Employer SBC Responsibilities: Another Often-Missed ACA Penalty

With so much focus on updates and concerns surrounding the employer mandate, “pay or play,” portion of the Affordable Care Act, it can be easy to gloss over some of the many nuances of Obamacare. Indeed, quickly finding an ACA solution to plug the hole in the proverbial penalty-dike needs to be top priority for ALEs in 2015, but all must be careful not to miss some of the other “less-hyped” components of the law that can still rack up sizable penalties.

Providing a Summary of Benefits and Coverage statement (SBC) to eligible employees prior to enrollment has been obligatory to ALEs since September 23, 2012. The purpose of SBCs is to provide those electing coverage a standard presentation of plan designs that affords them a clear side-by-side comparison of deductibles, out of pocket expenses, and other plan characteristics. Though the focus of the SBC portion of the law is emphasized as assisting, rather than penalizing employers, those identified as lacking any “good-faith” effort to present employees the required documents face fines of $1000 for each willful failure and $100 per day per individual for each day of non-compliance.

So what does this mean for employers? For those with fully-funded plans, the SBC responsibility falls on the shoulders of each individual carrier. For those with self-funded or combined full and self-funded plans, employer SBC responsibilities include generating and delivering SBCs for self-funded plans to eligible employees prior to their election of coverage. Responsibilities may shift based upon contractual arrangements between employers and carriers, or those employers using a benefits administration firm.

While providing SBCs can be as easy as posting an electronic file on the company shared-drive, by law employers must provide paper access to employees upon request, and ensure that remote employees and retirees have access to the SBCs. Of note, benefits software solutions and cloud-based employee benefits portals may provide side-by-side comparison of plans, but this feature does not fulfill the employer SBC responsibilities as stated in the ACA.

Bottom line—at the end of the day, employees are entitled by the ACA SBC regulations to have a Summary of Benefits and Coverage for each offered plan when electing their coverage.

Furthermore, like every portion of the ACA, the SBC component has not been spared regulatory modifications. Though not finalized, on December 22, 2014, the U.S. Departments of Health and Human Services, Labor, and the Treasury released proposed SBC regulations to templates (see draft template), glossary, and instruction guides. If passed, the new SBC regulation changes would apply to coverage that begins on or after September 1, 2015.

Final bottom line—when the dust settles, it is on the shoulders of employers to ensure that their employees have the required SBCs when they elect coverage, be it by their own efforts or holding responsible parties accountable. This is yet another compliance component employers should consider when determining their criteria for an ACA software solution, or deciding to comply with the ACA on their own. For most ALEs, time is already up.