Summary of Benefits and Coverage and Other Notices and Disclosures for Group Health Plans Thursday, October 20, 2011 9:0

1. Summary of Benefits and Coverage and Other Notices and Disclosures for Group Health PlansThursday, October 20, 20119:00 am – 10:00 am EST

2. Today’s Speakers • Joe DiBella • Executive Vice President of the Health & Welfare Practice • Conner Strong & Buckelew • Phyllis Saraceni, Esq. • Senior Vice President and Compliance & Audit Practice Leader • Conner Strong & Buckelew

3. Welcome and Agenda • This is Conner Strong & Buckelew’s sixth webinar focused on The Patient Protection and Affordable Care Act (“PPACA” or “Affordable Care Act”). • The focus of today’s webinar is on the uniform Summary of Benefits and Coverage (SBC) required by the Affordable Care Act. We will address the following: • Quick review of repeal efforts and latest status on healthcare reform • Address participant top questions received on general healthcare reform issues • Review detailed content requirements and proposed rules for the Summary of Benefits and Coverage (SBC) • Quick review of list of other notices and disclosures for group health plans

4. Latest Healthcare Reform Developments

5. Our New Healthcare System

6. Healthcare Reform Major Milestones 2011 – age 26 and other mandates take effect 2011 – FSAs can no longer be used for over-the-counter (OTC) medications 2013 – FSA contributions limited to $2,500 per year 2014 – eliminate annual limits on coverage 2014 – eliminate pre-existing condition limitations for everyone 2014 – employer mandates and assessments begin 2014 – automatic enrollment of employees 2017 – states can permit businesses with more than 100 employees to purchase coverage in the exchanges 2018 – 40% excise tax for high-cost “Cadillac” plans ($10,200 individual and $27,500 family coverage)

7. Latest Developments with the Law • The President is unlikely to sign legislation making big changes to the law, so there is no real possibility of repeal in the short term. However: • Major issue in presidential election • Still controversial in many circles • 25+ state legal challenges - some states refusing to begin exchange work • Supreme Court likely to consider mandate provisions next term - decision not likely before June 2012 • In the meantime, certain provisions are subject to delay (nondiscrimination for self insured benefit, claims/appeals standards, W-2 reporting delay) • Additional provisions have been repealed piecemeal (CLASS Act, 1099 reporting, free choice vouchers) • Future guidance expected on many upcoming reforms including further notice requirements, auto enrollment, pay or play, exchanges, etc.

8. Phase 1 Underway Immediate/short term provisions: • Implemented provisions likely to survive repeal efforts, such as the age 26 and annual/lifetime limits • Certain provisions subject to delay • Non-grandfathered and new plans must comply with new non-discrimination rules for self-insured plans (compliance not required until years after 3/11/11 - earliest effective date would be 1/1/12 for calendar year plans, but in any event not until after regulations or other administrative guidance has been issued) • Non-grandfathered and new plans must comply with new claims and appeals rules (enforcement grace period for certain of the new internal claims and appeals standards) • W-2 reporting delay (reporting requirement applies to 2012 W-2s issued to employees in 2013, therefore, employers will not be required to report the cost of health coverage until January 2013)

9. Phase II for 2014 • Major elements really begin to “kick in” in 2014 • 2014 individual mandate/health insurance exchange provisions: • What full repeal efforts are all about • Some proposed guidance being issued (exchanges and premium credit issues and affordability rules under shared responsibility provisions) • Future guidance expected on many issues (essential benefits, preventive service guidelines, waiver issues) • Certain provisions repealed or suspended (1099 reporting provisions repealed, free choice voucher provision repealed, CLASS Act long term care program suspended)

10. Top Participant Questions

11. Participant Questions Q.     What are the mandatory changes effective for 2012? A.  The good news is that there are very few mandated 2012 changes as most health care reform mandates were implemented during the 2011 plan year. The one significant change applies to plans that have an annual limit for essential benefits. The $750,000 limit for plan years beginning on or after September 23, 2010 is increased in the second year (plan years beginning on or after September 23, 2011) to $1,250,000. Certain changes would also be required if your plan is losing grandfathered status (doctor choice, preventive care to 100%, etc.). Q.     If I now move to non-grandfathered what do I need to complete to meet all the non-grandfathered requirements? What are the benefits of remaining grandfathered?  A. The rules require that grandfathered plans monitor their continued status as a grandfathered plan and if lost then determine the plan mandates that apply to each plan. Pros of maintaining status include being exempt from, or enjoying special treatment under, certain healthcare reform provisions (100% preventive care, appeals, emergency services, provider choice, age 26 exception for other coverage).

12. Participant Questions Q.  On the W-2s for 2013, should we show employer and employee deductions? A. Employers subject to the W-2 reporting mandate must comply for the 2012 tax year, i.e., for the W-2 issued in early 2013. Employers must report the fair market value of nontaxable health care coverage made available to the employee. The value includes both employer and employee contributions (both pre-tax and post-tax). Q. What benefits are subject to the W-2 reporting requirement? A. Subject to reporting are medical plans, including prescription drug benefits, Medicare supplement policies, EAPs, and executive physicals; dental and vision benefits, unless they are stand-alone (HIPAA-excepted) benefits elected separately from medical plans; on-site clinics, unless they only provide de minimis care; and employer health FSA contributions (above the amount elected by employees). Employers do not have to report HRAs, HSAs, and Archer MSA contributions. Employee health FSA contributions are not reportable (employers must already report them on the W-2). HIPAA-excepted benefits are not reportable, including stand-alone vision and dental benefits, accident, disability, supplemental liability, auto and other liability insurance, auto medical payment insurance, workers’ compensation, hospital or other indemnity insurance, disease-specific, and similar limited benefits.

13. Participant Questions Q. Are some states wanting the health care stated on the W-2's for 2011?  A. There are states that have a reporting requirement for certain health insurance provisions, such as the New York reporting requirement on the availability of dependent health care coverage and the Massachusetts reporting requirement on various health care reform provisions. But these are not W-2 reporting requirements for state purposes. Q.  Has there been any clarification on the definition of “essential benefits”? A. The essential health benefits (EHB) package will establish the minimum benefits – including preventive, diagnostic, and therapeutic services and products – that must be covered by certain health plans, including those participating in state-based health insurance exchanges. Regulators continue to work to define EHBs for health reform purposes, and on October 7, the Institute of Medicine of the National Academies (IOM) provided a set of criteria and approaches for developing a package of EHBs. IOM urges using benefits offered under a typical small-employer health plan as a starting point and setting a premium target to keep the EHB package affordable. The IOM report and public comments will be used to develop the essential benefits package, but the timing of official guidance is uncertain. 

14. Participant Questions Q. When should we expect to see the final requirements for the uniform summary of benefits and coverage (SBC)? A. Regulators are seeking comments by 10/21/11, including input on special considerations for group health plans and the feasibility of meeting the 3/23/12 deadline to begin providing SBCs. Since the proposed rules’ comment period doesn’t close until 10/21, it is likely that the final rules and SBC materials won’t be published until late this year or early next. Many are anticipating an extension of the March 23, 2012 effective date.

15. Summary of Benefits and Coverage (SBC) Overview

16. Summary of Benefits and Coverage (“SBC”) • Uniform summary of benefits and coverage (SBC) - a new health plan disclosure required by the Affordable Care Act. • Agencies provided a proposed template for the SBC along with instructions, sample language, and a guide to be used in completing the SBC. • Generally, all SBCs will include the same information in the same format so that participants can compare this information. • The plan is required to complete the template SBC by inserting plan details into the template.

17. Purpose of SBC • Intended to facilitate shopping and comparison across plans available to Individuals Example: Allowing individual to compare his employer coverage, with spouse’s employer coverage, with coverage in individual market • Some consider group health plan materials too complex for the average reader. • Belief is that people can better understand and compare plans’ terms, including cost-sharing requirements and restrictions on covered benefits if there is a standard SBC format as to content and appearance.

18. SBC Specifications • Proposed template was developed by the National Association of Insurance Commissioners (NAIC) with insured plans in mind – some editing would be beneficial to make it more usable by self-insured plans • Template must be used without modification - consists of a series of tables, with some pre-populated content and blank cells for plan-specific information. • Completed SBC cannot exceed four, double-sided pages and must use at least 12-point font. • Must exist as a stand-alone document that adheres to the prescribed content and format (regulators have invited comments on whether to let employers provide the SBC as part of an SPD). • Must be written in a “culturally and linguistically appropriate manner”. • A separate SBC must be furnished, free of charge, for each benefit package (so if employer offers both an HMO and a PPO, two SBCs must be provided).

19. SBC Content The SBC consists of the following: A Benefit Summary- Four-page, double-sided document that provides a description of covered benefits and benefit exclusions and limits and restrictions on covered benefits. There will be distinct versions for each level of coverage (individual, individual and spouse, family, etc.). Coverage Examples- Part of the SBC and includes common medical scenarios defined by HHS (e.g., scenarios for maternity, breast cancer, and diabetes are shown with typical services provided and cost-sharing for a plan). The actual examples are to be based on the cost-sharing of the specific plan (including deductible, coinsurance and copayment obligations). Phone Number and Website for Additional Information- A phone number and website must be made available for individuals to get additional information, such as certificates, booklets, contracts, relevant provider networks, or prescription drug formularies. The SBC also must list a website to obtain the uniform glossary.

20. Required Materials - Glossary • A separate uniform glossary containing required definitions, which must be used without modification. • Standalone document that includes uniform definitions for specific medical and coverage-related terms, as well as coverage examples showing estimated plan and enrollee costs for certain services. • Must be made available upon request, in either paper or electronic form (as requested), within seven days of the request. • For electronic disclosures, refer to plan's or insurer's website or HHS's or DOL's website (www.HealthCare.gov and www.dol.gov/ebsa/healthreform, respectively) where the uniform glossary may be found.

21. Other Communication Materials • SBCs are required in addition toany other disclosure made by the plan. • No relief currently provided to an employer that communicates the contents of the SBC in another document (some debate over whether to permit the actual SBC to appear within a plan’s SPD) • Group health plans subject to ERISA already must provide extensive disclosures, including summary plan descriptions (SPDs). The SBC is a new additional communication mandate. • Currently provided comparison charts and side-by-side tables comparing key features of all options available to an employee may be more helpful, but employers will have to furnish SBCs unless the final rules allow alternatives.

22. Which Plans Need SBCs? • Applies to group health plans (whether grandfathered or not) • Insured and self-insured group health plans subject to the Affordable Care Act • Generally, most plans providing medical coverage – for example, HMOs, PPOs, EPOs, high-deductible plans and prescription drug plans • Retiree-only plans and some types of dental and vision plans are exempt.

23. Who Provides SBCs? • Employers sponsoring self-funded arrangements (or the plan administrator) must send the SBCs • Employers with self-insured plans will work with their vendors to develop the SBC, however, only the employer is responsible for providing the SBC • Insurers will provide the SBCs for insured plans • Both the insurer and the employer are responsible for providing the SBC, but only one actually needs to furnish the documents to eligible individuals

24. Required Recipients • All individuals eligible for plan coverage (including family members) must receive an SBC for every benefit option available to them (can send a single SBC to families who have the same address). • An individual eligible for different benefit packages must receive an SBC for each option. • Covered individuals need only receive the SBC for the benefit option in which they are enrolled, unless they request SBCs for other options. • Plans must offer foreign-language assistance if they have SBC recipients in certain US counties where at least 10% of residents are only literate in the same non-English language (SBC may need to state, in the applicable foreign language, that non-English services and, on request, a translated SBC are available).

25. Required Delivery • Upon request - upon a participant’s request, the SBC must be provided within 7 days of the request • The uniform glossary must also be made available upon request. • At enrollment (initial and annual) as part of any written enrollment or other application materials • When special enrollment events prompt new enrollment opportunities - SBC must be provided within 7 days of the special enrollment request.

26. When Enrolling for Coverage • Plan must automatically provide an SBC with all enrollment packets, whether provided to new hires or during special or annual enrollment. • If the plan doesn’t distribute written enrollment materials, it must supply SBC materials by the first day an individual is eligible to enroll. • For subsequent plan years, SBCs would automatically be provided for the elected coverage with each year’s open enrollment materials, but SBCs for other benefit packages can be requested. • When coverage is renewing, SBC materials must be furnished with any written enrollment materials for renewal. If the renewal is automatic, eligible individuals must receive SBCs 30 days before the first day of the new plan year.

27. When Coverage Changes • If any mid-year material change to a plan affects the SBC’s content, then an updated SBC must be sent at least 60 days before the change takes effect • Can also be satisfied by providing a separate notice describing the SBC’s changed content by this same deadline. • ERISA’s definition of “material modification” applies for this purpose • So for employer plans, if there is a material modification to a plan feature or coverage that would affect the SBC content, notice of the modification would be required no later than 60 days before the modification’s effective date. Applies only to changes made during the plan year, and not to changes at annual renewal. • Compliance with this requirement also satisfies ERISA requirement that plans provide a summary of material modification (“SMM”) to participants and beneficiaries • Note: Compliance with SMM requirements does not mean compliance with the new SBC requirement

28. Delivery Methods • There are several permissible delivery methods for SBCs (delivering paper copies of SBCs always satisfies the requirement). • Electronic delivery is permitted in certain cases: • ERISA plans. Can send SBCs electronically by following DOL’s safe harbor standards for e-delivery of plan materials (rely on the DOL safe harbor for recipients who regularly access the employer’s e-mail system as a part of their jobs, for others such as retirees and COBRA and those without computer access, employers often mail paper copies. • Nonfederal governmental plans. Can deliver SBCs electronically by meeting the substance of the DOL safe harbor, or require paper delivery to anyone who did not use electronic means to request or submit a coverage application. Plans must implement several safeguards to assure successful e-delivery of SBCs, including requesting acknowledgment of receipt.

29. Penalties • DOL, IRS and HHS have enforcement authority over SBC compliance. • The enforcement mechanisms and precise penalty amounts may differ, depending on the circumstances and laws (such as ERISA) applicable to a particular plan. • The proposed rules broadly outline each agency’s enforcement scheme (more specific guidance is expected). • Willful failure to provide SBCs or the 60-day advance notice of a material modification could trigger fines up to $1,000 for each affected individual, which may be in addition to other applicable penalties. • A separate fine may be imposed for each individual affected by a failure to provide the SBC.

30. Effective Date • Current effective date is March 23, 2012, but look for possible delay of compliance date given that the law required publication of the SBC rules months ago. • Regulators are collecting comments on the feasibility of the March 23 deadline, including practical considerations for employers to comply by that date. • Proposed rules provide that starting as of March 23, 2012, SBCs must be provided whenever required (i.e., when written enrollment materials are supplied for new-hire and special enrollments, when coverage is renewed, and within seven days of a request). • Note: Often new requirements take effect based on a plan year that begins several months after the regulation is published, giving employers and carriers time to implement the change. However, the plan year is not considered for purposes of this SBC deadline.

31. Employer Next Steps • Consider preliminary steps under the proposed rules: • Keep an eye out for the final guidance on SBCs and an anticipated delay of the March 23, 2012 effective date. • Understand the effective date as it applies to your plans. • SBCs are not required for the 2012 open enrollment for plan years beginning January 1, 2012. However, even for calendar-year plans, SBCs will be required in 2012 at other times such as at initial (new hire) and special enrollment as well as upon request on and after March 23, 2012. Note that the requirement is effective (unless delayed in future guidance) beginning March 23, 2012—not plan years beginning on or after March 23, 2012. • List out benefit options and number of SBCs to be prepared. • Coordinate with vendors and insurers to understand and develop strategies for preparing and distributing SBC materials.

32. Employer Next Steps • Consider preliminary steps under the proposed rules: • List out recipient groups entitled to particular benefit package materials. • Consider eligible population groups to determine if requirements to offer foreign-language assistance will apply and, if so, to which benefit packages. • Consider delivery methods to use for which benefits-eligible groups. • Evaluate the SBC’s impact on existing plan communication strategies (e.g., consider whether SBC materials might replace or supplement current comparison materials). • The website of the Department of Labor's Employee Benefits Security Administration provides links to the proposed rules and other information related to the SBC and the Uniform Glossary. The information is available on EBSA's Affordable Care Act webpage at http://www.dol.gov/ebsa/healthreform/index.html.

33. Other Notices and Disclosuresfor Group Health Plans

34. Other Notices and Disclosures for Group Health Plans Consider distributions for other required disclosures: Long existing notices required under federal law • Summary Plan Descriptions (SPDs) – ERISA plans • Summary of Material Modifications (SMMs) – ERISA plans • Summary of Material Reductions (SMRs) – ERISA plans • CMS Creditable Coverage Notice • Women's Health and Cancer Rights Act (WHCRA) Notice • Newborns and Mothers Health Protection (NMHPA) Notice • HIPAA Privacy Notice and Reminder • HIPAA Preexisting Condition Notice (if required) • HIPAA Special Enrollment Rights Notice (updated for CHIP events) • State Premium Assistance Notice (CHIP) • COBRA Notices • USERRA Notice • Certain state reporting mandates (if required)

35. Other Notices and Disclosures for Group Health Plans • Newer notice requirements as a result of healthcare reform: • One-time written notice of age 26 special enrollment • One-time written notice of removal of lifetime limits (if required) • One-time written notices regarding provider choice (if required) • Advance notice of coverage rescission (if required) • Grandfather plan notice (if required) • Early Retiree Reinsurance Program (ERRP) notice (if required) • Annual limit waiver (mini-med plan) notice (if required) • SBC and material modification notices (March 23, 2012, unless delayed) • W-2 health coverage reporting (2013 or later for small plans) • Health insurance exchange notice (2013) • Employer report of health coverage offerings (2014) • Employer report of individual health coverage (2014) • Notice of high-cost coverage subject to excise tax (2018) • Auto enrollment notice (TBD) • Disclosure of plan data notice (TBD – for new and non-grandfathered plans) • Quality-of-care report and employee notice (TBD – for new and non-grandfathered plans)

36. Resources

37. Help from Conner Strong Conner Strong Healthcare Reform website page at: http://www.connerstrong.com/healthcare_reform • News updates • Online library of client updates and alerts • Summary of major provisions of the new law • Detailed Year-by-Year timeline of changes • Outline of all aspects of the new law Check back for updates, news and analysis, and updated tools to help you navigate this complex process.

38. Other Resources from Conner Strong Periodic Webinars Web-based presentations on health care legislation, regulations and innovative ideas Email Alerts and Updates High level, quickly produced articles about emerging issues intended to alert clients to legislative and regulatory developments Historic library available on line Perspectives Thought pieces intended to identify trends and issues, helping clients anticipate challenges

39. Agency Resources Patient Protection and Affordable Care Act: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3590enr.txt.pdf Reconciliation Bill: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4872eh.txt.pdf White House Web site for employers and individuals with information about the new reform law: http://www.whitehouse.gov/healthreform Agency healthcare reform sites: Health and Human Services (HHS): http://healthreform.gov/. Department of Labor (DOL): http://www.dol.gov/ebsa/healthreform/ Internal Revenue Service (IRS): http://www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6 Call Conner Strong at 877-861-3220

40. Appendix SBC and Glossary Templates

47. Glossary of Health Insurance and Medical Terms

48. Glossary of Health Insurance and Medical Terms

49. Glossary of Health Insurance and Medical Terms

50. Glossary of Health Insurance and Medical Terms