non-labor) 

Number of disclosures 

SBC Requirements—Issuers ........................... 440 480,000 $15,000,000 $2,900,000 41,000,000 

SBC Requirements—TPAs .............................. 750 560,000 17,000,000 3,700,000 49,000,000 

Coverage Example Requirements—Issuers .... 440 79,000 4,300,000 1,500,000 41,000,000 

Coverage Example Requirements—TPAs ...... 750 130,000 7,200,000 1,800,000 49,000,000 

Notice of Material Modifications—Issuers ....... 440 10,000 320,000 330,000 820,000 

Notice of Material Modifications—TPAs .......... 750 12,000 400,000 400,000 1,000,000 

Glossary Requests—Issuers ........................... 440 23,000 660,000 700,000 1,200,000 

Glossary Requests—TPAs .............................. 750 26,000 750,000 900,000 1,500,000 

Subtotal ..................................................... 1,300,000 46,000,000 12,000,000 95,000,000 

Total 2013 Costs ...................................... 58,000,000 

TABLE 6—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) ................................................................................ ............................ 80 120 160 

IT Professionals Benefits/Sales ................................................ 45 36 54 72 

Professionals ................................................................................... 50 40 60 80 

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

Implementing Systems Changes (IT and workflow) ........................ ............................ 480 720 960 

IT Professionals ........................................................................ 100 480 720 960 

Maintenance Updating to Address Changes in Requirements ....... ............................ 84 126 168 

IT Professionals Benefits/Sales ................................................ 55 46.20 69.30 92.40 

Professionals ................................................................................... 40 33.60 50.40 67.20 

Attorneys ................................................................................... 5 4.20 6.30 8.40 

SBC Requirement (maintenance) 

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

IT Professionals Benefits/Sales ................................................ 50 1.5 1.5 1.5 

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 0.02 

CE Requirement (maintenance) 

Producing 3 CEs .............................................................................. ............................ 90 90 90 

IT Professionals Benefits/Sales ................................................ 50 45 45 45 

Professionals ................................................................................... 50 45 45 45 

Internal Review of 3 CEs ................................................................. ............................ 30 30 30 

Financial Managers—Benefits/Sales ........................................ 50 15 15 15 

Professionals.

Attorneys ................................................................................... 50 15 15 15 

TABLE 7—ESTIMATED LOADED HOURLY WAGES FOR STAFF CATEGORIES

Staff category BLS code 

Loaded hourly 

wage 

(2011 Dollars) 

IT Professionals ........................................................................ Computer Systems Analysts (Occupation Code 15–1051) ..... $53.26 

Financial Professionals—Benefits/Sales .................................. Insurance Underwriters (Occupation Code 13–2053) ............. 41.94 

Financial Manager .................................................................... Financial Managers (Occupation Code 11–3031) ................... 75.32 

Attorneys ................................................................................... Lawyers (Occupation Code 23–1011) ..................................... 85.44 

Clerical Staff ............................................................................. Executive Secretaries and Administrative Assistants (Occupation Code 43–6011).29.15 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52459 

6. Regulatory Alternatives 

Several provisions in these proposed 

regulations involved policy choices. A 

first policy choice involved determining 

how to minimize the burden of 

providing the SBC to individuals and 

employers shopping for health 

insurance coverage. The Departments 

recognize it may be difficult for issuers 

to provide accurate information about 

the terms of coverage prior to 

underwriting. Accordingly, the 

proposed regulations provide that 

issuers offering health insurance 

coverage in connection with the 

individual market that make 

information for their standard policies 

available on the Secretary of HHS’s Web 

portal (HealthCare.gov), in compliance 

with 45 CFR 159.120, will have satisfied 

the requirement to provide an SBC to 

individuals who request information 

about coverage. The Departments 

believe this approach promotes 

regulatory efficiency, minimizing the 

administrative burden on health 

insurance issuers without lessening the 

protections under PHS Act section 2715. 

A second choice related to whether, 

in the case of covered individuals 

residing at the same address, one SBC 

would satisfy the disclosure 

requirement with respect to all such 

individuals, or whether multiple SBCs 

would be required to be provided. 

Under the proposed regulations, the 

Departments allow a plan or issuer to 

provide a single SBC in circumstances 

in which a participant and any 

beneficiaries (or, in the individual 

market, the primary subscriber and any 

covered dependents) are known to 

reside at the same address. 

In the group market, the proposed 

regulations would further limit burden 

by requiring a plan or issuer to provide, 

at renewal, a new SBC for only the 

benefit package in which a participant 

or beneficiary is enrolled. That is, if the 

plan offers multiple benefits packages, 

an SBC is not required for each benefit 

package offered under the group health 

plan, which the Departments believe 

would otherwise create an undue 

burden during open season. Participants 

and beneficiaries would be able to 

receive upon request an SBC for any 

benefits package for which they are 

eligible. The Departments believe this 

balanced approach addresses the needs 

of plans, issuers, and consumers, at 

renewal. 

A third policy choice related to the 

interpretation of the PHS Act section 

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

material modification (as defined for 

purposes of section 102 of ERISA) in 

any of the terms of the plan or coverage 

that is not reflected in the most recently 

provided SBC. The Departments note 

that a material modification, within the 

meaning of section 102 of ERISA and its 

implementing regulations at 29 CFR 

2520.104b-3, is broadly defined to 

include any modification to the 

coverage offered under the plan or 

policy, that independently, or in 

conjunction with other 

contemporaneous modifications or 

changes, would be considered by the 

average plan participant to be an 

important change in covered benefits or 

other terms of coverage under the plan 

or policy. The proposed regulations 

would interpret this provision as 

requiring notice only for a material 

modification that (1) affects the 

information in the SBC; and (2) occurs 

other than in connection with renewal 

or reissuance of coverage (that is, a midplan or -policy year change). This 

approach is consistent with the 

language of section 2715(d)(4) and is 

more narrowly focused on what we 

interpret to be the purpose of that 

provision. 

B. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (RFA) 

requires agencies that issue a regulation 

to analyze options for regulatory relief 

of small businesses if a proposed rule 

has a significant impact on a substantial 

number of small entities. The RFA 

generally defines a ‘‘small entity’’ as (1) 

a proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA), (2) a nonprofit 

organization that is not dominant in its 

field, or (3) a small government 

jurisdiction with a population of less 

than 50,000. (States and individuals are 

not included in the definition of ‘‘small 

entity.’’) The Departments use as their 

measure of significant economic impact 

on a substantial number of small entities 

a change in revenues of more than 3 to 

5 percent. 

As discussed in the Web Portal 

interim final rule (75 FR 24481), HHS 

examined the health insurance industry 

in depth in the Regulatory Impact 

Analysis we prepared for the proposed 

rule on establishment of the Medicare 

Advantage program (69 FR 46866, 

August 3, 2004). In that analysis, HHS 

determined that there were few if any 

insurance firms underwriting 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) that fell below the 

size thresholds for ‘‘small’’ business 

established by the SBA. Currently, the 

SBA size threshold is $7 million in 

annual receipts for both health insurers 

(North American Industry Classification 

System, or NAICS, Code 524114) and 

TPAs (NAICS Code 524292). 

Additionally, as discussed in the 

Medical Loss Ratio interim final rule (75 

FR 74918), HHS used a data set created 

from 2009 National Association of 

Insurance Commissioners (NAIC) Health 

and Life Blank annual financial 

statement data to develop an updated 

estimate of the number of small entities 

that offer comprehensive major medical 

coverage in the individual and group 

markets. For purposes of that analysis, 

HHS used total Accident and Health 

(A&H) earned premiums as a proxy for 

annual receipts. HHS estimated that 

there were 28 small entities with less 

than $7 million in A&H earned 

premiums offering individual or group 

comprehensive major medical coverage; 

however, this estimate may overstate the 

actual number of small health insurance 

issuers offering such coverage, since it 

does not include receipts from these 

companies’ other lines of business. 

These 28 small entities represent about 

6.4 percent of the approximately 440 

health insurers that are accounted for in 

this RIA. Based on this calculation, the 

Departments assume that there are an 

equal percentage of TPAs that are small 

entities. That is, 48 small entities 

represent about 6.4 percent of the 

approximately 750 TPAs that are 

accounted for in this RIA. 

The Departments estimate that issuers 

and TPAs earning less than $50 million 

in annual premium revenue, including 

the 76 small entities mentioned above, 

would incur costs of approximately 

$15,000, $26,000, and $15,000 per 

issuer/TPA in 2011, 2012 and 2013, 

respectively. Numbers of this magnitude 

do not approach the amounts necessary 

to be considered a ‘‘significant 

economic impact’’ on firms with 

revenues in the order of millions of 

dollars. Additionally, as discussed 

earlier, the Departments believe that 

these estimates overstate the number of 

small entities that will be affected by the 

requirements in this proposed 

regulation, as well as the relative impact 

of these requirements on these entities, 

because the Departments have based 

their analysis on the affected entities’ 

total A&H earned premiums (rather than 

their total annual receipts). Accordingly, 

the Departments have determined and 

certify that these proposed rules will not 

have a significant economic impact on 

a substantial number of small entities, 

and that a regulatory flexibility analysis 

is not required. 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52460 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

62The Departments estimate that there are 440 

issuers and 750 TPAs. Because the Department of 

Labor and the Department of the Treasury share the 

hour and cost burden for issuers and TPAs with the 

Department of Health and Human Services, the 

burden to produce the SBCs including Coverage 

Examples for group health plans is calculated using 

half the number of issuers (220) and 85% of the 

TPAs (638). While the group health plans could 

prepare their own SBCs including coverage 

examples, the Departments assume that SBCs 

C. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury it has been determined that 

this notice of proposed rulemaking is 

not a significant regulatory action as 

defined in Executive Order 12866. 

Therefore, a regulatory assessment is not 

required. It has also been determined 

that section 553(b) of the Administrative 

Procedure Act (5 U.S.C. chapter 5) does 

not apply to these proposed regulations. 

It is hereby certified that the collections 

of information contained in this notice 

of proposed rulemaking will not have a 

significant impact on a substantial 

number of small entities. Accordingly, a 

regulatory flexibility analysis under the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) is not required. Section 

54.9815–2715 of the proposed 

regulations would require both group 

health insurance issuers and group 

health plans to distribute an SBC and 

notice of any material modifications to 

the plan that affect the information 

required in the SBC. Under these 

proposed regulations, if a health 

insurance issuer satisfies the obligations 

to distribute an SBC and a notice of 

modifications, those obligations are 

satisfied not just for the issuer but also 

for the group health plan. For group 

health plans maintained by small 

entities, it is anticipated that the health 

insurance issuer will satisfy these 

obligations for both the plan and the 

issuer in almost all cases. For this 

reason, these information collection 

requirements will not impose a 

significant impact on a substantial 

number of small entities. Pursuant to 

section 7805(f) of the Code, this 

regulation has been submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

D. Unfunded Mandates Reform Act— 

Department of Labor and Department of 

Health and Human Services 

Section 202 of the Unfunded 

Mandates Reform Act (UMRA) of 1995 

that agencies assess anticipated costs 

and benefits before issuing any 

proposed rule that includes a Federal 

mandate that could result in 

expenditure in any one year by State, 

local or Tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars updated 

annually for inflation. In 2011, that 

threshold level is approximately $136 

million. These proposed regulations 

include no mandates on State, local, or 

Tribal governments. These proposed 

regulations include directions to 

produce standardized consumer 

disclosures that will affect private sector 

firms (for example, health insurance 

issuers offering coverage in the 

individual and group markets, and 

third-party administrators providing 

administrative services to group health 

plans), but we tentatively conclude that 

these costs will not exceed the $136 

million threshold. Thus, we tentatively 

conclude that these proposed 

regulations do not impose an unfunded 

mandate on State, local or Tribal 

governments or the private sector. 

Regardless, consistent with policy 

embodied in UMRA, this notice of 

proposed rulemaking has been designed 

to be the least burdensome alternative 

for State, local and Tribal governments, 

and the private sector while achieving 

the objectives of the Affordable Care 

Act. 

E. Paperwork Reduction Act 

1. Department of Labor and Department 

of the Treasury 

Section 2715 of the PHS Act directs 

the Departments, in consultation with 

the National Association of Insurance 

Commissioners (NAIC) and a working 

group comprised of stakeholders, to 

‘‘develop standards for use by a group 

health plan and a health insurance 

issuer in compiling and providing to 

applicants, enrollees, and policyholders 

and certificate holders a summary of 

benefits and coverage explanation that 

accurately describes the benefits and 

coverage under the applicable plan or 

coverage.’’ Plans and issuers are 

required to begin providing the 

disclosure (herein referred to as a 

‘‘summary of benefits and coverage’’ or 

SBC) no later than March 23, 2012. 

To implement this provision, 

collection of information requirements 

relate to the provision of the following: 

• Summary of benefits and coverage. 

• Coverage examples (as components 

of each SBC). 

• A uniform glossary of health 

coverage and medical terms (uniform 

glossary). 

• Notice of modifications. 

In developing these collections of 

information, the Departments have 

incorporated the documents 

recommended by the NAIC, including 

the SBC template (with instructions, 

samples and a guide for coverage 

examples calculations to be used in 

completing the template) and the 

uniform glossary. These collection 

instruments were developed over a 

period of several months and agreed to 

by the entire NAIC working group and 

recommended to the Departments by the 

NAIC. 

Currently, the Departments are 

soliciting public comments for 60 days 

concerning these disclosures. The 

Departments have submitted a copy of 

these interim final regulations to OMB 

in accordance with 44 U.S.C. 3507(d) for 

review of the information collections. 

The Departments and OMB are 

particularly interested in comments 

that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

for example, by permitting electronic 

submission of responses. 

Comments should be sent to the Office 

of Information and Regulatory Affairs, 

Attention: Desk Officer for the 

Employee Benefits Security 

Administration either by fax to (202) 

395–5806 or by e-mail to 

oira_submission@omb.eop.gov. A copy 

of the ICR may be obtained by 

contacting the PRA addressee: G. 

Christopher Cosby, Office of Policy and 

Research, U.S. Department of Labor, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue, NW., Room N–5718, 

Washington, DC 20210. Telephone: 

(202) 693–8410; Fax: (202) 219–4745. 

These are not toll-free numbers. E-mail: 

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 2011–2013. 

This estimate reflects approximately 220 

issuers offering comprehensive major 

medical coverage in the small and large 

group markets, and approximately 638 

third-party administrators (TPAs).62


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52461 

including coverage examples would be prepared by 

service providers, i.e., issuers and TPAs. 

63The premium revenue data come from the 2009 

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

where insurers report information about their 

various lines of business. 

64For the purposes of these and other estimates 

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

assumptions outlined above in section III.A.5. 

To account for variation in firm size, 

the Departments estimate a weighted 

burden on the basis of issuer’s 2009 

total earned premiums for 

comprehensive major medical 

coverage.63 The Departments define 

small issuers as those with total earned 

premiums less than $50 million; 

medium issuers as those with total 

earned premiums between $50 million 

and $999 million; and large issuers as 

those with total earned premiums of $1 

billion or more. Accordingly, the 

Departments estimate approximately 70 

small, 115 medium, and 35 large 

issuers. Similarly, the Departments 

estimate approximately 204 small, 332 

medium, and 102 large TPAs. 

2011 Burden Estimate 

While the disclosures in these 

proposed regulations are not required 

until March 2012, the Departments 

estimate a one-time administrative cost 

of about $36,000,000 across the industry 

and a total of about 680,000 burden 

hours to prepare for the provisions of 

these proposed regulations. This 

calculation is made assuming issuers 

and TPAs will need to implement two 

principal tasks: (1) Develop teams to 

analyze current workflow processes 

against the new rules and (2) make 

appropriate changes to IT systems and 

processes. 

With respect to task (1), the 

Departments estimate about 97,000 

burden hours and an equivalent cost of 

about $4,800,000. The Departments 

calculate these estimates as follows:64

TASK 1—ANALYZE CURRENT WORKFLOW AND NEW RULES

Hourly wage 

rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ........... $53.26 36 $1,900 54 $2,900 72 $3,800 

Benefits/Sales Professionals ...................... 41.94 40 1,700 60 2,500 80 3,400 

Attorneys ...................... 85.44 4 340 6 510 8 680 

Total per issuer/ 

TPA ................... 80 3,900 120 5,900 160 7,900 

Total for all 

issuers/TPAs ..... 22,000 1,100,000 53,000 2,600,000 22,000 1,100,000 

With respect to task (2), the 

Departments estimate about 580,000 

burden hours and an equivalent cost of 

about $31,000,000. The Departments 

calculate these estimates as follows: 

TASK 2—IT CHANGES

Hourly wage 

rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent Cost 

IT Professionals ........... $53.26 480 $26,000 720 $38,000 960 $51,000 

Total per issuer/ 

TPA ................... 480 26,000 720 38,000 960 51,000 

Total for all 

issuers/TPAs ..... 130,000 7,100,000 320,000 17,000,000 130,000 7,000,000 

The Departments assume the total 

one-time administrative burden will be 

divided equally between 2011 and 2012. 

Thus, in 2011, the Departments estimate 

a one-time administrative cost of about 

$18,000,000 across the industry and 

about 340,000 hours. The Departments 

assume issuers and TPAs will incur no 

other costs in 2011 related to the 

proposed collection of information. 

2012 Burden Estimate 

The estimate hour and cost burden for 

the collections of information in 2012 

are as follows: 

• The Departments estimate that there 

will be about 77,000,000 SBC responses. 

• The Departments assume that of the 

total number of SBC responses, 38% 

would be sent electronically in the 

small and large group markets. 

Accordingly, the Departments estimate 

that about 29,000,000 SBCs would be 

electronically distributed, and about 

48,000,000 SBCs would be distributed 

in paper form. The Departments assume 

there are no costs associated with 

electronic disclosures; there are costs 

only with regard to paper disclosures. 

Summary of Benefits and Coverage 

(not including coverage examples)—The 

estimated hour burden is about 820,000 

hours, and the estimated total cost is 

about $30,000,000. The Departments 

calculate these estimates as follows: 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52462 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

TASK 1—EQUIVALENT COSTS FOR PRODUCING SBCS

Hourly wage 

rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ........... $53.26 1.5 $80 1.5 $80 1.5 $80 

Benefits/Sales Professionals ...................... 41.94 1.5 63 1.5 63 1.5 63 

Financial Managers ...... 75.32 0.5 38 0.5 38 0.5 38 

Attorneys ...................... 85.44 0.5 43 0.5 43 0.5 43 

Total per issuer/ 

TPA ................... 4 220 4 220 4 220 

Total for all 

issuers/TPAs ..... 1100 61,000 1800 100,000 550 31,000 

TASK 2—EQUIVALENT COSTS FOR DISTRIBUTING SBCS

Hourly wage 

rate 

Hours per 

SBC 

Total number 

of SBCs Total hours Total equivalent cost 

Clerical Staff ......................................................................... $29.15 0.017 48,000,000 820,000 $24,000,000 

TASK 1—COST BURDEN FOR PRINTING SBCS

Cost per SBC Total SBCs Total cost burden 

Printing Costs .............................................................................................................................. $0.12 48,000,000 $5,800,0000 

Task 2: Coverage Examples—The 

estimated hour burden is about 100,000 

hours, and the estimated total cost is 

about $8,700,000. The Departments 

calculate these estimates as follows: 

TASK 2—EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES

Hourly wage 

rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ........... $53.26 45 $2,400 45 $2,400 45 $2,400 

Benefits/Sales Professionals ...................... 41.94 45 1,900 45 1,900 45 1,900 

Financial Managers ...... 75.32 15 1,100 15 1,100 15 1,100 

Attorneys ...................... 85.44 15 1,300 15 1,300 15 1,300 

Total per issuer/ 

TPA ................... 120 6,700 120 6,700 120 6,700 

Total for all 

issuers/TPAs ..... 33,000 1,900,000 53,000 3,000,000 16,000 900,000 

TASK 2—COST BURDEN FOR PRINTING COVERAGE EXAMPLES

Printing cost 

per CE 

Total CEs 

printed 

Total cost 

burden 

Printing Costs .............................................................................................................................. $0.06 48,000,000 $2,900,000 

Task 3: Glossary Requests—The 

Departments assume that in 2012, 

issuers and TPAs will begin responding 

to glossary requests to covered 

individuals, and that 2.5% of covered 

individuals, who receive paper SBCs, 

will request glossaries. The Departments 

further estimate that the burden and 

cost of providing the notices to be 2.5% 

of the burden and cost of distributing 

paper SBCs, plus an additional cost 

burden of $0.49 for each glossary 

(including $0.44 for first-class postage 

and $0.05 for supply costs). 

Accordingly, in 2012, the Departments 

estimate a total cost of about $1,300,000 

and 21,000 burden hours associated 

with about 1,200,000 glossary requests. 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52463 

65The 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 

including Coverage Examples, the Department 

assumes that SBCs including coverage examples 

would be prepared by service providers, i.e., issuers 

and TPAs. 

66The premium revenue data come from the 2009 

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

where insurers report information about their 

various lines of business. 

Task 4: One-Time Administrative 

Costs—As mentioned above, the 

Departments estimate a one-time 

administrative cost of about $36,000,000 

across the industry and a total of about 

680,000 burden hours, and assume this 

burden will be equally divided between 

2011 and 2012. Thus, in 2012, the 

Departments estimate a one-time 

administrative cost of about $18,000,000 

across the industry and about 340,000 

burden hours. 

The total 2012 burden estimate is 

about $58,000,000. The total number of 

burden hours is about 1,300,000. 

2013 Burden Estimate 

Task 1: Summary of Benefits and 

Coverage (not including coverage 

examples)—The number of SBC 

responses is assumed to remain 

constant. Thus, in 2013, the 

Departments again estimate a total cost 

of about $30,000,000 and about 820,000 

burden hours for SBCs (not including 

coverage examples). 

Task 2: Coverage Examples—The 

Departments again estimate a total cost 

of about $8,700,000 and 100,000 burden 

hours for coverage examples. 

Task 3: Notices of Modifications—The 

Departments assume that in 2013, 

issuers and TPAs would send notices of 

modifications to covered individuals, 

and that 2% of covered individuals 

would receive such notice. The 

Departments further estimate that the 

burden and cost of providing the notices 

to be 2% of the combined burden and 

cost of the SBCs including the coverage 

examples, plus an additional cost 

burden for $0.49 for each paper notice 

(including $0.44 for first-class postage 

and $0.05 for supply costs). 

Accordingly, in 2013, the Departments 

estimate a total cost of about $1,400,000 

and 18,000 burden hours associated 

with about 1,500,000 notices of 

modification. 

Task 4: Glossary Requests—The 

Departments assume that in 2013, 

issuers and TPAs will again respond to 

glossary requests to covered individuals, 

and that 5% of covered individuals, 

who receive paper SBCs, will request 

glossaries. The Departments further 

estimate that the burden and cost of 

providing the glossaries to be 5% of the 

burden and cost of distributing paper 

SBCs, plus an additional cost burden for 

$0.49 for each glossary (including $0.44 

for first-class postage and $0.05 for 

supply costs). Accordingly, in 2013, the 

Departments estimate a total cost of 

about $2,700,000 and 41,000 burden 

hours associated with 2,400,000 

glossary requests. 

Task 5: Maintenance Administrative 

Costs—In 2013, the Departments assume 

that issuers and TPAs will need to make 

updates to address changes in 

standards, and, thus, incur 15% of the 

one-time administrative burden. 

Accordingly, the estimated hour burden 

is about 100,000 hours, and the 

estimated total cost is about $5,400,000. 

The Departments calculate these 

estimates as follows: 

Hourly wage 

rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ........... $53.26 46.2 $2,500 69.3 $3,700 92.4 $4,900 

Benefits/Sales Professionals ...................... 41.94 33.6 1,800 50.4 2,700 67.2 3,600 

Attorneys ...................... 85.44 4.2 220 6.3 340 8.4 450 

Total per issuer/ 

TPA ................... ........................ 84 4,500 126 6,700 168 8,900 

Total for all 

issuers/TPAs ..... ........................ 23,000 1,200,000 56,000 3,000,000 23,000 1,200,000 

The total 2013 cost estimate is about 

$48,000,000.The total number of burden 

hours is about 1,100,000 hours. 

The Departments note that persons 

are not required to respond to, and 

generally are not subject to any penalty 

for failing to comply with, an ICR unless 

the ICR has a valid OMB control 

number. 

The 2012–2013 paperwork burden 

estimates are summarized as follows: 

Type of Review: New collection. 

Agencies: Employee Benefits Security 

Administration, Department of Labor; 

Internal Revenue Service, U.S. 

Department of the Treasury. 

Title: Affordable Care Act Uniform 

Explanation of Coverage Documents. 

OMB Number: XXXX–XXX; XXXX– 

XXXX. 

Affected Public: Business or other for 

profit; not-for-profit institutions. 

Total Respondents: 858. 

Total Responses: 80,000,000. 

Frequency of Response: On-going. 

Estimated Total Annual Burden 

Hours: 600,000 hours (Employee 

Benefits Security Administration); 

600,000 hours (Internal Revenue 

Service). 

Estimated Total Annual Burden Cost: 

$5,100,000 (Employee Benefits Security 

Administration); $5,100,000 (Internal 

Revenue Service). 

2. Department of Health and Human 

Services 

The Department estimates 333 

respondents each year from 2011–2013. 

This estimate reflects the approximately 

220 issuers offering comprehensive 

major medical coverage in the 

individual market and to fully-insured 

non-Federal governmental plans, and 

113 TPAs acting as service providers for 

self-insured non-Federal governmental 

plans.65

To account for variation in firm size, 

the Department estimates a weighted 

burden on the basis of issuer’s 2009 

total earned premiums for 

comprehensive major medical 

coverage.66 The Department defines 

small issuers as those with total earned 

premiums less than $50 million; 

medium issuers as those with total 

earned premiums between $50 million 

and $999 million; and large issuers as 

those with total earned premiums of $1 

billion or more. Accordingly, the 


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67For the purposes of these and other estimates 

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

assumptions outlined above in section III.A.5. 

Department estimates approximately 70 

small, 115 medium, and 35 large 

issuers. Similarly, the Department 

estimates approximately 36 small, 59 

medium, and 18 large TPAs. 

2011 Burden Estimate 

While the disclosures in these 

proposed regulations are not required 

until March 2012, the Department 

estimates a one-time administrative cost 

of about $14,000,000 across the industry 

and 270,000 burden hours to prepare for 

the provisions of these proposed 

regulations. This calculation is made 

assuming issuers and TPAs will need to 

implement two principal tasks: (1) 

Develop teams to analyze current 

workflow processes against the new 

standards and (2) make appropriate 

changes to IT systems and processes. 

With respect to task (1), the 

Department estimates about 38,000 

burden hours, and an equivalent cost of 

about $1,900,000. The Department 

calculates these estimates as follows: 67

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 ..................................................... $53.26 36 $1,900 54 $2,900 72 $3,800 

Benefits/Sales Professionals ................................. 41.94 40 1,700 60 2,500 80 3,400 

Attorneys ................................................................ 85.44 4 340 6 510 8 680 

Total per issuer/TPA ....................................... .................. 80 3,900 120 5,900 160 7,900 

Total for all issuers/TPAs ............................... .................. 8,500 420,000 21,000 1,000,000 8,500 450,000 

With respect to task (2), the 

Department estimates 230,000 burden 

hours, and an equivalent cost of out 

$12,000,000. The Department calculates 

these estimates as follows: 

TASK 2—IT CHANGES

Hourly 

wage rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ..................................................... $53.26 480 $26,000 720 $38,000 960 $51,000 

Total per issuer/TPA ....................................... .................. 480 26,000 720 38,000 960 51,000 

Total for all issuers/TPAs ....................................... .................. 51,000 2,700,000 125,000 6,700,000 51,000 2,700,000 

The Department assumes the total 

one-time administrative burden will be 

divided equally between 2011 and 2012. 

Thus, in 2011, the Department estimates 

a one-time administrative cost of about 

$7,000,000 across the industry and 

135,000 burden hours. The Department 

assumes issuers and TPAs will incur no 

other costs in 2011 related to the 

proposed collection of information. 

2012 Burden Estimate 

The hour and cost burden for the 

collections of information are as 

follows: 

• The Department estimates that there 

will be about 13,000,000 SBC responses 

in 2012. 

• The Department assumes that 38 

percent of the SBCs would be sent 

electronically in the group market, and 

70 percent of the SBCs would be sent 

electronically in the individual market. 

Accordingly, the Department estimates 

that about 5,900,000 SBCs would be 

electronically distributed, and about 

7,400,000 SBCs would be distributed in 

paper form. The Department assumes 

there are no costs associated with 

electronic disclosures, and there are 

costs only with regard to paper 

disclosures. 

Task 1: Summary of benefits and 

coverage (not including coverage 

examples)—The estimated hour burden 

is about 170,000 hours, and the 

estimated total cost is about $5,900,000. 

The Department calculates these 

estimates as follows: 

TASK 1—EQUIVALENT COSTS FOR PRODUCING SBCS

Hourly 

wage rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ..................................................... $53.26 1.5 $80 1.5 $80 1.5 $80 

Benefits/Sales Professionals ................................. 41.94 1.5 63 1.5 63 1.5 63 

Financial Managers ................................................ 75.32 0.5 38 0.5 38 0.5 38 


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TASK 1—EQUIVALENT COSTS FOR PRODUCING SBCS—Continued 

Hourly 

wage rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

Attorneys ................................................................ 85.44 0.5 43 0.5 43 0.5 43 

Total per issuer/TPA ....................................... .................. 4 220 4 220 4 220 

Total for all issuers/TPAs ............................... .................. 420 24,000 700 39,000 200 12,000 

TASK 1—EQUIVALENT COSTS FOR DISTRIBUTING SBCS

Hourly wage 

rate 

Hours per 

SBC 

Total number 

of SBCs Total hours Total equivalent cost 

Clerical Staff, Individual Market ........................................... $29.15 0.033 2,700,000 89,000 $2,600,000 

Clerical, Group Market ......................................................... 29.15 0.017 4,700,000 80,000 2,300,000 

Total .............................................................................. ........................ ........................ 7,400,000 170,000 $4,900,000 

TASK 1—COST BURDEN FOR PRINTING SBCS

Cost per SBC Total SBCs Cost burden 

Printing Costs .............................................................................................................................. $0.12 7,400,000 $890,000 

Task 2: Coverage Examples—The 

estimated hour burden is about 40,000 

hours, and the estimated total cost is 

about $2,700,000. The Department 

calculates these estimates as follows: 

TASK 2—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 ........... $53.26 45 $2,400 45 $2,400 45 $2,400 

Benefits/Sales Professionals ...................... 41.94 45 1,900 45 1,900 45 1,900 

Financial Managers ...... 75.32 15 1,100 15 1,100 15 1,100 

Attorneys ...................... 85.44 15 1,300 15 1,300 15 1,300 

Total per issuer/ 

TPA ................... ........................ 120 6,700 120 6,700 120 6,700 

Total for all 

issuers/TPAs ..... ........................ 13,000 710,000 21,000 1,200,000 6,400 350,000 

TASK 2—COST BURDEN FOR PRINTING COVERAGE EXAMPLES

Printing cost 

per CE 

Total CEs 

printed 

Total cost 

burden 

Printing Costs .............................................................................................................................. $0.06 7,400,000 $440,000 

Task 3: Glossary Requests—The 

Department assumes that in 2012, 

issuers and TPAs will begin responding 

to glossary requests to covered 

individuals, and that 2.5% of covered 

individuals, who receive paper SBCs, 

will request glossaries. The Departments 

further estimate that the burden and 

cost of providing the glossaries to be 

2.5% of the burden and cost of 

distributing paper SBCs, plus an 

additional cost burden of $0.49 for each 

glossary (including $0.44 for first-class 

postage and $0.05 for supply costs). 

Accordingly, in 2012, the Department 

estimates a total cost of about $240,000 

and 4,300 burden hours associated with 

about 190,000 glossary requests. 

Task 4: One-Time Administrative 

Costs: As mentioned above, the 

Department estimates a one-time 

administrative cost of about $14,000,000 

across the industry and a total of 

270,000 burden hours, and assumes this 

burden will be equally divided between 

2011 and 2012. Thus, in 2012, the 

Department estimates a one-time 

administrative cost of about $7,000,000 

across the industry and 135,000 burden 

hours. 


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The total 2012 burden estimate is 

about $16,000,000. The total number of 

burden hours is 350,000. 

2013 Burden Estimate 

Task 1: Summary of benefits and 

coverage (not including coverage 

examples)—The number of SBC 

responses is assumed to remain 

constant. Thus, in 2013, the Department 

again estimates a total cost of about 

$5,900,000 and 170,000 burden hours 

for SBCs (not including coverage 

examples). 

Task 2: Coverage Examples—In 2013, 

the Department again estimates a total 

cost of about $2,700,000 and 40,320 

burden hours for coverage examples. 

Task 3: Notices of Modifications—The 

Department assumes that in 2013, 

issuers will begin sending notices of 

modifications to covered individuals, 

and that 2% of covered individuals will 

receive such notice. The Department 

further estimates that the burden and 

cost of providing the notices to be 2% 

of the combined burden and cost of the 

SBCs including the coverage examples, 

plus an additional cost burden for $0.49 

for each paper notice (including $0.44 

for first-class postage and $0.05 for 

supply costs). Accordingly, in 2013, the 

Department estimates a total cost of 

about $300,000 and 4,200 burden hours 

associated with about 260,000 notices of 

modification. 

Task 4: Glossary Requests—The 

Department assumes that in 2013, 

issuers and TPAs will again respond to 

glossary requests to covered individuals, 

and that 5% of covered individuals, 

who receive paper SBCs, will request 

glossaries. The Department further 

estimates that the burden and cost of 

providing the glossaries to be 5% of the 

burden and cost of distributing paper 

SBCs, plus an additional cost burden of 

$0.49 for each glossary (including $0.44 

for first-class postage and $0.05 for 

supply costs). Accordingly, in 2013, the 

Department estimates a total cost of 

$470,000 and 8,500 burden hours 

associated with 370,000 glossary 

requests. 

Task 5: Maintenance Administrative 

Costs—In 2013, the Departments assume 

that issuers and TPAs will need to make 

updates to address changes in 

standards, and, thus, incur 15% of the 

one-time administrative burden. 

Accordingly, the estimated hour burden 

is about 40,000 hours, and the estimated 

total cost is about $2,000,000. The 

Departments calculate these estimates as 

follows: 

Hourly wage 

rate 

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

Hours Equivalent 

cost Hours Equivalent cost Hours Equivalent cost 

IT Professionals ........... $53.26 46.2 $2,500 69.3 $3,700 92.4 $4,900 

Benefits/Sales Professionals ...................... 41.94 33.6 1,800 50.4 2,700 67.2 3,600 

Attorneys ...................... 85.44 4.2 220 6.3 340 8.4 450 

Total per issuer/ 

TPA ................... ........................ 84 4,500 126 6,700 168 8,900 

Total for all 

issuers/TPAs ..... ........................ 8,900 470,000 22,000 1,100,000 8,900 470,000 

The total 2013 cost estimate is about 

$11,000,000. The total number of 

burden hours is about 260,000 hours. 

The Department notes that persons 

are not required to respond to, and 

generally are not subject to any penalty 

for failing to comply with, an ICR unless 

the ICR has a valid OMB control 

number. 

The 2012–2013 paperwork burden 

estimates are summarized as follows: 

Type of Review: New collection. 

Agency: Department of Health and 

Human Services. 

Title: Affordable Care Act Uniform 

Explanation of Coverage Documents. 

OMB Number: 0938–New. 

Affected Public: Business; State, 

Local, or Tribal Governments. 

Total Respondents: 333. 

Total Responses: 13,000,000. 

Frequency of Response: On-going. 

Estimated Total Annual Burden 

Hours: 310,000 hours. 

Estimated Total Annual Burden Cost: 

$1,600,000. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS’ Web site 

at http://www.cms.gov/Paperwork

ReductionActof1995/PRAL/ 

list.asp#TopOfPage or e-mail 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. 

If you comment on this information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–9982–P. Fax: 202–395–5806; or Email: OIRA_submission@omb.eop.gov. 

E. Federalism Statement—Department 

of Labor and Department of Health and 

Human Services 

Executive Order 13132 outlines 

fundamental principles of federalism, 

and requires the adherence to specific 

criteria by Federal agencies in the 

process of their formulation and 

implementation of policies that have 

‘‘substantial direct effects’’ on the 

States, the relationship between the 

national government and States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

federalism implications must consult 

with State and local officials and 

describe the extent of their consultation 

and the nature of the concerns of State 

and local officials in the preamble to the 

regulation. 

In the Departments’ view, these 

proposed rules have federalism 

implications, because it would have 

direct effects on the States, the 

relationship between national 

governments and States, or on the 

distribution of power and 

responsibilities among various levels of 

government relating to the disclosure of 

health insurance coverage information 

to consumers. Under these proposed 

rules, all group health plans and health 

insurance issuers offering group or 

individual health insurance coverage, 

including self-funded non-Federal 


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governmental plans as defined in 

section 2791 of the PHS Act, would be 

required to follow uniform standards for 

compiling and providing a summary of 

benefits and coverage to consumers. 

Such Federal standards developed 

under PHS Act section 2715(a) would 

preempt any related State standards that 

require a summary of benefits and 

coverage that provides less information 

to consumers than that required to be 

provided under PHS Act section 

2715(a). 

In general, through section 514, 

ERISA supersedes State laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

State laws that regulate insurance, 

banking, or securities. While ERISA 

prohibits States from regulating a plan 

as an insurance or investment company 

or bank, the preemption provisions of 

section 731 of ERISA and section 2724 

of the PHS Act (implemented in 29 CFR 

2590.731(a) and 45 CFR 146.143(a)) 

apply so that the HIPAA requirements 

(including those of the Affordable Care 

Act) are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of a Federal standard. 

The conference report accompanying 

HIPAA indicates that this is intended to 

be the ‘‘narrowest’’ preemption of State 

laws (See House Conf. Rep. No. 104– 

736, at 205, reprinted in 1996 U.S. Code 

Cong. & Admin. News 2018). States may 

continue to apply State law 

requirements except to the extent that 

such requirements prevent the 

application of the Affordable Care Act 

requirements that are the subject of this 

rulemaking. Accordingly, States have 

significant latitude to impose 

requirements on health insurance 

issuers that are more restrictive than the 

Federal law. However, under these 

proposed rules, a State would not be 

allowed to impose a requirement that 

modifies the summary of benefits and 

coverage required to be provided under 

PHS Act section 2715(a), because it 

would prevent the application of this 

proposed rule’s uniform disclosure 

requirement. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, the Departments have engaged in 

efforts to consult with and work 

cooperatively with affected States, 

including consulting with, and 

attending conferences of, the National 

Association of Insurance Commissioners 

and consulting with State insurance 

officials on an individual basis. It is 

expected that the Departments will act 

in a similar fashion in enforcing the 

Affordable Care Act, including the 

provisions of section 2715 of the PHS 

Act. Throughout the process of 

developing these proposed regulations, 

to the extent feasible within the specific 

preemption provisions of HIPAA as it 

applies to the Affordable Care Act, the 

Departments have attempted to balance 

the States’ interests in regulating health 

insurance issuers, and Congress’ intent 

to provide uniform minimum 

protections to consumers in every State. 

By doing so, it is the Departments’ view 

that they have complied with the 

requirements of Executive Order 13132. 

Pursuant to the requirements set forth 

in section 8(a) of Executive Order 

13132, and by the signatures affixed to 

this proposed rule, the Departments 

certify that the Employee Benefits 

Security Administration and the Centers 

for Medicare & Medicaid Services have 

complied with the requirements of 

Executive Order 13132 for the attached 

proposed rule in a meaningful and 

timely manner. 

IV. Statutory Authority 

The Department of the Treasury 

proposed regulations are proposed to be 

adopted pursuant to the authority 

contained in sections 7805 and 9833 of 

the Code. 

The Department of Labor proposed 

regulations are proposed to be adopted 

pursuant to the authority contained in 

29 U.S.C. 1027, 1059, 1135, 1161–1168, 

1169, 1181–1183, 1181 note, 1185, 

1185a, 1185b, 1185d, 1191, 1191a, 

1191b, and 1191c; sec. 101(g), Public 

Law 104–191, 110 Stat. 1936; sec. 

401(b), Public Law 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), 

Public Law 110–343, 122 Stat. 3881; sec. 

1001, 1201, and 1562(e), Public Law 

111–148, 124 Stat. 119, as amended by 

Public Law 111–152, 124 Stat. 1029; 

Secretary of Labor’s Order 3–2010, 75 

FR 55354 (September 10, 2010). 

The Department of Health and Human 

Services proposed regulations are 

proposed to be adopted pursuant to the 

authority contained in sections 2701 

through 2763, 2791, and 2792 of the 

PHS Act (42 U.S.C. 300gg through 

300gg–63, 300gg–91, and 300gg–92), as 

amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Part 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

Sarah Hall Ingram, 

Acting Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Signed this 15th day of August, 2011. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: July 28, 2011. 

Donald Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: August 9, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Chapter I 

Accordingly, 26 CFR parts 54 and 602 

are proposed to be amended as follows: 

PART 54—PENSION EXCISE TAXES 

Paragraph 1. The authority citation 

for Part 54 is amended by adding an 

entry for § 54.9815–2715 in numerical 

order to read in part as follows: 

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

Section 54.9815–2715 also issued under 26 

U.S.C. 9833. 

Par. 2. Section 54.9815–2715 is added 

to read as follows: 

§ 54.9815–2715 Summary of benefits and 

coverage and uniform glossary. 

(a) Summary of benefits and 

coverage—(1) In general. A group health 

plan (and its administrator as defined in 

section 3(16)(A) of ERISA), and a health 

insurance issuer offering group health 

insurance coverage, is required to 

provide a written summary of benefits 

and coverage (SBC) for each benefit 

package without charge to entities and 

individuals described in this paragraph 


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

this section. 

(i) By a group health insurance issuer 

to a group health plan—(A) A health 

insurance issuer offering group health 

insurance coverage must provide the 

SBC to a group health plan (or its 

sponsor) upon application or request for 

information about the health coverage as 

soon as practicable following the 

request, but in no event later than seven 

days following the request. If an SBC is 

provided upon request for information 

about health coverage and the plan (or 

its sponsor) subsequently applies for 

health coverage, a second SBC must be 

provided under this paragraph 

(a)(1)(i)(A) only if the information 

required to be in the SBC has changed. 

(B) If there is any change in the 

information required to be in the SBC 

before the coverage is offered, or before 

the first day of coverage, the issuer must 

update and provide a current SBC to the 

plan (or its sponsor) no later than the 

date of the offer (or no later than the first 

day of coverage, as applicable). 

(C) If the issuer renews or reissues the 

policy, certificate, or contract of 

insurance (for example, for a succeeding 

policy year), the issuer must provide a 

new SBC when the policy, certificate, or 

contract is renewed or reissued. 

(1) In the case of renewal or 

reissuance, if written application is 

required for renewal (in either paper or 

electronic form), the SBC must be 

provided no later than the date the 

materials are distributed. 

(2) If renewal or reissuance is 

automatic, the SBC must be provided no 

later than 30 days prior to the first day 

of the new policy year. 

(D) If a group health plan (or its 

sponsor) requests an SBC from a health 

insurance issuer offering group health 

insurance coverage, it must be provided 

as soon as practicable, but in no event 

later than seven days following the 

request for an SBC. 

(ii) By a group health insurance issuer 

and a group health plan to participants 

and beneficiaries—(A) A group health 

plan (including its administrator, as 

defined under section 3(16) of ERISA), 

and a health insurance issuer offering 

group health insurance coverage, must 

provide an SBC to a participant or 

beneficiary (as defined under sections 

3(7) and 3(8) of ERISA), and consistent 

with the rules of paragraph (a)(1)(iii) of 

this section) with respect to each benefit 

package offered by the plan or issuer for 

which the participant or beneficiary is 

eligible. 

(B) The SBC must be provided as part 

of any written application materials that 

are distributed by the plan or issuer for 

enrollment. If the plan does not 

distribute written application materials 

for enrollment, the SBC must be 

distributed no later than the first date 

the participant is eligible to enroll in 

coverage for the participant or any 

beneficiaries. 

(C) If there is any change to the 

information required to be in the SBC 

before the first day of coverage, the plan 

or issuer must update and provide a 

current SBC to a participant or 

beneficiary no later than the first day of 

coverage. 

(D) The plan or issuer must provide 

the SBC to special enrollees (as 

described in § 54.9801–6) within seven 

days of a request for enrollment 

pursuant to a special enrollment right. 

(E) If the plan or issuer requires 

participants or beneficiaries to renew in 

order to maintain coverage (for example, 

for a succeeding plan year), the plan or 

issuer must provide a new SBC when 

the coverage is renewed. 

(1) If written application is required 

for renewal (in either paper or electronic 

form), the SBC must be provided no 

later than the date the materials are 

distributed. 

(2) If renewal is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of coverage under 

the new plan year. 

(F) A plan or issuer must provide the 

SBC to participants or beneficiaries 

upon request, as soon as practicable, but 

in no event later than seven days 

following the request. 

(iii) Special rules to prevent 

unnecessary duplication with respect to 

group health coverage—(A) An entity 

required to provide an SBC under 

paragraph (a)(1) of this section with 

respect to an individual satisfies that 

requirement if another party provides 

the SBC, but only to the extent that the 

SBC is timely and complete in 

accordance with the other rules of this 

section. Therefore, for example, in the 

case of a group health plan funded 

through an insurance policy, the plan 

satisfies the requirement to provide an 

SBC with respect to an individual if the 

issuer provides a timely and complete 

SBC to the individual. 

(B) If a participant and any 

beneficiaries are known to reside at the 

same address, and a single SBC is 

provided to that address, the 

requirement to provide the SBC is 

satisfied with respect to all individuals 

residing at that address. If a 

beneficiary’s last known address is 

different than the participant’s last 

known address, a separate SBC is 

required to be provided to the 

beneficiary at the beneficiary’s last 

known address. 

(C) With respect to a group health 

plan that offers multiple benefit 

packages, the plan or issuer is required 

to provide a new SBC automatically 

upon renewal only with respect to the 

benefit package in which a participant 

or beneficiary is enrolled; SBCs are not 

required to be provided automatically 

with respect to benefit packages in 

which the participant or beneficiary are 

not enrolled. However, if a participant 

or beneficiary requests an SBC with 

respect to another benefit package (or 

more than one other benefit package) for 

which the participant or beneficiary is 

eligible, the SBC (or SBCs, in the case 

of a request for SBCs relating to more 

than one benefit package) must be 

provided upon request in accordance 

with the rules of paragraph (a)(1)(ii) of 

this section, which requires the SBC to 

be provided as soon as practicable, but 

in no event later than seven days 

following the request. 

(2) Content—(i) In general. The SBC 

must include the following: 

(A) Uniform definitions of standard 

insurance terms and medical terms so 

that consumers may compare health 

coverage and understand the terms of 

(or exceptions to) their coverage; 

(B) A description of the coverage, 

including cost sharing, for each category 

of benefits identified by the Secretary in 

guidance; 

(C) The exceptions, reductions, and 

limitations of the coverage; 

(D) The cost-sharing provisions of the 

coverage, including deductible, 

coinsurance, and copayment 

obligations; 

(E) The renewability and continuation 

of coverage provisions; 

(F) Coverage examples, in accordance 

with the rules of paragraph (a)(2)(ii) of 

this section; 

(G) With respect to coverage 

beginning on or after January 1, 2014, a 

statement about whether the plan or 

coverage provides minimum essential 

coverage as defined under section 

5000A(f) and whether the plan’s or 

coverage’s share of the total allowed 

costs of benefits provided under the 

plan or coverage meets applicable 

requirements; 

(H) A statement that the SBC is only 

a summary and that the plan document, 

policy, or certificate of insurance should 

be consulted to determine the governing 

contractual provisions of the coverage; 

(I) Contact information for questions 

and obtaining a copy of the plan 

document or the insurance policy, 

certificate, or contract of insurance 

(such as a telephone number for 

customer service and an Internet 

address for obtaining a copy of the plan 


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document or the insurance policy, 

certificate, or contract of insurance); 

(J) For plans and issuers that maintain 

one or more networks of providers, an 

Internet address (or similar contact 

information) for obtaining a list of 

network providers; 

(K) For plans and issuers that use a 

formulary in providing prescription 

drug coverage, an Internet address (or 

similar contact information) for 

obtaining information on prescription 

drug coverage; 

(L) An Internet address for obtaining 

the uniform glossary, as described in 

paragraph (c) of this section; and 

(M) Premiums (or in the case of a selfinsured group health plan, cost of 

coverage). 

(ii) Coverage examples. The SBC must 

include coverage examples that 

illustrate benefits provided under the 

plan or coverage for common benefits 

scenarios (including pregnancy and 

serious or chronic medical conditions) 

that are identified by the Secretary in 

accordance with the following: 

(A) Number of examples. The 

Secretary may identify up to six 

coverage examples that may be required 

in an SBC. 

(B) Benefits scenarios. For purposes of 

this section, a benefits scenario is a 

hypothetical situation, consisting of a 

sample treatment plan for a specified 

medical condition during a specific 

period of time, based on recognized 

clinical practice guidelines available 

through the National Guideline 

Clearinghouse, Agency for Healthcare 

Research and Quality. The Secretary 

will specify, in guidance, the types of 

services, dates of service, applicable 

billing codes, and allowed charges for 

each claim in the benefits scenario. 

(C) Demonstration of benefit provided. 

To demonstrate benefits provided under 

the plan or coverage, a plan or issuer 

simulates how claims would be 

processed under the scenarios provided 

by the Secretary to generate an estimate 

of cost sharing a consumer could expect 

to pay under the benefit package. The 

demonstration of benefits will take into 

account any cost sharing, excluded 

benefits, and other limitations on 

coverage, as described by the Secretary 

in guidance. 

(3) Appearance. A group health plan 

and a health insurance issuer must 

provide an SBC as a stand-alone 

document in the form authorized by the 

Secretary and completed in accordance 

with the instructions for completing the 

SBC that are authorized by the Secretary 

in guidance. The SBC must be presented 

in a uniform format, use terminology 

understandable by the average plan 

enrollee, not exceed four double-sided 

pages in length, and not include print 

smaller than 12-point font. 

(4) Form—(i) An SBC provided by an 

issuer offering group health insurance 

coverage to a plan (or its sponsor), may 

be provided in paper form. 

Alternatively, the SBC may be provided 

electronically (such as e-mail or an 

Internet posting) if the following three 

conditions are satisfied— 

(A) The format is readily accessible by 

the plan (or its sponsor); 

(B) The SBC is provided in paper form 

free of charge upon request, and 

(C) If the electronic form is an Internet 

posting, the issuer timely advises the 

plan (or its sponsor) in paper form or email that the documents are available on 

the Internet and provides the Internet 

address. 

(ii) An SBC provided by a plan or 

issuer to a participant or beneficiary 

may be provided in paper form. 

Alternatively, the SBC may be provided 

electronically if the requirements of 29 

CFR 2520.104b–1 are met. 

(5) Language. A group health plan or 

health insurance issuer must provide 

the SBC in a culturally and 

linguistically appropriate manner. For 

purposes of this paragraph (a)(5), a plan 

or issuer is considered to provide the 

SBC in a culturally and linguistically 

appropriate manner if the thresholds 

and standards of § 54.9815–2719T(e) are 

met as applied to the SBC. 

(b) Notice of modifications. If a group 

health plan, or health insurance issuer 

offering group health insurance 

coverage, makes any material 

modification (as defined under section 

102 of ERISA) in any of the terms of the 

plan or coverage that would affect the 

content of the SBC, that is not reflected 

in the most recently provided SBC, and 

that occurs other than in connection 

with a renewal or reissuance of 

coverage, the plan or issuer must 

provide notice of the modification to 

enrollees not later than 60 days prior to 

the date on which such modification 

will become effective. The notice of 

modification must be provided in a form 

that is consistent with the rules of 

paragraph (a)(4) of this section. 

(c) Uniform glossary—(1) In general. 

A group health plan, and a health 

insurance issuer offering group health 

insurance coverage, must make 

available to participants and 

beneficiaries the uniform glossary 

described in paragraph (c)(2) of this 

section in accordance with the 

appearance and format requirements of 

paragraphs (c)(3) and (c)(4) of this 

section. 

(2) Health-coverage-related terms and 

medical terms. The uniform glossary 

must provide uniform definitions, 

specified by the Secretary in guidance, 

for the following health-coverage-related 

terms and medical terms: 

(i) Allowed amount, appeal, balance 

billing, co-insurance, complications of 

pregnancy, co-payment, deductible, 

durable medical equipment, emergency 

medical condition, emergency medical 

transportation, emergency room care, 

emergency services, excluded services, 

grievance, habilitation services, health 

insurance, home health care, hospice 

services, hospitalization, hospital 

outpatient care, in-network coinsurance, in-network co-payment, 

medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment, 

out-of-pocket limit, physician services, 

plan, preauthorization, preferred 

provider, premium, prescription drug 

coverage, prescription drugs, primary 

care physician, primary care provider, 

provider, reconstructive surgery, 

rehabilitation services, skilled nursing 

care, specialist, usual customary and 

reasonable (UCR), and urgent care; and 

(ii) Such other terms as the Secretary 

determines are important to define so 

that individuals and employers may 

compare and understand the terms of 

coverage and medical benefits 

(including any exceptions to those 

benefits), as specified in guidance. 

(3) Appearance. A group health plan, 

and a health insurance issuer, must 

provide the uniform glossary with the 

appearance authorized in guidance, 

ensuring that the uniform glossary is 

presented in a uniform format and 

utilizes terminology understandable by 

the average plan enrollee. 

(4) Form and manner. A plan or issuer 

must make the uniform glossary 

described in this paragraph (c) available 

upon request, in either paper or 

electronic form (as requested), within 

seven days of the request. (Under the 

rules of paragraph (a) of this section, the 

form authorized in guidance for the SBC 

will disclose to participants and 

beneficiaries their rights to request a 

copy of the uniform glossary.) 

(d) Preemption. With respect to the 

standards for providing an SBC required 

under paragraph (a) of this section, State 

laws that require a health insurance 

issuer to provide an SBC that supplies 

less information than required under 

paragraph (a) of this section are 

preempted. 

(e) Failure to provide. A group health 

plan or health insurance issuer that 

willfully fails to provide information 

required under this section to a 

participant or beneficiary is subject to a 

fine of not more than $1,000 for each 

such failure. A failure with respect to 

each participant or beneficiary 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
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constitutes a separate offense for 

purposes of this paragraph (e). 

(f) Applicability date. This section is 

applicable beginning March 23, 2012. 

See § 54.9815–1251T(d), providing that 

this section applies to grandfathered 

health plans. 

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– 

* * * * * 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

29 CFR part 2590 is proposed to be 

amended 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) By a group health insurance issuer 

to a group health plan—(A) A health 

insurance issuer offering group health 

insurance coverage must provide the 

SBC to a group health plan (or its 

sponsor) upon application or request for 

information about the health coverage as 

soon as practicable following the 

request, but in no event later than seven 

days following the request. If an SBC is 

provided upon request for information 

about health coverage and the plan (or 

its sponsor) subsequently applies for 

health coverage, a second SBC must be 

provided under this paragraph 

(a)(1)(i)(A) only if the information 

required to be in the SBC has changed. 

(B) If there is any change in the 

information required to be in the SBC 

before the coverage is offered, or before 

the first day of coverage, the issuer must 

update and provide a current SBC to the 

plan (or its sponsor) no later than the 

date of the offer (or no later than the first 

day of coverage, as applicable). 

(C) If the issuer renews or reissues the 

policy, certificate, or contract of 

insurance (for example, for a succeeding 

policy year), the issuer must provide a 

new SBC when the policy, certificate, or 

contract is renewed or reissued. 

(1) In the case of renewal or 

reissuance, if written application is 

required for renewal (in either paper or 

electronic form), the SBC must be 

provided no later than the date the 

materials are distributed. 

(2) If renewal or reissuance is 

automatic, the SBC must be provided no 

later than 30 days prior to the first day 

of the new policy year. 

(D) If a group health plan (or its 

sponsor) requests an SBC from a health 

insurance issuer offering group health 

insurance coverage, it must be provided 

as soon as practicable, but in no event 

later than seven days following the 

request for an SBC. 

(ii) By a group health insurance issuer 

and a group health plan to participants 

and beneficiaries—(A) A group health 

plan (including its administrator, as 

defined under section 3(16) of ERISA), 

and a health insurance issuer offering 

group health insurance coverage, must 

provide an SBC to a participant or 

beneficiary (as defined under sections 

3(7) and 3(8) of ERISA), and consistent 

with the rules of paragraph (a)(1)(iii) of 

this section) with respect to each benefit 

package offered by the plan or issuer for 

which the participant or beneficiary is 

eligible. 

(B) The SBC must be provided as part 

of any written application materials that 

are distributed by the plan or issuer for 

enrollment. If the plan does not 

distribute written application materials 

for enrollment, the SBC must be 

distributed no later than the first date 

the participant is eligible to enroll in 

coverage for the participant or any 

beneficiaries. 

(C) If there is any change to the 

information required to be in the SBC 

before the first day of coverage, the plan 

or issuer must update and provide a 

current SBC to a participant or 

beneficiary no later than the first day of 

coverage. 

(D) The plan or issuer must provide 

the SBC to special enrollees (as 

described in § 2590.701–6 of this Part) 

within seven days of a request for 

enrollment pursuant to a special 

enrollment right. 

(E) If the plan or issuer requires 

participants or beneficiaries to renew in 

order to maintain coverage (for example, 

for a succeeding plan year), the plan or 

issuer must provide a new SBC when 

the coverage is renewed. 

(1) If written application is required 

for renewal (in either paper or electronic 

form), the SBC must be provided no 

later than the date the materials are 

distributed. 

(2) If renewal is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of coverage under 

the new plan year. 

(F) A plan or issuer must provide the 

SBC to participants or beneficiaries 

upon request, as soon as practicable, but 

in no event later than seven days 

following the request. 

(iii) Special rules to prevent 

unnecessary duplication with respect to 

group health coverage—(A) An entity 

required to provide an SBC under 

paragraph (a)(1) of this section with 

respect to an individual satisfies that 

requirement if another party provides 

the SBC, but only to the extent that the 

SBC is timely and complete in 

accordance with the other rules of this 

section. Therefore, for example, in the 

case of a group health plan funded 

through an insurance policy, the plan 

satisfies the requirement to provide an 

SBC with respect to an individual if the 

issuer provides a timely and complete 

SBC to the individual. 

(B) If a participant and any 

beneficiaries are known to reside at the 

same address, and a single SBC is 

provided to that address, the 

requirement to provide the SBC is 

satisfied with respect to all individuals 

residing at that address. If a 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
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beneficiary’s last known address is 

different than the participant’s last 

known address, a separate SBC is 

required to be provided to the 

beneficiary at the beneficiary’s last 

known address. 

(C) With respect to a group health 

plan that offers multiple benefit 

packages, the plan or issuer is required 

to provide a new SBC automatically 

upon renewal only with respect to the 

benefit package in which a participant 

or beneficiary is enrolled; SBCs are not 

required to be provided automatically 

with respect to benefit packages in 

which the participant or beneficiary are 

not enrolled. However, if a participant 

or beneficiary requests an SBC with 

respect to another benefit package (or 

more than one other benefit package) for 

which the participant or beneficiary is 

eligible, the SBC (or SBCs, in the case 

of a request for SBCs relating to more 

than one benefit package) must be 

provided upon request in accordance 

with the rules of paragraph (a)(1)(ii) of 

this section, which requires the SBC to 

be provided as soon as practicable, but 

in no event later than seven days 

following the request. 

(2) Content—(i) In general. The SBC 

must include the following: 

(A) Uniform definitions of standard 

insurance terms and medical terms so 

that consumers may compare health 

coverage and understand the terms of 

(or exceptions to) their coverage; 

(B) A description of the coverage, 

including cost sharing, for each category 

of benefits identified by the Secretary in 

guidance; 

(C) The exceptions, reductions, and 

limitations of the coverage; 

(D) The cost-sharing provisions of the 

coverage, including deductible, 

coinsurance, and copayment 

obligations; 

(E) The renewability and continuation 

of coverage provisions; 

(F) Coverage examples, in accordance 

with the rules of paragraph (a)(2)(ii) of 

this section; 

(G) With respect to coverage 

beginning on or after January 1, 2014, a 

statement about whether the plan or 

coverage provides minimum essential 

coverage as defined under section 

5000A(f) of the Internal Revenue Code 

and whether the plan’s or coverage’s 

share of the total allowed costs of 

benefits provided under the plan or 

coverage meets applicable requirements; 

(H) A statement that the SBC is only 

a summary and that the plan document, 

policy, or certificate of insurance should 

be consulted to determine the governing 

contractual provisions of the coverage; 

(I) Contact information for questions 

and obtaining a copy of the plan 

document or the insurance policy, 

certificate, or contract of insurance 

(such as a telephone number for 

customer service and an Internet 

address for obtaining a copy of the plan 

document or the insurance policy, 

certificate, or contract of insurance); 

(J) For plans and issuers that maintain 

one or more networks of providers, an 

Internet address (or similar contact 

information) for obtaining a list of 

network providers; 

(K) For plans and issuers that use a 

formulary in providing prescription 

drug coverage, an Internet address (or 

similar contact information) for 

obtaining information on prescription 

drug coverage; 

(L) An Internet address for obtaining 

the uniform glossary, as described in 

paragraph (c) of this section; and 

(M) Premiums (or in the case of a selfinsured group health plan, cost of 

coverage). 

(ii) Coverage examples. The SBC must 

include coverage examples that 

illustrate benefits provided under the 

plan or coverage for common benefits 

scenarios (including pregnancy and 

serious or chronic medical conditions) 

that are identified by the Secretary in 

accordance with the following: 

(A) Number of examples. The 

Secretary may identify up to six 

coverage examples that may be required 

in an SBC. 

(B) Benefits scenarios. For purposes of 

this section, a benefits scenario is a 

hypothetical situation, consisting of a 

sample treatment plan for a specified 

medical condition during a specific 

period of time, based on recognized 

clinical practice guidelines available 

through the National Guideline 

Clearinghouse, Agency for Healthcare 

Research and Quality. The Secretary 

will specify, in guidance, the types of 

services, dates of service, applicable 

billing codes, and allowed charges for 

each claim in the benefits scenario. 

(C) Demonstration of benefit provided. 

To demonstrate benefits provided under 

the plan or coverage, a plan or issuer 

simulates how claims would be 

processed under the scenarios provided 

by the Secretary to generate an estimate 

of cost sharing a consumer could expect 

to pay under the benefit package. The 

demonstration of benefits will take into 

account any cost sharing, excluded 

benefits, and other limitations on 

coverage, as described by the Secretary 

in guidance. 

(3) Appearance. A group health plan 

and a health insurance issuer must 

provide an SBC as a stand-alone 

document in the form authorized by the 

Secretary and completed in accordance 

with the instructions for completing the 

SBC that are authorized by the Secretary 

in guidance. The SBC must be presented 

in a uniform format, use terminology 

understandable by the average plan 

enrollee, not exceed four double-sided 

pages in length, and not include print 

smaller than 12-point font. 

(4) Form—(i) An SBC provided by an 

issuer offering group health insurance 

coverage to a plan (or its sponsor), may 

be provided in paper form. 

Alternatively, the SBC may be provided 

electronically (such as e-mail or an 

Internet posting) if the following three 

conditions are satisfied— 

(A) The format is readily accessible by 

the plan (or its sponsor); 

(B) The SBC is provided in paper form 

free of charge upon request, and 

(C) If the electronic form is an Internet 

posting, the issuer timely advises the 

plan (or its sponsor) in paper form or email that the documents are available on 

the Internet and provides the Internet 

address. 

(ii) An SBC provided by a plan or 

issuer to a participant or beneficiary 

may be provided in paper form. 

Alternatively, the SBC may be provided 

electronically if the requirements of 29 

CFR 2520.104b–1 are met. 

(5) Language. A group health plan or 

health insurance issuer must provide 

the SBC in a culturally and 

linguistically appropriate manner. For 

purposes of this paragraph (a)(5), a plan 

or issuer is considered to provide the 

SBC in a culturally and linguistically 

appropriate manner if the thresholds 

and standards of § 2590.715–2719(e) of 

this Part are met as applied to the SBC. 

(b) Notice of modifications. If a group 

health plan, or health insurance issuer 

offering group health insurance 

coverage, makes any material 

modification (as defined under section 

102 of ERISA) in any of the terms of the 

plan or coverage that would affect the 

content of the SBC, that is not reflected 

in the most recently provided SBC, and 

that occurs other than in connection 

with a renewal or reissuance of 

coverage, the plan or issuer must 

provide notice of the modification to 

enrollees not later than 60 days prior to 

the date on which such modification 

will become effective. The notice of 

modification must be provided in a form 

that is consistent with the rules of 

paragraph (a)(4) of this section. 

(c) Uniform glossary—(1) In general. 

A group health plan, and a health 

insurance issuer offering group health 

insurance coverage, must make 

available to participants and 

beneficiaries the uniform glossary 

described in paragraph (c)(2) of this 

section in accordance with the 

appearance and format requirements of 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
52472 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

paragraphs (c)(3) and (c)(4) of this 

section. 

(2) Health-coverage-related terms and 

medical terms. The uniform glossary 

must provide uniform definitions, 

specified by the Secretary in guidance, 

for the following health-coverage-related 

terms and medical terms: 

(i) Allowed amount, appeal, balance 

billing, co-insurance, complications of 

pregnancy, co-payment, deductible, 

durable medical equipment, emergency 

medical condition, emergency medical 

transportation, emergency room care, 

emergency services, excluded services, 

grievance, habilitation services, health 

insurance, home health care, hospice 

services, hospitalization, hospital 

outpatient care, in-network coinsurance, in-network co-payment, 

medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment, 

out-of-pocket limit, physician services, 

plan, preauthorization, preferred 

provider, premium, prescription drug 

coverage, prescription drugs, primary 

care physician, primary care provider, 

provider, reconstructive surgery, 

rehabilitation services, skilled nursing 

care, specialist, usual customary and 

reasonable (UCR), and urgent care; and 

(ii) Such other terms as the Secretary 

determines are important to define so 

that individuals and employers may 

compare and understand the terms of 

coverage and medical benefits 

(including any exceptions to those 

benefits), as specified in guidance. 

(3) Appearance. A group health plan, 

and a health insurance issuer, must 

provide the uniform glossary with the 

appearance authorized in guidance, 

ensuring that the uniform glossary is 

presented in a uniform format and 

utilizes terminology understandable by 

the average plan enrollee. 

(4) Form and manner. A plan or issuer 

must make the uniform glossary 

described in this paragraph (c) available 

upon request, in either paper or 

electronic form (as requested), within 

seven days of the request. (Under the 

rules of paragraph (a) of this section, the 

form authorized in guidance for the SBC 

will disclose to participants and 

beneficiaries their rights to request a 

copy of the uniform glossary.) 

(d) Preemption. See § 2590.731 of this 

Part. In addition, with respect to the 

standards for providing an SBC required 

under paragraph (a) of this section, State 

laws that require a health insurance 

issuer to provide an SBC that supplies 

less information than required under 

paragraph (a) of this section are 

preempted. 

(e) Failure to provide. A group health 

plan that willfully fails to provide 

information required under this section 

to a participant or beneficiary is subject 

to a fine of not more than $1,000 for 

each such failure. A failure with respect 

to each participant or beneficiary 

constitutes a separate offense for 

purposes of this paragraph (e). 

(f) Applicability date. This section is 

applicable beginning March 23, 2012. 

See § 2590.715–1251(d) of this Part, 

providing that this section applies to 

grandfathered health plans. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Subtitle A 

The Department of Health and Human 

Services proposes to amend 45 CFR part 

147 as follows: 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

1. The authority citation for part 147 

continues to read as follows: 

Authority: Sections 2710 through 2763, 

2791, and 2792 of the Public Health Service 

Act (42 U.S.C. 300gg through 300gg–63, 

300gg–91, and 300gg–92), as amended. 

2. Add § 147.200 to read as follows: 

§ 147.200 Summary of benefits and 

coverage and uniform glossary. 

(a) Summary of benefits and 

coverage—(1) In general. A group health 

plan (and its administrator as defined in 

section 3(16)(A) of ERISA), and a health 

insurance issuer offering group or 

individual health insurance coverage, is 

required to provide a written summary 

of benefits and coverage (SBC) for each 

benefit package without charge to 

entities and individuals described in 

this paragraph (a)(1) in accordance with 

the rules of this section. 

(i) By a group health insurance issuer 

to a group health plan—(A) A health 

insurance issuer offering group health 

insurance coverage must provide the 

SBC to a group health plan (or its 

sponsor) upon application or request for 

information about the health coverage as 

soon as practicable following the 

request, but in no event later than seven 

days following the request. If an SBC is 

provided upon request for information 

about health coverage and the plan (or 

its sponsor) subsequently applies for 

health coverage, a second SBC must be 

provided under this paragraph 

(a)(1)(i)(A) only if the information 

required to be in the SBC has changed. 

(B) If there is any change in the 

information required to be in the SBC 

before the coverage is offered, or before 

the first day of coverage, the issuer must 

update and provide a current SBC to the 

plan (or its sponsor) no later than the 

date of the offer (or no later than the first 

day of coverage, as applicable). 

(C) If the issuer renews or reissues the 

policy, certificate, or contract of 

insurance (for example, for a succeeding 

policy year), the issuer must provide a 

new SBC when the policy, certificate, or 

contract is renewed or reissued. 

(1) In the case of renewal or 

reissuance, if written application is 

required for renewal (in either paper or 

electronic form), the SBC must be 

provided no later than the date the 

materials are distributed. 

(2) If renewal or reissuance is 

automatic, the SBC must be provided no 

later than 30 days prior to the first day 

of the new policy year. 

(D) If a group health plan (or its 

sponsor) requests an SBC from a health 

insurance issuer offering group health 

insurance coverage, it must be provided 

as soon as practicable, but in no event 

later than seven days following the 

request for an SBC. 

(ii) By a group health insurance issuer 

and a group health plan to participants 

and beneficiaries—(A) A group health 

plan (including its administrator, as 

defined under section 3(16) of ERISA), 

and a health insurance issuer offering 

group health insurance coverage, must 

provide an SBC to a participant or 

beneficiary (as defined under sections 

3(7) and 3(8) of ERISA), and consistent 

with the rules of paragraph (a)(1)(iii) of 

this section) with respect to each benefit 

package offered by the plan or issuer for 

which the participant or beneficiary is 

eligible. 

(B) The SBC must be provided as part 

of any written application materials that 

are distributed by the plan or issuer for 

enrollment. If the plan does not 

distribute written application materials 

for enrollment, the SBC must be 

distributed no later than the first date 

the participant is eligible to enroll in 

coverage for the participant or any 

beneficiaries. 

(C) If there is any change to the 

information required to be in the SBC 

before the first day of coverage, the plan 

or issuer must update and provide a 

current SBC to a participant or 

beneficiary no later than the first day of 

coverage. 

(D) The plan or issuer must provide 

the SBC to special enrollees (as 

described in 45 CFR 146.117) within 

seven days of a request for enrollment 

pursuant to a special enrollment right. 

(E) If the plan or issuer requires 

participants or beneficiaries to renew in 

order to maintain coverage (for example, 

for a succeeding plan year), the plan or 

issuer must provide a new SBC when 

the coverage is renewed. 


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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52473 

(1) If written application is required 

for renewal (in either paper or electronic 

form), the SBC must be provided no 

later than the date the materials are 

distributed. 

(2) If renewal is automatic, the SBC 

must be provided no later than 30 days 

prior to the first day of coverage under 

the new plan year. 

(F) A plan or issuer must provide the 

SBC to participants or beneficiaries 

upon request, as soon as practicable, but 

in no event later than seven days 

following the request. 

(iii) Special rules to prevent 

unnecessary duplication with respect to 

group health coverage—(A) An entity 

required to provide an SBC under 

paragraph (a)(1) of this section with 

respect to an individual satisfies that 

requirement if another party provides 

the SBC, but only to the extent that the 

SBC is timely and complete in 

accordance with the other rules of this 

section. Therefore, for example, in the 

case of a group health plan funded 

through an insurance policy, the plan 

satisfies the requirement to provide an 

SBC with respect to an individual if the 

issuer provides a timely and complete 

SBC to the individual. 

(B) If a participant and any 

beneficiaries are known to reside at the 

same address, and a single SBC is 

provided to that address, the 

requirement to provide the SBC is 

satisfied with respect to all individuals 

residing at that address. If a 

beneficiary’s last known address is 

different than the participant’s last 

known address, a separate SBC is 

required to be provided to the 

beneficiary at the beneficiary’s last 

known address. 

(C) With respect to a group health 

plan that offers multiple benefit 

packages, the plan or issuer is required 

to provide a new SBC automatically 

upon renewal only with respect to the 

benefit package in which a participant 

or beneficiary is enrolled; SBCs are not 

required to be provided automatically 

with respect to benefit packages in 

which the participant or beneficiary are 

not enrolled. However, if a participant 

or beneficiary requests an SBC with 

respect to another benefit package (or 

more than one other benefit package) for 

which the participant or beneficiary is 

eligible, the SBC (or SBCs, in the case 

of a request for SBCs relating to more 

than one benefit package) must be 

provided upon request in accordance 

with the rules of paragraph (a)(1)(ii) of 

this section, which requires the SBC to 

be provided as soon as practicable, but 

in no event later than seven days 

following the request. 

(iv) By a health insurance issuer 

offering individual health insurance 

coverage—(A) Individuals prior to 

coverage. A health insurance issuer 

offering individual health insurance 

coverage must provide an SBC to an 

individual upon receiving an 

application for, or a request for 

information about, any health insurance 

policy, as soon as practicable following 

the application or request, but in no 

event later than seven days following 

the application or request. 

(1) If an SBC is provided upon request 

for information about a particular health 

insurance policy and the individual 

subsequently submits an application for 

the same policy, a second SBC must be 

provided under this paragraph 

(a)(1)(iv)(A) only if the information 

required to be in the SBC has changed. 

(2) If the issuer modifies the terms of 

coverage after receiving an application 

for any health insurance policy 

(including modifications as a result of 

medical underwriting) so that the 

information required to be in the SBC 

has changed, the issuer must provide an 

updated SBC that reflects these changes 

to the terms of coverage to the applicant, 

for each policy for which an application 

was received, as soon as practicable, but 

in no event later than the date on which 

the offer of coverage is made. 

(B) Individuals covered under 

individual health insurance coverage— 

(1) A health insurance issuer offering 

individual health insurance coverage 

must generally provide an SBC to an 

individual who accepts an offer of 

coverage no later than the first day of 

coverage. However, if the SBC is 

provided upon request for information 

about health insurance coverage or at 

the time that an offer of coverage is 

made under paragraph (a)(1)(iv)(A) of 

this section, the SBC must be provided 

under this paragraph (a)(1)(iv)(B) only if 

the information required to be in the 

SBC has changed. 

(2) The issuer must provide the SBC 

to policyholders annually at renewal, no 

later than 30 days prior to the first day 

of coverage under the new policy year. 

The SBC must reflect any modified 

policy terms that would be effective on 

the first day of the new policy year. 

(C) Upon request. A health insurance 

issuer offering individual health 

insurance coverage must provide an 

SBC to any policyholder or covered 

dependent, upon request, as soon as 

practicable, but in no event later than 

seven days following the request. 

(v) Special rule to prevent 

unnecessary duplication with respect to 

individual health insurance coverage. If 

the policy covers more than one 

individual (or if an application for 

coverage is being made for more than 

one individual); all those individuals 

are known to reside at the same address; 

and a single SBC is provided to that 

address, then the requirement to 

provide the SBC is satisfied with respect 

to all individuals residing at that 

address. If an individual’s last known 

address is different than the last known 

address of the policyholder, the issuer is 

required to provide an SBC to the 

individual at the individual’s last 

known address. 

(2) Content—(i) In general. The SBC 

must include the following: 

(A) Uniform definitions of standard 

insurance terms and medical terms so 

that consumers may compare health 

coverage and understand the terms of 

(or exceptions to) their coverage; 

(B) A description of the coverage, 

including cost sharing, for each category 

of benefits identified by the Secretary in 

guidance; 

(C) The exceptions, reductions, and 

limitations of the coverage; 

(D) The cost-sharing provisions of the 

coverage, including deductible, 

coinsurance, and copayment 

obligations; 

(E) The renewability and continuation 

of coverage provisions; 

(F) Coverage examples, in accordance 

with the rules of paragraph (a)(2)(ii) of 

this section; 

(G) With respect to coverage 

beginning on or after January 1, 2014, a 

statement about whether the plan or 

coverage provides minimum essential 

coverage as defined under section 

5000A(f) of the Internal Revenue Code 

and whether the plan’s or coverage’s 

share of the total allowed costs of 

benefits provided under the plan or 

coverage meets applicable requirements; 

(H) A statement that the SBC is only 

a summary and that the plan document, 

policy, or certificate of insurance should 

be consulted to determine the governing 

contractual provisions of the coverage; 

(I) Contact information for questions 

and obtaining a copy of the plan 

document or the insurance policy, 

certificate, or contract of insurance 

(such as a telephone number for 

customer service and an Internet 

address for obtaining a copy of the plan 

document or the insurance policy, 

certificate, or contract of insurance); 

(J) For plans and issuers that maintain 

one or more networks of providers, an 

Internet address (or similar contact 

information) for obtaining a list of 

network providers; 

(K) For plans and issuers that use a 

formulary in providing prescription 

drug coverage, an Internet address (or 

similar contact information) for 


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52474 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 

obtaining information on prescription 

drug coverage; 

(L) An Internet address for obtaining 

the uniform glossary, as described in 

paragraph (c) of this section; and 

(M) Premiums (or in the case of a selfinsured group health plan, cost of 

coverage). 

(ii) Coverage examples. The SBC must 

include coverage examples that 

illustrate benefits provided under the 

plan or coverage for common benefits 

scenarios (including pregnancy and 

serious or chronic medical conditions) 

that are identified by the Secretary in 

accordance with the following: 

(A) Number of examples. The 

Secretary may identify up to six 

coverage examples that may be required 

in an SBC. 

(B) Benefits scenarios. For purposes of 

this section, a benefits scenario is a 

hypothetical situation, consisting of a 

sample treatment plan for a specified 

medical condition during a specific 

period of time, based on recognized 

clinical practice guidelines available 

through the National Guideline 

Clearinghouse, Agency for Healthcare 

Research and Quality. The Secretary 

will specify, in guidance, the types of 

services, dates of service, applicable 

billing codes, and allowed charges for 

each claim in the benefits scenario. 

(C) Demonstration of benefit provided. 

To demonstrate benefits provided under 

the plan or coverage, a plan or issuer 

simulates how claims would be 

processed under the scenarios provided 

by the Secretary to generate an estimate 

of cost sharing a consumer could expect 

to pay under the benefit package. The 

demonstration of benefits will take into 

account any cost sharing, excluded 

benefits, and other limitations on 

coverage, as described by the Secretary 

in guidance. 

(3) Appearance. A group health plan 

and a health insurance issuer must 

provide an SBC as a stand-alone 

document in the form authorized by the 

Secretary and completed in accordance 

with the instructions for completing the 

SBC that are authorized by the Secretary 

in guidance. The SBC must be presented 

in a uniform format, use terminology 

understandable by the average plan 

enrollee (or, in the case of individual 

market coverage, the average individual 

covered a health insurance policy), not 

exceed four double-sided pages in 

length, and not include print smaller 

than 12-point font. 

(4) Form—(i) An SBC provided by an 

issuer offering group health insurance 

coverage to a plan (or its sponsor), may 

be provided in paper form. 

Alternatively, the SBC may be provided 

electronically (such as e-mail or an 

Internet posting) if the following three 

conditions are satisfied— 

(A) The format is readily accessible by 

the plan (or its sponsor); 

(B) The SBC is provided in paper form 

free of charge upon request, and 

(C) If the electronic form is an Internet 

posting, the issuer timely advises the 

plan (or its sponsor) in paper form or email that the documents are available on 

the Internet and provides the Internet 

address. 

(ii) An SBC provided by a plan or 

issuer to a participant or beneficiary 

may be provided in paper form. 

Alternatively, for non-Federal 

governmental plans, the SBC may be 

provided electronically if the plan 

conforms to either the substance of the 

ERISA provisions at 29 CFR 2520.104b– 

1, or the provisions governing electronic 

disclosure for individual health 

insurance issuers set forth in paragraph 

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

(iii) With respect to an SBC provided 

by an issuer offering individual health 

insurance coverage, the SBC may be 

provided in either electronic or paper 

form. 

(A) Paper disclosure. Unless specified 

otherwise by an individual, an issuer 

must provide an SBC (and any 

subsequent SBC) in paper form if: 

(1) Upon the individual’s request for 

information or request for an 

application for coverage, the individual 

makes the request in person, by phone, 

or by mail; or 

(2) When submitting an application 

for coverage, the individual completes 

the application by phone or mail. 

(B) Electronic disclosure—(1) An 

issuer may provide an SBC (and any 

SBC provided thereafter) in electronic 

form (such as through an Internet 

posting or via electronic mail) if: 

(i) Upon an individual’s request for 

information or request for an 

application for coverage, the individual 

makes a request electronically; or 

(ii) When submitting an application, 

an individual completes an application 

for coverage electronically. 

(2) If an issuer provides an SBC in 

electronic form, the issuer must: 

(i) Request that an individual 

acknowledge receipt of the SBC; 

(ii) Make the SBC available in an 

electronic format that is readily usable 

by the general public; 

(iii) If the SBC is posted on the 

Internet, display the SBC in a location 

that is prominent and readily accessible 

to the individual and provide timely 

notice, in electronic or non-electronic 

form, to each individual who requests 

information or applies for coverage that 

apprises the individual the SBC is 

available on the Internet and includes 

the applicable Internet address; 

(iv) Promptly provide in accordance 

with the rules of paragraph (iii), without 

charge, penalty, or the imposition of any 

other condition or consequence, a paper 

copy of the SBC upon request. An issuer 

must provide an individual with the 

ability to request a paper copy of the 

SBC both by using the issuer’s Web site 

(such as by clicking on a clearly 

identified box to make the request) and 

by calling a readily available telephone 

line, the number for which is 

prominently displayed on the issuer’s 

Web site, policy documents, and other 

marketing materials related to the policy 

and clearly identified as to purpose; and 

(v) Ensure an SBC provided in 

electronic form is provided in 

accordance with the appearance, 

content, and language requirements of 

this section. 

(C) Deemed compliance. A health 

insurance issuer offering individual 

health insurance coverage that complies 

with the requirements set forth at 45 

CFR § 159.120 (relating to the Federal 

health reform Web portal) is deemed to 

comply with the requirement to provide 

the SBC to an individual requesting 

information prior to applying for 

coverage. However, an issuer must 

provide any SBC provided at the time of 

application or subsequently in a form 

and manner compliant with the 

requirements of paragraphs (a)(4)(iii)(A) 

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

(5) Language. A group health plan or 

health insurance issuer must provide 

the SBC in a culturally and 

linguistically appropriate manner. For 

purposes of this paragraph (a)(5), a plan 

or issuer is considered to provide the 

SBC in a culturally and linguistically 

appropriate manner if the thresholds 

and standards of § 147.136(e) of this 

chapter are met as applied to the SBC. 

(b) Notice of modifications. If a group 

health plan, or health insurance issuer 

offering group or individual health 

insurance coverage, makes any material 

modification (as defined under section 

102 of ERISA, 29 U.S.C. 1022) in any of 

the terms of the plan or coverage that 

would affect the content of the SBC, that 

is not reflected in the most recently 

provided SBC, and that occurs other 

than in connection with a renewal or 

reissuance of coverage, the plan or 

issuer must provide notice of the 

modification to enrollees (or, in the case 

of individual market coverage, an 

individual covered a health insurance 

policy), not later than 60 days prior to 

the date on which such modification 

will become effective. The notice of 

modification must be provided in a form 


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Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Proposed Rules 52475 

that is consistent with the rules of 

paragraph (a)(4) of this section. 

(c) Uniform glossary—(1) In general. 

A group health plan, and a health 

insurance issuer offering group health 

insurance coverage, must make 

available to participants and 

beneficiaries, and a health insurance 

issuer offering individual health 

insurance coverage must make available 

to applicants, policyholders, and 

covered dependents, the uniform 

glossary described in paragraph (c)(2) of 

this section in accordance with the 

appearance and format requirements of 

paragraphs (c)(3) and (c)(4) of this 

section. 

(2) Health-coverage-related terms and 

medical terms. The uniform glossary 

must provide uniform definitions, 

specified by the Secretary in guidance, 

for the following health-coverage-related 

terms and medical terms: 

(i) Allowed amount, appeal, balance 

billing, co-insurance, complications of 

pregnancy, co-payment, deductible, 

durable medical equipment, emergency 

medical condition, emergency medical 

transportation, emergency room care, 

emergency services, excluded services, 

grievance, habilitation services, health 

insurance, home health care, hospice 

services, hospitalization, hospital 

outpatient care, in-network coinsurance, in-network co-payment, 

medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment, 

out-of-pocket limit, physician services, 

plan, preauthorization, preferred 

provider, premium, prescription drug 

coverage, prescription drugs, primary 

care physician, primary care provider, 

provider, reconstructive surgery, 

rehabilitation services, skilled nursing 

care, specialist, usual customary and 

reasonable (UCR), and urgent care; and 

(ii) Such other terms as the Secretary 

determines are important to define so 

that individuals and employers may 

compare and understand the terms of 

coverage and medical benefits 

(including any exceptions to those 

benefits), as specified in guidance. 

(3) Appearance. A group health plan, 

and a health insurance issuer, must 

provide the uniform glossary with the 

appearance authorized in guidance, 

ensuring that the uniform glossary is 

presented in a uniform format and 

utilizes terminology understandable by 

the average plan enrollee (or, in the case 

of individual market coverage, an 

average individual covered under a 

health insurance policy). 

(4) Form and manner. A plan or issuer 

must make the uniform glossary 

described in this paragraph (c) available 

upon request, in either paper or 

electronic form (as requested), within 

seven days of the request. (Under the 

rules of paragraph (a) of this section, the 

form authorized in guidance for the SBC 

will disclose to participants, 

beneficiaries, and individuals covered 

under an individual policy their rights 

to request a copy of the uniform 

glossary.) 

(d) Preemption. For purposes of this 

section, the provisions of section 2724 

of the PHS Act continue to apply with 

respect to preemption of State law. In 

addition, with respect to the standards 

for providing an SBC required under 

paragraph (a) of this section, State laws 

that require a health insurance issuer to 

provide an SBC that supplies less 

information than required under 

paragraph (a) of this section are 

preempted. 

(e) Failure to provide. A health 

insurance issuer or a non-Federal 

governmental health plan that willfully 

fails to provide information required 

under this section is subject to a fine of 

not more than $1,000 for each such 

failure. A failure with respect to each 

covered individual constitutes a 

separate offense for purposes of this 

paragraph (e). HHS will enforce these 

provisions in a manner consistent with 

45 CFR 150.101 through 150.465. 

(f) Applicability date. This section is 

applicable beginning March 23, 2012. 

See § 147.140(d) of this chapter, 

providing that this section applies to 

grandfathered health plans. 

[FR Doc. 2011–21193 Filed 8–17–11; 11:15 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

[CMS–9982–NC] 

45 CFR Part 147 

Summary of Benefits and Coverage 

and Uniform Glossary—Templates, 

Instructions, and Related Materials 

Under the Public Health Service Act 

AGENCY: 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: Solicitation of comments. 

SUMMARY: The Departments of the 

Health and Human Services, Labor, and 

the Treasury (the Departments) are 

simultaneously publishing in the 

Federal Register this document and 

proposed regulations (2011 proposed 

regulations) under the Patient Protection 

and Affordable Care Act to implement 

the disclosure for group health plans 

and health insurance issuers of the 

summary of benefits and coverage (SBC) 

and the uniform glossary. This 

document proposes a template for an 

SBC; instructions, sample language, and 

a guide for coverage examples 

calculations to be used in completing 

the template; and a uniform glossary 

that would satisfy the disclosure 

requirements under section 2715 of the 

Public Health Service (PHS) Act. 

Comments are invited on these 

materials. 

DATES: Comment Dates: Comments are 

due on or before October 21, 2011. 

ADDRESSES: Written comments may be 

submitted to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Please do not submit duplicates. 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments are 

posted on the Internet exactly as 

received, and can be retrieved by most 

Internet search engines. No deletions, 

modifications, or redactions will be 

made to the comments received, as they 

are public records. Comments may be 

submitted anonymously. 

Department of Labor. Comments to 

the Department of Labor, identified by 

RIN 1210–AB52, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: E–OHPSCA2715.EBSA

@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: RIN 1210–AB52. 

Comments received by the 

Department of Labor will be posted 


jlentini on DSK4TPTVN1PROD with PROPOSALS2