SBC (Summary of Benefits and Coverages) requirements under the Affordable Care Act (healthcare reform) mandate that all group health plans distribute an SBC to its employees and plan participants. This requirement applies to government, church and private sector plans.
SPD (Summary Plan Description) requirements under ERISA mandate that group health plans (private sector employers) distribute an SPD which contain specific plan information (and COBRA information). This document should be sent with proof of mail unless distributed in accordance with electronic disclosure requirements and consent to receive electronically from plan participants. Often employers mistake this notification duty as completed through the plan certificate booklet, or through regular open enrollment (renewal notices). This is not so. Employers must provide these specific SPD notices per ERISA annually, or each time there is a plan modification. Further, it must be sent to all eligible plan participants which includes qualified beneficiaries or COBRA enrollees.
COBRA Information Required and Distribution Methods for SBC:
1) SBCs should utilize the U.S. Department of Labor template (model notice) for SBC requirements which is available for immediate download here: https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-template-final.pdf. Further, employers may use the Sample completed SBC also furnished by the DOL as a guide: https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-completed-final.pdf.
2) The template contains the required statement about COBRA continuation/alternative coverage:
Your Rights to Continue Coverage: There are agencies that can help if you want to continue your coverage after it ends. The contact information for those agencies is: [insert State, HHS, DOL, and/or other applicable agency contact information]. Other coverage options may be available to you too, including buying individual insurance coverage through the Health Insurance Marketplace. For more information about the Marketplace, visit www.HealthCare.gov or call 1-800-318-2596.
3) You cannot be too careful when it comes to notification. Some attorneys would argue that many plans do not include enough COBRA information in their SBC. Consult a seasoned ERISA attorney for specific verbiage to add to your notices and to ensure that you are following the appropriate process for distribution. Electronic distribution of the SBC is appropriate if done in accordance with the statute:
(A) With respect to participants and beneficiaries enrolled under the plan, the SBC may be provided electronically --
(1) In accordance with the Department of Labor's electronic disclosure regulations at 29 CFR 2520.104b-1; or
(2) In connection with online enrollment or online renewal of coverage under the plan (so, for example, posted on or linked to the internet portal where online enrollment occurs); or
(3) In response to an online request made by a participant or beneficiary for the SBC.
(B) With respect to participants and beneficiaries who are eligible but not enrolled *for coverage, the SBC may be provided electronically if:
(1) The format is readily accessible (such as in an html, MS Word, or pdf format; or, perhaps the SBC appears in the email without need of having any additional application to open the document, or there is a link directly to the document as posted on the internet); and
(2) In a case in which the electronic form is an Internet posting, the plan or issuer timely notifies the individual in paper form (such as a postcard) or email that the documents are available on the Internet, provides the Internet address, and notifies the individual that the documents are available in paper form upon request. [The agencies have provided model language (which can be tailored by plans and insurers) to meet the requirement to provide an e-card or postcard in connection with website postings to inform employees of the availability of an SBC. Such language could be used in the proposed cover letter.]
*Note: the “eligible but not enrolled” category would apply to COBRA qualified beneficiaries at least where the individual is enrolled in one health plan (e.g., medical) but not in another (e.g., dental) since such individuals would need to be allowed to enroll in other group health plans of the employer not previously elected under COBRA as long as active employees can do so at open enrollment.
What Your SPD Should Include About COBRA:
1) Per DOL Regulation §2520.102-3(o) the SPD should include "a description of the rights and obligations of participants and beneficiaries with respect to continuation coverage, including, among other things, information concerning qualifying events and qualified beneficiaries, premiums, notice and election requirements and procedures, and duration of coverage.”
2) The SPD should include a Statement of ERISA rights which includes specific language pursuant to DOL Regulation §2520.102-3(t). "All Plan Participants shall be entitled to … Continue Group Health Plan Coverage. Continue health care coverage for yourself, spouse or dependents if there is a loss of coverage under the plan as a result of a qualifying event. You or your dependents may have to pay for such coverage. Review this summary plan description and the documents governing the plan on the rules governing your COBRA continuation coverage rights.”
3) The SPD should include a thorough disclosure of any circumstances that might result in loss of coverage (health related benefits) pursuant to ERISA § 102. For example, this would address the requirement of beneficiaries to give timely notice of event, and advise that coverage could become unavailable if QB fails to report events timely.
4) The SPD should go above and beyond what is required in the General Notice (Initial Rights Notice). While the DOL says that your SPD may be combined with the Initial Rights Notice, it has been our experience that employers are better off to follow standard notification procedures and keep each of these notifications separate. Single distribution of SPDs often causes COBRA violations.
5) COBRA & Family Medical Leave (FMLA) often interact with one another as a result of loss of coverage (qualifying event) when employees on approved family and medical leave do not return to work or return and then lose their employment whether voluntarily or involuntarily. The SPD should contain verbiage specific to the interaction between COBRA and FMLA and how it impacts Qualified Beneficiaries or plan participants.
The information in this blog post (“post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from CobraHelp. or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.