Td 9575

Vol. 77

Tuesday,

No. 30

February 14, 2012

Part VII

Department of the Treasury
Internal Revenue Service
26 Parts 54 and 602

Department of Labor
Employee Benefits Security Administration
29 CFR Part 2590

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Department of Health and Human Services
45 CFR Part 147
Summary of Benefits and Coverage and Uniform Glossary; Final Rule

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations
beneficiaries who enroll in group health
plan coverage other than through an
open enrollment period (including
individuals who are newly eligible for
coverage and special enrollees), the
requirements under PHS Act section
2715 and these final regulations apply
beginning on the first day of the first
plan year that begins on or after
September 23, 2012. For disclosures to
plans, and to individuals and
dependents in the individual market,
these requirements are applicable to
health insurance issuers beginning on
September 23, 2012.

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
[TD 9575]
RIN 1545–BJ94

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

FOR FURTHER INFORMATION CONTACT:

Amy Turner or Heather Raeburn,
Employee Benefits Security
Administration, Department of Labor, at
(202) 693–8335; Karen Levin, Internal
Revenue Service, Department of the
Treasury, at (202) 622–6080; Jennifer
Libster or Padma Shah, Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, at (301) 492–4222.

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
[CMS–9982–F]

45 CFR Part 147
RIN 0938–AQ73

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

This document contains final
regulations regarding the summary of
benefits and coverage and the uniform
glossary for group health plans and
health insurance coverage in the group
and individual markets under the
Patient Protection and Affordable Care
Act. This document implements the
disclosure requirements under section
2715 of the Public Health Service Act to
help plans and individuals better
understand their health coverage, as
well as other coverage options. A
guidance document published
elsewhere in this issue of the Federal
Register provides further guidance
regarding compliance.
DATES: Effective date. These final
regulations are effective April 16, 2012.
Applicability date. The requirements
to provide an SBC, notice of
modification, and uniform glossary
under PHS Act section 2715 and these
final regulations apply for disclosures to
participants and beneficiaries who
enroll or re-enroll in group health
coverage through an open enrollment
period (including re-enrollees and late
enrollees) beginning on the first day of
the first open enrollment period that
begins on or after September 23, 2012.
For disclosures to participants and

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SUMMARY:

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SUPPLEMENTARY INFORMATION:

Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws may call the EBSA
Toll-Free Hotline at 1–866–444–EBSA
(3272) or visit the Department of Labor’s
Web site (http://www.dol.gov/ebsa). In
addition, information from HHS on
private health insurance for consumers
can be found on the Centers for
Medicare & Medicaid Services (CMS)
Web site (http://www.cms.hhs.gov/
HealthInsReformforConsume/
01_Overview.asp) and information on
health reform can be found at http://
www.healthcare.gov.
I. Executive Summary
A. Purpose of the Regulatory Action
1. Need for Regulatory Action
Under section 2715 of the Public
Health Service Act (PHS Act), as added
by the Patient Protection and Affordable
Care Act (Affordable Care Act), the
Departments of Health and Human
Services, Labor, and the Treasury (the
Departments) are to develop standards
for use by group health plans and health
insurance issuers offering group or
individual health insurance coverage in
compiling and providing a summary of
benefits and coverage (SBC) that
‘‘accurately describes the benefits and
coverage under the applicable plan or
coverage.’’ PHS Act section 2715 also
calls for the ‘‘development of standards
for the definitions of terms used in
health insurance coverage.’’

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This regulation establishes the
standards required to be met under PHS
Act section 2715. Among other things,
these standards ensure this information
is presented in clear language and in a
uniform format that helps consumers to
better understand their coverage and
better compare coverage options. The
current patchwork of non-uniform
consumer disclosure requirements
makes shopping for coverage inefficient,
difficult, and time-consuming,
particularly in the individual and small
group market, but also in some large
employer plans in which workers may
be confused about the value of their
health benefits as part of their total
compensation. As a result of this
confusion, health insurance issuers and
employers may face less pressure to
compete on price, benefits, and quality,
contributing to inefficiency in the health
insurance and labor markets.
The statute is detailed but not selfimplementing, contains ambiguities,
and specifically requires the
Departments to develop standards,
consult with the National Association of
Insurance Commissioners, and issue
regulations. Therefore these consumer
protections cannot be established
without this regulation.
2. Legal Authority
The substantive authority for this
regulation is generally PHS Act section
2715, which is incorporated by
reference into Employee Retirement
Income Security Act (ERISA) section
715 and the Internal Revenue Code
(Code) section 9815. PHS Act section
2792, ERISA section 734, and Code
section 9833 also provide rulemaking
authority. (For a fuller discussion of the
Departments’ legal authority, see section
V. of this preamble.)
B. Summary of the Major Provisions of
This Regulatory Action
Paragraph (a) of the final regulations
implements the general disclosure
requirement and sets forth the standards
for who provides an SBC, to whom, and
when. The regulations outline three
different scenarios under which an SBC
will be provided: (1) By a group health
insurance issuer to a group health plan;
(2) by a group health insurance issuer
and a group health plan to participants
and beneficiaries; and (3) by a health
insurance issuer to individuals and
dependents in the individual market.
For each scenario, an SBC must be
provided in several different
circumstances, such as upon application
for coverage, by the first day of coverage
(if information in the SBC has changed),
upon renewal or reissuance, and upon
request. The final regulations also

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include special rules to prevent
unnecessary duplication in the
provision of an SBC with respect to
group health coverage and individual
health insurance coverage.
The final regulations set forth a list of
requirements for the SBC that generally
mirror those set forth in the statute.
There are a total of 12 required content
elements under the regulations,
including uniform standard definitions
of medical and health coverage terms,
which will help consumers better
understand their coverage; a description
of the coverage including the cost
sharing requirements such as
deductibles, coinsurance, and copayments; and information regarding
any exceptions, reductions, or
limitations under the coverage. The
final regulations also require inclusion
of coverage examples, which illustrate
benefits provided under the plan or
coverage for common benefits scenarios.
In addition, the regulations specify
requirements related to the appearance
of the SBC, which generally must be
presented in a uniform format, cannot
exceed four double-sided pages in
length, and must not include print
smaller than 12-point font. These
requirements are detailed further in a
Notice published elsewhere in today’s
Federal Register providing additional
guidance related to PHS Act section
2715 and these final regulations.
PHS Act section 2715 and the final
regulations also require that plans and
issuers provide notice of modification in
any of the terms of the plan or coverage
involved that would affect the content
of the SBC, that is not reflected in the
most recently provided SBC, and that
occurs other than in connection with a
renewal or reissuance of coverage.
Finally, the statute directs the
Departments to develop standards for
definitions for certain insurance-related
and medical terms, as well as other
terms that will help consumers
understand and compare the terms of
coverage and the extent of medical
benefits (including any exceptions and
limitations). Group health plans and
health insurance issuers must provide
the uniform glossary in the appearance
specified by the Departments, so that
the glossary is presented in a uniform
format and uses terminology
understandable by the average plan
enrollee or individual covered under an
individual policy. A guidance document
published elsewhere in today’s Federal
Register provides further guidance with
respect to the uniform glossary.
The requirements to provide an SBC,
notice of modification, and uniform
glossary under PHS Act section 2715
and these final regulations apply for

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disclosures with respect to participants
and beneficiaries who enroll or re-enroll
in group health coverage through an
open enrollment period (including reenrollees and late enrollees), beginning
on the first day of the first open
enrollment period that begins on or after
September 23, 2012. For disclosures to
participants and beneficiaries who
enroll in group health plan coverage
other than through an open enrollment
period (including individuals who are
newly eligible for coverage and special
enrollees), the requirements under PHS
Act section 2715 and these final
regulations apply beginning on the first
day of the first plan year that begins on
or after September 23, 2012. For
disclosures to plans, and to individuals
and dependents in the individual
market, these requirements apply to
health insurance issuers beginning on
September 23, 2012.
C. Costs and Benefits
The direct benefits of these final
regulations come from improved
information, which will enable
consumers, both individuals and
employers, to better understand the
coverage they have and make better
coverage decisions, based on their
preferences with respect to benefit
design, level of financial protection, and
cost. The Departments believe that such
improvements will result in a more
efficient, competitive market. These
final regulations will also benefit
consumers by reducing the time they
spend searching for and compiling
health plan and coverage information.
Under the final regulations, group
health plans and health insurance
issuers will incur costs to compile and
provide the summary of benefits and
coverage and uniform glossary of health
coverage and medical terms. The
Departments estimate that the
annualized cost may be around $73
million. As is common with regulations
implementing new policies, there is
considerable uncertainty arising from
general data limitations and the degree
to which economies of scale exist for
disclosing this information.
Nonetheless, the Departments believe
that these final regulations lower overall
administrative costs from the proposed
regulations because of several policy
changes, notably flexibility in the
instructions for completing the SBC, the
omission of premium (or cost of
coverage) information from the SBC, the
reduction in the number of coverage
examples required from three to two,
and provisions allowing greater
flexibility for electronic disclosure.
In accordance with Executive Orders
12866 and 13563, the Departments

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believe that the benefits of this
regulatory action justify the costs.
II. Background
The Patient Protection and Affordable
Care Act, Pub. L. 111–148, was enacted
on March 23, 2010; the Health Care and
Education Reconciliation Act, Pub. L.
111–152, was enacted on March 30,
2010 (these are collectively known as
the ‘‘Affordable Care Act’’). The
Affordable Care Act reorganizes,
amends, and adds to the provisions of
part A of title XXVII of the Public
Health Service Act (PHS Act) relating to
group health plans and health insurance
issuers in the group and individual
markets. The term ‘‘group health plan’’
includes both insured and self-insured
group health plans.1 The Affordable
Care Act adds section 715(a)(1) to the
Employee Retirement Income Security
Act (ERISA) and section 9815(a)(1) to
the Internal Revenue Code (the Code) to
incorporate the provisions of part A of
title XXVII of the PHS Act into ERISA
and the Code, and make them
applicable to group health plans, and
health insurance issuers providing
health insurance coverage in connection
with group health plans. The PHS Act
sections incorporated by this reference
are sections 2701 through 2728. PHS
Act sections 2701 through 2719A are
substantially new, though they
incorporate some provisions of prior
law. PHS Act sections 2722 through
2728 are sections of prior law
renumbered, with some, mostly minor,
changes.
Subtitles A and C of title I of the
Affordable Care Act amend the
requirements of title XXVII of the PHS
Act (changes to which are incorporated
into ERISA by section 715). The
preemption provisions of ERISA section
731 and PHS Act section 2724 2
(implemented in 29 CFR 2590.731(a)
and 45 CFR 146.143(a)) apply so that the
requirements of part 7 of ERISA and
title XXVII of the PHS Act, as amended
by the Affordable Care Act, are not to be
‘‘construed to supersede any provision
of State law which establishes,
implements, or continues in effect any
standard or requirement solely relating
to health insurance issuers in
connection with group or individual
health insurance coverage except to the
extent that such standard or
1 The term ‘‘group health plan’’ is used in title
XXVII of the PHS Act, part 7 of ERISA, and chapter
100 of the Code, and is distinct from the term
‘‘health plan,’’ as used in other provisions of title
I of the Affordable Care Act. The term ‘‘health plan’’
does not include self-insured group health plans.
2 Code section 9815 incorporates the preemption
provisions of PHS Act section 2724. Prior to the
Affordable Care Act, there were no express
preemption provisions in chapter 100 of the Code.

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requirement prevents the application of
a requirement’’ of provisions added to
the PHS Act by the Affordable Care Act.
Accordingly, State laws with stricter
health insurance issuer requirements
than those imposed by the PHS Act will
not be superseded by those provisions.
(Preemption and State flexibility under
PHS Act section 2715 are discussed
more fully below under section III.D.)
The Departments of Health and
Human Services (HHS), Labor, and the
Treasury (the Departments) are taking a
phased approach to issuing regulations
implementing the revised PHS Act
sections 2701 through 2719A and
related provisions of the Affordable Care
Act. These final regulations are being
published to implement the disclosure
requirements under PHS Act section
2715. As discussed more fully below, a
document containing further guidance
for compliance is published elsewhere
in this issue of the Federal Register.
III. Overview of the Final Regulations
A. Summary of Benefits and Coverage

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1. In General
Section 2715 of the PHS Act, added
by the Affordable Care Act, directs the
Departments to develop standards for
use by a group health plan and a health
insurance issuer offering group or
individual health insurance coverage in
compiling and providing a summary of
benefits and coverage (SBC) that
‘‘accurately describes the benefits and
coverage under the applicable plan or
coverage.’’ PHS Act section 2715 also
calls for the ‘‘development of standards
for the definitions of terms used in
health insurance coverage.’’
The statute directs the Departments,
in developing such standards, to
‘‘consult with the National Association
of Insurance Commissioners’’ (referred
to in this document as the ‘‘NAIC’’), ‘‘a
working group composed of
representatives of health insurancerelated consumer advocacy
organizations, health insurance issuers,
health care professionals, patient
advocates including those representing
individuals with limited English
proficiency, and other qualified
individuals.’’ 3 On July 29, 2011, the
3 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. In developing its
recommendations, the NAIC considered the results
of various consumer testing sponsored by both
insurance industry and consumer associations.
Throughout the process, NAIC working group draft
documents and meeting notes were displayed on
the NAIC’s Web site for public review, and several
interested parties filed formal comments. In
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NAIC provided its final
recommendations to the Departments
regarding the SBC. On August 22, 2011,
the Departments published in the
Federal Register proposed regulations
(76 FR 52442) and an accompanying
document with templates, instructions,
and related materials (76 FR 52475) for
implementing the disclosure provisions
under PHS Act section 2715. The
proposed regulations and accompanying
document adhered to the
recommendations of the NAIC. After
consideration of all the comments
received on the proposed regulations
and accompanying document, the
Departments are publishing these final
regulations. In conjunction with these
final regulations, the Departments are
also publishing a guidance document
elsewhere in this issue of the Federal
Register that contains further guidance
for compliance, including information
on how to obtain the SBC template
(with instructions and sample language
for completing the template) and the
uniform glossary. All of these items are
displayed at www.dol.gov/ebsa/
healthreform and www.cciio.cms.gov.
2. Providing the SBC
Paragraph (a) of the final regulations
implements the general disclosure
requirement and sets forth the standards
for who provides an SBC, to whom, and
when. PHS Act section 2715 generally
requires that an SBC be provided to
applicants, enrollees, and policyholders
or certificate holders. PHS Act section
2715(d)(3) places the responsibility to
provide an SBC on ‘‘(A) a health
insurance issuer (including a group
health plan that is not a self-insured
plan) offering health insurance coverage
within the United States; or (B) in the
case of a self-insured group health plan,
the plan sponsor or designated
administrator of the plan (as such terms
are defined in section 3(16) of
ERISA).’’ 4 Accordingly, the final
regulations interpret PHS Act section
2715 to apply to both group health plans
and health insurance issuers offering
group or individual health insurance
coverage. In addition, consistent with
the statute, the final regulations hold the
plan administrator of a group health
group members, conference calls and in-person
meetings were open to other interested parties and
individuals and provided an opportunity for nonmember feedback. See www.naic.org/
committees_b_consumer_information.htm.
4 ERISA section 3(16) defines an administrator as:
(i) The person specifically designated by the terms
of the instrument under which the plan is operated;
(ii) if an administrator is not so designated, the plan
sponsor; or (iii) in the case of a plan for which an
administrator is not designated and plan sponsor
cannot be identified, such other person as the
Secretary of Labor may by regulation prescribe.

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plan responsible for providing an SBC.
Under the final regulations, the SBC
must be provided in writing and free of
charge.
Several commenters argued that large
group health plans or self-insured group
health plans should be exempt from the
requirement to provide the SBC. Many
of these commenters noted that such
plans already provide a wealth of useful
information, including a summary plan
description and open season materials
that accurately describe the plan and
any coverage options. However, the
statute includes no such exemption for
large or self-insured plans. Moreover,
the Departments believe that the SBC’s
uniform format and appearance
requirements will allow individuals to
easily compare coverage options across
different types of plans and insurance
products, including those offered
through Affordable Insurance Exchanges
(Exchanges) beginning in 2014.
Several commenters asked whether
the SBC is required to be provided with
respect to all group health plans,
including certain account-type
arrangements such as health flexible
spending arrangements (health FSAs) 5,
health reimbursement arrangements
(HRAs) 6, and health savings accounts
(HSAs) 7. An SBC need not be provided
for plans, policies, or benefit packages
that constitute excepted benefits. Thus,
for example, an SBC need not be
provided for stand-alone dental or
vision plans or health FSAs if they
constitute excepted benefits under the
Departments’ regulations.8 If benefits
under a health FSA do not constitute
excepted benefits, the health FSA is a
group health plan generally subject to
the SBC requirements. For a health FSA
that does not meet the criteria for
excepted benefits and that is integrated
with other major medical coverage, the
SBC is prepared for the other major
medical coverage, and the effects of the
health FSA can be denoted in the
appropriate spaces on the SBC for
deductibles, copayments, coinsurance,
and benefits otherwise not covered by
the major medical coverage. A standalone health FSA must satisfy the SBC
requirements independently.
An HRA is a group health plan.
Benefits under an HRA generally do not
constitute excepted benefits, and thus
HRAs are generally subject to the SBC
requirements. A stand-alone HRA
generally must satisfy the SBC
requirements (though many of the
5 See

Code section 106(c)(2).
IRS Notice 2002–45, 2002–2 C.B. 93.
7 See Code section 223.
8 See 26 CFR 54.9831–1(c), 29 CFR 2590.732(c),
45 CFR 146.145(c).
6 See

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limitations that apply under traditional
fee-for-service or network plans do not
apply under stand-alone HRAs). An
HRA integrated with other major
medical coverage need not separately
satisfy the SBC requirements; the SBC is
prepared for the other major medical
coverage, and the effects of employer
allocations to an account under the HRA
can be denoted in the appropriate
spaces on the SBC for deductibles,
copayments, coinsurance, and benefits
otherwise not covered by the other
major medical coverage.
HSAs generally are not group health
plans and thus generally are not subject
to the SBC requirements. Nevertheless,
an SBC prepared for a high deductible
health plan associated with an HSA can
mention the effects of employer
contributions to HSAs in the
appropriate spaces on the SBC for
deductibles, copayments, coinsurance,
and benefits otherwise not covered by
the high deductible health plan.
There are three general scenarios
under which an SBC will be provided:
(1) By a group health insurance issuer
to a group health plan; (2) by a group
health insurance issuer and a group
health plan to participants and
beneficiaries; and (3) by a health
insurance issuer to individuals and
dependents in the individual market. In
general, the proposed regulations
directed that, in each of these scenarios,
the SBC be provided when an employer
or individual is comparing health
coverage options, including prior to
purchasing or enrolling in a particular
plan or policy.
Some commenters asserted that
certain timing requirements in the
proposed regulations could be
administratively difficult for plans and
issuers to meet under certain
conditions, such as when negotiations
of policy terms are ongoing less than 30
days before renewal, making the
proposed timeframe for providing the
SBC difficult or impossible to achieve.
In response to public comments, the
final regulations streamline and
harmonize the rules for providing the
SBC, while ensuring that individuals
and employers have timely and
complete information under all three
scenarios in which an SBC might be
provided. Moreover, in certain
circumstances, the final regulations
provide plans and issuers with
additional time to provide the SBC. For
example, under the proposed
regulations, an SBC would have been
required to be provided as soon as
practicable following an application for
health coverage or a request for an SBC,
but in no event later than seven days
following the application or request. For

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all three scenarios under which an SBC
might be provided, the final regulations
substitute a seven business day period
for the seven calendar day period in the
proposed regulations in each place it
appeared.
The Departments also received
comments regarding issuance of an SBC
at renewal or reissuance of coverage.
The proposed regulations would have
required that, if written application
materials are required for renewal, the
SBC must be provided no later than the
date on which the materials are
distributed. This requirement has been
retained without change in the final
regulations. In addition, upon an
automatic renewal of coverage (that is,
when written application materials are
not required for renewal), the proposed
regulations would have required a new
SBC to be provided no later than 30
days prior to the first day of coverage
under the new plan or policy year. The
final regulations require that, in general,
if renewal or reissuance of coverage is
automatic, the SBC must be provided no
later than 30 days prior to the first day
of the new plan or policy year.
However, with respect to insured
coverage, in situations in which the SBC
cannot be provided within this
timeframe because, for instance, the
issuer and the purchaser have not yet
finalized the terms of coverage for the
new policy year, the final regulations
provide an exception. Under that
circumstance, the SBC must be provided
as soon as practicable, but in no event
later than seven business days after the
issuance of the policy, certificate, or
contract of insurance (for simplicity,
referred to collectively as a ‘‘policy’’ in
the remainder of this preamble), or the
receipt of written confirmation of intent
to renew, whichever is earlier. The
regulations provide this flexibility only
when the terms of coverage are finalized
in fewer than 30 days in advance of the
new policy year; otherwise, the SBC
must be provided upon automatic
renewal no later than 30 days prior to
the first day of coverage under the new
plan or policy year.
a. Provision of the SBC by an Issuer to
a Plan
Paragraph (a)(1)(i) of the final
regulations requires a health insurance
issuer offering group health insurance
coverage to provide an SBC to a group
health plan (including, for this purpose,
its sponsor) upon an application by the
plan for health coverage. The SBC must
be provided as soon as practicable
following receipt of the application, but
in no event later than seven business
days following receipt of the
application. If there is any change to the

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information required to be in the SBC
before the first day of coverage, the
issuer must update and provide a
current SBC to the plan no later than the
first day of coverage. If the information
is unchanged, the SBC does not need to
be provided again in connection with
coverage for that plan year, except upon
request. As noted later in this preamble,
the final regulations, in contrast to the
proposed regulations, do not include
premium or cost of coverage
information as a required element of the
SBC. In many cases, the only change to
the information the proposed
regulations required to be in the SBC
between application for coverage and
the first day of coverage is the premium
or cost of coverage information. Because
these final regulations eliminate the
requirement to include premium or cost
of coverage information in the SBC, the
Departments anticipate that the number
of circumstances in which issuers will
have to provide a second SBC will be
significantly fewer under the final
regulations than they would have been
under the proposed regulations.
b. Provision of the SBC by a Plan or
Issuer to Participants and Beneficiaries
Under paragraph (a)(1)(ii) of the final
regulations, a group health plan
(including the plan administrator), and
a health insurance issuer offering group
health insurance coverage, must provide
an SBC to a participant or beneficiary 9
with respect to each benefit package
offered by the plan or issuer for which
the participant or beneficiary is
eligible.10 Some commenters stated that
SBCs should only be provided to
participants, not beneficiaries, or that
the SBC should only be provided to
beneficiaries upon request. The
9 ERISA section 3(7) defines a participant as: Any
employee or former employee of an employer, or
any member or former member of an employee
organization, who is or may become eligible to
receive a benefit of any type from an employee
benefit plan which covers employees of such
employers or members of such organization, or
whose beneficiaries may be eligible to receive any
such benefit. ERISA section 3(8) defines a
beneficiary as: A person designated by a
participant, or by the terms of an employee benefit
plan, who is or may become entitled to a benefit
thereunder.
10 With respect to insured group health plan
coverage, PHS Act section 2715 generally places the
obligation to provide an SBC on both a plan and
issuer. As discussed below, under section III.A.2.d.,
‘‘Special Rules to Prevent Unnecessary Duplication
With Respect to Group Health Coverage’’, if either
the issuer or the plan provides the SBC, both will
have satisfied their obligations. As they do with
other notices required of both plans and issuers
under Part 7 of ERISA, Title XXVII of the PHS Act,
and Chapter 100 of the Code, the Departments
expect plans and issuers to make contractual
arrangements for sending SBCs. Accordingly, the
remainder of this preamble generally refers to
requirements for plans or issuers.

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statutory language, which refers to
‘‘applicants’’ and ‘‘enrollees,’’ could be
interpreted to support either
interpretation. These final regulations
retain the requirement that the SBC be
provided to both participants and
beneficiaries. However, as described
below, the final regulations include an
anti-duplication rule under which a
single SBC may be provided to a family
unless any beneficiaries are known to
reside at a different address.
Accordingly, separate SBCs need to be
provided to beneficiaries only in limited
circumstances.
The SBC must be provided as part of
any written application materials that
are distributed by the plan or issuer for
enrollment. If the plan does not
distribute written application materials
for enrollment, the SBC must be
distributed no later than the first date
the participant is eligible to enroll in
coverage for the participant or any
beneficiaries. If there is any change to
the information required to be in the
SBC between the application for
coverage and the first day of coverage,
the plan or issuer must update and
provide a current SBC to a participant
or beneficiary no later than the first day
of coverage.
Under the final regulations, the plan
or issuer must also provide the SBC to
special enrollees.11 The proposed
regulations would have required that
the SBC be provided within seven
calendar days of a request for special
enrollment. One commenter stated that
special enrollees should not be
distinguished from other enrollees with
such expedited disclosure, particularly
since they have already enrolled in
coverage and are no longer comparing
coverage options. The final rule
provides that special enrollees must be
provided the SBC no later than when a
summary plan description is required to
be provided under the timeframe set
forth in ERISA section 104(b)(1)(A) and
its implementing regulations, which is
90 days from enrollment. The revised
timing requirement related to providing
an SBC in connection with special
enrollment is expected to reduce
administrative costs for providing SBCs
to these individuals, who have already
chosen the plan, policy, or benefit
package in which to enroll. To the
extent individuals who are eligible for
special enrollment and are
contemplating their coverage options
would like to receive SBCs earlier, they
may always request an SBC with respect
to any particular plan, policy, or benefit
11 Regulations regarding special enrollment are
available at 26 CFR 54.9801–6, 29 CFR 2590.701–
6, and 45 CFR 146.117.

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package and the SBC is required to be
provided as soon as practicable, but in
no event later than seven business days
following receipt of the request (as
discussed more fully below).
c. Provision of the SBC Upon Request in
Group Health Coverage
As discussed earlier in this preamble,
a health insurance issuer offering group
health insurance coverage must provide
the SBC to a group health plan (and a
plan or issuer must provide the SBC to
a participant or beneficiary) upon
request for an SBC or summary
information about the health coverage,
as soon as practicable, but in no event
later than seven business days following
receipt of the request. The Departments
received several comments addressing
the requirement to provide the SBC
upon request. Many comments were
supportive of this approach, especially
with regards to participants and
beneficiaries needing information about
their coverage in the middle of a plan
year after life changes. Other comments
suggested that providing SBCs to
employers and individuals who are only
‘‘shopping’’ for coverage and not yet
enrolled is unnecessary and will require
multiple SBCs to be provided as
employers and individuals go through
underwriting.
The final regulations retain the
requirement that the SBC be provided
upon request to participants,
beneficiaries and employers, including
prior to submitting an application for
coverage, because the SBC provides
information that not only helps
consumers understand their coverage,
but also helps consumers compare
coverage options prior to selecting
coverage. The Departments believe it is
essential for employers, participants,
and beneficiaries to have this
information to help make informed
coverage decisions and believe that the
modifications to the SBC template,
including the removal of premium
information, adequately addresses the
concerns that health insurance issuers
will have to provide multiple SBCs to
employers and individuals prior to
underwriting.
Health insurance issuers offering
individual market coverage must also
provide the SBC to individuals upon
request, to allow consumers reviewing
coverage options the same ability to
compare coverage options in the
individual market, as well in the
Exchanges and the group markets.

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d. Special Rules to Prevent Unnecessary
Duplication With Respect to Group
Health Coverage
The proposed regulations provided
three rules to streamline provision of
the SBC and prevent unnecessary
duplication with respect to group health
plan coverage. Paragraph (a)(1)(iii) of
the final regulations retains these
special rules, with some modifications.
The first states that the requirement to
provide an SBC generally will be
considered satisfied for all entities if it
is provided by any entity, so long as all
timing and content requirements are
satisfied. The second states that a single
SBC may be provided to a participant
and any beneficiaries at the participant’s
last known address. However, if a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address. Finally, under the
special rule providing that SBCs are not
required to be provided automatically
upon renewal for benefit packages in
which the participant or beneficiary is
not enrolled, a plan or issuer generally
has up to seven business days (rather
than seven calendar days, as specified
in the proposed regulation) to respond
to a request to provide the SBC with
respect to another benefit package for
which the participant or beneficiary is
eligible.
Many commenters pointed out the
potential duplication and confusion that
can result with carve-out arrangements,
which is generally when a plan or issuer
contracts with an administrative service
provider (such as a pharmacy benefit
manager or managed behavioral health
organization) to manage prescribed
functions such as managed care and
utilization review. Plans and issuers
should coordinate with their service
providers, and with each other, to
ensure that the SBCs they provide are
accurate.
e. Provision of the SBC by an Issuer
Offering Individual Market Coverage
Under these final regulations, the
Secretary of HHS sets forth standards
applicable to individual health
insurance coverage about who provides
an SBC, to whom, and when. The
provisions of the final regulations for
individual market coverage parallel the
group market requirements described
above, with only those changes
necessary to reflect the differences
between the two markets, and the
provisions of the final regulations are
intended to more clearly reflect the
similarity between the two sets of rules.

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For example, individuals and
dependents in the individual market are
comparable to group health plan
participants and beneficiaries.
Accordingly, an issuer offering
individual health insurance coverage
must provide an SBC to an individual
or dependent upon receiving an
application for any health insurance
policy, as soon as practicable following
receipt of the application, but in no
event later than seven business days
following receipt of the application. If
there is any change in the information
required to be in the SBC between the
application for coverage and the first
day of coverage, the issuer must update
and provide a current SBC to an
individual or dependent no later than
the first day of coverage.12 Additionally,
an issuer must provide the SBC to any
individual or dependent upon request
for an SBC or summary information
about a health insurance product as
soon as practicable, but in no event later
than seven business days following the
request. Similar to the group market, a
request for an SBC or summary
information includes a request made at
any time, including prior to applying for
coverage.
The final regulations retain the
individual market anti-duplication rule,
similar to the group health coverage
anti-duplication rule, for individual
health insurance coverage that covers
more than one individual (or an
application for coverage that is being
made for more than one individual). In
that case, as under the proposed
regulations, a single SBC may generally
be provided to one address, unless any
dependents are known to reside at a
different address.
3. Content

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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;
12 As noted elsewhere in this preamble, the final
regulations, in contrast to the proposed regulations,
do not include premium information as a required
element of the SBC. Because, in many cases, the
only change to the information required to be in the
SBC before the first day of coverage is the premium,
the Departments anticipate that the number of
circumstances in which issuers will have to provide
a second SBC before the first day of coverage will
significantly decrease under the final regulation.

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d. The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
e. The renewability and continuation
of coverage provisions;
f. A coverage facts label that includes
examples to illustrate common benefits
scenarios (including pregnancy and
serious or chronic medical conditions)
and related cost sharing based on
recognized clinical practice guidelines;
g. A statement about whether the plan
provides minimum essential coverage as
defined under section 5000A(f) of the
Code, and whether the plan’s or
coverage’s share of the total allowed
costs of benefits provided under the
plan or coverage meets applicable
requirements;
h. A statement that the SBC is only a
summary and that the plan document,
policy, or certificate of insurance should
be consulted to determine the governing
contractual provisions of the coverage;
and
i. A contact number to call with
questions and an Internet web address
where a copy of the actual individual
coverage policy or group certificate of
coverage can be reviewed and obtained.
The proposed regulations generally
mirrored the content elements set forth
in the statute, with four additional
elements recommended by the NAIC: (1)
For plans and issuers that maintain one
or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of the
network providers; (2) for plans and
issuers that maintain a prescription drug
formulary, an Internet address where an
individual may find more information
about the prescription drug coverage
under the plan or coverage; (3) an
Internet address where an individual
may review and obtain the uniform
glossary; and (4) premiums (or cost of
coverage for self-insured group health
plans). The proposed regulations
solicited comments on these additional
four content elements. In addition, the
proposed regulations solicited
comments on whether the SBC should
include a disclosure informing
individuals of their right to receive a
paper copy of the glossary upon request.
These final regulations retain the first
two proposed additional content
elements without change, modify the
third, and delete the fourth. The final
regulations retain: (1) The inclusion of
an Internet address (or other contact
information) for obtaining a list of the
network providers, and (2) the inclusion
of an Internet address (or similar contact
information) where an individual may
find more information about the
prescription drug coverage under the

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8673

plan or coverage. The final regulations
also retain the requirement of the
inclusion of an Internet address where
an individual may review and obtain
the uniform glossary, with a
modification. The Departments received
several comments regarding the
inclusion of information concerning the
uniform glossary including a suggestion
that individuals be informed of their
right to request a paper copy of the
uniform glossary. Commenters noted
that the omission of such a disclosure
would deny important information to
some individuals who are most in need
of this information. After review and
consideration of the comments, the final
regulations require information for
obtaining copies of the uniform
glossary, which includes an Internet
address where an individual may
review the uniform glossary, a contact
phone number to obtain a paper copy of
the uniform glossary, and a disclosure
that paper copies of the uniform
glossary are available. It is important to
note that the definitions in the glossary
are solely for the purpose of these
regulations; they do not, for example,
apply to Medicare coverage policy nor
the Secretary of Health and Human
Services’ definition of essential health
benefits.
The final regulations do not require
the SBC to include premium or cost of
coverage information. The Departments
received numerous comments on this
issue. Comments supporting the
inclusion of premium information
stated that this information was
essential for consumers to make
meaningful coverage comparisons, and
it was necessary for consumers to make
coverage comparisons and understand
their total financial exposure, as well as
useful to encourage competition in the
markets on both price and value. One
comment stated that employees also
need this information to know if the
coverage offered by an employer meets
the Affordable Care Act’s affordability
test,13 which determines the eligibility
of employees for premium tax credits
with respect to qualified health plans
purchased on an Exchange.14 Comments
opposing this additional content
requirement stated that this requirement
would be administratively burdensome
in the group market, where health
insurance issuers do not have
information on employer contributions,
and would not be able to provide
13 See Code section 36B(c)(2)(C)(i)(II), as added by
section 1401 of the Affordable Care Act.
14 Providing information in the SBC for
individuals relating to Exchanges and the premium
tax credit is addressed in the document containing
further compliance guidance that is published
elsewhere in this issue of the Federal Register.

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accurate cost of coverage information to
employees. In addition, some comments
noted that it would not be possible to
provide an accurate premium estimate
prior to medical underwriting. Some
comments recommended that premium
information be provided in a separate
document, for example, a premium
table.
After considering all of the comments,
the final regulations do not require the
SBC to include premium or cost of
coverage information. The Departments
understand that it is administratively
and logistically complex to convey this
information to individuals in an SBC in
divergent circumstances in both the
individual and group markets,
including, for example, when premiums
differ based on family size and when, in
the group market, employer
contributions impact cost of coverage.
The Departments recognize that the
inclusion of premium information in the
SBC could result in numerous SBCs
being required to be provided to
individuals. However, if premium
information is not required, only a
single SBC might be necessary. The
Departments believe that premium
information can be more efficiently and
effectively provided by means other
than the SBC. For example, in the
individual market, the Departments note
that some of this information may be
available through the Federal health
care reform Web portal,
HealthCare.gov,15 to individuals
shopping for coverage. Furthermore, the
Departments anticipate that premium
information for qualified health plans
will be made widely available through
Exchanges for coverage effective
beginning in 2014.
With respect to the uniform
definitions required by the statute, the
Departments proposed to follow the
NAIC’s recommended two-part
approach, requiring provision of—(1) a
uniform glossary, which includes
definitions of health coverage
terminology, to be provided in
connection with the SBC, and (2) a
‘‘Why this Matters’’ column for the SBC
template (with instructions for plans
and issuers to use in completing the
SBC template).16 The Departments
retain this approach in the final
regulations. The guidance document
published elsewhere in today’s Federal
Register addresses comments received
15 Established pursuant to 45 CFR 159.120 (75 FR
24470).
16 National Association of Insurance
Commissioners, Consumer Information Working
Group, December 17, 2010, Final Package of
Attachments. Available at http://www.naic.org/
documents/committees_b_consumer_information_
ppaca_final_materials.pdf.

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on the SBC and related materials
(including the uniform glossary) and
details the changes from the initial
proposal.
The statute also directs that the SBC
include a statement about whether a
plan or coverage provides minimum
essential coverage, as defined under
section 5000A(f) of the Code, (minimum
essential coverage statement) and
whether the plan’s or coverage’s share of
the total allowed costs of benefits
provided under the plan or coverage
meets applicable minimum value
requirements (minimum value
statement).17 However, this content is
not relevant until other elements of the
Affordable Care Act are implemented.
Therefore, the final regulations require
the minimum essential coverage and
minimum value statements to be
included in SBCs with respect to
coverage beginning on or after January
1, 2014.18 Future guidance will address
the minimum essential coverage and
minimum value statements.
The statute also requires that an SBC
contain a ‘‘coverage facts label.’’ For
ease of reference, the proposed
regulations used the term ‘‘coverage
examples’’ in place of the statutory
term. The Departments received many
comments regarding the coverage
examples. Some comments supported
the general approach in the proposed
regulations and indicated that coverage
examples would be a valuable
comparison tool for consumers. Other
comments expressed concerns that the
coverage examples would cause
confusion for consumers, as the
examples do not represent the actual
treatment plan for any particular
individual, or might not represent the
actual costs that an individual might
incur for a similar cost of treatment.
Some such comments urged the
Departments to take a different
approach to the coverage examples,
17 PHS Act section 2715(b)(3)(G) provides that
this statement must indicate whether the plan or
coverage (1) provides minimum essential coverage
(as defined under section 5000A(f) of the Code) and
(2) ensures that the plan’s or coverage’s share of the
total allowed costs of benefits provided under the
plan or coverage is not less than 60 percent of such
costs. The minimum essential coverage and
minimum value requirements are part of a larger set
of health coverage reforms that take effect on
January 1, 2014.
18 In the Notice providing compliance guidance
published separately in today’s Federal Register,
the Departments state that the SBC template (with
instructions, samples, and a guide for coverage
example calculations to be used in completing the
SBC template) does not provide language to comply
with these requirements because the Notice
authorizes these documents only with respect to the
first year of applicability. Information on the
minimum essential coverage statement and the
minimum value statement will be provided in
future guidance.

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such as providing an actual cost
calculator. The Departments also
received comments on the number of
coverage examples that should be
required, as well as which benefit
scenarios should be included in the
final regulations. Comments varied with
regards to the number of recommended
coverage examples, ranging from one to
more than six.
These final regulations retain the
general approach to the coverage
examples that was proposed.19
Consumer testing performed on behalf
of the NAIC 20 demonstrated that the
coverage examples facilitated
individuals’ understanding of the
benefits and limitations of a plan or
policy and helped them make more
informed choices about their options.
Such testing also showed that
individuals were able to comprehend
that the examples were only illustrative.
Additionally, while some plans provide
very useful coverage calculators to their
enrollees to help them make health care
decisions, they are not uniform across
all plans and most are not available to
individuals prior to enrollment, making
it difficult for individuals and
employers to make coverage
comparisons. Nonetheless, as discussed
in the guidance document issued
elsewhere in this issue of the Federal
Register, the Departments are taking a
phased approach to implementing the
coverage examples and intend to
consider additional feedback from
consumer testing in the future.
To the extent a plan’s terms that are
required to be in the SBC template
cannot reasonably be described in a
manner consistent with the template
and instructions, the plan or issuer must
19 The Departments are making one technical
change in these final regulations. The proposed
regulations stated that the underlying benefits
scenario for a coverage example must be based on
recognized clinical practice guidelines ‘‘available
through’’ the National Guideline Clearinghouse
(NGC), Agency for Healthcare Research and Quality.
The Departments believe that the proposed
regulations would have inadvertently excluded
recognized clinical practice guidelines available
through other sources, such as the National
Comprehensive Cancer Network. Accordingly, these
final regulations provide that a benefits scenario
must be based on recognized clinical guidelines ‘‘as
defined by’’ the NGC. Currently, the NGC uses a
definition set forth by the Institute of Medicine. The
current definition of clinical practice guidelines
adopted by NGC is available at http://
www.guideline.gov/about/inclusion-criteria.aspx.
20 A summary of the focus group testing done by
America’s Health Insurance Plans is available at:
http://www.naic.org/documents/committees_
b_consumer_information_101012_ahip_focus_
group_summary.pdf, a summary of the focus group
testing done by Consumers Union on the coverage
examples is available at: http://
prescriptionforchange.org/wordpress/wp-content/
uploads/2011/08/A_New_Way_of_
Comparing_Health_Insurance.pdf.

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accurately describe the relevant plan
terms while using its best efforts to do
so in a manner that is still consistent
with the instructions and template
format as reasonably possible. Such
situations may occur, for example, if a
plan provides a different structure for
provider network tiers or drug tiers than
is contemplated by the template and
these instructions, if a plan provides
different benefits based on facility type
(such as hospital inpatient versus nonhospital inpatient), in a case where the
effects of a health FSA or an HRA are
being described, or if a plan provides
different cost sharing based on
participation in a wellness program.
Finally, the Departments solicited
comments on whether any special rules
are necessary to accommodate
expatriate plans and received comments
related to adjustments needed for
expatriate plan coverage. Some
commenters noted that PHS Act section
2715(d)(3) refers to a health insurance
issuer ‘‘offering health insurance
coverage within the United States.’’ 21
Other commenters suggested that
coverage information that is particularly
important to expatriates (such as
medical evacuation, repatriation
benefits, and country-appropriate care)
be exempt from the requirements under
PHS Act section 2715. These final
regulations include a special provision
that provides that, in lieu of
summarizing coverage for items and
services provided outside the United
States, a plan or issuer may provide an
Internet address (or similar contact
information) for obtaining information
about benefits and coverage provided
outside the United States. Also, to the
extent the plan or policy provides
coverage available within the United
States, the plan or issuer is still required
to provide an SBC in accordance with
PHS Act section 2715 that accurately
summarizes benefits and coverage
available within the United States.
4. Appearance
PHS Act section 2715 sets forth
standards related to the appearance of
the SBC. Specifically, the statute
provides that the SBC is to be presented
in a uniform format, utilizing
terminology understandable by the
average plan enrollee, that does not
exceed four pages in length, and does
not include print smaller than 12-point
font. The final regulations retain the
21 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.

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interpretation from the proposed
regulations that the four-page limitation
is four double-sided pages.22
The proposed regulations requested
comments regarding the requirement to
provide the SBC as a stand-alone
document. Specifically, comments were
requested about whether the SBC
should be allowed to be included in a
summary plan description (SPD) if it is
intact and prominently displayed and
the timing requirements for delivery of
the SBC are met. The Departments
received many comments in response to
this request. Some comments opposed
allowing the SBC to be included
alongside or within an SPD, noting that
SPDs tend to be lengthy documents and
allowing this would be contrary to the
purpose of requiring a short summary
document. However, many comments
supported this approach, indicating that
permitting this option would reduce
burdens and costs associated with
printing and disseminating the SBC
documents.
Paragraph (a)(3) of these final
regulations requires plans and issuers to
provide the SBC in the form specified
by the Secretaries in guidance and
completed in accordance with the
instructions for completing the SBC that
are specified by the Secretaries in
guidance. A guidance document
published elsewhere in this issue of the
Federal Register provides such
guidance. The Notice specifies that
SBCs provided in connection with
group health plan coverage may be
provided either as a stand-alone
document or in combination with other
summary materials (for example, an
SPD), if the SBC information is intact
and prominently displayed at the
beginning of the materials (such as
immediately after the Table of Contents
in an SPD) and in accordance with the
timing requirements for providing an
SBC. For health insurance coverage
offered in the individual market, the
SBC must be provided as a stand-alone
document, but HHS notes that it can be
included in the same mailing as other
plan materials. This guidance regarding
appearance may be modified for years
after the first year of applicability.
22 PHS Act section 2715(b)(1) does not prescribe
whether the four pages are four single-sided pages
or four double-sided pages. The SBC template
transmitted by NAIC exceeded four single-sided
pages. After considering the extent of statutorilyrequired content in PHS Act section 2715(b)(3), as
well as the appearance and language requirements
of PHS Act sections 2715(b)(1) and (2), the
Departments are interpreting four pages to be four
double-sided pages, in order to ensure that this
information is presented in an understandable and
meaningful way.

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5. Form
a. Group Health Plan Coverage
To facilitate faster and less
burdensome disclosure of the SBC, and
to be consistent with PHS Act section
2715(d)(2), which permits disclosure in
either paper or electronic form, the
proposed regulations set forth rules to
permit greater use of electronic
transmittal of the SBC. Those proposed
regulations generally permitted issuers
to provide the SBC to plans
electronically (such as an email or
Internet posting) if certain conditions
were met, and required plans and
issuers providing the SBC to
participants and beneficiaries to comply
with the Department of Labor’s
electronic disclosure safe harbor
requirements at 29 CFR 2520.104b–1(c).
In all circumstances, the proposed
regulations permitted plans and issuers
to provide SBCs in paper form.
Comments generally supported
permitting provision of the SBC
electronically; however, some
comments also asked for more flexibility
with regard to electronic provision to
participants and beneficiaries. These
comments generally requested the rule
for provision to participants and
beneficiaries mirror the rule for
provision to plans, and suggested this
change would reduce costs and burdens
associated with delivery. Other
comments raised concerns about
decreased consumer protection if the
rules for providing an electronic SBC
are too flexible. Some commenters also
asked to extend to the group market the
option available to individual market
issuers to provide information to
HealthCare.gov to be in compliance
with the requirement to provide the SBC
upon request for information about
coverage prior to submitting an
application.
After taking into account all of the
comments, these final regulations
generally retain the approach from the
proposed regulations with respect to an
SBC provided electronically by an
issuer to a plan. For SBCs provided
electronically by a plan or issuer to
participants and beneficiaries, these
final regulations make a distinction
between a participant or beneficiary
who is already covered under the group
health plan, and a participant or
beneficiary who is eligible for coverage
but not enrolled in a group health plan.
This distinction should provide new
flexibility in some circumstances, while
also ensuring adequate consumer
protections where necessary. For
participants and beneficiaries who are
already covered under the group health
plan, these final regulations permit

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provision of the SBC electronically if
the requirements of the Department of
Labor’s regulations at 29 CFR
2520.104b–1 are met. (Paragraph (c) of
those regulations includes an electronic
disclosure safe harbor.23) For
participants and beneficiaries who are
eligible for but not enrolled in coverage,
these final regulations permit the SBC to
be provided electronically if the format
is readily accessible and a paper copy is
provided free of charge upon request.
Additionally, if the electronic form is an
Internet posting, the plan or issuer must
timely advise the individual in paper
form (such as a postcard) or email that
the documents are available on the
Internet, provide the Internet address,
and notify the individual that the
documents are available in paper form
upon request. The Departments note
that the rules for participants and
beneficiaries who are eligible for but not
enrolled in coverage are substantially
similar to the requirements for an issuer
providing an electronic SBC to a plan.
Finally, as in the proposed regulations,
plans, and participants and beneficiaries
(both covered, and eligible but not
enrolled) have the right to receive an
SBC in paper format, free of charge,
upon request.

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b. Individual Health Insurance Coverage
The Departments received several
comments on the proposed regulations,
which generally required paper delivery
of the SBC and set forth certain
circumstances in which electronic
disclosure is permissible. Some
comments recommended the SBC for
individual market coverage be provided
in paper form by default, unless the
individual explicitly elects electronic
delivery. These comments cautioned
against assuming individuals have
regular access to a computer or a
requisite level of computer literacy
simply because an individual submits a
request online. Instead, they argued
individuals should be able to specify the
form in which they prefer to receive the
SBC.
Other comments recommended
greater flexibility for electronic delivery
to reduce the costs of compliance,
including eliminating the requirement
to acknowledge receipt of an SBC
23 On April 7, 2011, the Department of Labor
published a Request for Information regarding
electronic disclosure at 76 FR 19285. In it, the
Department of Labor stated that it is reviewing the
use of electronic media by employee benefit plans
to furnish information to participants and
beneficiaries covered by employee benefit plans
subject to ERISA. Because these regulations adopt
the ERISA electronic disclosure rules by crossreference, any changes that may be made to 29 CFR
2520.104b–1 in the future would also apply to the
SBC.

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provided through electronic delivery
methods. These comments urged the
Departments to adopt broader standards
that reflect the current state of
technology. Specifically, they
recommended extending the electronic
delivery rules that apply to disclosure
from the issuer to the plan in paragraph
(a)(4)(i) of the final regulations, to
disclosure in the individual market.
Some comments also suggested that
plans provide in their enrollment
materials a notice of the individual’s
right to receive a paper copy of the SBC
upon request, and a telephone number
or other contact information for making
such request.
The Departments determined it is
appropriate to amend the individual
market standards in the proposed
regulations related to the form and
manner of delivery. Rather than
specifying the circumstances making
paper or electronic appropriate, these
final regulations establish the general
standard that an issuer offering
individual health insurance coverage
must provide the SBC in a manner that
can reasonably be expected to provide
actual notice regardless of the format.
These final regulations provide several
examples of methods of delivery that
may satisfy this requirement. For
instance, an issuer may reasonably
expect an individual or dependent to
receive actual notice if the issuer
provides the SBC by email to an
individual who has agreed to receive the
SBC (or other electronic disclosures) by
email from the issuer and who has
provided an email address for that
purpose. Or, if the SBC is posted on the
Internet, an individual may reasonably
be expected to receive actual notice if
the issuer timely advises the individual
in paper form (such as a postcard) that
the documents are available on the
Internet and includes the applicable
Internet address.
These final regulations substantially
retain the safeguards for electronic
disclosure in the proposed regulations.
Under these final regulations, an issuer
providing the SBC electronically must
ensure that the format is readily
accessible; the SBC is placed in a
location that is prominent and readily
accessible; the SBC is provided in an
electronic form that is consistent with
the appearance, content, and language
requirements of these final regulations;
and that the issuer notifies the
individual or dependent that the SBC is
available from the issuer in paper form
without charge upon request. These
final regulations remove the
‘‘acknowledge receipt’’ requirement.
However, the regulations also require
that the SBC be provided in an

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electronic form which can be
electronically retained and printed.
These final regulations provide
standards for the form and manner of
providing the SBC that balance the
objective of protecting consumers by
providing accessible information with
the goal of simplifying information
collection burdens on issuers.
Finally, the final regulations clarify
the provision that would deem health
insurance issuers in the individual
market to be in compliance with the
requirement to provide the SBC to an
individual requesting information about
coverage prior to submitting an
application if the issuer provides the
information to HealthCare.gov. The final
regulations clarify that a health
insurance issuer offering individual
health insurance coverage must provide
all of the content required under
paragraph (a)(2), as specified in
guidance by the Secretary, to
HealthCare.gov to be deemed compliant
with the requirement to provide an SBC
to an individual requesting summary
information prior to submitting an
application for coverage. The final
regulations further clarify that any SBC
furnished pursuant to a request for an
SBC, at the time of application or
subsequently, would be required to be
provided in a form and manner
consistent with the rules described
above. The Departments determined
that this provision is consistent with the
standards for electronic disclosure and
reduces the burden of providing an SBC
to individuals shopping for individual
health insurance coverage.
The Departments received comments
in support of this approach which stated
HealthCare.gov provides useful
summary information about health
insurance products that are available to
both individuals and small employers
shopping for coverage and
recommended the final regulations
similarly extend the ‘‘deemed
compliance’’ provision to the small
group market. At this time, the
Departments are reviewing comments
requesting that the regulations extend
the deemed compliance provision to the
small group market and may issue
future guidance on this issue.
6. Language
PHS Act section 2715(b)(2) provides
that standards shall ensure that the SBC
‘‘is presented in a culturally and
linguistically appropriate manner.’’ The
final regulations retain the approach of
the proposed regulations and provide
that, to satisfy the requirement to
provide the SBC in a culturally and
linguistically appropriate manner, a
plan or issuer follows the rules for

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providing notices with respect to claims
and appeals in a culturally and
linguistically appropriate manner under
PHS Act section 2719, and paragraph (e)
of its implementing regulations.24 Note,
nothing in these final regulations should
be construed as limiting an individual’s
rights under Federal or State civil rights
statutes, such as Title VI of the Civil
Rights Act of 1964 (Title VI) which
prohibits recipients of Federal financial
assistance, including issuers
participating in Medicare Advantage,
from discriminating on the basis of race,
color, or national origins. To ensure
non-discrimination on the basis of
national origin, recipients are required
to take reasonable steps to ensure
meaningful access to their programs and
activities by limited English proficient
persons. For more information, see,
‘‘Guidance to Federal Financial
Assistance Recipients Regarding Title VI
Prohibition Against National Origin
Discrimination Affecting Limited
English Proficient Persons,’’ available at
http://www.hhs.gov/ocr/civilrights/
resources/specialtopics/lep/
policyguidancedocument.html. While
the Departments received several
comments regarding the thresholds set
forth in the claims and appeals
regulations, the Departments are not
making any changes to those standards
through these final regulations. Any
changes suggested will be considered as
part of future rulemakings related to the
regulations under PHS Act section 2719,
so that the two rules remain consistent.
B. Notice of Modification
PHS Act section 2715(d)(4) directs
that a group health plan or health
insurance issuer offering group or
individual health insurance coverage
must provide notice of any material
modification if it makes a material
modification (as defined under ERISA
section 102) in any of the terms of the
plan or coverage involved that is not
reflected in the most recently provided
SBC. The comments generally
supported the standards regarding the
notice of modification in the proposed
regulations, which are adopted as final
regulations without change.
However, some comments requested
clarification concerning the requirement
to provide a notice of modification. For
example, several comments requested
clarification on what changes in the
terms of coverage would rise to the level
of a material modification. For purposes
of PHS Act section 2715, the proposed
and final regulations interpret the
statutory reference to the SBC to mean
24 See 75 FR 43330 (July 23, 2010), as amended
by 76 FR 37208 (June 24, 2011).

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that only a material modification in the
terms of the plan or coverage that would
affect the content of the SBC; that is not
reflected in the most recently provided
SBC; and that occurs other than in
connection with a renewal or reissuance
of coverage would trigger the notice. In
these circumstances, the notice would
be required to be provided to enrollees
(or, in the individual market, covered
individuals) no later than 60 days prior
to the date on which such change will
become effective. A material
modification, within the meaning of
section 102 of ERISA, includes any
modification to the coverage offered
under a plan or policy that,
independently, or in conjunction with
other contemporaneous modifications or
changes, would be considered by an
average plan participant (or in the case
of individual market coverage, an
average individual covered under a
policy) to be an important change in
covered benefits or other terms of
coverage under the plan or policy.25 A
material modification could be an
enhancement of covered benefits or
services or other more generous plan or
policy terms. It includes, for example,
coverage of previously excluded
benefits or reduced cost-sharing. A
material modification could also be a
material reduction in covered services
or benefits, as defined in 29 CFR
2520.104b–3(d)(3) of the Department of
Labor’ regulations, or more stringent
requirements for receipt of benefits. As
a result, it also includes changes or
modifications that reduce or eliminate
benefits, increase cost-sharing, or
impose a new referral requirement.26
(However, changes to the information in
the SBC resulting from changes in the
regulatory requirements for an SBC are
not changes to the plan or policy
requiring the mid-year provision of a
notice of modification, unless specified
in such new requirements.)
The Departments also received
comments seeking clarification on when
a notice of modification must be
provided. Several comments suggested
that this notice must also be provided
for modifications effective for new plan
or policy years. The final regulations
require that this notice be provided only
for changes other than in connection
with a renewal or reissuance of
coverage. At renewal, plans and issuers
must provide an updated SBC in
25 See DOL Information Letter, Washington Star/
Washington-Baltimore Newspaper Guild to
Munford Page Hall, II, Baker & McKenzie (February
8, 1985).
26 See, e.g., Ward v. Maloney, 386 F.Supp.2d 607,
612 (M.D.N.C. 2005), which discusses judicial
interpretations of when an amendment is and is not
a material modification.

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accordance with the requirements
otherwise applicable to SBCs. PHS Act
section 2715 and paragraph (b) of the
final regulations specify the timing for
providing a notice of modification in
situations other than in connection with
a renewal or reissuance of coverage. To
the extent a plan or policy implements
a mid-year change that is a material
modification, that affects the content of
the SBC, and that occurs other than in
connection with a renewal or reissuance
of coverage, the final regulations require
a notice of modification to be provided
60 days in advance of the effective date
of the change. Comments generally
supported the flexibility provided in the
proposed regulations, which permitted
plans and issuers to either provide an
updated SBC reflecting the
modifications or provide a separate
notice describing the material
modifications. Plans and issuers
continue to have this flexibility under
these final regulations.
For ERISA-covered group health plans
subject to PHS Act section 2715, this
notice is required in advance of the
timing requirements under the
Department of Labor’s regulations at 29
CFR 2520.104b–3 for providing a
summary of material modification
(SMM) (generally not later than 210
days after the close of the plan year in
which the modification or change was
adopted, or, in the case of a material
reduction in covered services or
benefits, not later than 60 days after the
date of adoption of the modification or
change). In situations where a complete
notice is provided in a timely manner
under PHS Act section 2715(d)(4), an
ERISA-covered plan will also satisfy the
requirement to provide an SMM under
Part 1 of ERISA.
C. Uniform Glossary
Section 2715(g)(2) of the PHS Act
directs the Departments to develop
standards for definitions for at least the
following insurance-related terms: coinsurance, co-payment, deductible,
excluded services, grievance and
appeals, non-preferred provider, out-ofnetwork co-payments, out-of-pocket
limit, preferred provider, premium, and
UCR (usual, customary and reasonable)
fees. Section 2715(g)(3) of the PHS Act
directs the Departments to develop
standards for definitions for at least the
following medical terms: durable
medical equipment, emergency medical
transportation, emergency room care,
home health care, hospice services,
hospital outpatient care, hospitalization,
physician services, prescription drug
coverage, rehabilitation services, and
skilled nursing care. Additionally, the
statute directs the Departments to

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develop standards for such other terms
as will help consumers understand and
compare the terms of coverage and the
extent of medical benefits (including
any exceptions and limitations).
The final regulations adopt the
approach of the proposed regulations
with respect to the uniform glossary.
This includes the adoption of the NAIC
recommendation to include the
following additional terms in the
uniform glossary: Allowed amount,
balance billing, complications of
pregnancy, emergency medical
condition, emergency services,
habilitation services, health insurance,
in-network co-insurance, in-network copayment, medically necessary, network,
out-of-network co-insurance, plan,
preauthorization, prescription drugs,
primary care physician, primary care
provider, provider, reconstructive
surgery, specialist, and urgent care.
The Departments received a number
of comments on the proposed uniform
glossary. Several comments
recommended that the final glossary
include additional terms. In general,
these comments recommended
additional terms to provide consumers
with additional information to help
them better understand their coverage
and the content of the SBC. These
comments suggested the glossary
include additional terms that may
appear in the SBC and that may cause
confusion, including specialty drugs,
mental health services and behavioral
health, cosmetic surgery, and preventive
care. In addition, some commenters
recommended including definitions for
complex or potentially confusing
insurance terms, including explanations
of plan types (such as health
maintenance organizations or ERISA
plans) and terms such as actuarial value
and cost-sharing. Other commenters
warned against making the uniform
glossary too long.
Some commenters recommended
modifications to certain definitions in
the uniform glossary. For example,
several comments recommended
modification to the term ‘‘medical
necessity.’’ In developing the final
uniform glossary, the Departments were
very cognizant of the consumer testing
performed by the NAIC with respect to
the uniform glossary included in the
proposed regulations and the need to
convey in concise, easy-to-understand
language basic medical and coverage
terms.27 Accordingly, very minor
27 A summary of the focus group testing done by
America’s Health Insurance Plans is available at:
http://www.naic.org/documents/committees_b_
consumer_information_101012_ahip_focus_group_
summary.pdf, a summary of the focus group testing
done by Consumers Union on the SBC template and

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changes were made in the final uniform
glossary, and it continues to include a
disclaimer that the terms and
definitions of terms in particular plans
or policies may differ from those
contained in the glossary, together with
information on how to get a copy of the
actual policy or plan document.
Some commenters requested
flexibility to use their own, planspecific or policy-specific terms in the
glossary. PHS Act section 2715(g) is
titled ‘‘Development of Standard
Definitions.’’ The NAIC developed the
uniform glossary to provide generalized,
plain-English definitions for common
coverage and medical terms. The
document was intended to help
consumers understand the basics of
insurance. At the same time, the
document specifically cautions that it is
intended to be a general educational
tool and that individual plan terms may
differ (and refers consumers to the SBC
for information on how to get an
accurate description of their actual plan
or policy terms). A guidance document
published elsewhere in this issue of the
Federal Register announces the
availability of the final uniform
glossary. The SBC may be used by plans
and issuers to convey more accurate
descriptions, where appropriate.
Like the proposed regulations, the
final regulations direct a plan or issuer
to make the uniform glossary available
upon request within seven business
days. A plan or issuer satisfies this
requirement by complying with the
content requirement described in
paragraph (a)(2)(i)(L) of the final
regulations, which requires that the SBC
include an Internet address where an
individual may review and obtain the
uniform glossary, a contact phone
number to obtain a paper copy of the
uniform glossary, and a disclosure that
paper copies are available upon request.
The Internet address may be a place
where the document can be found on
the plan’s or issuer’s Web site, or the
Web site of either the Department of
Labor or HHS. However, a plan or issuer
must make a paper copy of the glossary
available within seven business days
upon request. Group health plans and
health insurance issuers must provide
the uniform glossary in the appearance
specified by the Departments, so that
the glossary is presented in a uniform
format and uses terminology
understandable by the average plan
enrollee or individual covered under an
individual policy.
the uniform glossary is available at: http://www.
commonwealthfund.org/Publications/Issue-Briefs/
2011/Feb/Making-Health-Insurance-Cost-SharingClear.aspx.

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D. Preemption
Section 2715 of the PHS Act is
incorporated into ERISA section 715,
and Code section 9815, and is subject to
the preemption provisions of ERISA
section 731 and PHS Act section 2724
(implemented in 29 CFR 2590.731(a)
and 45 CFR 146.143(a)). Under these
provisions, the requirements of part 7 of
ERISA and part A of title XXVII of the
PHS Act, as amended by the Affordable
Care Act, are not to be ‘‘construed to
supersede any provision of State law
which establishes, implements, or
continues in effect any standard or
requirement solely relating to health
insurance issuers in connection with
group or individual health insurance
coverage except to the extent that such
standard or requirement prevents the
application of a requirement’’ of part A
of title XXVII of the PHS Act.
Accordingly, State laws that impose
requirements on health insurance
issuers that are stricter than those
imposed by the Affordable Care Act will
not be superseded by the Affordable
Care Act. Moreover, PHS Act section
2715(e) provides that the standards
developed under PHS Act section
2715(a), ‘‘shall preempt any related
State standards that require [an SBC]
that provides less information to
consumers than that required to be
provided under this section, as
determined by the [Departments].’’
Reading these two preemption
provisions together, the final regulations
do not prevent States from imposing
separate, additional disclosure
requirements on health insurance
issuers.
The Departments received several
comments seeking clarification on the
preemption of State disclosure
standards. These comments indicate
that many States have existing
disclosure requirements that may be
duplicative and noted consumers could
be confused by multiple disclosures.
These final regulations retain the
preemption standard as stated in the
proposed regulations. However, the
Departments take note of the concerns
about the potential for consumer
confusion, and encourage States to take
steps to harmonize existing State
requirements with these Federal
consumer disclosure requirements. The
Departments will work with States to
clarify the requirements, potential
differences, and options.
In addition, some comments
requested clarification that States may
not require the modification of the SBC
or uniform glossary in their own
disclosure standards. Comments stated
that any State modifications to these

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documents would defeat the purpose of
having an SBC template and uniform
glossary, and one comment requested
that any State law modifications to these
documents be preempted, and that any
additional content required by State law
be limited to an addendum to the SBC.
If States require health insurance issuers
to provide information not contained in
the SBC or uniform glossary, then they
may require issuers to provide that
information only if it is provided in a
document that is separate from the SBC.
This separate document can, however,
be provided at the same time as the
SBC.
E. Failure To Provide
PHS Act section 2715(f), incorporated
into ERISA section 715 and Code
section 9815, provides that a group
health plan (including its
administrator), and a health insurance
issuer offering group or individual
health insurance coverage, that
‘‘willfully fails to provide the
information required under this section
shall be subject to a fine of not more
than $1,000 for each such failure.’’ In
addition, under PHS Act section 2715(f),
a separate fine may be imposed for each
individual or entity for whom there is
a failure to provide an SBC. Due to the
different enforcement jurisdictions of
the Departments, as well as their
different underlying enforcement
structures, the mechanisms for imposing
the new penalty vary slightly, as
discussed below.

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1. Department of HHS
Enforcement of Part A of Title XXVII
of the PHS Act, including section 2715,
is generally governed by PHS Act
section 2723 and corresponding
regulations at 45 CFR 150.101 et seq.
Under those provisions, a State has the
discretion to enforce the provisions
against health insurance issuers in the
first instance, and the Secretary of HHS
only enforces a provision after the
Secretary determines that a State has
failed to substantially enforce the
provision. If a State enforces a provision
such as PHS Act section 2715, it uses its
own enforcement mechanisms. If the
Secretary enforces, the statute provides
for penalties of up to $100 per day for
each affected individual.
PHS Act section 2715(f) provides that
an entity that willfully fails to provide
the information required under PHS Act
section 2715 shall be subject to a fine of
not more than $1,000 for each such
failure. Such failure constitutes a
separate offense with respect to each
enrollee. This penalty can only be
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Paragraph (e) of the final regulations
clarifies that States have primary
enforcement authority over health
insurance issuers for any violations,
whether willful or not, using their own
remedies and that PHS Act section 2715
does not limit the Secretary’s authority
to impose penalties for willful
violations regardless of State
enforcement. However, the Secretary
intends to use enforcement discretion if
the Secretary determines that the State
is adequately addressing willful
violations.
The Secretary of HHS has direct
enforcement authority for violations by
non-Federal governmental plans, and
will use the appropriate penalty for
violations of section 2715, depending on
whether the violation is willful.
Paragraph (e) of the HHS final
regulations cross references the
enforcement regulations at 45 CFR
150.101 et seq., and states that they
relate to any failure, regardless of intent,
by a health insurance issuer or nonFederal governmental plan, to comply
with any requirement of PHS Act
section 2715.
2. Departments of Labor and the
Treasury
The Department of Labor enforces the
requirements of part 7 of ERISA with
respect to ERISA-covered group health
plans (generally, plans other than
church plans or plans maintained by a
governmental entity) and the
Department of the Treasury enforces the
requirements of chapter 100 of the Code
with respect to group health plans
maintained by an entity that is not a
governmental entity. On April 21, 1999,
pursuant to section 104 of the Health
Insurance Portability and
Accountability Act of 1996 (HIPAA),
Public Law 104–191, the Secretaries
entered into a memorandum of
understanding 28 that, among other
things, established a mechanism for
coordinating enforcement and avoiding
duplication of effort for shared
jurisdiction. The memorandum of
understanding applies, as appropriate,
to health legislation enacted after April
21, 1999 over which at least two of the
Departments share jurisdiction,
including PHS Act section 2715 as
incorporated into ERISA and the Code.
Therefore, in enforcing PHS Act section
2715, the Departments of Labor and the
Treasury will coordinate to avoid
duplication in the case of group health
plans that are not church plans and that
are not maintained by a governmental
entity.
28 See

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a. Department of Labor
The Department of Labor will issue
separate regulations in the future
describing the procedures for
assessment of the civil fine provided
under PHS Act section 2715(f) as
incorporated by section 715 of ERISA.
In accordance with ERISA section
502(b)(3), 29 U.S.C. 1132(b)(3), the
Secretary of Labor is not authorized to
assess this fine against a health
insurance issuer.
b. Department of the Treasury
If a group health plan (other than a
plan maintained by a governmental
entity) fails to comply with the
requirements of chapter 100 of the Code,
an excise tax is imposed under section
4980D of the Code. The excise tax is
generally $100 per day per individual
for each day that the plan fails to
comply with chapter 100 with respect to
that individual. Numerous rules under
section 4980D reduce the amount of the
excise tax for failures due to reasonable
cause and not to willful neglect. Special
rules apply for church plans. Taxpayers
subject to the excise tax under section
4980D are required to report the failures
under chapter 100 and the amount of
the excise tax on IRS Form 8928. See 26
CFR 54.4980D–1, 54.6011–2, and
54.6151–1.
Section 2715(f) of the PHS Act
subjects a plan sponsor or designated
administrator to a fine of not more than
$1,000 for each failure to provide an
SBC. Unless and until future guidance
provides otherwise, group health plans
subject to chapter 100 of the Code
should continue to report the excise tax
of section 4980D on IRS Form 8928 with
respect to failures to comply with PHS
Act section 2715. The Secretaries of
Labor and the Treasury will coordinate
to determine appropriate cases in which
the fine of PHS Act section 2715(f)
should be imposed on group health
plans that are in the jurisdiction of both
Departments.
F. Applicability
PHS Act section 2715 provides that
the requirement for group health plans
and health insurance issuers to provide
an SBC applies not later than 24 months
after the date of enactment of the
Affordable Care Act (which is March 23,
2012). PHS Act section 2715 also
provides that group health plans and
health insurance issuers shall provide
the SBC pursuant to standards
developed by the Departments. The
proposed regulations proposed an
applicability date beginning March 23,
2012. At the same time, the Departments
invited comments generally, as well as

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on a range of discrete issues, including
the timing of the application of the SBC
requirement. On November 17, 2011,
the Departments issued guidance 29
providing that, until final regulations
are issued and applicable, plans and
issuers are not required to comply with
PHS Act section 2715.
The Departments received numerous
comments on the applicability date of
the regulations. Several comments
stated plans and issuers would need
time to make changes to their systems
and workflow processes and could not
come into compliance by March 23,
2012 without incurring significant cost
and administrative challenges. Some
comments recommend delaying
applicability for 12 months, noting that
PHS Act section 2715 contemplates that
plans and issuers would have 12
months from the date the Secretary
develops standards to begin providing
the SBC, while others recommended
delaying applicability for 18 to 24
months to allow sufficient time for
group health plans to revise and
coordinate service vendor agreements.
Other comments stated the requirements
should apply beginning with a plan’s
open enrollment period to avoid
disruption during the plan year. Still
others recommended phasing in the
requirements by market segment,
starting with the individual market
initially and broadening over time to
include the group market. These
commenters emphasized the complexity
in the group market of coordinating
between the plan and the issuer (and
perhaps across multiple issuers and/or
service providers) and the greater need
for standardized information in the
individual market (where there are no
other Federal requirements to provide
summary information). Finally, some
comments expressed support for the
proposed March 23, 2012 applicability
date, arguing individuals and employers
should receive the consumer protections
of PHS Act section 2715 no later than
the date intended by statute.
Following review of the comments
submitted on this issue and further
consideration of the administrative and
systems changes required to implement
these requirements, the Departments
have determined it would not be
feasible to require plans and issuers to
comply with the standards in the final
regulations beginning March 23, 2012
and have delayed the applicability date
for six months from that which was
proposed to provide sufficient time for
29 See FAQs About Affordable Care Act
Implementation Part VII and Mental Health Parity
Implementation, available at www.dol.gov/ebsa/
faqs/faq-aca7.html and cciio.cms.gov/resources/
factsheets/aca_implementation_faqs7.html.

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plans and issuers to come into
compliance with these provisions. The
Departments agree that implementing
these provisions to coincide with
employers’ typical open enrollment
processes in the group market will
reduce confusion for current enrollees
who typically make enrollment
decisions during annual open
enrollment periods and will avoid
unnecessary cost to group health plan
sponsors of producing these materials
off-cycle. The final regulations provide
that the requirements to provide an
SBC, notice of modification, and
uniform glossary under PHS Act section
2715 and these final regulations apply
for disclosures with respect to
participants and beneficiaries who
enroll or re-enroll in group health
coverage through an open enrollment
period (including re-enrollees and late
enrollees), beginning on the first day of
the first open enrollment period that
begins on or after September 23, 2012.
For administrative simplicity, with
respect to disclosures to participants
and beneficiaries who enroll in group
health plan coverage other than through
an open enrollment period (including
individuals who are newly eligible for
coverage and special enrollees), PHS
Act section 2715 and these final
regulations apply on the first day of the
first plan year that begins on or after
September 23, 2012. For disclosures to
plans, and to individuals and
dependents in the individual market,
these requirements are applicable to
health insurance issuers beginning
September 23, 2012.
IV. Economic Impact and Paperwork
Burden
A. Executive Orders 12866 and 13563—
Department of Labor and Department of
Health and Human Services
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects; distributive impacts; and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This rule
has been designated a ‘‘significant
regulatory action’’ under section 3(f) of
Executive Order 12866. Accordingly,
the rule has been reviewed by the Office
of Management and Budget.
A regulatory impact analysis (RIA)
must be prepared for major rules with

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economically significant effects ($100
million or more in any 1 year). As
discussed below, the Departments have
concluded that these final regulations
would not have economic impacts of
$100 million or more in any one year or
otherwise meet the definition of an
‘‘economically significant rule’’ under
Executive Order 12866. Nonetheless,
consistent with Executive Orders 12866
and 13563, the Departments have
provided an assessment of the potential
benefits and the costs associated with
this final regulation.
The Departments have updated the
cost estimates from what was presented
in the proposed regulations. Since
publication of the proposed regulations,
the Departments have continued to
refine assumptions and estimates to take
into account policy decisions made in
the final regulations and to incorporate
better data. The estimates presented in
this rule are a result of those efforts and
represent the Departments’ best
estimate. Discussion of the public
comments and the updates to the
Departments’ estimates are included in
the relevant sections of the impact
analysis. While the Departments believe
the estimates in these final regulations
represent the Departments’ best
estimate, the Departments emphasize
there is considerable uncertainty, as is
common with regulations implementing
new policies, and the discussion
throughout the impact analysis reflects
this.
1. Current Regulatory Framework
Health plan sponsors and issuers do
not currently uniformly disclose
information to consumers about benefits
and coverage in a simple and consistent
way. ERISA-covered group health plans
are required to describe important plan
information concerning eligibility,
benefits, and participant rights and
responsibilities in a summary plan
description (SPD). But as these
documents have increased in size and
complexity—for example, due to the
insertion of more legalistic language that
is designed to mitigate the employer’s
risk of litigation—they have become
more difficult for participants and
beneficiaries to understand.30 Indeed, a
recent analysis of SPDs from 40
employer health plans from across the
United States (varying based on
geography, firm size, and industry
sector) found that, on average, SPDs are
generally written at a first year college
reading level (with readability ranging
30 ERISA Advisory Council. Report of the
Working Group on health and Welfare Benefit
Plans’ Communication. November 2005. Available
at: http://www.dol.gov/ebsa/publications/AC_
1105c_report.html.

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from a 9th grade reading level to nearly
a college graduate reading level).31
Moreover, the formats of existing SPDs
are not standardized. For example,
while these documents could be dozens
of pages long, there is no requirement
that they include an executive
summary. Additionally, group health
plans not covered by ERISA, such as
plans sponsored by State and local
governments, are not required to comply
with such disclosure requirements.
In the individual market, health
insurance issuers are subject to various,
diverse State disclosure laws. For
example, States like Massachusetts,32
New York,33 Rhode Island,34 Utah 35
and Vermont 36 have established
minimum standards for disclosure of
health insurance information. However,
even within such States, consumer
disclosures vary widely with respect to
their required content. Additionally,
some State disclosure laws are limited
to current enrollees, so that individuals
shopping for coverage do not receive
information about health insurance
coverage options. Other State disclosure
requirements only extend to managed
care organizations, and not to other
segments of the market.37
2. Need for Regulatory Action

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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
31 ‘‘How Readable Are Summary Plan
Descriptions For Health Care Plans?’’ Employee
Benefit Research Institute (EBRI) Notes. October
2006, Vol. 27, No. 10. Available at: http://www.ebri.
org/pdf/notespdf/EBRI_Notes_10-20061.pdf.
32 M.G.L.A. 176Q § 5 (2010).
33 NY Ins. Law § 3217-a (2010).
34 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.
35 Utah Code § 31A–22–613.5 (2010).
36 Division of Health Care Administration, Rule
10.000: Quality Assurance Standards and Consumer
Protections for Managed care Plans, State of
Vermont, September 20, 1997.
37 For example, New York requires Health
Maintenance Organizations to provide to
prospective members, as well as policyholders,
information on cost-sharing, including out-ofnetwork costs, limitations and exclusions on
benefits, prior authorization requirements, and
other disclosures such as appeal rights. NY Ins. Law
section 3217-a (2010). Utah requires each insurer
issuing a health benefit plan to provide all
enrollees, prior to enrollment in the health benefit
plan, written disclosure of restrictions or
limitations on prescription drugs and biologics,
coverage limits under the plan, and any limitation
or exclusion of coverage. Utah Code section 31A–
22–613.5 (2010). Rhode Island requires all health
insurance forms to meet minimum readability
standards. Office of the Health Insurance
Commissioner Regulation 5: Standards for
Readability of Health Insurance Forms, State of
Rhode Island and Providence Plantations, August
21, 2010.

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more uniform format that helps
consumers to better understand their
coverage and better compare coverage
options. These final regulations are
necessary to provide standards for a
summary of benefits and coverage (SBC)
and a uniform glossary of terms used in
health coverage. This approach is
consistent with Executive Order 13563,
which directs agencies to ‘‘identify and
consider regulatory approaches that
reduce burdens and maintain flexibility
and freedom of choice for the public.
These approaches include * * *
disclosure requirements as well as
provision of information to the public in
a form that is clear and intelligible.’’
The current patchwork of consumer
disclosure requirements makes the
process of shopping for coverage an
inefficient, difficult, and timeconsuming task. Consumers incur
significant search costs while trying to
locate reliable cost, coverage and benefit
data.38 Such search costs arise, in part,
due to a lack of uniform information
across the various coverage options,
particularly in the individual and small
group markets, but also in large
employer plans. Although not directly
comparable, in Medigap, a market with
standardized benefits, the average perbeneficiary search cost was estimated at
$72—far higher than in other insurance
markets, such as auto insurance.39
In addition to individual consumers,
employers, especially small business
employers, also face a daunting search
process when they shop for health
coverage. A 2011 study of the
commercial health insurance market
found that many employers, especially
small businesses, lack the necessary
knowledge, sophistication, and
information to efficiently choose
appropriate health plans to purchase on
behalf of their employees. This lack of
knowledge, sophistication, and
information requires health insurers to
spend more money on marketing to
target small business employers. Health
insurers then pass the extra marketing
costs on to employers in the form of
higher premiums. The study determined
that in 1997, this inefficiency cost
consumers in the fully insured market
$34.4 billion. Employers’ lack of
knowledge, sophistication, and
information also produces incentives for
health insurers to charge different prices
38 M. Susan Marquis et al., ‘‘Consumer Decision
Making in the Individual Health Insurance Market,’’
25 Health Affairs w.226, w.231–w.232 (May 2006).
Available at: http://content.healthaffairs.org/
content/25/3/w226.full.pdf+html.
39 Nicole Maestas et al., ‘‘Price Variation in
Markets with Homogenous Goods: The Case of
Medigap,’’ National Bureau of Economic Research
(January 2009).

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for identical products to different
customers, depending upon the
customer’s negotiating skills. This price
variability causes 64 percent more
turnover in plan membership, than
would otherwise occur. High levels of
turnover discourage health insurers
from promoting healthy lifestyles and
investing in the future health of their
policyholders.40
Given this difficulty in obtaining
comparable information across and
within health insurance markets,
consumers may not always make
informed purchase decisions that best
meet the health and financial needs of
themselves, their families, or their
employees. Similarly, workers may
overestimate or underestimate the value
of employer-sponsored health benefits,
and thus their total compensation; and
health insurance issuers and employers
may face less pressure to compete on
price, benefits, and quality, leading to
inefficiency in the health insurance and
labor markets.
Furthermore, research suggests that
many consumers do not understand
how health coverage works. Oftentimes,
contracts and benefit descriptions are
written in technical language that
requires a sophisticated level of literacy
that many people do not have.41 One
study found that consumers have
particular difficulty understanding cost
sharing and tend to underestimate their
coverage for mental health, substance
abuse and prescription drug benefits,
while overestimating their coverage for
long-term care.42
3. Summary of Impacts
Table 1 below depicts an accounting
statement summarizing the
Departments’ assessment of potential
benefits, costs, and transfers associated
with this regulatory action. The
Departments have limited the period
covered by the RIA to 2012–2013.
Estimates are not provided for
subsequent years, because there will be
significant changes in the marketplace
in 2014, including those related to the
offering of new individual and small
group plans through the Affordable
40 Cebul, Randall D., James B. Rebitzer, Lowell J.
Taylor, and Mark E. Votruba. 2011. ‘‘Unhealthy
Insurance Markets: Search Frictions and the Cost
and Quality of Health Insurance.’’ American
Economic Review, 101 (August 2011): 1842–1871.
41 For example, as discussed earlier, the average
Summary Plan Description is written at a first-year
college reading level. See Employee Benefit
Research Institute, October 2006.
42 D.W. Garnick, A.M. Hendricks, K.E. Thorpe,
J.P. Newhouse, K. Donelan and R.J. Blendon. ‘‘How
well do Americans understand their health
coverage?’’ Health Affairs, 12(3). 1993:204–12.
Available at: http://content.healthaffairs.org/
content/12/3/204.full.pdf.

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Insurance Exchanges, and new market
reforms outside of the new Exchanges,
and the wide-ranging scope of these
changes makes it difficult to project
results for 2014 and beyond.
The direct benefits of these final
regulations come from improved
information, which will enable
consumers, both individuals and
employers, to better understand the
coverage they have and allow
consumers choosing coverage to more
easily compare coverage options. As a
result, consumers may make better
coverage decisions, which more closely
match their preferences with respect to
benefit design, level of financial
protection, and cost. The Departments
believe that such improvements will
result in a more efficient, competitive
market. These final regulations would
also benefit consumers by reducing the
time they spend searching for and
compiling health plan and coverage
information.

Under the final regulations, group
health plans and health insurance
issuers would incur costs to compile
and provide the summary of benefits
and coverage disclosures and a uniform
glossary of health coverage and medical
terms. The Departments estimate that
the annualized cost may be around $73
million, although there is considerable
uncertainty arising from general data
limitations and the degree to which
economies of scale exist for disclosing
this information. The Departments’
annualized cost estimates for the final
regulation are higher than the estimated
annualized cost of $50 million, which
was set forth in the proposed
regulations, because, among other
things, the Departments now have
narrowed the cost estimate period from
2011–2013 to 2012–2013. This change
reflects the fact that the Departments
issued guidance on November 17, 2011
providing that, until final regulations
are issued and applicable, plans and

issuers are not required to comply with
PHS Act section 2715, and the fact that
these final regulations are being
published in 2012.43 Nonetheless, these
final regulations lower overall
administrative costs compared to the
proposed regulations because of several
policy changes, notably the omission of
premium or cost of coverage
information from SBCs, the provision of
only two coverage examples, and
provisions allowing greater flexibility
for electronic disclosures prior to
enrollment in coverage.
The Departments anticipate that the
provisions of these final regulations will
help consumers, including employers,
make better health coverage choices and
more easily understand their coverage.
In accordance with Executive Orders
12866 and 13563, the Departments
believe that the benefits of this
regulatory action justify the costs.

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

Estimate

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

Year dollar

$73
73

2012
2012

Discount rate
percent
7
3

Period
covered
2012–2013
2012–2013

4. Benefits
In developing these final regulations,
the Departments carefully considered
their potential effects, including costs,
benefits, and transfers. Because of data
limitations, the Departments did not
attempt to quantify expected benefits of
these final regulations. Nonetheless, the
Departments were able to identify
several benefits, which are discussed
below.
These final regulations could generate
significant economic and social welfare
benefits to consumers. Under these final
regulations, health insurance issuers
and group health plans would provide
clear and consistent information to
consumers. Uniform disclosure is
anticipated to benefit individuals
shopping for, or enrolled in, group and
individual health insurance coverage
and group health plans. The direct
benefits of these final regulations come
from improved information, which will

enable consumers to better understand
the coverage they have and allow
consumers choosing coverage to more
easily compare options. As a result,
consumers will make better coverage
decisions, which more closely match
their preferences with respect to benefit
design, level of financial protection, and
cost. The Departments believe that such
improvements will result in a more
efficient, competitive market.
These final regulations would also
benefit consumers by reducing the time
they spend searching for and compiling
health plan and coverage information.
As stated above, consumers in the
individual market, as well as consumers
in some large employer-sponsored
plans, have a number of coverage
options and must make a choice using
disclosures and tools that vary widely in
content and format. A growing body of
decision-making research suggests that
the abundance and complexity of

information can overwhelm consumers
and create a significant non-price barrier
to coverage.44 For example, a RAND
study of California’s individual market
found that reducing barriers to
information about health insurance
products would lead to increases in
purchase rates comparable to modest
price subsidies.45 By ensuring
consumers have access to readily
available, concise, and understandable
information about their coverage
options, these final regulations could
reduce consumers’ cost of obtaining
information and may increase health
insurance purchase rates and
satisfaction with the plan purchased.
Furthermore, greater transparency in
pricing and benefits information will
allow consumers to make more
informed purchasing decisions,
resulting in cost-savings for some valueconscious consumers who today pay
higher premiums because of imperfect

43 See FAQs About Affordable Care Act
Implementation Part VII and Mental Health Parity
Implementation, available at www.dol.gov/ebsa/
faqs/faq-aca7.html and cciio.cms.gov/resources/
factsheets/aca_implementation_faqs7.html.

44 Judith H. Hibbard and Ellen Peters,
‘‘Supporting Informed Consumer Health Care
Decisions: Data Presentation Approaches that
Facilitate the Use of Information in Choice,’’ 24
Annu. Rev. Public Health 413, 416 (2003).

45 M. Susan Marquis et al., ‘‘Consumer Decision
Making in the Individual Health Insurance Market,’’
25 Health Affairs w.226, w.231-w.232 (May 2006).
Available at: http://content.healthaffairs.org/
content/25/3/w226.full.pdf+html.

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information about benefits.46 In
particular, the use of coverage examples
called for by these final regulations
would better enable consumers to
understand how key coverage
provisions operate in the context of
recognizable health care situations and
more meaningfully compare the level of
financial protection offered by a plan or
coverage, resulting in potential costsavings.47 48 The Departments therefore
expect that uniform disclosures under
these final regulations will enable
consumers to derive more value from
their health coverage and enhance the
ability of plan sponsors, particularly
small businesses, to purchase products
that are appropriate to both their needs
and the health and financial needs of
their employees.
Finally, these final regulations are
expected to facilitate consumers’ ability
to understand their coverage. As stated
above, research suggests that consumers
do not understand how coverage works
or the terminology used in health
insurance policies. Consequently,
consumers may face unexpected
medical expenses if they become
seriously ill. They may also become
confused by a coverage or payment
decision made by their plan or issuer,
leading to inefficiency in the operation
of employee benefit plans and health
insurance coverage. By making it easier
for consumers to understand the key
features of their coverage, these final
regulations would enhance consumers’
ability to use their coverage.
Additionally, the uniform format will
make it easier for consumers who
change jobs or insurance coverage to see
how their new plan or coverage benefits
are similar to and different from their
previous coverage.

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5. Costs
Section 2715 of the PHS Act and these
final regulations direct group health
plans and health insurance issuers to
compile and provide an SBC and a
uniform glossary of health coverage and
medical terms. The Departments have
attempted to quantify one-time start-up
46 A study of California’s individual market found
that 25 percent of consumers chose products with
premiums that were more than 30 percent higher
than the median price for an actuarially equivalent
product for a similar person. Melinda Beeuwkes
Buntin et al., ‘‘Trends and Variability In Individual
Insurance Products,’’ Health Affairs w3.449, w3.457
(2003), available at http://content.healthaffairs.org/
content/early/2003/09/24/hlthaff.w3.449.citation.
47 Shoshanna Sofaer et al., ‘‘Helping Medicare
Beneficiaries Choose Health Insurance: The Illness
Episode Approach, 30 The Gerontologist 308–315
(1990).
48 Michael Schoenbaum et al., ‘‘Health Plan
Choice and Information about Out-of-Pocket Costs:
An Experimental Analysis,’’ 38 Inquiry 35–48
(Spring 2001).

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costs as well as maintenance costs
associated with these requirements.
However, there is considerable
uncertainty arising from general data
limitations and the degree to which
economies of scale can be realized to
reduce costs for issuers and third party
administrators (TPAs).
In the proposed regulations, the
Departments estimated total
administrative costs to be $25 million in
2011, $73 million in 2012, and $58
million in 2013. The Departments now
estimate that issuers and TPAs will
incur approximately $90 million in onetime costs and maintenance costs in
2012, and $55 in maintenance costs in
2013. These costs and the methodology
used to estimate them are discussed
below, and presented in Tables 2–6
below.
General Assumptions
In order to assess the potential
administrative costs relating to these
final regulations, the Departments
consulted with several industry experts,
including individuals at large health
insurance issuers and representing a
TPA association, individuals who
formerly worked at health insurance
companies, and insurance market
researchers, to gain insight into the tasks
and level of resources required. The
discussions focused on estimating the
costs that would be start-up versus
maintenance, and determining which
functions or departments of an
insurance company or TPA would be
involved in implementing the provision.
In addition, we reviewed the analyses of
other Affordable Care Act regulations
that impose new requirements on health
insurance issuers and TPAs, to
determine appropriate work levels and
categories for this regulation.
Particularly, we analyzed the Medical
Loss Ratio (MLR) interim final rule (75
FR 74918). Based on these discussions,
the Departments estimate that there will
be two categories of principal costs
associated with the standards in these
final regulations: one-time start-up costs
and ongoing maintenance costs. The
one-time start-up costs include costs to
develop teams to review the new
standards and costs to implement
workflow and process changes,
particularly the development of
information technology (IT) systems
interfaces that would generate SBC
disclosures through data housed in a
number of different systems. The
maintenance costs include costs to
maintain and update IT systems in
compliance with the final standards; to
produce, review, distribute, and update
the SBC disclosures; to produce and
distribute notices of modifications; and

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to provide the glossary in paper form
upon request.
With respect to the individual market,
issuers are responsible for generating,
reviewing, updating, and distributing
SBCs. With respect to employersponsored coverage, the Departments
assume that fully-insured plans will rely
on health insurance issuers, and selfinsured plans will rely on TPAs, to
perform these functions. Some
commenters stated that some employers
internally prepare plan materials and do
not rely on TPAs. While the
Departments acknowledge that some
plans may internally prepare the SBC
disclosures, the Departments do not
have sufficient data to develop separate
estimates for such plans. Therefore, the
Departments continue to make this
simplifying assumption because most
plans appear to rely on issuers and
TPAs for the purpose of administrative
duties such as enrollment and claims
processing.49 Thus, the Departments
have used health insurance issuers and
TPAs as the units of analysis for the
purposes of estimating administrative
costs in this regulatory impact analysis.
As discussed in the MLR interim final
rule, the Departments estimate there are
about 440 firms offering comprehensive
coverage in the individual, small, or
large group markets, and 75 million
covered lives therein.50 The number of
covered lives includes individuals in
the individual market as well as those
in insured group health plans.
With respect to the self-insured
market, the Departments estimate there
are 77 million individuals in selfinsured ERISA-covered plans and
approximately 14 million individuals in
self-insured non-Federal governmental
plans.51 The Departments note that,
according to 2007 Economic Census
data, there are 2,243 TPAs providing
administrative services for health and/or
welfare funds. However, there is some
uncertainty as to whether all of those
TPAs serve self-insured plans; many
49 See, for example, the Department of Labor’s
March 2011 report to Congress on self-insured
health plans, available at http://www.dol.gov/ebsa/
pdf/ACAReportToCongress032811.pdf.
50 The NAIC data actually indicate 442 issuers
and 74,830,101 covered lives. But the Departments
have limited these values to only two significant
figures given general data uncertainty. For example,
the NAIC data do not include issuers regulated by
California’s Department of Managed Health Care
(DMHC) as well as small, single-State issuers that
are not required by State regulators to submit NAIC
annual financial statements.
51 U.S. Department of Labor, EBSA calculations
using the March 2009 Current Population Survey
Annual Social and Economic Supplement and the
2009 Medical Expenditure Panel Survey; see also
interim final rule for internal claims and appeals
and external review processes (75 FR 43330,
43345).

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issuers, for example, have subsidiary
lines of business through administrative
services only (ASO) contracts through
which they perform third-party
administrative functions for self-insured
plans.52 Based on conversations with a
national TPA association, the
Departments assume that about onethird of the total number of TPAs, or
about 748 TPAs, are relevant for
purposes of this analysis. However,
given the considerable overlap between
issuers and TPAs, the Departments
recognize there may be fewer affected
TPAs, so these estimates should be
considered an upper bound of burden
estimates.
Because the SBC disclosures are
closely related to disclosures that
issuers and TPAs provide today as a
part of their normal operations (for
example, covered benefits and cost
sharing), the Departments estimate that
the incremental costs of compiling and
providing such readily available
information in the final, standardized
format is estimated to be modest.53 The
regulated community has taken
exception to this assumption, and it has
stated in written comments, and
discussions with the Departments, that
information will need to be pulled from
multiple sources. However, an opposite
conclusion appears to have been
reached by a November 2011 survey
related to the regulated community’s
preparedness for SBCs. Particularly, the
survey noted that existing
communications practices and
technology would allow affected entities
to be in compliance even by the
statutory compliance date of March 23,
2012.54 The results of this survey are
52 See, for example, the Department of Labor’s
March 2011 report to Congress on self-insured
health plans, available at http://www.dol.gov/ebsa/
pdf/ACAReportToCongress032811.pdf.
53 For example, issuers in the individual and
small group markets already report some of the SBC
information to HHS for display in the plan finder
on the HealthCare.gov Web site. Issuers have been
reporting data to HHS since May 2010 and have
refreshed that data on a quarterly basis. These
reporting entities have demonstrated that they have
the capacity to report information on plan benefit
design. See http://finder.healthcare.gov/. Further,
ERISA-covered plans already report some of the
SBC information in summary plan descriptions
(SPDs).
54 See December 13, 2011 news release for
HighRoads Pulse Study, available at http://
newsroom.highroads.com/hr-complianceconnection/highroads-study-shows-employers-willnot-eliminate-benefits-coverage-due-to-health-carereform. Among other things, the study’s author
noted, ‘‘SBCs have not caused a great concern
among organizations. * * * This is partly a
reflection of current communications practices—
many employers are already providing a level of
communication close to that required by the SBC
regulations—and partly a reflection of HR
departments embracing technology. By using
automation to leverage existing data, they are better

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also consistent with comments
indicating that timely compliance is
feasible.
The per-issuer or per-TPA cost will
largely be determined by size (based on
annual premium revenues) and current
practices—most importantly, whether
the issuer or TPA maintains a robust
information technology infrastructure,
including a plan benefits design
database. Moreover, with regard to
issuers, administrative costs may be
related to the number of markets in
which a company operates (that is,
individual, small group, or large group
market); the number of policies it offers;
and the number of States and licensed
entities through which it offers
coverage.
To account for variations among
issuers, the Departments classify them
by size as small, medium, and large
issuers based on 2009 premium revenue
for individual, small group, and large
group comprehensive coverage.55
Consistent with the assumptions that
were used in the MLR interim final rule,
small issuers are defined as those
earning up to $50 million in annual
premium revenue; medium issuers as
those earning between $50 million and
$1 billion in annual premium revenue;
and large issuers as those earning more
than $1 billion in annual premium
revenue. Based on these assumptions,
the Departments estimate there are 140
small, 230 medium, and 70 large
issuers.
To account for variations among
TPAs, the Departments applied the
proportions of small, medium, and large
issuers to the estimated 750 TPAs. The
Departments acknowledge that issuers
and TPAs are different and may not
have the same size variation.
Nonetheless, given general data
limitations, the Departments have
adopted this methodology, and, on its
basis, estimate that there are 240 small,
390 medium, and 120 large TPAs. Table
2 below summarizes the estimated
number of issuers and TPAs.

TABLE 2—ISSUER AND TPA SIZE
CLASSIFICATION
Small
Issuers ........
TPAs ...........

140
240

Medium
230
390

Large
70
120

able to respond to required changes. That will
enable timely compliance once the new deadline is
determined.’’
55 The premium revenue data come from the 2009
NAIC financial statements, also known as ‘‘Blanks,’’
where insurers report information about their
various lines of business.

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Staffing Assumptions
Table 5 below summarizes the
Departments’ staffing assumptions,
including the estimated number of
hours for each task for a small, medium,
or large issuer/TPA as well as the
percentage of time that different
professionals devote to each task. The
following assumptions are based on the
best information available to the
Departments at this time. Particularly,
the following series of assumptions are
based on conversations with industry
experts, the Departments’ understanding
of the regulated community, and
previous analysis in the MLR interim
final rule.
IT Systems and Workflow Process
Changes
In the proposed regulations, the
Departments estimated that it would
take a large issuer/TPA about 960 hours
to implement IT systems and workflow
process changes, based on discussions
with a large issuer. These final
regulations incorporate policy changes
designed to reduce administrative
burden. The Departments estimate that
the administrative burden to implement
IT systems and workflow process
changes would be reduced, at least, by
about 10 percent.56 Accordingly, the
Departments are reducing the 960 hours
time burden downward, by 10 percent,
to 864 hours. The Departments continue
to assume that IT systems and workflow
process changes would be implemented
only by IT professionals. Furthermore,
the Departments continue to assume
that a medium issuer/TPA would need
about 75 percent of a large issuer’s/
TPA’s time, and a small issuer would
need about 50 percent of a large
issuer’s/TPA’s time, to implement IT
systems and workflow process changes.
These estimates are based on the
assumption that medium and smaller
issuers and TPA’s have fewer products/
clients that need to come into
compliance.
In the proposed regulations, the
Departments estimated that it would
take a large issuer/TPA about 160 hours
to develop teams to analyze the new
standards in relation to their current
workflow processes. These final
regulations incorporate policy changes
designed to reduce administrative
56 A 10 percent is a conservative estimate of the
reduction in administrative burden. A national
association of insurance companies informed the
Departments that premium information alone may
account for 10 percent of compliance costs. Given
that the omission of premium information from
SBCs is one of several policy changes in these final
regulations, we conclude that there could be, at a
minimum, a 10 percent reduction in administrative
burden.

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burden. The Departments estimate that
the administrative burden to develop
teams would be reduced by about 10
percent. Accordingly, the Departments
are revising the 160 hours time burden
downward, by 10 percent, to 144 hours.
The Departments continue to assume
teams would be comprised of IT
professionals (45 percent), benefits/sales
professionals (50 percent), and attorneys
(5 percent), based on technical analysis
presented in the MLR interim final rule.
The Departments also continue to scale
down the burden for medium and small
issuers/TPAs by assuming the same
relative proportion as above (that is, 75
percent and 50 percent, respectively).
In the proposed regulations, the
Departments assumed that, in 2013,
each issuer/TPA would incur a separate
maintenance cost to maintain IT
systems and address changes in
regulatory provisions. The Departments
assumed the maintenance cost would
equal 15% of the total one-time burden
noted above (for example, the
Departments assumed it will take a large
issuer 15% of 1008 hours, or 151 hours).
The Departments further assumed that
the teams to implement the
maintenance tasks would be comprised
of IT professionals (55%), benefits/sales
professionals (40%), and attorneys (5%).
The Departments maintain these
assumptions in these final regulations.
The Departments continue to assume
that the one-time and maintenance costs
to implement IT systems changes and
address regulatory requirements would
be split between the costs to produce
SBCs and the costs to produce the
coverage examples (CEs).

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Production and Review of SBCs and CEs
In the proposed regulations, the
Departments estimated that each issuer/
TPA would need 3 hours to produce,
and 1 hour to review, SBCs (not
including CEs) for all products. Some
commenters thought this time burden
was an underestimate. However, these
commenters did not provide data that
could allow the Departments to adjust
their estimates. Accordingly, in these
final regulations, the Departments are
retaining their original estimates. The
Departments also continue to assume
that the 3 hours needed to produce
SBCs would be equally divided between
IT professionals and benefits/sales
professionals. The Departments also
continue to assume that the 1 hour
needed to review SBCs would be
equally divided between financial
managers for benefits/sales
professionals and attorneys, based on
previous analyses related to the MLR
regulation.

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In the proposed regulations, the
Departments estimated it would take
each issuer/TPA about 90 hours to
produce, and about 30 hours to review,
CEs related to three benefits scenarios
for all applicable products, based on the
MLR regulation. However, under the
guidance document published
elsewhere in this issue of the Federal
Register, issuers and TPAs will need to
produce a CE related to only two
benefits scenarios in 2012 and 2013.
Accordingly, in these final regulations,
the Departments are adjusting the time
burden downward by one-third. The
Departments now estimate that each
issuer/TPA would need about 60 hours
to produce, and about 20 hours to
review, two CEs for all products. The
Departments continue to assume that
the 60 hours to produce the two CEs
would be equally divided between IT
professionals and benefits/sales
professionals. The Departments also
continue to assume that the 20 hours to
review the two CEs would be equally
divided between financial managers and
attorneys.
For each individual who receives the
SBC in paper form, the Departments
estimate that printing and distributing
the paper disclosures would take
clerical staff about 1 minute (0.02 hours)
in the group markets and about 2
minutes (0.03 hours) in the individual
market. The Departments assume that
the individual market has lower
economies of scale and, thus, increased
distribution costs.
Labor Cost Assumptions
Table 7 below presents the
Departments’ hourly labor cost
assumptions (stated in 2012 dollars) for
each staff category based on Bureau of
Labor Statistics (BLS) data. The
Departments use mean hourly wage
estimates from the BLS May 2010
National Occupational Employment and
Wage Estimates (accessed at http://
www.bls.gov/oes/current/
oes_nat.htm#00–0000) for computer
systems analysts (Occupation Code 15–
1121), insurance underwriters
(Occupation Code 13–2053), financial
managers (Occupation Code 23–1011),
executive secretaries and administrative
assistants (Occupation Code 43–6011),
and attorneys (Occupation Code 23–
1011) as the basis for estimating labor
costs for 2012 through 2013 and adjust
the hourly wage rate to include a 33
percent fringe benefit estimate for
private sector employees.57
57 See the Technical Appendix to the MLR
interim final rule, available at http://cciio.cms.gov.

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8685

Distribution Assumptions
The Departments make the following
assumptions regarding the distribution
of the SBC disclosures (including
CEs).58 These assumptions are based on
the best information available to the
Departments at this time. Particularly,
the following series of assumptions are
based on conversations with industry
experts, the Departments’ understanding
of the regulated community, and
previous analysis in the MLR interim
final rule. The distribution assumptions
are as follows:
• The SBCs would be limited to one
per household for family members
located at the same residence.
According to one large issuer, there are
2.2 covered lives per family.
• The number of individuals who
would receive an SBC before enrolling
in the plan or coverage equals 20
percent of the number of enrollees at
any point during the course of a year.59
• In 2012 and 2013, respectively,
about 2.5 percent and 5 percent of
covered individuals who receive a paper
SBC would receive a paper glossary
from issuers and TPAs. The
Departments assume that the burden
and cost of providing paper glossaries
would be proportional to the burden
and cost of providing papers SBCs,
excluding coverage examples. The
Departments also assume that
individuals who do not request a paper
copy of the glossary will access it
electronically using the Internet address
provided in the SBC. These
assumptions, presented here in these
final regulations, have not changed from
the proposed regulations.
• In 2013, about 2 percent of covered
individuals would receive a notice of
modifications.60 Further, the burden
58 Although CEs are an integral component of
SBCs, the costs associated with CEs are different
from the rest of the SBC, and, thus, are separately
calculated within this analysis.
59 Based on this assumption, the Departments
make the following estimate. Prior to enrollment in
a given year, 180,000 individuals would receive
SBCs from small issuers or TPAs; 3,700,000
individuals would receive SBCs from medium
issuers or TPAs; 11,000,000 individuals would
receive SBCs from large issuers or TPAs.
60 ERISA section 104(b) requires ERISA-covered
plans to furnish participants and beneficiaries with
a Summary of Material Modifications (SMM) no
later than 210 days after the end of the plan year
in which the material change was adopted or in the
case of a material reduction in covered services or
benefits, no later than 60 days after adoption of the
modification or change. As part of its analysis for
the Department of Labor’s SPD/SMM regulations
(29 CFR 2520.104b-3), the Department estimated
that about 20 percent of health plans would need
to distribute SMM in a given year due to plan
amendments. However, almost all of these
modifications occur between plan years—not
during a plan year; therefore, the modifications

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and cost of providing such notices
would be proportional to the combined
burden and cost of providing the SBCs,
including CEs. In 2012, the first year of
implementation, the number of notices
of modifications would be negligible.
• In the proposed regulations, the
Departments estimated that electronic
distribution would account for 38
percent of all disclosures in the group
market and 70 percent of all disclosures
in the individual market. The estimate
for the group market was based on the
methodology used to analyze the cost
burden for the Department of Labor’s
claims procedure regulation (OMB
Control Number 1210–0053).61
• In these final regulations, the
Departments are revising upward their
estimate of electronic distribution in the
group market to 50 percent for preenrollment disclosures. This upward
revision is justified, because, for
participants and beneficiaries who are
eligible but not enrolled for coverage,
these final regulations permit the SBC to
be provided electronically if the format

is readily accessible and a paper copy is
provided free of charge upon request.
• The estimate for the group market
remains the same for post-enrollment
disclosures. The estimate for the
individual market also remains the
same, and is based on statistics set forth
by the National Telecommunications
and Information Administration, which
indicate that 30 percent of Americans
do not use the Internet.62
• SBC disclosures would be
distributed with usual marketing and
enrollment materials, thus, costs to mail
the documents will be negligible.
However, paper glossaries and notices
of modifications would require mailing
and supply costs as follows: $0.45
postage cost per mailing and $0.05
supply cost per mailing. The postage
costs have increased by $0.01 from the
$0.44, as set forth in the proposed
regulations, to reflect new first-class
postage rates effective January 22, 2012.
• Printing costs $0.03 per side of a
page. The Departments estimate that it
would cost $0.18 to print a complete

SBC (which is six sides of a page based
on the length of the NAIC sample
completed SBC) and $0.12 to print the
uniform glossary (which is four sides of
a page, based on the length of the NAIC
recommended uniform glossary). This
cost burden is in addition to the time it
would take clerical staff to print and
distribute the SBC or glossary.
Cost Estimate
The Tables below present costs and
burden hours for issuers and TPAs
associated with the final disclosure
requirements of PHS Act section 2715.
Tables 3–4 contain cost estimates for
2012 and 2013, derived from the labor
hours presented in Table 5 and the
hourly rate estimates presented in Table
6, as well as estimates of non-labor
costs. Labor hour estimates were
developed for each one-time and
maintenance task associated with
analyzing requirements, developing IT
systems, and producing SBCs (that
include CEs).

TABLE 3—2012 HOUR BURDEN, EQUIVALENT COST, AND COST BURDEN—2012 DOLLARS
Number of affected entities

Hour burden

Equivalent
cost

Cost burden
(non-labor)

Number of
disclosures

SBC Requirements—Issuers ...............................................
SBC Requirements—TPAs ..................................................
Coverage Example Requirements—Issuers ........................
Coverage Example Requirements—TPAs ..........................
Glossary Requests—Issuers ...............................................
Glossary Requests—TPAs ..................................................

440
750
440
750
440
750

570,000
760,000
193,000
330,000
10,000
12,000

$21,000,000
30,000,000
10,500,000
17,900,000
310,000
380,000

$2,700,000
3,600,000
1,400,000
1,800,000
350,000
460,000

570,000
60,000
193,000
330,000
10,000
12,000

Subtotal .........................................................................

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

1,900,000

80,000,000

10,000,000

1,900,000

Total 2012 Costs ...................................................

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

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

90,000,000

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

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

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

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Number of affected entities

Hour burden

Equivalent
cost

Cost burden
(non-labor)

Number of
disclosures

SBC Requirements—Issuers ...............................................
SBC Requirements—TPAs ..................................................
Coverage Example Requirements—Issuers ........................
Coverage Example Requirements—TPAs ..........................
Notice of Material Modifications—Issuers ...........................
Notice of Material Modifications—TPAs ..............................
Glossary Requests—Issuers ...............................................
Glossary Requests—TPAs ..................................................

440
750
440
750
440
750
440
750

430,000
540,000
59,000
100,000
8,900
11,000
20,000
25,000

$14,000,000
18,000,000
3,300,000
5,600,000
290,000
380,000
630,000
760,000

$2,700,000
3,600,000
1,400,000
1,800,000
310,000
400,000
710,000
920,000

41,000,000
49,000,000
41,000,000
49,000,000
820,000
990,000
1,100,000
1,500,000

Subtotal .........................................................................

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

1,200,000

43,000,000

12,000,000

94,000,000

Total 2013 Costs ...................................................

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

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

55,000,000

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

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

would be required to be disclosed in a SBC that is
distributed upon renewal of coverage. The
Departments, thus, expect that only two percent of
plans will need to issue a notice of modification in
the middle of a plan year, because mid-year changes
that would result in an update to the SBC are very

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rare, based on the Department of Labor’s experience
with ERISA plans. For purposes of simplification,
the Departments extend this assumption to the
individual market as well.
61 See the ERISA e-disclosure rule at 29 CFR
2520.104b–1.

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62 U.S. Department of Commerce, National
Telecommunications and Information
Administration, Digital Nation (February 2010),
available at http://www.ntia.doc.gov/reports/2010/
NTIA_internet_use_report_Feb2010.pdf.

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8687

TABLE 5—ESTIMATED STAFFING HOURS FOR SMALL, MEDIUM, AND LARGE ISSUERS AND TPAS
Hours
Percent of
hours by task

Staffing hour assumptions

IT Development and Workflow Process Change:
One-Time Develop Teams/Analyze Requirements (IT, underwriting/
sales) ...............................................................................................
IT Professionals Benefits/Sales ..........................................................
Professionals ......................................................................................
Attorneys .............................................................................................
Implementing Systems Changes (IT and workflow) ...........................
IT Professionals ..................................................................................
Maintenance:
Updating to Address Changes in Requirements ................................
IT Professionals ..................................................................................
Benefits/Sales Professionals ..............................................................
Attorneys .............................................................................................
SBC Requirement (maintenance):
Producing SBCs .................................................................................
IT Professionals ..................................................................................
Benefits/Sales Professionals ..............................................................
Internal Review of SBCs ....................................................................
Financial Managers—Benefits/Sales Professionals ...........................
Attorneys .............................................................................................
Producing and Distributing Paper Version of SBCs (Group Markets):
Clerical Staff .......................................................................................
Producing and Distributing Paper Version of SBCs (Individual Market):
Clerical Staff .......................................................................................
CE Requirement (maintenance):
Producing CEs ....................................................................................
IT Professionals ..................................................................................
Benefits/Sales Professionals ..............................................................
Internal Review of CEs .......................................................................
Financial Managers—Benefits/Sales Professionals ...........................
Attorneys .............................................................................................

Small
issuer/TPA

Medium
issuer/TPA

Large
issuer/TPA

........................
45
50
5
........................
100

72
32
36
4
432
432

108
49
54
5
648
648

144
65
72
7
864
864

........................
55
40
5

76
42
30
4

113
62
45
6

151
83
60
8

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

3
1.5
1.5
1
0.5
0.5

3
1.5
1.5
1
0.5
0.5

3
1.5
1.5
1
0.5
0.5

100

0.02

0.02

0.02

100

0.03

0.03

0.03

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

60
30
30
20
10
10

60
30
30
20
10
10

60
30
30
20
10
10

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TABLE 6—ESTIMATED LOADED HOURLY WAGES FOR STAFF CATEGORIES
Loaded
hourly wage
(2012 dollars)

Staff category

BLS Code

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

Computer Systems Analysts (Occupation Code 15–1121) .........................................
Insurance Underwriters (Occupation Code 13–2053) .................................................
Financial Managers (Occupation Code 11–3031) .......................................................
Lawyers (Occupation Code 23–1011) .........................................................................
Executive Secretaries and Administrative Assistants (Occupation Code 43–6011) ...

The Departments received many
comments stating that the preliminary
cost analysis underestimated the onetime start-up costs as well as
maintenance costs. For example, one
commenter did a survey of its members
(hereinafter ‘‘regulated community
survey’’), wherein 36 member
companies responded to questions
regarding implementation and
maintenance costs. The commenter
extrapolated the survey results to all
enrollees with coverage in the United
States. Accordingly, the commenter
projected that one-time implementation
costs would be $188 million and
maintenance costs would be $194
million per year. The commenter stated
that a significant cost driver was the
March 23, 2012 deadline to switch from

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current benefit descriptions to the new
uniform SBCs. Accordingly, the
commenter estimated that there could
be a savings of 23 percent with an 18month extension of the implementation
timeline. The commenter also stated
that additional factors affecting costs
were, among other things, the proposed
regulations’ requirement to provide
premium information; the number and
complexity of coverage examples; the
renewal process and timeframe to
provide SBCs; the number of variations
of SBCs to be delivered to each
applicant or enrollee; paper delivery of
SBCs to most group enrollees; and
insufficient flexibility in the SBC
template. As discussed elsewhere in this
preamble, the Departments have taken
steps to ease administrative burden

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$54.52
43.76
78.50
86.86
30.78

related to most of these factors, and
therefore believe that these estimates do
not reflect the policies in the final rule.
Because the regulated community
survey, as well other commenters’ cost
estimates, did not provide specific,
detailed cost information, it is difficult
for the Department to acquire more than
a general understanding of the
differences between the Departments’
cost estimates and the commenters’ cost
estimates. Accordingly, the Departments
continue to believe that there is
considerable uncertainty arising from
general data limitations and the degree
to which economies of scale are
achievable.
Even if the Departments were to
utilize the regulated community survey,
or other commenters’ cost estimates, it

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would be necessary for the Departments
to discount those projected costs to
account for policy changes in these final
regulations. Particularly, these final
regulations now omit premium or cost
of coverage information from SBCs,
provide for only two coverage examples,
and allow greater flexibility for
electronic disclosures prior to
enrollment in coverage.

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6. Regulatory Alternatives
Several provisions in these final
regulations involved policy choices. A
first policy choice involved the
applicability date of these final
regulations. The Departments received
many comments indicating that the
proposed March 23, 2012 applicability
date was not practical for compliance.
Accordingly, in these final regulations,
the Departments are delaying the
applicability of these provisions by six
months to provide plans and issuers
additional time to comply. As discussed
elsewhere in this preamble, for
disclosures to plans, and to individuals
and dependents in the individual
market, these final regulations apply to
health insurance issuers beginning
September 23, 2012. Similarly, for the
group market, for disclosures with
respect to participants and beneficiaries
who enroll or re-enroll through an open
enrollment period (including reenrollees and late enrollees), these final
regulations apply beginning on the first
day of the first open enrollment period
that begins on or after September 23,
2012. For disclosures with respect to
participants and beneficiaries who
enroll other than through an open
enrollment period (including
individuals who are newly eligible for
coverage and special enrollees), these
final regulations apply on the first day
of the first plan year that begins on or
after September 23, 2012. This approach
to implementation should lessen
administrative burden on the regulated
community.
A second policy choice involved
whether to include premium or cost of
coverage information in the SBC. The
Departments received many comments
that expressed concerns about the
complexity of conveying such
information in both the individual and
group markets. As noted above in the
preamble to these final regulations, the
Departments believe that premium
information can be more efficiently and
effectively provided in documentation
other than the SBC. Therefore, the
Departments are not requiring plans and
issuers to include premium or cost of
coverage information in the SBC.
Accordingly, this policy choice should

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also lessen administrative burden on the
regulated community.
A third policy choice involved the
number of coverage examples that plans
issuers must provide in the SBC. The
Departments received a number of
comments about the potential cost and
burden associated with providing
coverage examples. To address these
concerns, the guidance document
published elsewhere in this issue of the
Federal Register clarifies that for the
first year of applicability, the SBC will
include only two coverage examples—
having a baby (normal delivery) and
routine maintenance of well-controlled
type 2 diabetes. Additional coverage
examples will be added in later years.
This policy choice should also lessen
administrative burden on the regulated
community.
A fourth policy choice involved
determining how to minimize the
burden of providing the SBC to
individuals shopping for health
insurance coverage. The Departments
recognize it may be difficult for issuers
to provide accurate information about
the terms of coverage prior to
underwriting. Accordingly, these final
regulations provide that if individual
health insurance issuers provide the
information required by these final
regulations and as specified in guidance
published by the Secretary to the HHS
Secretary’s Web portal (HealthCare.gov),
as established by 45 CFR 159.120, then
they will be deemed to have satisfied
the requirement to provide an SBC to
individuals who request summary
information about coverage prior to
submitting an application. The
Departments determined this approach
promotes regulatory efficiency,
minimizing the administrative burden
on health insurance issuers without
significantly lessening the protections
under PHS Act section 2715.
A fifth policy choice related to
electronic distribution of SBCs. The
Departments received comments about
the electronic transmission of SBCs to
participants and beneficiaries in the
group market. Specifically, some
comments requested that plans and
issuers be permitted to provide SBCs to
participants and beneficiaries in a
manner other than those set forth by the
Department of Labor’s electronic
disclosure safe harbor requirements at
29 CFR 2520.104b-1(c). These final
regulations retain the proposed
requirements, but make a distinction
between a participant or beneficiary
who is already covered under the group
health plan, and a participant or
beneficiary who is eligible for coverage
but not enrolled in a group health plan.
This distinction should provide new

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flexibility in some circumstances, while
also ensuring adequate consumer
protections where necessary, and will
help reduce the burden of providing the
SBC to participants and beneficiaries
prior to enrollment.
A sixth policy choice related to
whether, in the case of covered
individuals residing at the same
address, one SBC would satisfy the
disclosure requirement with respect to
all such individuals, or whether
multiple SBCs would be required to be
provided. Under these final regulations,
a single SBC may be provided to a
family unless any individuals are
known to reside at a different address.
Separate SBCs will therefore need to be
provided only in limited circumstances.
A seventh policy choice related to
how many SBCs a participant or
beneficiary would automatically receive
from a group health plan at renewal.
The final regulations would further
limit burden by requiring a plan or
issuer to provide, at renewal, a new SBC
for only the benefit package in which a
participant or beneficiary is enrolled.
That is, if the plan offers multiple
benefits packages, an SBC is not
required for each benefit package
offered under the group health plan,
which the Departments believe would
otherwise create an undue burden
during open season. Participants and
beneficiaries would be able to receive
upon request an SBC for any benefits
package for which they are eligible. The
Departments believe this balanced
approach addresses the needs of plans,
issuers, and consumers, at renewal.
An eighth policy choice related to the
interpretation of the PHS Act section
2715(d)(4), which requires notice of any
material modification in any of the
terms of the plan or coverage that is not
reflected in the most recently provided
SBC. The Departments note that a
material modification, within the
meaning of section 102 of ERISA and its
implementing regulations at 29 CFR
2520.104b-3, is broadly defined to
include any modification to the
coverage offered under the plan or
policy, that independently, or in
conjunction with other
contemporaneous modifications or
changes, would be considered by the
average plan participant to be an
important change in covered benefits or
other terms of coverage under the plan
or policy. The final regulations interpret
this provision as requiring notice only
for a material modification that would
affect the content of the SBC; that is not
reflected in the most recently provided
SBC; and that occurs other than in
connection with renewal or reissuance
of coverage (that is, a mid-plan or

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policy-year change). This approach is
consistent with the language of PHS Act
section 2715(d)(4) and is more narrowly
focused on what we interpret to be the
purpose of that provision.
B. Regulatory Flexibility Act—
Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (RFA)
requires agencies that issue a regulation
to analyze options for regulatory relief
of small businesses if a final rule has a
significant impact on a substantial
number of small entities. The RFA
generally defines a ‘‘small entity’’ as (1)
a proprietary firm meeting the size
standards of the Small Business
Administration (SBA), (2) a nonprofit
organization that is not dominant in its
field, or (3) a small government
jurisdiction with a population of less
than 50,000. (States and individuals are
not included in the definition of ‘‘small
entity.’’) The Departments use as their
measure of significant economic impact
on a substantial number of small entities
a change in revenues of more than 3 to
5 percent.
As discussed in the Web Portal
interim final rule (75 FR 24481), HHS
examined the health insurance industry
in depth in the Regulatory Impact
Analysis that HHS prepared for the final
rule on establishment of the Medicare
Advantage program (69 FR 46866,
August 3, 2004). In that analysis, HHS
determined that there were few if any
insurance firms underwriting
comprehensive health insurance
policies (in contrast, for example, to
travel insurance policies or dental
discount policies) that fell below the
size thresholds for ‘‘small’’ business
established by the SBA. Currently, the
SBA size threshold is $7 million in
annual receipts for both health insurers
(North American Industry Classification
System, or NAICS, Code 524114) and
TPAs (NAICS Code 524292).
Additionally, as discussed in the
Medical Loss Ratio interim final rule (75
FR 74918), HHS used a data set created
from 2009 National Association of
Insurance Commissioners (NAIC) Health
and Life Blank annual financial
statement data to develop an updated
estimate of the number of small entities
that offer comprehensive major medical
coverage in the individual and group
markets. For purposes of that analysis,
HHS used total Accident and Health
(A&H) earned premiums as a proxy for
annual receipts. HHS estimated that
there were 28 small entities with less
than $7 million in A&H earned
premiums offering individual or group
comprehensive major medical coverage;
however, this estimate may overstate the

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actual number of small health insurance
issuers offering such coverage, since it
does not include receipts from these
companies’ other lines of business.
These 28 small entities represent about
6.4 percent of the approximately 440
health insurers that are accounted for in
this RIA. Based on this calculation, the
Departments assume that there are an
equal percentage of TPAs that are small
entities. That is, 48 small entities
represent about 6.4 percent of the
approximately 750 TPAs that are
accounted for in this RIA.
The Departments estimate that issuers
and TPAs earning less than $50 million
in annual premium revenue, including
the 76 small entities mentioned above,
would incur costs of approximately
$33,000 and $10,000 per issuer/TPA in
2012 and 2013, respectively. Numbers
of this magnitude do not approach the
amounts necessary to be considered a
‘‘significant economic impact’’ on firms
with revenues in the order of millions
of dollars. Additionally, as discussed
earlier, the Departments believe that
these estimates overstate the number of
small entities that will be affected by the
requirements in this final regulation, as
well as the relative impact of these
requirements on these entities, because
the Departments have based their
analysis on the affected entities’ total
A&H earned premiums (rather than their
total annual receipts). Accordingly, the
Departments have determined and
certify that these final regulations will
not have a significant economic impact
on a substantial number of small
entities, and that a regulatory flexibility
analysis is not required.
C. Special Analyses—Department of the
Treasury
For purposes of the Department of the
Treasury it has been determined that
this Treasury decision is not a
significant regulatory action as defined
in Executive Order 12866. Therefore, a
regulatory assessment is not required. It
has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these final regulations. It is hereby
certified that the collections of
information contained in this Treasury
decision will not have a significant
impact on a substantial number of small
entities. Accordingly, a regulatory
flexibility analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. Section 54.9815–2715 of
the final regulations requires both group
health insurance issuers and group
health plans to distribute an SBC and
notice of any material modifications to
the plan that affect the information
required in the SBC. Under these final

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8689

regulations, if a health insurance issuer
satisfies the obligations to distribute an
SBC and a notice of modifications, those
obligations are satisfied not just for the
issuer but also for the group health plan.
For group health plans maintained by
small entities, it is anticipated that the
health insurance issuer will satisfy these
obligations for both the plan and the
issuer in almost all cases. For this
reason, these information collection
requirements will not impose a
significant impact on a substantial
number of small entities. Pursuant to
section 7805(f) of the Code, the notice
of proposed rulemaking preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
D. Unfunded Mandates Reform Act—
Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded
Mandates Reform Act (UMRA) of 1995
that agencies assess anticipated costs
and benefits before issuing any final
rule that includes a Federal mandate
that could result in expenditure in any
one year by State, local or Tribal
governments, in the aggregate, or by the
private sector, of $100 million in 1995
dollars updated annually for inflation.
In 2011, that threshold level is
approximately $136 million. These final
regulations include no mandates on
State, local, or Tribal governments.
These final regulations include
directions to produce standardized
consumer disclosures that will affect
private sector firms (for example, health
insurance issuers offering coverage in
the individual and group markets, and
third-party administrators providing
administrative services to group health
plans), but we conclude that these costs
will not exceed the $136 million
threshold. Thus, we conclude that these
final regulations do not impose an
unfunded mandate on State, local or
Tribal governments or the private sector.
Regardless, consistent with policy
embodied in UMRA, this notice of final
rulemaking has been designed to be the
least burdensome alternative for State,
local and Tribal governments, and the
private sector while achieving the
objectives of the Affordable Care Act.
E. Paperwork Reduction Act
1. Department of Labor and Department
of the Treasury
Section 2715 of the PHS Act directs
the Departments, in consultation with
the National Association of Insurance
Commissioners (NAIC) and a working
group comprised of stakeholders, to

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‘‘develop standards for use by a group
health plan and a health insurance
issuer in compiling and providing to
applicants, enrollees, and policyholders
and certificate holders a summary of
benefits and coverage explanation that
accurately describes the benefits and
coverage under the applicable plan or
coverage.’’ For disclosures to plans, and
to individuals and dependents in the
individual market, these final
regulations apply to health insurance
issuers beginning September 23, 2012.
Similarly, for the group market, for
disclosures with respect to participants
and beneficiaries who enroll or re-enroll
through an open enrollment period
(including re-enrollees and late
enrollees), these final regulations apply
beginning on the first day of the first
open enrollment period that begins on
or after September 23, 2012. For
disclosures with respect to participants
and beneficiaries who enroll other than
through an open enrollment period
(including individuals who are newly
eligible for coverage and special
enrollees), these final regulations apply
on the first day of the first plan year that
begins on or after September 23, 2012.
To implement this provision,
collection of information requirements
relate to the provision of the following:

• Summary of benefits and coverage.
• Coverage examples (as components
of each SBC).
• A uniform glossary of health
coverage and medical terms (uniform
glossary).
• Notice of modifications.
A copy of the ICR may be obtained by
contacting the PRA addressee: G.
Christopher Cosby, Office of Policy and
Research, U.S. Department of Labor,
Employee Benefits Security
Administration, 200 Constitution
Avenue NW., Room N–5718,
Washington, DC 20210. Telephone:
(202) 693–8410; Fax: (202) 219–4745.
These are not toll-free numbers. Email:
ebsa.opr@dol.gov. ICRs submitted to
OMB also are available at reginfo.gov
(http://www.reginfo.gov/public/do/
PRAMain).
The Departments estimate 858
respondents each year from 2012–2013.
This estimate reflects approximately 220
issuers offering comprehensive major
medical coverage in the small and large
group markets, and approximately 638
third-party administrators (TPAs).63
To account for variation in firm size,
the Departments estimate a weighted
burden on the basis of issuer’s 2009
total earned premiums for
comprehensive major medical

coverage.64 The Departments define
small issuers as those with total earned
premiums less than $50 million;
medium issuers as those with total
earned premiums between $50 million
and $999 million; and large issuers as
those with total earned premiums of $1
billion or more. Accordingly, the
Departments estimate approximately 70
small, 115 medium, and 35 large
issuers. Similarly, the Departments
estimate approximately 204 small, 332
medium, and 102 large TPAs.
2012 Burden Estimate
In 2012, the Departments estimate a
one-time administrative burden of about
620,000 hours with an equivalent cost of
about $34,000,000 across the industry to
prepare for the provisions of these final
regulations. This calculation is made
assuming issuers and TPAs will need to
implement two principal tasks: (1)
develop teams to analyze current
workflow processes against the new
rules and (2) make appropriate changes
to IT systems and processes. With
respect to task (1), the Departments
estimate about 88,000 burden hours
with an equivalent cost of about
$4,500,000. The Departments calculate
these estimates as follows: 65

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

Medium issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

Large issuer/TPA
Equivalent
cost

Hours

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

$54.52
43.76
86.86

32
36
4

$1,800
1,600
310

49
54
5

$2,600
2,400
500

65
72
7

$3,500
3,200
630

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

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

72

3,700

108

5,500

144

7,300

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

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

20,000

1,000,000

48,000

2,500,000

20,000

1,000,000

With respect to task (2), the
Departments estimate about 530,000
burden hours with an equivalent cost of

about $29,000,000. The Departments
calculate these estimates as follows:

TASK 2—IT CHANGES
Small issuer/TPA

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Hourly wage
rate

Hours

Equivalent
cost

$54.52

63 The Departments estimate that there are 440
issuers and 750 TPAs. Because the Department of
Labor and the Department of the Treasury share the
hour and cost burden for issuers and TPAs with the
Department of Health and Human Services, the
burden to produce the SBCs including Coverage
Examples for group health plans is calculated using

half the number of issuers (220) and 85 percent of
the TPAs (638). While the group health plans could
prepare their own SBCs, the Departments assume
that SBCs would be prepared by service providers,
i.e., issuers and TPAs.
64 The premium revenue data come from the 2009
NAIC financial statements, also known as ‘‘Blanks,’’

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$24,000

Sfmt 4700

Equivalent
cost

Hours

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

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432

Medium issuer/TPA

648

$35,000

Large issuer/TPA
Hours
864

Equivalent
cost
$47,000

where insurers report information about their
various lines of business.
65 For the purposes of these and other estimates
in this section IV.E, the Departments again use the
assumptions outlined above in section IV.A.5.

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8691

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

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

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

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

432

24,000

648

35,000

864

47,000

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

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

120,000

6,600,000

290,000

16,000,000

120,000

6,400,000

In addition to the one-time
administrative costs mentioned above,
the Departments assume that plans and
issuers will incur additional
administrative burden. With regard to
this administrative burden, the
estimated hour and cost burden for the
collections of information in 2012 are as
follows:
• The Departments estimate that there
will be about 77,000,000 SBCs.

• The Departments assume 50 percent
of the total number of SBCs would be
sent electronically prior to enrollment,
and 38 percent would be sent
electronically after enrollment, in the
small and large group markets.
Accordingly, the Departments estimate
that about 31,000,000 SBCs would be
electronically distributed, and about
46,000,000 SBCs would be distributed
in paper form. The Departments assume

there are costs only for paper
disclosures, but no costs for electronic
disclosures.
Task 3: SBCs—The estimated hour
burden for preparing the SBCs is about
780,000 hours with an equivalent cost of
about $24,000,000, and a cost burden of
about $5,500,000. The Departments
calculate these estimates as follows:

TASK 3: EQUIVALENT COSTS FOR PRODUCING SBCS
[Except coverage examples]
Small issuer/TPA
Hourly wage
rate

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

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

$54.52
43.76
78.50
86.86

1.5
1.5
0.5
0.5

$82
66
39
43

1.5
1.5
0.5
0.5

$82
66
39
43

1.5
1.5
0.5
0.5

$82
66
39
43

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

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

4

230

4

230

4

230

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

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

1,100

63,000

1,800

100,000

500

32,000

TASK 3: EQUIVALENT COSTS FOR DISTRIBUTING SBCS
Hourly wage
rate

Hours per
SBC

Total number
of SBCs

Total hours

Total equivalent cost

$30.78

0.017

46,000,000

780,000

$24,000,000

Cost per SBCs

Total number
of SBCs

Total cost
burden

$0.12

46,000,000

$5,500,000

Clerical staff .........................................................................

TASK 3: COST BURDEN FOR PRINTING SBCS

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

Task 4: Two Coverage Examples—The
estimated hour burden for producing
and printing coverage examples is about

69,000 hours with an equivalent cost of
about $4 million, and a cost burden of

about $2,800,000. The Departments
calculate these estimates as follows:

TASK 4: EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES
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Small issuer/TPA
Hourly wage
rate
IT Professionals .......................................
Benefits/Sales Professionals ...................
Financial Managers ..................................
Attorneys ..................................................

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PO 00000

Equivalent
cost

Hours

$54.52
43.76
78.50
86.86

Frm 00025

Medium issuer/TPA

30
30
10
10

Fmt 4701

$1,640
1,310
780
870

Sfmt 4700

Equivalent
cost

Hours
30
30
10
10

E:\FR\FM\14FER4.SGM

$1,640
1,310
780
870

14FER4

Large issuer/TPA
Equivalent
cost

Hours
30
30
10
10

$1,640
1,310
780
870

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TASK 4: EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES—Continued
Small issuer/TPA
Hourly wage
rate

Medium issuer/TPA

Equivalent
cost

Hours

Large issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

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

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

80

4,600

80

4,600

80

4,600

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

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

21,900

1,260,000

36,000

2,100,000

11,000

630,000

TASK 4: COST BURDEN FOR PRINTING COVERAGE EXAMPLES
Printing cost
per CE set

Total CE sets
printed

Total cost
burden

$0.06

46,000,000

$2,800,000

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

Task 5: Glossary Requests—The
Departments assume that, in 2012,
issuers and TPAs will begin responding
to glossary requests from covered
individuals, and that 2.5 percent of
covered individuals, who receive paper
SBCs, will request glossaries in paper
form. The Departments estimate that the
hour and cost burden of providing the
notices to be 2.5 percent of the hour and
cost burden of distributing paper SBCs,
plus an additional cost burden of $0.50
for each glossary (including $0.45 for
first-class postage and $0.05 for supply
costs). Accordingly, in 2012, the
Departments estimate an hour burden of
about 24,000 hours with an equivalent
cost of about $740,000 and a cost
burden of about $740,000 associated
with about 1,200,000 glossary requests.
The total 2012 burden estimate is
about 1,500,000 hours with an
equivalent cost of about $63,000,000
and cost burden of about $9,000,000.
2013 Burden Estimate
Task 1: SBCs—The number of
disclosures is assumed to remain
constant at about 77,000,000.
Accordingly, in 2013, the Departments
again estimate a burden of about

Small Issuer/TPA
Hourly wage
rate

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Task 4: Glossary Requests—The
Departments assume that, in 2013,
issuers and TPAs will again respond to
glossary requests from covered
individuals, and that five percent of
covered individuals, who receive paper
SBCs, will request glossaries in paper
form. The Departments estimate that the
burden and cost of providing the
glossaries to be five percent of the hour
and cost burden of distributing paper
SBCs, plus an additional cost burden for
$0.50 for each glossary (including $0.45
for first-class postage and $0.05 for
supply costs). Accordingly, in 2013, the
Departments estimate an hour burden of
about 39,000 hours with an equivalent
cost of about $1,200,000 and a cost
burden of about $1,400,000 associated
with 2,300,000 glossary requests.
Task 5: Maintenance Administrative
Costs—In 2013, the Departments assume
that issuers and TPAs will need to make
updates to address changes in
standards, and, thus, incur 15 percent of
the one-time administrative burden.
Accordingly, the estimated hour burden
is about 93,000 hours, with an
equivalent cost of about $4,800,000. The
Departments calculate these estimates as
follows:

780,000 hours with an equivalent cost of
about $5,500,000 and a cost burden of
about $24,000,000 for preparing and
distributing SBCs.
Task 2: Two Coverage Examples—The
Departments again estimate about
69,000 hours with an equivalent cost of
about $4,000,000 and a cost burden of
about $2,800,000 for producing and
printing coverage examples.
Task 3: Notices of Modifications—The
Departments assume that, in 2013,
issuers and TPAs would send notices of
modifications to covered individuals,
and that two percent of covered
individuals would receive such notice.
The Departments estimate that the hour
and cost burden of providing the notices
to be two percent of the combined hour
and cost burden of providing the SBCs
including the coverage examples, plus
an additional cost burden of $0.50 for
each paper notice (including $0.45 for
first-class postage and $0.05 for supply
costs). Accordingly, in 2013, the
Departments estimate an hour burden of
about 17,000 hours with an equivalent
cost of $570,000 and a cost burden of
about $630,000 associated with
preparing and distributing about
1,500,000 notices of modification.

Medium Issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

Large Issuer/TPA
Equivalent
cost

Hours

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

$54.52
43.76
86.86

42
30
4

$2,300
1,300
350

62
45
6

$3,400
2,000
520

83
60
8

$4,500
2,600
690

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

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

76

4,000

113

5,900

151

7,800

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

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

21,000

1,100,000

51,000

2,600,000

21,000

1,100,000

The total 2013 burden estimate is
about 1,000,000 hours with an
equivalent cost of nearly $35,000,000
and a cost burden of $10,000,000.

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Estimates are not provided for
subsequent years, because there will be
significant changes in the marketplace
in 2014, including those related to the
offering of new individual and small

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group plans through the Affordable
Insurance Exchanges, and new market
reforms outside of the new Exchanges,
and the wide-ranging scope of these

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations
changes makes it difficult to project
results for 2014 and beyond.
The Departments note that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number.
The 2012–2013 paperwork burden
estimates are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of the Treasury.
Title: Affordable Care Act Uniform
Explanation of Coverage Documents
OMB Number: 1210–0147; 1545–
2229.
Affected Public: Business or other for
profit; not-for-profit institutions.
Total Respondents: 858.
Total Responses: 79,500,000.
Frequency of Response: On-going.
Estimated Total Annual Burden
Hours (two year average): 620,000 hours
(Employee Benefits Security
Administration); 620,000 hours (Internal
Revenue Service).

Estimated Total Annual Cost Burden
(two year average): $4,800,000
(Employee Benefits Security
Administration); $4,800,000 (Internal
Revenue Service).

8693

earned premiums between $50 million
and $999 million; and large issuers as
those with total earned premiums of $1
billion or more. Accordingly, the
Department estimates approximately 70
small, 115 medium, and 35 large
issuers. Similarly, the Department
estimates approximately 36 small, 59
medium, and 18 large TPAs.

2. Department of Health and Human
Services
ICRs Related to the Summary of Benefits
and Uniform Glossary (45 CFR 147.200)
The Department estimates 333
respondents each year from 2012–2013.
This estimate reflects the approximately
220 issuers offering comprehensive
major medical coverage in the
individual market and to fully-insured
non-federal governmental plans, and
113 TPAs acting as service providers for
self-insured non-federal governmental
plans.66
To account for variation in firm size,
the Department estimates a weighted
burden on the basis of issuers’ 2009
total earned premiums for
comprehensive major medical
coverage.67 The Department defines
small issuers as those with total earned
premiums less than $50 million;
medium issuers as those with total

2012 Burden Estimate
In 2012, the Department estimates a
one-time administrative burden of about
230,000 hours with an equivalent cost of
about $13,000,000 across the industry to
prepare for the provisions of these final
regulations. This calculation is made
assuming issuers and TPAs will need to
implement two principal tasks: (1)
develop teams to analyze current
workflow processes against the new
standards and (2) make appropriate
changes to IT systems and processes.
With respect to task (1), the
Department estimates about 34,000
burden hours with an equivalent cost of
about $1,800,000. The Department
calculates these estimates as follows:68

TASK 1: ANALYZE CURRENT WORKFLOW AND NEW RULES
Small Issuer/TPA
Hourly
Wage Rate

Medium Issuer/TPA

Equivalent
Cost

Hours

Equivalent
Cost

Hours

Large Issuer/TPA
Equivalent
Cost

Hours

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

$54.52
43.76
86.86

32
36
4

$1,800
1,600
310

49
54
5

$2,600
2,400
500

65
72
7

$3,500
3,200
600

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

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

72

3,700

108

6,000

144

7,000

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

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

7,600

390,000

19,000

1,000,000

7,600

370,000

With respect to task (2), the
Department estimates about 200,000
burden hours with an equivalent cost of

about $11,000,000. The Department
calculates these estimates as follows:

TASK 2: IT CHANGES
Small Issuer/TPA

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Hourly
Wage Rate

Hours

Medium Issuer/TPA

Equivalent
Cost

Equivalent
Cost

Hours

Large Issuer/TPA
Hours

Equivalent
Cost

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

$54.52

432

$24,000

648

$35,000

864

$50,000

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

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

432

24,000

648

35,000

864

50,000

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

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

46,000

2,500,000

110,000

6,100,000

46,000

2,700,000

66 The Department estimates that there are 440
issuers and 750 TPAs. Because the Department
shares the hour and cost burden for issuers with the
Department of Labor and the Department of the
Treasury, the burden to produce the SBCs including
coverage examples for non-federal governmental
plans and issuers in the individual market is

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calculated using half the number of issuers (221)
and 15% of TPAs (113). While non-federal
governmental plans could prepare their own SBCs,
the Department assumes that SBCs would be
prepared by service providers, i.e., issuers and
TPAs.

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67 The premium revenue data come from the 2009
NAIC financial statements, also known as ‘‘Blanks,’’
where insurers report information about their
various lines of business
68 For the purposes of these and other estimates
in this section IV.E, the Department again use the
assumptions outlined above in section IV.A.5.

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In addition to the one-time
administrative costs mentioned above,
the Department assumes that plans and
issuers will incur additional
administrative burden. With regard to
this administrative burden, the
estimated hour and cost burden for the
collections of information in 2012 are as
follows:
• The Department estimates that there
will be about 13,000,000 SBCs.

• The Department assumes 50 percent
of the total number of SBCs would be
sent electronically prior to enrollment,
and 38 percent would be sent
electronically after enrollment, in the
small and large group markets. The
Department further assumes 70 percent
of SBCs would be sent electronically in
the individual market. Accordingly, the
Department estimates that about
7,100,000 disclosures would be
electronically distributed, and about

6,200,000 disclosures would be
distributed in paper form. The
Department assumes there are costs only
for paper disclosures, but no costs for
electronic disclosures
Task 3: SBCs—The estimated hour
burden is about 130,000 hours with an
equivalent cost of about $4,200,000, and
a cost burden of about $740,000. The
Department calculates these estimates as
follows:

TASK 3—EQUIVALENT COSTS FOR PRODUCING SBCS (EXCEPT COVERAGE EXAMPLES)
Small Issuer
Hourly wage
rate

Medium Issuer

Equivalent
cost

Hours

Large Issuer

Equivalent
cost

Hours

Equivalent
cost

Hours

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

$54.52
43.76
78.50
86.86

1.5
1.5
0.5
0.5

$82
66
39
43

1.5
1.5
0.5
0.5

$82
66
39
43

1.5
1.5
0.5
0.5

$82
66
39
43

Total per issuer .................................

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

4

230

4

230

4

230

Total for all issuers ...........................

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

420

24,000

700

40,000

210

12,000

Total number of SBCs

Total hours

Total equivalent cost

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

Hours per
SBC

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

$30.78
30.78

0.033
0.017

1,700,000
4,500,000

56,000
77,000

$1,700,000
2,400,000

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

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

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

6,200,000

130,000

4,100,000

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

Total SBCs

Cost burden

$0.12

6,200,000

$740,000

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

Task 4: Two Coverage Examples—The
estimated hour burden for producing
and printing coverage examples is about

27,000 hours with an equivalent cost of
about $1,500,000, and a cost burden of

about $370,000. The Department
calculates these estimates as follows:

TASK 4—EQUIVALENT COSTS FOR PRODUCING COVERAGE EXAMPLES
Small Issuer/TPA

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Hourly wage
rate

Medium Issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

Large Issuer/TPA
Equivalent
cost

Hours

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

$54.52
43.76
78.50
86.86

30
30
10
10

$1,640
1,310
780
870

30
30
10
10

$1,640
1,310
780
870

30
30
10
10

$1,640
1,310
780
870

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

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

80

4,600

80

4,600

80

4,600

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

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

8,500

490,000

14,000

800,000

4,200

240,000

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8695

TASK 4—COST BURDEN FOR PRINTING COVERAGE EXAMPLES
Printing cost
per CE set

Total CE sets
printed

Total cost burden

$0.06

6,200,000

$370,000

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

Task 5: Glossary Requests—The
Department assumes that, in 2012,
issuers and TPAs will begin responding
to glossary requests from covered
individuals, and that 2.5 percent of
covered individuals, who receive paper
SBCs, will request glossaries in paper
form. The Department assumes that the
hour and cost burden of providing the
glossaries to be 2.5 percent of the hour
and cost burden of distributing paper
SBCs, plus an additional cost burden of
$0.50 for each glossary (including $0.45
for first-class postage and $0.05 for
supply costs). Accordingly, in 2012, the
Department estimates an hour burden of
about 2,700 hours with an equivalent
cost of about $82,000 and a cost burden
of about $99,000 associated with about
160,000 glossary requests.
The total 2012 burden estimate is
about 390,000 hours, or 1,200 hours per
respondent, with an equivalent cost of
about $19,000,000, or $57,000 per
respondent, and cost burden of about
$1,200,000, or $3,600 per respondent.
2013 Burden Estimate
Task 1: SBCs—The number of
disclosures is assumed to remain
constant at 13,000,000. Thus, in 2013,

Small issuer/TPA
Hourly wage
rate

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Task 4: Glossary Requests—The
Department assumes that, in 2013,
issuers and TPAs will again respond to
glossary requests from covered
individuals, and that five percent of
covered individuals, who receive paper
SBCs, will request glossaries in paper
form. The Department estimates that the
hour and cost burden of providing the
glossaries to be 5 percent of the hour
and cost burden of distributing paper
SBCs, plus an additional cost burden of
$0.50 for each glossary (including $0.45
for first-class postage and $0.05 for
supply costs). Accordingly, in 2013, the
Department estimates an hour burden of
about 5,300 hours with an equivalent
cost of $160,000 and a cost burden of
about $190,000 associated with 310,000
glossary requests.
Task 5: Maintenance Administrative
Costs—In 2013, the Department assumes
that issuers and TPAs will need to make
updates to address changes in
standards, and, thus, incur 15 percent of
the one-time administrative burden.
Accordingly, the estimated hour burden
is about 36,000 hours with an
equivalent cost of about $1,800,000. The
Department calculates these estimates as
follows:

the Department again estimates an hour
burden of about 130,000 hours with an
equivalent cost of about $4,200,000 and
cost burden of about $740,000.
Task 2: Two Coverage Examples—The
Department again estimates an hour
burden of about 27,000 hours with an
equivalent cost of about $1,500,000 and
cost burden of about $370,000 for
producing and printing coverage
examples.
Task 3: Notices of Modifications—The
Department assumes that, in 2013,
issuers will begin sending notices of
modifications to covered individuals,
and that two percent of covered
individuals would receive such notice.
The Department estimates that the hour
and cost burden of providing the notices
to be two percent of the combined hour
and cost burden of providing the SBCs
including the coverage examples, plus
an additional cost burden of $0.50 for
each paper notice (including $0.45 for
first-class postage and $0.05 for supply
costs). Accordingly, in 2013, the
Department estimates an hour burden of
about 3,100 hours with an equivalent
cost of about $118,000 and a cost
burden of about $22,000 associated with
about 260,000 notices of modification.

Medium issuer/TPA

Equivalent
cost

Hours

Equivalent
cost

Hours

Large issuer/TPA
Equivalent
cost

Hours

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

$54.52
43.76
86.86

42
30
4

$2,300
1,300
350

62
45
6

$3,400
2,000
520

83
60
8

$4,500
2,600
690

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

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

76

4,000

113

5,900

151

7,800

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

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

8,100

420,000

20,000

1,000,000

8,000

410,000

The total 2013 burden estimate is
about 200,000 hours, or about 600 hours
per respondent, with an equivalent cost
of about $7,800,000, or $23,000 per
respondent, and cost burden of about
$1,400,000, or $4,200 per respondent.
Estimates are not provided for
subsequent years, because there will be
significant changes in the marketplace
in 2014, including those related to the
offering of new individual and small
group plans through the Affordable
Insurance Exchanges, and new market
reforms outside of the new Exchanges,
and the wide-ranging scope of these

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changes makes it difficult to project
results for 2014 and beyond.
The Department notes that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number.
The 2012–2013 paperwork burden
estimates are summarized as follows:
Type of Review: New collection
(Request for a new OMB Control
Number).
Agency: Department of Health and
Human Services.

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Title: Affordable Care Act Uniform
Explanation of Coverage Documents
CMS Identifier (OMB Control
Number): CMS–10407 (0938–1146).
Affected Public: Business; State,
Local, or Tribal Governments.
Total Respondents: 333.
Total Responses: 13,000,000.
Frequency of Response: On-going.
Estimated Total Annual Burden
Hours (two year average): 300,000
hours.
Estimated Total Annual Cost Burden
(two year average): $1,300,000.

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ICRs Related to Deemed Compliance
Reporting (45 CFR 147.200(a)(4)(iii)(C))
Under 45 CFR 147.200(a)(4)(iii)(C), if
individual health insurance issuers
provide information required by these
final regulations to the HHS Secretary’s
Web portal (HealthCare.gov), as
established by 45 CFR 159.120, then
they will be deemed to have satisfied
the requirement to provide an SBC to
individuals who request information
about coverage prior to submitting an
application for coverage. Individual
health insurance issuers already provide
most SBC content elements to
HealthCare.gov, except for five data
elements related to patient
responsibility for each coverage
example: deductibles, co-payments, coinsurance, limits or exclusions, and the
total of all four cost-sharing amounts.
Accordingly, the additional burden
associated with the requirements under
§ 147.200(a)(4)(iii)(C) is the time and
effort it would take each of the 220
issuers in the individual market to enter
the five additional data elements into an
Excel spreadsheet. We estimate that it
will take these issuers about 110 hours,
at a total estimated cost of about $3,300,
for each coverage example. For two
coverage examples, the burden and cost
would be about 220 hours at a cost of
about $6,600.
In deriving these figures, we used the
following hourly labor rates and
estimated the time to complete each
task: $ 30.78/hr and 0.5 hr/issuer for
clerical staff to enter data into an Excel
spreadsheet, or about $15 per
respondent per coverage example.
This information collection
requirement reflects the clarification in
these final regulations that issuers must
provide all content required in the SBC,
including the information necessary for
coverage examples, to Healthcare.gov to
be deemed compliant. The
aforementioned burden estimates will
be submitted for OMB review and
approval as a revision to the information
collection request currently approved
under OMB control number 0938–1086.
To obtain copies of the supporting
statement and any related forms for the
final paperwork collections referenced
above, access CMS’ Web site at http://
www.cms.gov/PaperworkReduction
Actof1995/PRAL/list.asp#TopOfPage or
email your request, including your
address, phone number, OMB number,
and CMS document identifier, to
Paperwork@cms.hhs.gov, or call the
Reports Clearance Office at 410–786–
1326.

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F. Federalism Statement—Department
of Labor and Department of Health and
Human Services
Executive Order 13132 outlines
fundamental principles of federalism,
and requires the adherence to specific
criteria by Federal agencies in the
process of their formulation and
implementation of policies that have
‘‘substantial direct effects’’ on the
States, the relationship between the
national government and States, or on
the distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
federalism implications must consult
with State and local officials and
describe the extent of their consultation
and the nature of the concerns of State
and local officials in the preamble to the
regulation.
In the Departments’ view, these final
rules have federalism implications,
because it would have direct effects on
the States, the relationship between
national governments and States, or on
the distribution of power and
responsibilities among various levels of
government relating to the disclosure of
health insurance coverage information
to consumers. Under these final rules,
all group health plans and health
insurance issuers offering group or
individual health insurance coverage,
including self-funded non-federal
governmental plans as defined in
section 2791 of the PHS Act, would be
required to follow uniform standards for
compiling and providing a summary of
benefits and coverage to consumers.
Such Federal standards developed
under PHS Act section 2715(a) would
preempt any related State standards that
require a summary of benefits and
coverage that provides less information
to consumers than that required to be
provided under PHS Act section
2715(a).
In general, through section 514,
ERISA supersedes State laws to the
extent that they relate to any covered
employee benefit plan, and preserves
State laws that regulate insurance,
banking, or securities. While ERISA
prohibits States from regulating a plan
as an insurance or investment company
or bank, the preemption provisions of
section 731 of ERISA and section 2724
of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a))
apply so that the HIPAA requirements
(including those of the Affordable Care
Act) are not to be ‘‘construed to
supersede any provision of State law
which establishes, implements, or
continues in effect any standard or
requirement solely relating to health

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insurance issuers in connection with
group health insurance coverage except
to the extent that such standard or
requirement prevents the application of
a requirement’’ of a Federal standard.
The conference report accompanying
HIPAA indicates that this is intended to
be the ‘‘narrowest’’ preemption of State
laws (See House Conf. Rep. No. 104–
736, at 205, reprinted in 1996 U.S. Code
Cong. & Admin. News 2018). States may
continue to apply State law
requirements except to the extent that
such requirements prevent the
application of the Affordable Care Act
requirements that are the subject of this
rulemaking. Accordingly, States have
significant latitude to impose
requirements on health insurance
issuers that are more restrictive than the
Federal law. However, under these final
rules, a State would not be allowed to
impose a requirement that modifies the
summary of benefits and coverage
required to be provided under PHS Act
section 2715(a), because it would
prevent the application of this final
rule’s uniform disclosure requirement.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have federalism implications or limit
the policy making discretion of the
States, the Departments have engaged in
efforts to consult with and work
cooperatively with affected States,
including consulting with, and
attending conferences of, the National
Association of Insurance Commissioners
and consulting with State insurance
officials on an individual basis. It is
expected that the Departments will act
in a similar fashion in enforcing the
Affordable Care Act, including the
provisions of section 2715 of the PHS
Act. Throughout the process of
developing these final regulations, to
the extent feasible within the specific
preemption provisions of HIPAA as it
applies to the Affordable Care Act, the
Departments have attempted to balance
the States’ interests in regulating health
insurance issuers, and Congress’ intent
to provide uniform minimum
protections to consumers in every State.
By doing so, it is the Departments’ view
that they have complied with the
requirements of Executive Order 13132.
Pursuant to the requirements set forth
in section 8(a) of Executive Order
13132, and by the signatures affixed to
this final rule, the Departments certify
that the Employee Benefits Security
Administration and the Centers for
Medicare & Medicaid Services have
complied with the requirements of
Executive Order 13132 for the attached
final rule in a meaningful and timely
manner.

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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations
G. Congressional Review Act
This regulation is subject to the
Congressional Review Act provisions of
the Small Business Regulatory
Enforcement Fairness Act of 1996
(5 U.S.C. 801 et seq.), which specifies
that before a rule can take effect, the
Federal agency promulgating the rule
shall submit to each House of the
Congress and to the Comptroller General
a report containing a copy of the rule
along with other specified information,
and has been transmitted to Congress
and the Comptroller General for review.
V. Statutory Authority
The Department of the Treasury
regulations are adopted pursuant to the
authority contained in sections 7805
and 9833 of the Code.
The Department of Labor regulations
are adopted pursuant to the authority
contained in 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1185d, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public
Law104–191, 110 Stat. 1936; sec. 401(b),
Public Law 105–200, 112 Stat. 645
(42 U.S.C. 651 note); sec. 512(d), Public
Law 110–343, 122 Stat. 3881; sec. 1001,
1201, and 1562(e), Public Law 111–148,
124 Stat. 119, as amended by Public
Law 111–152, 124 Stat. 1029; Secretary
of Labor’s Order 3–2010, 75 FR 55354
(September 10, 2010).
The Department of Health and Human
Services regulations are adopted
pursuant to the authority contained in
sections 2701 through 2763, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg
through 300gg–63, 300gg–91, and
300gg–92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health
insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590

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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

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requirements, and State regulation of
health insurance.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Approved: February 7, 2012.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury
(Tax Policy).
Signed this 7th day of February, 2012.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Dated: February 6, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Dated: February 6, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.

Department of the Treasury
Internal Revenue Service
26 CFR Chapter 1

Accordingly, the Internal Revenue
Service amends 26 CFR parts 54 and
602 as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for Part 54 is amended by adding an
entry for § 54.9815–2715 in numerical
order to read in part as follows:

■

Authority: 26 U.S.C. 7805. * * *
Section 54.9815–2715 also issued under 26
U.S.C. 9833.

Par. 2. Section 54.9815–2715 is added
to read as follows:

■

§ 54.9815–2715 Summary of benefits and
coverage and uniform glossary.

(a) Summary of benefits and
coverage—(1) In general. A group health
plan (and its administrator as defined in
section 3(16)(A) of ERISA), and a health
insurance issuer offering group health
insurance coverage, is required to
provide a written summary of benefits
and coverage (SBC) for each benefit
package without charge to entities and
individuals described in this paragraph
(a)(1) in accordance with the rules of
this section.
(i) SBC provided by a group health
insurance issuer to a group health
plan—(A) Upon application. A health
insurance issuer offering group health
insurance coverage must provide the
SBC to a group health plan (or its
sponsor) upon application for health
coverage, as soon as practicable
following receipt of the application, but
in no event later than seven business

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8697

days following receipt of the
application.
(B) By first day of coverage (if there
are changes). If there is any change in
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
issuer must update and provide a
current SBC to the plan (or its sponsor)
no later than the first day of coverage.
(C) Upon renewal. If the issuer renews
or reissues the policy, certificate, or
contract of insurance (for example, for a
succeeding policy year), the issuer must
provide a new SBC as follows:
(1) If written application is required
(in either paper or electronic form) for
renewal or reissuance, the SBC must be
provided no later than the date the
written application materials are
distributed.
(2) If renewal or reissuance is
automatic, the SBC must be provided no
later than 30 days prior to the first day
of the new plan or policy year; however,
with respect to an insured plan, if the
policy, certificate, or contract of
insurance has not been issued or
renewed before such 30-day period, the
SBC must be provided as soon as
practicable but in no event later than
seven business days after issuance of the
new policy, certificate, or contract of
insurance, or the receipt of written
confirmation of intent to renew,
whichever is earlier.
(D) Upon request. If a group health
plan (or its sponsor) requests an SBC or
summary information about a health
insurance product from a health
insurance issuer offering group health
insurance coverage, an SBC must be
provided as soon as practicable, but in
no event later than seven business days
following receipt of the request.
(ii) SBC provided by a group health
insurance issuer and a group health
plan to participants and beneficiaries—
(A) In general. A group health plan
(including its administrator, as defined
under section 3(16) of ERISA), and a
health insurance issuer offering group
health insurance coverage, must provide
an SBC to a participant or beneficiary
(as defined under sections 3(7) and 3(8)
of ERISA), and consistent with
paragraph (a)(1)(iii) of this section, with
respect to each benefit package offered
by the plan or issuer for which the
participant or beneficiary is eligible.
(B) Upon application. The SBC must
be provided as part of any written
application materials that are
distributed by the plan or issuer for
enrollment. If the plan or issuer does
not distribute written application
materials for enrollment, the SBC must
be distributed no later than the first date
on which the participant is eligible to

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enroll in coverage for the participant or
any beneficiaries.
(C) By first day of coverage (if there
are changes). If there is any change to
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
plan or issuer must update and provide
a current SBC to a participant or
beneficiary no later than the first day of
coverage.
(D) Special enrollees. The plan or
issuer must provide the SBC to special
enrollees (as described in § 54.9801–6)
no later than the date by which a
summary plan description is required to
be provided under the timeframe set
forth in ERISA section 104(b)(1)(A) and
its implementing regulations, which is
90 days from enrollment.
(E) Upon renewal. If the plan or issuer
requires participants or beneficiaries to
renew in order to maintain coverage (for
example, for a succeeding plan year),
the plan or issuer must provide a new
SBC when the coverage is renewed, as
follows:
(1) If written application is required
for renewal (in either paper or electronic
form), the SBC must be provided no
later than the date on which the written
application materials are distributed.
(2) If renewal is automatic, the SBC
must be provided no later than 30 days
prior to the first day of the new plan or
policy year; however, with respect to an
insured plan, if the policy, certificate, or
contract of insurance has not been
issued or renewed before such 30-day
period, the SBC must be provided as
soon as practicable but in no event later
than seven business days after issuance
of the new policy, certificate, or contract
of insurance, or the receipt of written
confirmation of intent to renew,
whichever is earlier.
(F) Upon request. A plan or issuer
must provide the SBC to participants or
beneficiaries upon request for an SBC or
summary information about the health
coverage, as soon as practicable, but in
no event later than seven business days
following receipt of the request.
(iii) Special rules to prevent
unnecessary duplication with respect to
group health coverage—(A) An entity
required to provide an SBC under this
paragraph (a)(1) with respect to an
individual satisfies that requirement if
another party provides the SBC, but
only to the extent that the SBC is timely
and complete in accordance with the
other rules of this section. Therefore, for
example, in the case of a group health
plan funded through an insurance
policy, the plan satisfies the
requirement to provide an SBC with
respect to an individual if the issuer

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provides a timely and complete SBC to
the individual.
(B) If a single SBC is provided to a
participant and any beneficiaries at the
participant’s last known address, then
the requirement to provide the SBC to
the participant and any beneficiaries is
generally satisfied. However, if a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address.
(C) With respect to a group health
plan that offers multiple benefit
packages, the plan or issuer is required
to provide a new SBC automatically
upon renewal only with respect to the
benefit package in which a participant
or beneficiary is enrolled; SBCs are not
required to be provided automatically
upon renewal with respect to benefit
packages in which the participant or
beneficiary is not enrolled. However, if
a participant or beneficiary requests an
SBC with respect to another benefit
package (or more than one other benefit
package) for which the participant or
beneficiary is eligible, the SBC (or SBCs,
in the case of a request for SBCs relating
to more than one benefit package) must
be provided upon request as soon as
practicable, but in no event later than
seven business days following receipt of
the request.
(2) Content—(i) In general. Subject to
paragraph (a)(2)(iii) of this section, the
SBC must include the following:
(A) Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage, in
accordance with guidance as specified
by the Secretary;
(B) A description of the coverage,
including cost sharing, for each category
of benefits identified by the Secretary in
guidance;
(C) The exceptions, reductions, and
limitations of the coverage;
(D) The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
(E) The renewability and continuation
of coverage provisions;
(F) Coverage examples, in accordance
with paragraph (a)(2)(ii) of this section;
(G) With respect to coverage
beginning on or after January 1, 2014, a
statement about whether the plan or
coverage provides minimum essential
coverage as defined under section
5000A(f) and whether the plan’s or
coverage’s share of the total allowed
costs of benefits provided under the

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plan or coverage meets applicable
requirements;
(H) A statement that the SBC is only
a summary and that the plan document,
policy, certificate, or contract of
insurance should be consulted to
determine the governing contractual
provisions of the coverage;
(I) Contact information for questions
and obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for
customer service and an Internet
address for obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance);
(J) For plans and issuers that maintain
one or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of
network providers;
(K) For plans and issuers that use a
formulary in providing prescription
drug coverage, an Internet address (or
similar contact information) for
obtaining information on prescription
drug coverage; and
(L) An Internet address for obtaining
the uniform glossary, as described in
paragraph (c) of this section, as well as
a contact phone number to obtain a
paper copy of the uniform glossary, and
a disclosure that paper copies are
available.
(ii) Coverage examples. The SBC must
include coverage examples specified by
the Secretary in guidance that illustrate
benefits provided under the plan or
coverage for common benefits scenarios
(including pregnancy and serious or
chronic medical conditions) in
accordance with this paragraph
(a)(2)(ii).
(A) Number of examples. The
Secretary may identify up to six
coverage examples that may be required
in an SBC.
(B) Benefits scenarios. For purposes of
this paragraph (a)(2)(ii), a benefits
scenario is a hypothetical situation,
consisting of a sample treatment plan
for a specified medical condition during
a specific period of time, based on
recognized clinical practice guidelines
as defined by the National Guideline
Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary
will specify, in guidance, the
assumptions, including the relevant
items and services and reimbursement
information, for each claim in the
benefits scenario.
(C) Illustration of benefit provided.
For purposes of this paragraph (a)(2)(ii),
to illustrate benefits provided under the
plan or coverage for a particular benefits
scenario, a plan or issuer simulates
claims processing in accordance with

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guidance issued by the Secretary to
generate an estimate of what an
individual might expect to pay under
the plan, policy, or benefit package. The
illustration of benefits provided will
take into account any cost sharing,
excluded benefits, and other limitations
on coverage, as specified by the
Secretary in guidance.
(iii) Coverage provided outside the
United States. In lieu of summarizing
coverage for items and services
provided outside the United States, a
plan or issuer may provide an Internet
address (or similar contact information)
for obtaining information about benefits
and coverage provided outside the
United States. In any case, the plan or
issuer must provide an SBC in
accordance with this section that
accurately summarizes benefits and
coverage available under the plan or
coverage within the United States.
(3) Appearance. A group health plan
and a health insurance issuer must
provide an SBC in the form, and in
accordance with the instructions for
completing the SBC, that are specified
by the Secretary in guidance. The SBC
must be presented in a uniform format,
use terminology understandable by the
average plan enrollee, not exceed four
double-sided pages in length, and not
include print smaller than 12-point font.
(4) Form—(i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may
be provided in paper form.
Alternatively, the SBC may be provided
electronically (such as by email or an
Internet posting) if the following three
conditions are satisfied—
(A) The format is readily accessible by
the plan (or its sponsor);
(B) The SBC is provided in paper form
free of charge upon request; and
(C) If the electronic form is an Internet
posting, the issuer timely advises the
plan (or its sponsor) in paper form or
email that the documents are available
on the Internet and provides the Internet
address.
(ii) An SBC provided by a group
health plan or health insurance issuer to
a participant or beneficiary may be
provided in paper form. Alternatively,
the SBC may be provided electronically
(such as by email or an Internet posting)
if the requirements of this paragraph
(a)(4)(ii) are met.
(A) With respect to participants and
beneficiaries covered under the plan,
the SBC may be provided electronically
if the requirements of 29 CFR
2520.104b–1 are met.
(B) With respect to participants and
beneficiaries who are eligible but not
enrolled for coverage, the SBC may be
provided electronically if—

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(1) The format is readily accessible;
(2) The SBC is provided in paper form
free of charge upon request; and
(3) In a case in which the electronic
form is an Internet posting, the plan or
issuer timely notifies the individual in
paper form (such as a postcard) or email
that the documents are available on the
Internet, provides the Internet address,
and notifies the individual that the
documents are available in paper form
upon request.
(5) Language. A group health plan or
health insurance issuer must provide
the SBC in a culturally and
linguistically appropriate manner. For
purposes of this paragraph (a)(5), a plan
or issuer is considered to provide the
SBC in a culturally and linguistically
appropriate manner if the thresholds
and standards of § 54.9815–2719T(e) are
met as applied to the SBC.
(b) Notice of modification. If a group
health plan, or health insurance issuer
offering group health insurance
coverage, makes any material
modification (as defined under section
102 of ERISA) in any of the terms of the
plan or coverage that would affect the
content of the SBC, that is not reflected
in the most recently provided SBC, and
that occurs other than in connection
with a renewal or reissuance of
coverage, the plan or issuer must
provide notice of the modification to
enrollees not later than 60 days prior to
the date on which the modification will
become effective. The notice of
modification must be provided in a form
that is consistent with paragraph (a)(4)
of this section.
(c) Uniform glossary—(1) In general.
A group health plan, and a health
insurance issuer offering group health
insurance coverage, must make
available to participants and
beneficiaries the uniform glossary
described in paragraph (c)(2) of this
section in accordance with the
appearance and the form and manner
requirements of paragraphs (c)(3) and
(4) of this section.
(2) Health-coverage-related terms and
medical terms. The uniform glossary
must provide uniform definitions,
specified by the Secretary in guidance,
of the following health-coverage-related
terms and medical terms:
(i) Allowed amount, appeal, balance
billing, co-insurance, complications of
pregnancy, co-payment, deductible,
durable medical equipment, emergency
medical condition, emergency medical
transportation, emergency room care,
emergency services, excluded services,
grievance, habilitation services, health
insurance, home health care, hospice
services, hospitalization, hospital
outpatient care, in-network co-

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8699

insurance, in-network co-payment,
medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment,
out-of-pocket limit, physician services,
plan, preauthorization, preferred
provider, premium, prescription drug
coverage, prescription drugs, primary
care physician, primary care provider,
provider, reconstructive surgery,
rehabilitation services, skilled nursing
care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary
determines are important to define so
that individuals and employers may
compare and understand the terms of
coverage and medical benefits
(including any exceptions to those
benefits), as specified in guidance.
(3) Appearance. A group health plan,
and a health insurance issuer, must
provide the uniform glossary with the
appearance specified by the Secretary in
guidance to ensure the uniform glossary
is presented in a uniform format and
uses terminology understandable by the
average plan enrollee.
(4) Form and manner. A plan or issuer
must make the uniform glossary
described in this paragraph (c) available
upon request, in either paper or
electronic form (as requested), within
seven business days after receipt of the
request.
(d) Preemption. State laws that
require a health insurance issuer to
provide an SBC that supplies less
information than required under
paragraph (a) of this section are
preempted.
(e) Failure to provide. A group health
plan or health insurance issuer that
willfully fails to provide information
required under this section to a
participant or beneficiary is subject to a
fine of not more than $1,000 for each
such failure. A failure with respect to
each participant or beneficiary
constitutes a separate offense for
purposes of this paragraph (e).
(f) Effective/Applicability date—(1)
This section is applicable to group
health plans and group health insurance
issuers in accordance with this
paragraph (f). (See § 54.9815–1251T(d),
providing that this section applies to
grandfathered health plans.)
(i) For disclosures with respect to
participants and beneficiaries who
enroll or re-enroll through an open
enrollment period (including reenrollees and late enrollees), this
section applies beginning on the first
day of the first open enrollment period
that begins on or after September 23,
2012; and
(ii) For disclosures with respect to
participants and beneficiaries who

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enroll in coverage other than through an
open enrollment period (including
individuals who are newly eligible for
coverage and special enrollees), this
section applies beginning on the first
day of the first plan year that begins on
or after September 23, 2012.
(2) For disclosures with respect to
plans, this section is applicable to
health insurance issuers beginning
September 23, 2012.

§ 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
PART 602—OMB CONTROL NUMBERS (a)(1) in accordance with the rules of
this section.
UNDER THE PAPERWORK
(i) SBC provided by a group health
REDUCTION ACT
insurance issuer to a group health
plan—(A) Upon application. A health
■ Par. 3. The authority citation for part
602 continues to read in part as follows: insurance issuer offering group health
insurance coverage must provide the
Authority: 26 U.S.C. 7805. * * *
SBC to a group health plan (or its
sponsor) upon application for health
■ Par. 4. Section 602.101(b) is amended
coverage, as soon as practicable
by adding the following entry in
following receipt of the application, but
numerical order to the table to read as
in no event later than seven business
follows:
days following receipt of the
§ 602.101 OMB Control numbers.
application.
*
*
*
*
*
(B) By first day of coverage (if there
are changes). If there is any change in
(b) * * *
the information required to be in the
CFR part or section where
Current OMB
SBC that was provided upon application
identified and described
control No.
and before the first day of coverage, the
issuer must update and provide a
current SBC to the plan (or its sponsor)
*
*
*
*
*
54.9815–2715 .......................
1545–2229 no later than the first day of coverage.
(C) Upon renewal. If the issuer renews
or reissues the policy, certificate, or
*
*
*
*
*
contract of insurance (for example, for a
succeeding policy year), the issuer must
Department of Labor
provide a new SBC as follows:
Employee Benefits Security
(1) If written application is required
Administration
(in either paper or electronic form) for
renewal or reissuance, the SBC must be
29 CFR Chapter XXV
provided no later than the date the
For the reasons stated in the
written application materials are
preamble, the Employee Benefits
Security Administration amends 29 CFR distributed.
(2) If renewal or reissuance is
part 2590 as follows:
automatic, the SBC must be provided no
later than 30 days prior to the first day
PART 2590—RULES AND
of the new plan or policy year; however,
REGULATIONS FOR GROUP HEALTH
with respect to an insured plan, if the
PLANS
policy, certificate, or contract of
insurance has not been issued or
■ 1. The authority citation for part 2590
renewed before such 30-day period, the
continues to read as follows:
SBC must be provided as soon as
Authority: 29 U.S.C. 1027, 1059, 1135,
practicable but in no event later than
1161–1168, 1169, 1181–1183, 1181 note,
seven business days after issuance of the
1185, 1185a, 1185b, 1185d, 1191, 1191a,
new policy, certificate, or contract of
1191b, and 1191c; sec. 101(g), Pub. L. 104–
191, 110 Stat. 1936; sec. 401(b), Pub. L. 105–
insurance, or the receipt of written
200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
confirmation of intent to renew,
512(d), Pub. L. 110–343, 122 Stat. 3881; sec.
whichever is earlier.
1001, 1201, and 1562(e), Pub. L. 111–148,
(D) Upon request. If a group health
124 Stat. 119, as amended by Pub. L. 111–
plan (or its sponsor) requests an SBC or
152, 124 Stat. 1029; Secretary of Labor’s
summary information about a health
Order 3–2010, 75 FR 55354 (September 10,
insurance product from a health
2010).
insurance issuer offering group health
insurance coverage, an SBC must be
Subpart C—Other Requirements
provided as soon as practicable, but in
■ 2. Section 2590.715–2715 is added to
no event later than seven business days
subpart C to read as follows:
following receipt of the request.

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(ii) SBC provided by a group health
insurance issuer and a group health
plan to participants and beneficiaries—
(A) In general. A group health plan
(including its administrator, as defined
under section 3(16) of ERISA), and a
health insurance issuer offering group
health insurance coverage, must provide
an SBC to a participant or beneficiary
(as defined under sections 3(7) and 3(8)
of ERISA), and consistent with
paragraph (a)(1)(iii) of this section, with
respect to each benefit package offered
by the plan or issuer for which the
participant or beneficiary is eligible.
(B) Upon application. The SBC must
be provided as part of any written
application materials that are
distributed by the plan or issuer for
enrollment. If the plan or issuer does
not distribute written application
materials for enrollment, the SBC must
be distributed no later than the first date
on which the participant is eligible to
enroll in coverage for the participant or
any beneficiaries.
(C) By first day of coverage (if there
are changes). If there is any change to
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
plan or issuer must update and provide
a current SBC to a participant or
beneficiary no later than the first day of
coverage.
(D) Special enrollees. The plan or
issuer must provide the SBC to special
enrollees (as described in § 2590.701–6
of this Part) no later than the date by
which a summary plan description is
required to be provided under the
timeframe set forth in ERISA section
104(b)(1)(A) and its implementing
regulations, which is 90 days from
enrollment.
(E) Upon renewal. If the plan or issuer
requires participants or beneficiaries to
renew in order to maintain coverage (for
example, for a succeeding plan year),
the plan or issuer must provide a new
SBC when the coverage is renewed, as
follows:
(1) If written application is required
for renewal (in either paper or electronic
form), the SBC must be provided no
later than the date on which the written
application materials are distributed.
(2) If renewal is automatic, the SBC
must be provided no later than 30 days
prior to the first day of the new plan or
policy year; however, with respect to an
insured plan, if the policy, certificate, or
contract of insurance has not been
issued or renewed before such 30-day
period, the SBC must be provided as
soon as practicable but in no event later
than seven business days after issuance
of the new policy, certificate, or contract
of insurance, or the receipt of written

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confirmation of intent to renew,
whichever is earlier.
(F) Upon request. A plan or issuer
must provide the SBC to participants or
beneficiaries upon request for an SBC or
summary information about the health
coverage, as soon as practicable, but in
no event later than seven business days
following receipt of the request.
(iii) Special rules to prevent
unnecessary duplication with respect to
group health coverage—(A) An entity
required to provide an SBC under this
paragraph (a)(1) with respect to an
individual satisfies that requirement if
another party provides the SBC, but
only to the extent that the SBC is timely
and complete in accordance with the
other rules of this section. Therefore, for
example, in the case of a group health
plan funded through an insurance
policy, the plan satisfies the
requirement to provide an SBC with
respect to an individual if the issuer
provides a timely and complete SBC to
the individual.
(B) If a single SBC is provided to a
participant and any beneficiaries at the
participant’s last known address, then
the requirement to provide the SBC to
the participant and any beneficiaries is
generally satisfied. However, if a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address.
(C) With respect to a group health
plan that offers multiple benefit
packages, the plan or issuer is required
to provide a new SBC automatically
upon renewal only with respect to the
benefit package in which a participant
or beneficiary is enrolled; SBCs are not
required to be provided automatically
upon renewal with respect to benefit
packages in which the participant or
beneficiary is not enrolled. However, if
a participant or beneficiary requests an
SBC with respect to another benefit
package (or more than one other benefit
package) for which the participant or
beneficiary is eligible, the SBC (or SBCs,
in the case of a request for SBCs relating
to more than one benefit package) must
be provided upon request as soon as
practicable, but in no event later than
seven business days following receipt of
the request.
(2) Content—(i) In general. Subject to
paragraph (a)(2)(iii) of this section, the
SBC must include the following:
(A) Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage, in

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accordance with guidance as specified
by the Secretary;
(B) A description of the coverage,
including cost sharing, for each category
of benefits identified by the Secretary in
guidance;
(C) The exceptions, reductions, and
limitations of the coverage;
(D) The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
(E) The renewability and continuation
of coverage provisions;
(F) Coverage examples, in accordance
with paragraph (a)(2)(ii) of this section;
(G) With respect to coverage
beginning on or after January 1, 2014, a
statement about whether the plan or
coverage provides minimum essential
coverage as defined under section
5000A(f) of the Internal Revenue Code
and whether the plan’s or coverage’s
share of the total allowed costs of
benefits provided under the plan or
coverage meets applicable requirements;
(H) A statement that the SBC is only
a summary and that the plan document,
policy, certificate, or contract of
insurance should be consulted to
determine the governing contractual
provisions of the coverage;
(I) Contact information for questions
and obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for
customer service and an Internet
address for obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance);
(J) For plans and issuers that maintain
one or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of
network providers;
(K) For plans and issuers that use a
formulary in providing prescription
drug coverage, an Internet address (or
similar contact information) for
obtaining information on prescription
drug coverage; and
(L) An Internet address for obtaining
the uniform glossary, as described in
paragraph (c) of this section, as well as
a contact phone number to obtain a
paper copy of the uniform glossary, and
a disclosure that paper copies are
available.
(ii) Coverage examples. The SBC must
include coverage examples specified by
the Secretary in guidance that illustrate
benefits provided under the plan or
coverage for common benefits scenarios
(including pregnancy and serious or
chronic medical conditions) in
accordance with this paragraph
(a)(2)(ii).

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8701

(A) Number of examples. The
Secretary may identify up to six
coverage examples that may be required
in an SBC.
(B) Benefits scenarios. For purposes of
this paragraph (a)(2)(ii), a benefits
scenario is a hypothetical situation,
consisting of a sample treatment plan
for a specified medical condition during
a specific period of time, based on
recognized clinical practice guidelines
as defined by the National Guideline
Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary
will specify, in guidance, the
assumptions, including the relevant
items and services and reimbursement
information, for each claim in the
benefits scenario.
(C) Illustration of benefit provided.
For purposes of this paragraph (a)(2)(ii),
to illustrate benefits provided under the
plan or coverage for a particular benefits
scenario, a plan or issuer simulates
claims processing in accordance with
guidance issued by the Secretary to
generate an estimate of what an
individual might expect to pay under
the plan, policy, or benefit package. The
illustration of benefits provided will
take into account any cost sharing,
excluded benefits, and other limitations
on coverage, as specified by the
Secretary in guidance.
(iii) Coverage provided outside the
United States. In lieu of summarizing
coverage for items and services
provided outside the United States, a
plan or issuer may provide an Internet
address (or similar contact information)
for obtaining information about benefits
and coverage provided outside the
United States. In any case, the plan or
issuer must provide an SBC in
accordance with this section that
accurately summarizes benefits and
coverage available under the plan or
coverage within the United States.
(3) Appearance. A group health plan
and a health insurance issuer must
provide an SBC in the form, and in
accordance with the instructions for
completing the SBC, that are specified
by the Secretary in guidance. The SBC
must be presented in a uniform format,
use terminology understandable by the
average plan enrollee, not exceed four
double-sided pages in length, and not
include print smaller than 12-point font.
(4) Form—(i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may
be provided in paper form.
Alternatively, the SBC may be provided
electronically (such as by email or an
Internet posting) if the following three
conditions are satisfied—
(A) The format is readily accessible by
the plan (or its sponsor);

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(B) The SBC is provided in paper form
free of charge upon request; and
(C) If the electronic form is an Internet
posting, the issuer timely advises the
plan (or its sponsor) in paper form or
email that the documents are available
on the Internet and provides the Internet
address.
(ii) An SBC provided by a group
health plan or health insurance issuer to
a participant or beneficiary may be
provided in paper form. Alternatively,
the SBC may be provided electronically
(such as by email or an Internet posting)
if the requirements of this paragraph
(a)(4)(ii) are met.
(A) With respect to participants and
beneficiaries covered under the plan,
the SBC may be provided electronically
if the requirements of 29 CFR
2520.104b–1 are met.
(B) With respect to participants and
beneficiaries who are eligible but not
enrolled for coverage, the SBC may be
provided electronically if:
(1) The format is readily accessible;
(2) The SBC is provided in paper form
free of charge upon request; and
(3) In a case in which the electronic
form is an Internet posting, the plan or
issuer timely notifies the individual in
paper form (such as a postcard) or email
that the documents are available on the
Internet, provides the Internet address,
and notifies the individual that the
documents are available in paper form
upon request.
(5) Language. A group health plan or
health insurance issuer must provide
the SBC in a culturally and
linguistically appropriate manner. For
purposes of this paragraph (a)(5), a plan
or issuer is considered to provide the
SBC in a culturally and linguistically
appropriate manner if the thresholds
and standards of § 2590.715–2719(e) of
this Part are met as applied to the SBC.
(b) Notice of modification. If a group
health plan, or health insurance issuer
offering group health insurance
coverage, makes any material
modification (as defined under section
102 of ERISA) in any of the terms of the
plan or coverage that would affect the
content of the SBC, that is not reflected
in the most recently provided SBC, and
that occurs other than in connection
with a renewal or reissuance of
coverage, the plan or issuer must
provide notice of the modification to
enrollees not later than 60 days prior to
the date on which the modification will
become effective. The notice of
modification must be provided in a form
that is consistent with paragraph (a)(4)
of this section.
(c) Uniform glossary—(1) In general.
A group health plan, and a health
insurance issuer offering group health

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

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to a participant or beneficiary is subject
to a fine of not more than $1,000 for
each such failure. A failure with respect
to each participant or beneficiary
constitutes a separate offense for
purposes of this paragraph (e).
(f) Applicability date—(1) This section
is applicable to group health plans and
group health insurance issuers in
accordance with this paragraph (f). (See
§ 2590.715–1251(d), providing that this
section applies to grandfathered health
plans.)
(i) For disclosures with respect to
participants and beneficiaries who
enroll or re-enroll through an open
enrollment period (including reenrollees and late enrollees), this
section applies beginning on the first
day of the first open enrollment period
that begins on or after September 23,
2012; and
(ii) For disclosures with respect to
participants and beneficiaries who
enroll in coverage other than through an
open enrollment period (including
individuals who are newly eligible for
coverage and special enrollees), this
section applies beginning on the first
day of the first plan year that begins on
or after September 23, 2012.
(2) For disclosures with respect to
plans, this section is applicable to
health insurance issuers beginning
September 23, 2012.
Department of Health and Human
Services
45 CFR Subtitle A
For the reasons stated in the
preamble, the Department of Health and
Human Services amends 45 CFR part
147 as follows:
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP AND INDIVIDUAL HEALTH
INSURANCE MARKETS
2. The authority citation for part 147
continues to read as follows:

■

Authority: Sections 2701 through 2763,
2791, and 2792 of the Public Health Service
Act (42 U.S.C. 300gg through 300gg–63,
300gg–91, and 300gg–92), as amended.
■

3. Add § 147.200 to read as follows:

§ 147.200 Summary of benefits and
coverage and uniform glossary.

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

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entities and individuals described in
this paragraph (a)(1) in accordance with
the rules of this section.
(i) SBC provided by a group health
insurance issuer to a group health
plan—(A) Upon application. A health
insurance issuer offering group health
insurance coverage must provide the
SBC to a group health plan (or its
sponsor) upon application for health
coverage, as soon as practicable
following receipt of the application, but
in no event later than seven business
days following receipt of the
application.
(B) By first day of coverage (if there
are changes). If there is any change in
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
issuer must update and provide a
current SBC to the plan (or its sponsor)
no later than the first day of coverage.
(C) Upon renewal. If the issuer renews
or reissues the policy, certificate, or
contract of insurance (for example, for a
succeeding policy year), the issuer must
provide a new SBC as follows:
(1) If written application is required
(in either paper or electronic form) for
renewal or reissuance, the SBC must be
provided no later than the date the
written application materials are
distributed.
(2) If renewal or reissuance is
automatic, the SBC must be provided no
later than 30 days prior to the first day
of the new plan or policy year; however,
with respect to an insured plan, if the
policy, certificate, or contract of
insurance has not been issued or
renewed before such 30-day period, the
SBC must be provided as soon as
practicable but in no event later than
seven business days after issuance of the
new policy, certificate, or contract of
insurance, or the receipt of written
confirmation of intent to renew,
whichever is earlier.
(D) Upon request. If a group health
plan (or its sponsor) requests an SBC or
summary information about a health
insurance product from a health
insurance issuer offering group health
insurance coverage, an SBC must be
provided as soon as practicable, but in
no event later than seven business days
following receipt of the request.
(ii) SBC provided by a group health
insurance issuer and a group health
plan to participants and beneficiaries—
(A) In general. A group health plan
(including its administrator, as defined
under section 3(16) of ERISA), and a
health insurance issuer offering group
health insurance coverage, must provide
an SBC to a participant or beneficiary
(as defined under sections 3(7) and 3(8)
of ERISA), and consistent with

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paragraph (a)(1)(iii) of this section, with
respect to each benefit package offered
by the plan or issuer for which the
participant or beneficiary is eligible.
(B) Upon application. The SBC must
be provided as part of any written
application materials that are
distributed by the plan or issuer for
enrollment. If the plan or issuer does
not distribute written application
materials for enrollment, the SBC must
be distributed no later than the first date
on which the participant is eligible to
enroll in coverage for the participant or
any beneficiaries.
(C) By first day of coverage (if there
are changes). If there is any change to
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
plan or issuer must update and provide
a current SBC to a participant or
beneficiary no later than the first day of
coverage.
(D) Special enrollees. The plan or
issuer must provide the SBC to special
enrollees (as described in 45 CFR
146.117) no later than the date by which
a summary plan description is required
to be provided under the timeframe set
forth in ERISA section 104(b)(1)(A) and
its implementing regulations, which is
90 days from enrollment.
(E) Upon renewal. If the plan or issuer
requires participants or beneficiaries to
renew in order to maintain coverage (for
example, for a succeeding plan year),
the plan or issuer must provide a new
SBC when the coverage is renewed, as
follows:
(1) If written application is required
for renewal (in either paper or electronic
form), the SBC must be provided no
later than the date on which the written
application materials are distributed.
(2) If renewal is automatic, the SBC
must be provided no later than 30 days
prior to the first day of the new plan or
policy year; however, with respect to an
insured plan, if the policy, certificate, or
contract of insurance has not been
issued or renewed before such 30-day
period, the SBC must be provided as
soon as practicable but in no event later
than seven business days after issuance
of the new policy, certificate, or contract
of insurance, or the receipt of written
confirmation of intent to renew,
whichever is earlier.
(F) Upon request. A plan or issuer
must provide the SBC to participants or
beneficiaries upon request for an SBC or
summary information about the health
coverage, as soon as practicable, but in
no event later than seven business days
following receipt of the request.
(iii) Special rules to prevent
unnecessary duplication with respect to
group health coverage—(A) An entity

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8703

required to provide an SBC under this
paragraph (a)(1) with respect to an
individual satisfies that requirement if
another party provides the SBC, but
only to the extent that the SBC is timely
and complete in accordance with the
other rules of this section. Therefore, for
example, in the case of a group health
plan funded through an insurance
policy, the plan satisfies the
requirement to provide an SBC with
respect to an individual if the issuer
provides a timely and complete SBC to
the individual.
(B) If a single SBC is provided to a
participant and any beneficiaries at the
participant’s last known address then
the requirement to provide the SBC to
the participant and any beneficiaries is
generally satisfied. However, if a
beneficiary’s last known address is
different than the participant’s last
known address, a separate SBC is
required to be provided to the
beneficiary at the beneficiary’s last
known address.
(C) With respect to a group health
plan that offers multiple benefit
packages, the plan or issuer is required
to provide a new SBC automatically
upon renewal only with respect to the
benefit package in which a participant
or beneficiary is enrolled; SBCs are not
required to be provided automatically
upon renewal with respect to benefit
packages in which the participant or
beneficiary is not enrolled. However, if
a participant or beneficiary requests an
SBC with respect to another benefit
package (or more than one other benefit
package) for which the participant or
beneficiary is eligible, the SBC (or SBCs,
in the case of a request for SBCs relating
to more than one benefit package) must
be provided upon request as soon as
practicable, but in no event later than
seven business days following receipt of
the request.
(iv) SBC provided by a health
insurance issuer offering individual
health insurance coverage—(A) Upon
application. A health insurance issuer
offering individual health insurance
coverage must provide an SBC to an
individual covered under the policy
(including every dependent) upon
receiving an application for any health
insurance policy, as soon as practicable
following receipt of the application, but
in no event later than seven business
days following receipt of the
application.
(B) By first day of coverage (if there
are changes). If there is any change in
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
issuer must update and provide a

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current SBC to the individual no later
than the first day of coverage.
(C) Upon renewal. The issuer must
provide the SBC to policyholders
annually at renewal. The SBC must
reflect any modified policy terms that
would be effective on the first day of the
new policy year. The SBC must be
provided as follows:
(1) If written application is required
(in either paper or electronic form) for
renewal or reissuance, the SBC must be
provided no later than the date on
which the written application materials
are distributed.
(2) If renewal or reissuance is
automatic, the SBC must be provided no
later than 30 days prior to the first day
of the new policy year; however, if the
policy, certificate, or contract of
insurance has not been issued or
renewed before such 30-day period, the
SBC must be provided as soon as
practicable but in no event later than
seven business days after issuance of the
new policy, certificate, or contract of
insurance, or the receipt of written
confirmation of intent to renew,
whichever is earlier.
(D) Upon request. A health insurance
issuer offering individual health
insurance coverage must provide an
SBC to any individual or dependent
anytime an individual requests an SBC
or summary information about a health
insurance product as soon as
practicable, but in no event later than
seven business days following receipt of
the request. For purposes of this
paragraph (a)(1)(iv)(D), a request for an
SBC or summary information about a
health insurance product includes a
request made both before and after an
individual submits an application for
coverage.
(v) Special rule to prevent
unnecessary duplication with respect to
individual health insurance coverage. If
a single SBC is provided to an
individual and any dependents at the
individual’s last known address, then
the requirement to provide the SBC to
the individual and any dependents is
generally satisfied. However, if a
dependent’s last known address is
different than the individual’s last
known address, a separate SBC is
required to be provided to the
dependent at the dependents’ last
known address.
(2) Content—(i) In general. Subject to
paragraph (a)(2)(iii) of this section, the
SBC must include the following:
(A) Uniform definitions of standard
insurance terms and medical terms so
that consumers may compare health
coverage and understand the terms of
(or exceptions to) their coverage, in

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accordance with guidance as specified
by the Secretary;
(B) A description of the coverage,
including cost sharing, for each category
of benefits identified by the Secretary in
guidance;
(C) The exceptions, reductions, and
limitations of the coverage;
(D) The cost-sharing provisions of the
coverage, including deductible,
coinsurance, and copayment
obligations;
(E) The renewability and continuation
of coverage provisions;
(F) Coverage examples, in accordance
with paragraph (a)(2)(ii) of this section;
(G) With respect to coverage
beginning on or after January 1, 2014, a
statement about whether the plan or
coverage provides minimum essential
coverage as defined under section
5000A(f) of the Internal Revenue Code
and whether the plan’s or coverage’s
share of the total allowed costs of
benefits provided under the plan or
coverage meets applicable requirements;
(H) A statement that the SBC is only
a summary and that the plan document,
policy, certificate, or contract of
insurance should be consulted to
determine the governing contractual
provisions of the coverage;
(I) Contact information for questions
and obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for
customer service and an Internet
address for obtaining a copy of the plan
document or the insurance policy,
certificate, or contract of insurance);
(J) For plans and issuers that maintain
one or more networks of providers, an
Internet address (or similar contact
information) for obtaining a list of
network providers;
(K) For plans and issuers that use a
formulary in providing prescription
drug coverage, an Internet address (or
similar contact information) for
obtaining information on prescription
drug coverage; and
(L) An Internet address for obtaining
the uniform glossary, as described in
paragraph (c) of this section, as well as
a contact phone number to obtain a
paper copy of the uniform glossary, and
a disclosure that paper copies are
available.
(ii) Coverage examples. The SBC must
include coverage examples specified by
the Secretary in guidance that illustrate
benefits provided under the plan or
coverage for common benefits scenarios
(including pregnancy and serious or
chronic medical conditions) in
accordance with this paragraph
(a)(2)(ii).

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(A) Number of examples. The
Secretary may identify up to six
coverage examples that may be required
in an SBC.
(B) Benefits scenarios. For purposes of
this paragraph (a)(2)(ii), a benefits
scenario is a hypothetical situation,
consisting of a sample treatment plan
for a specified medical condition during
a specific period of time, based on
recognized clinical practice guidelines
as defined by the National Guideline
Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary
will specify, in guidance, the
assumptions, including the relevant
items and services and reimbursement
information, for each claim in the
benefits scenario.
(C) Illustration of benefit provided.
For purposes of this paragraph (a)(2)(ii),
to illustrate benefits provided under the
plan or coverage for a particular benefits
scenario, a plan or issuer simulates
claims processing in accordance with
guidance issued by the Secretary to
generate an estimate of what an
individual might expect to pay under
the plan, policy, or benefit package. The
illustration of benefits provided will
take into account any cost sharing,
excluded benefits, and other limitations
on coverage, as specified by the
Secretary in guidance.
(iii) Coverage provided outside the
United States. In lieu of summarizing
coverage for items and services
provided outside the United States, a
plan or issuer may provide an Internet
address (or similar contact information)
for obtaining information about benefits
and coverage provided outside the
United States. In any case, the plan or
issuer must provide an SBC in
accordance with this section that
accurately summarizes benefits and
coverage available under the plan or
coverage within the United States.
(3) Appearance. A group health plan
and a health insurance issuer must
provide an SBC in the form, and in
accordance with the instructions for
completing the SBC, that are specified
by the Secretary in guidance. The SBC
must be presented in a uniform format,
use terminology understandable by the
average plan enrollee (or, in the case of
individual market coverage, the average
individual covered under a health
insurance policy), not exceed four
double-sided pages in length, and not
include print smaller than 12-point font.
A health insurance issuer offering
individual health insurance coverage
must provide the SBC as a stand-alone
document.
(4) Form—(i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may

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be provided in paper form.
Alternatively, the SBC may be provided
electronically (such as by email or an
Internet posting) if the following three
conditions are satisfied—
(A) The format is readily accessible by
the plan (or its sponsor);
(B) The SBC is provided in paper form
free of charge upon request; and
(C) If the electronic form is an Internet
posting, the issuer timely advises the
plan (or its sponsor) in paper form or
email that the documents are available
on the Internet and provides the Internet
address.
(ii) An SBC provided by a group
health plan or health insurance issuer to
a participant or beneficiary may be
provided in paper form. Alternatively,
for non-Federal governmental plans, the
SBC may be provided electronically if
the plan conforms to either the
substance of the ERISA provisions at 29
CFR 2590.715–2715(a)(4)(ii), or the
provisions governing electronic
disclosure for individual health
insurance issuers set forth in paragraph
(a)(4)(iii) of this section.
(iii) An issuer offering individual
health insurance coverage must provide
an SBC in a manner that can reasonably
be expected to provide actual notice in
paper or electronic form.
(A) An issuer satisfies the
requirements of this paragraph (a)(4)(iii)
if the issuer:
(1) Hand-delivers a printed copy of
the SBC to the individual or dependent;
(2) Mails a printed copy of the SBC to
the mailing address provided to the
issuer by the individual or dependent;
(3) Provides the SBC by email after
obtaining the individual’s or
dependent’s agreement to receive the
SBC or other electronic disclosures by
email;
(4) Posts the SBC on the Internet and
advises the individual or dependent in
paper or electronic form, in a manner
compliant with paragraphs
(a)(4)(iii)(A)(1) through (3), that the SBC
is available on the Internet and includes
the applicable Internet address; or
(5) Provides the SBC by any other
method that can reasonably be expected
to provide actual notice.
(B) An SBC may not be provided
electronically unless:
(1) The format is readily accessible;
(2) The SBC is placed in a location
that is prominent and readily accessible;
(3) The SBC is provided in an
electronic form which can be
electronically retained and printed;
(4) The SBC is consistent with the
appearance, content, and language
requirements of this section;
(5) The issuer notifies the individual
or dependent that the SBC is available

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in paper form without charge upon
request and provides it upon request.
(C) Deemed compliance. A health
insurance issuer offering individual
health insurance coverage that provides
the content required under paragraph
(a)(2) of this section, as specified in
guidance published by the Secretary, to
the federal health reform Web portal
described in 45 CFR 159.120 will be
deemed to satisfy the requirements of
paragraph (a)(1)(iv)(D) of this section
with respect to a request for summary
information about a health insurance
product made prior to an application for
coverage. However, nothing in this
paragraph should be construed as
otherwise limiting such issuer’s
obligations under this section.
(5) Language. A group health plan or
health insurance issuer must provide
the SBC in a culturally and
linguistically appropriate manner. For
purposes of this paragraph (a)(5), a plan
or issuer is considered to provide the
SBC in a culturally and linguistically
appropriate manner if the thresholds
and standards of § 147.136(e) of this
chapter are met as applied to the SBC.
(b) Notice of modification. If a group
health plan, or health insurance issuer
offering group or individual health
insurance coverage, makes any material
modification (as defined under section
102 of ERISA) in any of the terms of the
plan or coverage that would affect the
content of the SBC, that is not reflected
in the most recently provided SBC, and
that occurs other than in connection
with a renewal or reissuance of
coverage, the plan or issuer must
provide notice of the modification to
enrollees (or, in the case of individual
market coverage, an individual covered
under a health insurance policy) not
later than 60 days prior to the date on
which the modification will become
effective. The notice of modification
must be provided in a form that is
consistent with paragraph (a)(4) of this
section.
(c) Uniform glossary—(1) In general.
A group health plan, and a health
insurance issuer offering group health
insurance coverage, must make
available to participants and
beneficiaries, and a health insurance
issuer offering individual health
insurance coverage must make available
to applicants, policyholders, and
covered dependents, the uniform
glossary described in paragraph (c)(2) of
this section in accordance with the
appearance and form and manner
requirements of paragraphs (c)(3) and
(4) of this section.
(2) Health-coverage-related terms and
medical terms. The uniform glossary
must provide uniform definitions,

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specified by the Secretary in guidance,
of the following health-coverage-related
terms and medical terms:
(i) Allowed amount, appeal, balance
billing, co-insurance, complications of
pregnancy, co-payment, deductible,
durable medical equipment, emergency
medical condition, emergency medical
transportation, emergency room care,
emergency services, excluded services,
grievance, habilitation services, health
insurance, home health care, hospice
services, hospitalization, hospital
outpatient care, in-network coinsurance, in-network co-payment,
medically necessary, network, nonpreferred provider, out-of-network coinsurance, out-of-network co-payment,
out-of-pocket limit, physician services,
plan, preauthorization, preferred
provider, premium, prescription drug
coverage, prescription drugs, primary
care physician, primary care provider,
provider, reconstructive surgery,
rehabilitation services, skilled nursing
care, specialist, usual customary and
reasonable (UCR), and urgent care; and
(ii) Such other terms as the Secretary
determines are important to define so
that individuals and employers may
compare and understand the terms of
coverage and medical benefits
(including any exceptions to those
benefits), as specified in guidance.
(3) Appearance. A group health plan,
and a health insurance issuer, must
provide the uniform glossary with the
appearance specified by the Secretary in
guidance to ensure the uniform glossary
is presented in a uniform format and
uses terminology understandable by the
average plan enrollee (or, in the case of
individual market coverage, an average
individual covered under a health
insurance policy).
(4) Form and manner. A plan or issuer
must make the uniform glossary
described in this paragraph (c) available
upon request, in either paper or
electronic form (as requested), within
seven business days after receipt of the
request.
(d) Preemption. For purposes of this
section, the provisions of section 2724
of the PHS Act continue to apply with
respect to preemption of State law. In
addition, State laws that require a health
insurance issuer to provide an SBC that
supplies less information than required
under paragraph (a) of this section are
preempted.
(e) Failure to provide. A health
insurance issuer or a non-federal
governmental health plan that willfully
fails to provide information required
under this section is subject to a fine of
not more than $1,000 for each such
failure. A failure with respect to each
covered individual constitutes a

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

separate offense for purposes of this
paragraph (e). HHS will enforce these
provisions in a manner consistent with
45 CFR 150.101 through 150.465.
(f) Applicability date—(1) This section
is applicable to group health plans and
group health insurance issuers in
accordance with this paragraph (f). (See
§ 147.140(d), providing that this section
applies to grandfathered health plans.)
(i) For disclosures with respect to
participants and beneficiaries who
enroll or re-enroll through an open
enrollment period (including reenrollees and late enrollees), this
section applies beginning on the first
day of the first open enrollment period
that begins on or after September 23,
2012; and
(ii) For disclosures with respect to
participants and beneficiaries who
enroll in coverage other than through an
open enrollment period (including
individuals who are newly eligible for
coverage and special enrollees), this
section applies beginning on the first
day of the first plan year that begins on
or after September 23, 2012.
(2) For disclosures with respect to
plans, and to individuals and
dependents in the individual market,
this section is applicable to health
insurance issuers beginning September
23, 2012.
[FR Doc. 2012–3228 Filed 2–9–12; 11:15 am]
BILLING CODE P

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

mstockstill on DSK4VPTVN1PROD with RULES4

45 CFR Part 147
Summary of Benefits and Coverage
and Uniform Glossary—Templates,
Instructions, and Related Materials;
and Guidance for Compliance
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.

AGENCIES:

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Guidance for compliance and
notice of availability of templates,
instructions, and related materials.

ACTION:

The Departments of Health
and Human Services, Labor, and the
Treasury are simultaneously publishing
in the Federal Register this guidance
document and final regulations under
the Patient Protection and Affordable
Care Act to implement the disclosure for
group health plans and health insurance
issuers of the summary of benefits and
coverage (SBC), notice of modifications,
and the uniform glossary. This guidance
document provides guidance for
compliance with section 2715 of the
Public Health Service Act and the
Departments’ final regulations,
including a template for the SBC,
instructions, sample language, a guide
for coverage example calculations, and
the uniform glossary.
FOR FURTHER INFORMATION CONTACT:
Amy Turner or Heather Raeburn,
Employee Benefits Security
Administration, Department of Labor, at
(202) 693–8335; Karen Levin, Internal
Revenue Service, Department of the
Treasury, at (202) 622–6080; Jennifer
Libster or Padma Shah, Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, at (301) 492–4222.
Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws may call the EBSA
Toll-Free Hotline at 1–866–444–EBSA
(3272) or visit the Department of Labor’s
Web site (http://www.dol.gov/ebsa). In
addition, information from HHS on
private health insurance for consumers
can be found on the Centers for
Medicare & Medicaid Services (CMS)
Web site (http://www.cms.hhs.gov/
HealthInsReformforConsume/
01_Overview.asp) and information on
health reform can be found at http://
www.healthcare.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:

I. Introduction
The Departments of Health and
Human Services (HHS), Labor, and the
Treasury (the Departments) are taking a
phased approach to issuing regulations
and guidance implementing the revised
Public Health Service Act (PHS Act)
sections 2701 through 2719A and
related provisions of the Patient
Protection and Affordable Care Act
(Affordable Care Act).1 Section 2715 of
1 The Affordable Care Act also adds section
715(a)(1) to the Employee Retirement Income
Security Act (ERISA) and section 9815(a)(1) to the
Internal Revenue Code (the Code) to incorporate the

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the PHS Act directs the Departments to
develop standards for use by a group
health plan and a health insurance
issuer in compiling and providing a
summary of benefits and coverage (SBC)
that ‘‘accurately describes the benefits
and coverage under the applicable plan
or coverage.’’ Section 2715 of the PHS
Act also directs the Departments to
provide for the development of
‘‘standards for the definitions of terms
used in health insurance coverage.’’ The
statute directs the Departments, in
developing such standards, to ‘‘consult
with the National Association of
Insurance Commissioners’’ (referred to
in this guidance document as the
‘‘NAIC’’), ‘‘a working group composed
of representatives of health insurancerelated consumer advocacy
organizations, health insurance issuers,
health care professionals, patient
advocates including those representing
individuals with limited English
proficiency, and other qualified
individuals.’’
After consultation with the NAIC,2 on
August 22, 2011, the Departments
published proposed regulations to
implement PHS Act section 2715,3 as
well as a companion document that
proposed an SBC template (with
instructions, sample language, and a
guide for coverage examples
calculations to be used in completing
the SBC template) and a uniform
glossary.4 HHS also published on its
Web site (at http://cciio.cms.gov, and
accessible via hyperlink from
www.dol.gov/ebsa/healthreform) the
coding and pricing information
necessary to perform calculations for the
three proposed coverage examples.
Comments were solicited on these
materials.
Final regulations under PHS Act
section 2715 are being published
elsewhere in this issue of the Federal
Register (final regulations). This
guidance document provides guidance
for compliance with PHS Act section
2715 and the final regulations,
including information on how to obtain
the SBC template (with instructions and
sample language for completing the
template) and the uniform glossary.
These items are displayed at
www.dol.gov/ebsa/healthreform and
www.cciio.cms.gov.
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.
2 A summary of the NAIC’s work can be found at
76 FR 52476–77, August 22, 2011.
3 76 FR 52442, August 22, 2011.
4 76 FR 52475, August 22, 2011.

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