[Federal Register Volume 76, Number 162 (Monday, August 22, 2011)]
[Proposed Rules]
[Pages 52441-52475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21193]



[[Page 52441]]

Vol. 76

Monday,

No. 162

August 22, 2011

Part III





Department of the Treasury





Internal Revenue Service





26 CFR Parts 54 and 602





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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





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Summary of Benefits and Coverage and the Uniform Glossary; Proposed 
Rules

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

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 54 and 602

[REG-140038-10]
RIN 1545-BJ94

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB52

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 147

[CMS-9982-P]
RIN 0938-AQ73


Summary of Benefits and Coverage and the Uniform Glossary

AGENCY: Internal Revenue Service, Department of the Treasury; Employee 
Benefits Security Administration, Department of Labor; Centers for 
Medicare & Medicaid Services, Department of Health and Human Services.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations regarding 
disclosure of the summary of benefits and coverage and the uniform 
glossary for group health plans and health insurance coverage in the 
group and individual markets under the Patient Protection and 
Affordable Care Act. This document implements the disclosure 
requirements to help plans and individuals better understand their 
health coverage, as well as other coverage options. The templates and 
instructions to be used in making these disclosures are being issued 
separately in today's Federal Register.

DATES: Comment date. Comments are due on or before October 21, 2011.

ADDRESSES: Written comments may be submitted to any of the addresses 
specified below. Any comment that is submitted to any Department will 
be shared with the other Departments. Please do not submit duplicates.
    All comments will be made available to the public. Warning: Do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments are posted on the 
Internet exactly as received, and can be retrieved by most Internet 
search engines. No deletions, modifications, or redactions will be made 
to the comments received, as they are public records. Comments may be 
submitted anonymously.
    Department of Labor. Comments to the Department of Labor, 
identified by RIN 1210-AB52, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected].
     Mail or Hand Delivery: Office of Health Plan Standards and 
Compliance Assistance, Employee Benefits Security Administration, Room 
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attention: RIN 1210-AB52.
    Comments received by the Department of Labor will be posted without 
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and 
available for public inspection at the Public Disclosure Room, N-1513, 
Employee Benefits Security Administration, 200 Constitution Avenue, 
NW., Washington, DC 20210.
    Department of Health and Human Services. In commenting, please 
refer to file code CMS-9982-P. Because of staff and resource 
limitations, we cannot accept comments by facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services,Department of 
Health and Human Services,Attention: CMS-9982-P, P.O. Box 8016, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9982-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call (410) 786-7195 in advance to schedule your arrival with one 
of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 
three weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. EST. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

[[Page 52443]]

    Internal Revenue Service. Comments to the IRS, identified by REG-
140038-10, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: CC:PA:LPD:PR (REG-140038-10), Room 5205, Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044.
     Hand or courier delivery: Monday through Friday between 
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-140038-10), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington DC 20224.
    All submissions to the IRS will be open to public inspection and 
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC 
from 9 a.m. to 4 p.m.

FOR FURTHER INFORMATION CONTACT: Amy Turner or Heather Raeburn, 
Employee Benefits Security Administration, Department of Labor, at 
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of 
the Treasury, at (202) 622-6080; Jennifer Libster or Padma Shah, 
Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, at (301) 492-4252.
    Customer Service Information: Individuals interested in obtaining 
information from the Department of Labor concerning employment-based 
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health 
insurance for consumers can be found on the Centers for Medicare & 
Medicaid Services (CMS) Web site (http://www.cms.hhs.gov/HealthInsReformforConsume/01_Overview.asp) and information on health 
reform can be found at http://www.healthcare.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Patient Protection and Affordable Care Act, Public Law 111-148, 
was enacted on March 23, 2010; the Health Care and Education 
Reconciliation Act, Public Law 111-152, was enacted on March 30, 2010 
(these are collectively known as the ``Affordable Care Act''). The 
Affordable Care Act reorganizes, amends, and adds to the provisions of 
part A of title XXVII of the Public Health Service Act (PHS Act) 
relating to group health plans and health insurance issuers in the 
group and individual markets. The term ``group health plan'' includes 
both insured and self-insured group health plans.\1\ The Affordable 
Care Act adds section 715(a)(1) to the Employee Retirement Income 
Security Act (ERISA) and section 9815(a)(1) to the Internal Revenue 
Code (the Code) to incorporate the provisions of part A of title XXVII 
of the PHS Act into ERISA and the Code, and make them applicable to 
group health plans, and health insurance issuers providing health 
insurance coverage in connection with group health plans. The PHS Act 
sections incorporated by this reference are sections 2701 through 2728. 
PHS Act sections 2701 through 2719A are substantially new, though they 
incorporate some provisions of prior law. PHS Act sections 2722 through 
2728 are sections of prior law renumbered, with some, mostly minor, 
changes.
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    \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.
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    Subtitles A and C of title I of the Affordable Care Act amend the 
requirements of title XXVII of the PHS Act (changes to which are 
incorporated into ERISA by section 715). The preemption provisions of 
ERISA section 731 and PHS Act section 2724 \2\ (implemented in 29 CFR 
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements of 
part 7 of ERISA and title XXVII of the PHS Act, as amended by the 
Affordable Care Act, are not to be ``construed to supersede any 
provision of State law which establishes, implements, or continues in 
effect any standard or requirement solely relating to health insurance 
issuers in connection with group or individual health insurance 
coverage except to the extent that such standard or requirement 
prevents the application of a requirement'' of provisions added to the 
PHS Act by the Affordable Care Act. Accordingly, State laws that with 
stricter health insurance issuer requirements than those imposed by the 
PHS Act will not be superseded by those provisions. Preemption and 
State flexibility under PHS Act section 2715 are discussed more fully 
below under section II.D.
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    \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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    The Departments of Health and Human Services (HHS), Labor, and the 
Treasury (the Departments) are taking a phased approach to issuing 
regulations implementing the revised PHS Act sections 2701 through 
2719A and related provisions of the Affordable Care Act. These proposed 
regulations propose standards for implementing PHS Act section 2715. As 
discussed more fully below, templates and instructions for meeting the 
disclosure requirements of PHS Act section 2715 are being issued 
separately in today's Federal Register.

II. Overview of the Proposed Regulations

A. Summary of Benefits and Coverage

1. In General
    Section 2715 of the PHS Act, added by the Affordable Care Act, 
directs the Departments to develop standards for use by a group health 
plan and a health insurance issuer in compiling and providing a summary 
of benefits and coverage (SBC) that ``accurately describes the benefits 
and coverage under the applicable plan or coverage.'' The statute 
directs the Departments, in developing such standards, to ``consult 
with the National Association of Insurance Commissioners'' (referred to 
in this preamble as the ``NAIC''), ``a working group composed of 
representatives of health insurance-related consumer advocacy 
organizations, health insurance issuers, health care professionals, 
patient advocates including those representing individuals with limited 
English proficiency, and other qualified individuals.'' The NAIC 
convened a working group (NAIC working group) comprised of a diverse 
group of stakeholders. This working group met frequently each month for 
over one year while developing its recommendations.\3\ Throughout the 
process, NAIC working group draft documents and meeting notes were 
displayed on the NAIC's Web site for public review, and several 
interested parties filed formal comments. In addition to participation 
from the NAIC working group members, conference calls and in-person 
meetings were open to other interested parties

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and individuals and provided an opportunity for non-member feedback. 
The Departments have received transmittals from the NAIC that include a 
recommended template for the SBC (with instructions and samples to be 
used in completing the template) and a recommended uniform glossary.\4\
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    \3\ In developing its recommendations, the NAIC considered the 
results of various consumer testing sponsored by both insurance 
industry and consumer associations. Specifically, the draft SBC 
template, including the coverage examples, and the draft uniform 
glossary underwent consumer testing to assist in determining 
adjustments to ensure the final product was consumer friendly. 
Summaries of this testing are available at: http://www.naic.org/documents/committees_b_consumer_information_101012_ahip_focus_group_summary.pdf; http://www.naic.org/documents/committees_b_consumer_information_110603_ahip_bcbsa_consumer_testing.pdf; http://www.naic.org/documents/committees_b_consumer_information_101014_consumers_union.pdf (a more detailed 
summary of which is accessible at: http://prescriptionforchange.org/pdf/CU_Consumer_Testing_Report_Dec_2010.pdf); and http://www.naic.org/documents/committees_b_consumer_information_110603_consumers_union_testing.pdf.
    \4\ Information on the NAIC working group, including drafts of 
SBC materials and other supporting documents developed for 
compliance with PHS Act section 2715, working group membership 
lists, and meeting minutes, is available at: http://www.naic.org/committees_b_consumer_information.htm.
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    These regulations generally propose standards for group health 
plans (and their plan administrators), and health insurance issuers 
offering group or individual health insurance coverage, that will 
govern who provides an SBC, who receives an SBC, when the SBC will be 
provided, and how it will be provided. The Departments invite comment 
on the standards of the proposed regulations.
    In conjunction with these proposed regulations, the Departments are 
publishing a document today that provides the proposed template for the 
SBC (with proposed instructions and sample language for completing the 
template) and the proposed uniform glossary that are identical to the 
documents that were developed and agreed to by the entire NAIC working 
group and then voted on and approved by the full NAIC. Instead of 
proposing possible changes to the NAIC's proposed SBC template and 
related materials, the document published today incorporates all of the 
NAIC working group's recommended materials (with the exception of a 
sample coverage example \5\) and invites public comment. The 
Departments recognize that changes to the SBC template may be 
appropriate to accommodate various types of plan and coverage designs, 
to provide additional information to individuals, or to improve the 
efficacy of the disclosures recommended by the NAIC. In addition, the 
SBC template and related documents were drafted by the NAIC primarily 
for use by health insurance issuers.\6\
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    \5\ The Appendices do not include a sample coverage example 
calculation for breast cancer in the individual market that was 
transmitted by the NAIC. Upon review, it appeared that some of the 
data in the example might be subject to copyright protection. 
Moreover, the sample coverage example provided by NAIC was limited 
to breast cancer in the individual market and did not address the 
other two coverage examples--maternity coverage and diabetes. 
Finally, particular coding information and pricing information 
included in the sample would change annually, which would result in 
the data included in the sample becoming outdated relatively 
quickly. Accordingly, HHS is publishing on its Web site (at http://cciio.cms.gov), the coding and pricing information necessary to 
perform coverage example calculations for all three coverage 
examples. HHS will update this information annually.
    \6\ National Association of Insurance Commissioners, Consumer 
Information Working Group, December 17, 2010 Letter to the 
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
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    In general, the Departments have heard concerns about the potential 
redundancies and additional cost associated with elements of the SBC 
requirement--including the uniform glossary and the coverage facts 
labels--particularly for those plans and group health insurance issuers 
that already provide a Summary Plan Description (SPD) under 29 CFR 
2520.104b-2. Comments are solicited on whether the SBC should be 
allowed to be provided within an SPD if the SBC is intact and 
prominently displayed at the beginning of the SPD (for example, 
immediately after a cover page and table of contents), and if the 
timing requirements for providing the SBC (described in paragraph (a) 
of the proposed regulations) are satisfied. The Departments also 
welcome further comments on ways the SBC might be coordinated with 
other group health plan disclosure materials (e.g., application and 
open season materials) to communicate effectively with participants and 
beneficiaries about their coverage and make it easy for them to compare 
coverage options while also avoiding undue cost or burden on plans and 
group health insurance issuers.
    Consistent with the goals of balancing effective communication and 
ease of comparison for individuals with minimization of cost and 
duplication, other sections of this preamble outline and invite comment 
on potential approaches to major elements of the SBC--the statutorily-
required uniform glossary and the coverage examples--in the interest of 
streamlining standards and making implementation of these components as 
helpful and user-friendly for individuals, and as workable and 
efficient as possible.
    As discussed below, PHS Act section 2715 generally directs group 
health plans and health insurance issuers to comply with the SBC 
requirements beginning on or after March 23, 2012. Comments are 
requested regarding factors that may affect the feasibility of 
implementation within this time frame. After the public comment period 
on these documents, the Departments will finalize the SBC template and 
instructions. Consistent with PHS Act section 2715(c), the Departments 
will periodically review and update the documents as appropriate, 
taking into account public comments.
2. Providing the SBC
    Paragraph (a) of the proposed regulations implements the general 
disclosure requirement and sets forth the proposed standards for who 
provides an SBC, to whom, and when. PHS Act section 2715 generally sets 
forth that an SBC be provided to applicants, enrollees, and 
policyholders or certificate holders. PHS Act section 2715(d)(3) places 
the responsibility to provide an SBC on ``(A) a health insurance issuer 
(including a group health plan that is not a self-insured plan) 
offering health insurance coverage within the United States; or (B) in 
the case of a self-insured group health plan, the plan sponsor or 
designated administrator of the plan (as such terms are defined in 
section 3(16) of ERISA).'' \7\ Accordingly, these proposed regulations 
would interpret PHS Act section 2715 to apply to both group health 
plans and health insurance issuers offering group or individual health 
insurance coverage. In addition, consistent with the statute, these 
proposed regulations would make a plan administrator of a group health 
plan responsible for providing an SBC. Under the proposed regulations, 
the SBC would be provided in writing free of charge.
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    \7\ 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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    In general, the proposed rules direct that the SBC be provided when 
a plan or individual is comparing health coverage options. If the 
information in the SBC changes between the time of application, when 
the coverage is offered, and when a policy is issued (often the case 
only for individual market coverage), the proposal would require that 
an updated SBC be provided. If the information is unchanged, the SBC 
does not need to be provided again, except upon request. This general 
approach is explained more fully below.
a. Provision of the SBC Automatically by an Issuer to a Plan
    Paragraph (a)(1)(i) of the proposed regulations provides that a 
health insurance issuer offering group health insurance coverage 
provide the SBC to a group health plan (including, for this purpose, 
its sponsor) upon an application or request for information

[[Page 52445]]

by the plan about the health coverage (see section II.A.2.c. of this 
preamble, below, for a discussion of this proposal). Under this 
proposal, the SBC must be provided as soon as practicable following the 
request, but in no event later than seven days following the request. 
If an SBC is provided upon request for information about health 
coverage and the plan subsequently applies for health coverage, a 
second SBC will be provided automatically only if the information in 
the SBC has changed. If there is a change to the information in the SBC 
before the coverage is offered, or before the first day of coverage, 
the issuer must update and provide a current SBC to the plan no later 
than the date of the offer (or no later than the first day of coverage, 
as applicable). The Departments recognize that often the only change to 
the SBC is a final premium quote (usually in the individual health 
insurance market or the small group market). The Departments request 
comments on whether, in such circumstances, premium information can be 
provided in another way that is easily understandable and useful to 
plan sponsors and individuals, other than by sending a new, full SBC.
    An issuer also must provide a new SBC if and when the policy, 
certificate, or contract (for simplicity, referred to collectively as a 
``policy'' in the remainder of this preamble) is renewed or reissued. 
In the case of renewal or reissuance, if the issuer requires written 
application materials for renewal (in either paper or electronic form), 
it must provide the SBC no later than the date the materials are 
distributed. If renewal or reissuance is automatic, the SBC must be 
provided no later than 30 days prior to the first day of the new policy 
year.
b. Provision of the SBC Automatically by a Plan or Issuer to 
Participants and Beneficiaries
    Under paragraph (a)(1)(ii) of the proposed regulations, a group 
health plan (including the plan administrator), and a health insurance 
issuer offering group health insurance coverage, must provide an SBC to 
a participant or beneficiary \8\ with respect to each benefit package 
offered for which the participant or beneficiary is eligible.\9\ The 
SBC must be provided as part of any written application materials that 
are distributed by the plan or issuer for enrollment. If the plan does 
not distribute written application materials for enrollment, the SBC 
must be distributed no later than the first date the participant is 
eligible to enroll in coverage for the participant and any 
beneficiaries. If there is any change to the information required to be 
in the SBC before the first day of coverage, the plan or issuer must 
update and provide a current SBC to a participant or beneficiary no 
later than the first day of coverage.
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    \8\ 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 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.
    \9\ 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 II.A.2.d., 
``Special Rules to Prevent Unnecessary Duplication With Respect to 
Group Health Coverage'', if either the issuer or the plan provides 
the SBC, both will have satisfied their obligations. As they do with 
other notices required of both plans and issuers under Part 7 of 
ERISA, Title XXVII of the PHS Act, and Chapter 100 of the Code, the 
Departments expect plans and issuers to make contractual 
arrangements for sending SBCs. Accordingly, the remainder of this 
preamble generally refers to requirements for plans or issuers.
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    The plan or issuer must also provide the SBC to special enrollees 
within seven days of a request for enrollment pursuant to a special 
enrollment period.\10\ Additionally, the plan or issuer must provide a 
new SBC if and when the coverage is renewed. Specifically, if written 
application materials are required for renewal (in either paper or 
electronic form), the SBC must be provided no later than the date the 
materials are distributed. If renewal is automatic, the proposed rules 
provide that the SBC must be provided no later than 30 days prior to 
the first day of coverage in the new plan year.
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    \10\ Regulations regarding special enrollment can be found at 26 
CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117.
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c. Provision of the SBC Upon Request
    The regulations propose that a health insurance issuer offering 
group health insurance coverage provide the SBC to a group health plan 
(and a plan or issuer must provide the SBC to a participant or 
beneficiary) upon request, as soon as practicable, but in no event 
later than seven days following the request. Although PHS Act section 
2715 does not specifically reference furnishing SBCs on request, PHS 
Act section 2715(a) authorizes the Departments to develop standards for 
providing the SBC to applicants, enrollees, policyholders, and 
certificate holders. The Departments believe that this provision 
recognizes that plans and individuals may need or desire the 
information provided in the SBC at times other than those set forth in 
the statute to ensure that the plans and individuals have continuous 
access to coverage and cost information to make informed choices about 
health coverage.\11\ In addition, while the ``upon request'' provision 
may result in some additional administrative work for plans and 
issuers, the Departments have used discretion elsewhere in these 
proposed regulations to create special rules for avoiding duplication 
and also propose to reduce burden by facilitating electronic 
transmittal of the SBC, where appropriate. Accordingly, the Departments 
have sought to balance providing consumer access to SBCs with 
minimizing burdens on employers and insurers.
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    \11\ Moreover, this provision is consistent with requirements 
under ERISA section 104(b)(4), which requires ERISA-covered group 
health plans to provide to participants and beneficiaries, upon 
request, copies of the instruments under which the plan is 
established or operated.
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d. Special Rules To Prevent Unnecessary Duplication With Respect to 
Group Health Coverage
    The Departments propose, in paragraph (a)(1)(iii), three rules to 
streamline provision of the SBC and prevent unnecessary duplication 
with respect to group health plan coverage. First, the requirement to 
provide an SBC will be considered satisfied for all entities if the SBC 
is provided by any entity, so long as all timing and content 
requirements are also satisfied. For example, if a health insurance 
issuer offering group health insurance coverage provides a complete, 
timely SBC to the plan's participants and beneficiaries, the plan's 
requirement to provide the SBC will be satisfied.
    Second, if a participant and any beneficiaries are known to reside 
at the same address, providing a single SBC to that address will 
satisfy the obligation to provide the SBC for all individuals residing 
at that address. However, if a beneficiary's last known address is 
different than the participant's last known address, a separate SBC 
must be provided to the beneficiary at the beneficiary's last known 
address.
    Finally, to further reduce unnecessary duplication with respect to 
a group health plan that offers multiple benefit packages, in 
connection with renewal, the plan and issuer only need to automatically 
provide a new SBC with respect to the benefit package in which a 
participant or beneficiary is enrolled. SBCs are not required to be 
provided automatically with respect to benefit packages in which the 
participant or

[[Page 52446]]

beneficiary is not enrolled. However, if a participant or beneficiary 
requests an SBC with respect to another benefit package for which the 
participant or beneficiary is eligible, the SBC must be provided as 
soon as practicable, but in no event later than seven days following 
the request.
e. Provision of the SBC by an Issuer Offering Individual Market 
Coverage
    Under these regulations, the Secretary of HHS sets forth proposed 
standards applicable to individual health insurance coverage for who 
provides an SBC, to whom, and when. The intent is to parallel the 
proposed group market requirements described above, with only those 
changes necessary to reflect the differences between the two markets. 
For example, individual policyholders and dependents in the individual 
market are comparable to group health plan participants and 
beneficiaries. Accordingly, an issuer offering individual health 
insurance coverage must provide an SBC as soon as practicable after 
receiving a request for application or a request for information, but 
in no event later than seven days after receipt of the request. If an 
individual later applies for the same policy, a second SBC is required 
to be provided only if the information in the SBC has changed.
    An issuer that makes an offer of coverage must provide an updated 
SBC only if it has modified the terms of coverage for the individual 
(including as a result of medical underwriting) that are required to be 
reflected in the SBC. Similarly, when an individual accepts the offer 
of coverage, if any terms are modified before the first day of 
coverage, an updated SBC must again be provided no later than the first 
day of coverage. A health insurance issuer will provide an SBC annually 
at renewal, no later than 30 days before the start of the new policy 
year, reflecting any changes effective for the new policy year.
    Finally, similar to the group health coverage rules, for individual 
health insurance coverage that covers more than one individual (or an 
application for coverage that is being made for more than one 
individual), if all those individuals are known to reside at the same 
address, a single SBC may be provided to that address. This single SBC 
will satisfy the requirement to provide the SBC for all individuals 
residing at that address. However, if an individual's last known 
address is different than the last known address of the individual 
requesting coverage, the policyholder, or a dependent of either, a 
separate SBC must be provided to that individual at the individual's 
last known address.
3. Content
    PHS Act section 2715(b)(3) generally provides that the SBC must 
include:
    a. Uniform definitions of standard insurance terms and medical 
terms so that consumers may compare health coverage and understand the 
terms of (or exceptions to) their coverage;
    b. A description of the coverage, including cost sharing, for each 
category of benefits identified by the Departments;
    c. The exceptions, reductions, and limitations on coverage;
    d. The cost-sharing provisions of the coverage, including 
deductible, coinsurance, and copayment obligations;
    e. The renewability and continuation of coverage provisions;
    f. A coverage facts label that includes examples to illustrate 
common benefits scenarios (including pregnancy and serious or chronic 
medical conditions) and related cost sharing based on recognized 
clinical practice guidelines;
    g. A statement about whether the plan provides minimum essential 
coverage as defined under section 5000A(f) of the Code, and whether the 
plan's or coverage's share of the total allowed costs of benefits 
provided under the plan or coverage meets applicable requirements;
    h. A statement that the SBC is only a summary and that the plan 
document, policy, or certificate of insurance should be consulted to 
determine the governing contractual provisions of the coverage; and
    i. A contact number to call with questions and an Internet Web 
address where a copy of the actual individual coverage policy or group 
certificate of coverage can be reviewed and obtained.

The proposed regulations generally parallel the content elements set 
forth in the statute. As discussed above, the Departments are issuing a 
document that proposes to use the NAIC's recommended SBC template and 
instructions to satisfy the SBC content and appearance requirements of 
PHS Act section 2715.

    A few of the content elements included in the NAIC's 
recommendations warrant further explanation and discussion. The 
template developed by the NAIC working group and transmitted to the 
Departments includes four elements not specified in the statute. 
Consistent with the Departments' approach of including all of the 
NAIC's recommended materials, the proposed regulations include these 
additional recommended elements. The four additional elements are: (1) 
For plans and issuers that maintain one or more networks of providers, 
an Internet address (or similar contact information) for obtaining a 
list of the network providers; (2) for plans and issuers that maintain 
a prescription drug formulary, an Internet address where an individual 
may find more information about the prescription drug coverage under 
the plan or coverage; (3) an Internet address where an individual may 
review and obtain the uniform glossary; and (4) premiums (or cost of 
coverage for self-insured group health plans).
    The Departments have included these elements in the proposed 
regulation consistent with the NAIC's recommendations. PHS Act section 
2715(a) requires the Departments to develop regulations for provision 
of an SBC that accurately describes benefits and coverage, which 
includes the statutory content elements listed above, but the 
Departments believe they are not limited to them. The statute also 
requires the Departments to consult with the NAIC on the development of 
the standards for the SBC, which includes content. The Departments' 
proposal includes all of the NAIC's recommendations, including the 
additional content, and the Departments invite comments on this 
approach and the four additional SBC content elements. For example, 
with respect to the requirement to include an Internet address that may 
be used to obtain a copy of the uniform glossary, the Departments 
invite comments on whether the SBC also should disclose the option to 
receive a paper copy of the uniform glossary upon request.
    The NAIC instructions provide that the premium generally is the 
premium as charged by the issuer (which may be evidenced in a rate 
table attached to the SBC),\12\ or the cost of coverage in the case of 
self-insured plans. The NAIC instructions further provide that, in the 
case of a group health plan, a participant or beneficiary should 
consult the employer for information regarding the actual cost of 
coverage net of any employer subsidy. This raises issues regarding the 
ability to compare premium or cost information between coverage 
options. The Departments request comments regarding whether the SBC 
should include premium or cost information and if so, the extent to 
which such information should reflect

[[Page 52447]]

the actual cost to an individual net of any employer contribution, as 
well as the extent to which the cost information should include costs 
for different tiers of coverage (for example, self-only, family). The 
Departments also request comments on how this information can be 
provided in a way that allows individuals and plan sponsors to make 
meaningful comparisons about the cost of their coverage options.
---------------------------------------------------------------------------

    \12\ See page 4 of the NAIC Draft Instruction Guide for Group 
Policies (available at http://www.naic.org/documents/committees_b_consumer_information_hhs_dol_submission_1107_inst_grp.pdf).
---------------------------------------------------------------------------

    With respect to the definitions, the Departments propose to follow 
an approach consistent with the recommendations received from the 
NAIC.\13\ Specifically, PHS Act section 2715(b)(3)(A) requires plans 
and issuers to include in the SBC ``uniform definitions'' of common 
health insurance terms that are consistent with the standards developed 
under section 2715(g). PHS Act section 2715(g) directs the Departments 
to ``provide for the development of standards for the definitions of 
terms used in health insurance coverage,'' including specified 
insurance-related terms and medical terms, as well as other terms the 
Departments determine are important to define.
---------------------------------------------------------------------------

    \13\ National Association of Insurance Commissioners, Consumer 
Information Working Group, December 17, 2010 Letter to the 
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
---------------------------------------------------------------------------

    The NAIC working group adopted a two-part approach to the 
definitions. First, it drafted a consumer-friendly uniform glossary, 
which includes definitions of health coverage terminology, to be 
provided in connection with the SBC. The NAIC's uniform glossary 
provides simple, general, descriptive definitions designed to help 
consumers understand terms and concepts commonly used in health 
coverage. For example, ``out-of-pocket limit'' is defined in the NAIC's 
uniform glossary as:

    The most you pay during a policy period (usually a year) before 
your health insurance or plan begins to pay 100% of the allowed 
amount. This limit never includes your premium, balance-billed 
charges or health care your health insurance or plan doesn't cover. 
Some health insurance or plans don't count all of your co-payments, 
deductibles, co-insurance payments, out-of-network payments or other 
expenses toward this limit.

In these proposed regulations, and as described more fully below under 
section II.C. of this preamble under the heading ``Uniform Glossary'', 
the Departments propose that the NAIC uniform glossary be used to 
satisfy the requirements of PHS Act 2715(g).

    At the same time, these generic glossary definitions, alone, would 
not necessarily help consumers understand what terms mean under a given 
plan or policy, nor would they support meaningful comparison of 
coverage options under PHS Act section 2715(b)(3)(A) because the 
generic terms used in the glossary are not plan- or policy-specific and 
would not enable consumers to understand what the terms actually mean 
in the context of a specific contract. Therefore, in addition to the 
uniform glossary, the NAIC working group also developed a ``Why this 
Matters'' column for the draft SBC template (with instructions for 
plans and issuers to use in completing the SBC template).\14\ The 
instructions specify how plans and issuers must describe each coverage 
component in the SBC. For example, the instructions indicate what 
information must be provided about a plan's out-of-pocket limit on cost 
sharing, including whether copayments, out-of-network coinsurance, and 
deductibles are subject to this limit.
---------------------------------------------------------------------------

    \14\ 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.
---------------------------------------------------------------------------

    In the Departments' proposal, the ``Why this Matters'' column in 
the SBC template, together with the instructions for completing this 
column, constitute the definitions required to be provided under PHS 
Act section 2715(b)(3)(A). This approach allows plans and issuers 
flexibility in how they design benefits and coverage features, but 
proposes that benefits and features be described in a consistent way so 
that individuals and employers will understand them and appreciate 
differences from one plan or policy to the next.
    With respect to the element of the SBC regarding a statement about 
whether a plan or coverage provides minimum essential coverage (as 
defined under section 5000A(f) of the Code) and whether the plan's or 
coverage's share of the total allowed costs of benefits provided under 
the plan or coverage meets applicable minimum value requirements 
(minimum essential coverage statement),\15\ because this content is not 
relevant until other elements of the Affordable Care Act are 
implemented, this statement is not in the NAIC recommendations. For the 
same reason, these proposed regulations provide that the minimum 
essential coverage statement is not required to be in the SBC until the 
plan or coverage is required to provide an SBC with respect to coverage 
beginning on or after January 1, 2014.\16\
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    \15\ 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.
    \16\ 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. The Departments' proposal 
recognizes this effective date and the need for additional guidance 
with respect to these requirements and is consistent with the 
recommendation in the transmittal letter from the NAIC. The NAIC 
will continue to work to develop a recommendation for this SBC 
requirement and will submit it to the Departments at a later date.
---------------------------------------------------------------------------

    Starting in 2014, certain individuals who purchase health insurance 
coverage through the new Affordable Insurance Exchanges (``Exchanges'') 
may be eligible for a premium tax credit to help pay for the cost of 
that coverage. In general, individuals offered affordable minimum 
essential coverage under an employer-sponsored plan will not be 
eligible to receive a premium tax credit. Correctly establishing 
whether an employer is offering affordable minimum essential coverage 
is important to individuals, employers, and Exchanges and necessitates 
the verification of certain information about employer coverage, 
including the information in the minimum essential coverage statement. 
The Departments are exploring several reporting options under the 
Affordable Care Act and other applicable statutory authorities \17\ to 
determine how information about employer-provided coverage can be 
provided and verified in a manner that limits the burden on 
individuals, employers, and Exchanges. Because the statutory SBC 
elements include the information in the minimum essential coverage 
statement, the Departments invite comments on how employers might 
provide this information to employees and the Exchanges in a manner 
that minimizes duplication and burden. The Departments also recognize 
that some of the plan level information that is required to be provided 
in the SBC is also required to be provided under section 6056 of the 
Code (requiring employers to report to the IRS specific information 
related to employer-sponsored health coverage

[[Page 52448]]

provided to employees) and are coordinating their efforts to determine 
how and whether the same data can be used for multiple purposes. To 
help develop a simple, efficient system for employers, the Treasury 
Department and the IRS intend to request comments on employer 
information reporting required under section 6056 of the Code.
---------------------------------------------------------------------------

    \17\ In addition to section 2715 of the PHS Act, these 
authorities include, but are not limited to, section 6056 of the 
Code, as added by section 1514 of the Affordable Care Act (requiring 
employers to report to the Internal Revenue Service specific 
information related to employer-sponsored health coverage provided 
to employees); and section 18B of the Fair Labor Standards Act, as 
added by section 1512 of the Affordable Care Act (requiring 
employers to disclose to employees information regarding Exchange 
coverage options).
---------------------------------------------------------------------------

    The last SBC content item that merits further discussion is the 
coverage facts label. The statute requires that an SBC contain a 
``coverage facts label.'' For ease of reference, the regulations 
propose to use ``coverage examples,'' the term recommended by the NAIC, 
in place of the statutory term. As specified in the statute, the 
proposed regulations provide that the coverage examples illustrate 
benefits provided under the plan or coverage for common benefits 
scenarios, including pregnancy and serious or chronic medical 
conditions. The coverage example would estimate what proportion of 
expenses under an illustrative benefits scenario might be covered by a 
given plan or policy. Consumers then could use this information to 
compare their share of the costs of care under different plan or 
coverage options to make an informed purchasing decision.
    Under the proposed regulations, consistent with the recommendations 
of the NAIC working group, a benefits scenario is a hypothetical 
situation, consisting of a sample treatment plan for a specified 
medical condition during a specific period of time, based on recognized 
clinical practice guidelines available through the National Guideline 
Clearinghouse.\18\ A benefits scenario would include the information 
needed to simulate how claims would be processed under the scenario to 
generate an estimate of cost sharing a consumer could expect to pay 
under the benefit package. The document published contemporaneously 
with these proposed regulations includes specific instructions and an 
HHS Web site with specific information necessary to simulate benefits 
covered under the plan or policy for specified benefits scenarios.\19\
---------------------------------------------------------------------------

    \18\ The National Guideline Clearinghouse, within the Agency for 
Healthcare Research and Quality (AHRQ), publishes systematically 
developed statements to assist practitioner and patient decisions 
about appropriate health care for specific clinical circumstances, 
available at http://www.guideline.gov/.
    \19\ A general instruction guide for completing the coverage 
examples portion of the SBC, which is identical to that transmitted 
by the NAIC, is included in the document published today by the 
Departments. These instructions, together with specific assumptions 
for coding data and reimbursement rates published today on HHS's Web 
site comprise the Departments' instructions for completing the 
coverage examples portion of the SBC. See http://cciio.cms.gov. 
http://www.naic.org/documents/committees_b_consumer_information_hhs_dol_submission_1107_template_blank.xls. The coding and 
reimbursement rate assumptions were developed by HHS and are also 
open for public comment.
---------------------------------------------------------------------------

    These proposed regulations provide that the Departments may 
identify up to six coverage examples that may be required in an SBC. A 
maximum of six coverage examples was discussed by the NAIC working 
group, so that consumers may easily read, understand, and compare how 
benefits are provided for different common medical conditions. In 
future years, the SBC may include coverage examples in addition to the 
three proposed now. The Departments propose to limit the number of 
coverage examples to no more than six to limit the burden on plans and 
issuers and to ensure that there is adequate space in the SBC to 
present coverage examples in a manner that is easy to read and useful 
for individuals. A document published contemporaneously with these 
proposed regulations adopts a phase-in approach to the coverage 
examples, and uses the three coverage examples recommended by NAIC for 
inclusion first--having a baby (normal delivery), treating breast 
cancer, and managing diabetes.\20\
---------------------------------------------------------------------------

    \20\ See http://www.naic.org/documents/committees_b_consumer_information_final_coverage_ex.pdf.
---------------------------------------------------------------------------

    The Departments invite comments on the proposed coverage examples, 
whether additional benefits scenarios would be helpful and, if so, what 
those examples should be. The Departments also invite comments on the 
benefits and costs associated with developing multiple coverage 
examples, as well as how multiple coverage examples might promote or 
hinder the ability to understand and compare terms of coverage. It is 
anticipated that any additional coverage examples will only be required 
to be provided prospectively, and that plans and issuers will be 
provided with adequate time for compliance. Additionally, the 
Departments invite comments on whether and how to phase in the 
implementation of the requirement to provide coverage examples. For 
example, one option would provide that in 2012, coverage examples would 
only need to be provided for the SBCs with respect to a subset of all 
benefits packages offered by group health plans or health insurance 
issuers, with coverage examples required to be provided for all 
benefits packages in later years. Comments are invited on these issues.
    Comments are also requested on whether it would be feasible or 
desirable to permit plans and issuers to input plan- or policy-specific 
information into a central Internet portal, such as the Federal health 
care reform Web site (http://www.healthcare.gov), that would use the 
information to generate the coverage examples for each plan or policy. 
The examples would then be available on the Internet portal for access 
by individuals. Alternatively, some have suggested that plans and 
issuers might provide individuals, in a convenient format in the SBC, 
the several items of plan- or policy-specific information necessary to 
generate the coverage examples and a reference to the Internet portal, 
so that individuals could input the information into the Internet 
portal to generate the coverage examples for the plan or policy. The 
Departments note that the NAIC considered and rejected the idea of a 
``cost calculator'' or similar tool. The Departments solicit comments 
on the cost and benefits of these alternatives, including whether such 
approaches would provide an efficient and effective method for 
individuals, plans, and issuers to generate or access the coverage 
examples and how any such approaches could adequately serve individuals 
who do not have regular access to the Internet (for example, by 
disclosing in the SBC the option to obtain paper copies of coverage 
examples generated by the plan or issuer).
4. Appearance
    Section 2715 of the PHS Act sets forth the appearance for the SBC. 
Specifically, the statute provides that the SBC is to be presented in a 
uniform format, utilizing terminology understandable by the average 
plan enrollee, that does not exceed four pages in length, and does not 
include print smaller than 12-point font. The proposed regulations, 
consistent with the NAIC recommendation, interpret the four-page 
limitation as four double-sided pages.\21\ The Departments' view is 
that this approach will enable group health plans, participants and 
beneficiaries, and individuals in the individual insurance market to 
receive enough information to shop for, compare, and make informed 
decisions

[[Page 52449]]

regarding various coverage options that may be available to them.\22\ 
The Departments seek comments on this approach.
---------------------------------------------------------------------------

    \21\ 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 statutorily-required 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.
    \22\ PHS Act sections 2715(b)(3)(A) and (g)(2) clearly reference 
consumers comparing coverage and PHS Act section 2715(b)(1) requires 
a uniform format, to enable shopping and comparing health coverage 
options.
---------------------------------------------------------------------------

    Consistent with the NAIC recommendations provided to the 
Departments,\23\ under these proposed regulations, a group health plan 
or a health insurance issuer will provide the SBC as a stand-alone 
document in the form authorized by the Departments and completed in 
accordance with the instructions and guidance for completing the SBC 
that are authorized by the Departments. As noted earlier in this 
preamble, comments are invited on whether and how the SBC might best be 
coordinated with the SPD and other group health plan disclosure 
materials.
---------------------------------------------------------------------------

    \23\ National Association of Insurance Commissioners, Consumer 
Information Working Group, December 17, 2010 Letter to the 
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
---------------------------------------------------------------------------

5. Form and Manner
a. Group Health Plan Coverage
    To facilitate faster and less burdensome disclosure of the SBC, and 
consistent with PHS Act section 2715(d)(2), the proposed regulations 
set forth rules to facilitate electronic transmittal of the SBC, where 
appropriate. Specifically, an SBC provided by a plan or issuer to a 
participant or beneficiary may be provided in paper form. 
Alternatively, for plans and issuers subject to ERISA or the Code, the 
SBC may be provided electronically if the requirements of the 
Department of Labor's electronic disclosure safe harbor at 29 CFR 
2520.104b-1(c) are met.\24\ For non-Federal governmental plans, the 
regulations propose that the SBC may be provided electronically if 
either the substance of the provisions of the Department of Labor's 
electronic disclosure rule are met, or if the provisions governing 
electronic disclosure in the individual health insurance market 
(described below) are met.
---------------------------------------------------------------------------

    \24\ 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 cross-reference, any changes 
that may be made to 29 CFR 2520.104b-1 in the future would also 
apply to the SBC.
---------------------------------------------------------------------------

    With respect to an SBC provided by an issuer to a plan, the SBC may 
be provided in paper form or electronically (such as e-mail transmittal 
or an Internet posting on the issuer's Web site or on http://www.healthcare.gov). For electronic forms, the format must be readily 
accessible by the plan; the SBC must be provided in paper form free of 
charge upon request; and for Internet postings, the plan must be 
notified by paper or e-mail that the documents are available on the 
Internet, and given the Web address. The Departments invite comments on 
whether any clarifications are needed with respect to the ``readily 
accessible'' standard (for example, whether the requirements for 
passwords or special software create a sufficient burden that the 
documents are not ``readily accessible''). The Departments also invite 
comment on whether modifications or adaptations of the SBC are 
necessary to facilitate or improve electronic disclosure.
b. Individual Health Insurance Coverage
    With respect to the individual market, the proposed regulations set 
forth the circumstances in which an issuer offering individual health 
insurance coverage may provide an SBC in either paper or electronic 
form. Specifically, under these proposed regulations, unless specified 
otherwise by an individual, an issuer would be required to provide an 
SBC (and any subsequent SBC) in paper form if, upon the individual's 
request for information or request for an application, the individual 
makes the request in person, by phone or by fax, or by U.S. mail or 
courier service; or if, when submitting an application, the individual 
completes the application for coverage by hand, by phone or by fax, or 
by U.S. mail or courier service. As an alternative, the Departments 
seek comments on whether it might be appropriate to allow issuers to 
fulfill an individual's request in electronic form, unless the 
individual requests a paper form.
    Under this proposed rule, an issuer may provide an SBC (and any 
subsequent SBC) in electronic form (such as through an Internet posting 
or via electronic mail) if an individual requests information or 
requests an application for coverage electronically; or, if an 
individual submits an application for coverage electronically.
    To ensure actual receipt of an SBC provided in electronic form, 
these proposed regulations would set forth certain safeguards for 
electronic disclosure in the individual market. Under the proposed 
regulations, an issuer that provides the SBC electronically must:
     Request that an individual acknowledge receipt of the SBC;
     Make the SBC available in an electronic format that is 
readily usable by the general public;
     If the SBC is posted on the Internet, display the SBC in a 
location that is prominent and readily accessible to the individual and 
provide timely notice, in electronic or non-electronic form, to each 
individual who requests information about, or an application for, 
coverage, that apprises the individual the SBC is available on the 
Internet and includes the applicable Internet address;
     Promptly provide a paper copy of the SBC upon request 
without charge, penalty, or the imposition of any other condition or 
consequence, and provide the individual with the ability to request a 
paper copy of the SBC both by using the issuer's Web site (such as by 
clicking on a clearly identified box to make the request) and by 
calling a readily available telephone line, the number for which is 
prominently displayed on the issuer's Web site, policy documents, and 
other marketing materials related to the policy and clearly identified 
as to purpose; and
     Ensure an SBC provided in electronic form is provided in 
accordance with the appearance, content, and language requirements of 
this section.

The Departments welcome comments as to whether these or other 
safeguards are appropriate.

    Finally, consistent with the standards for electronic disclosure, 
these proposed regulations seek to reduce the burden of providing an 
SBC to individuals shopping for coverage. Specifically, these proposed 
regulations provide that a health insurance issuer that complies with 
the requirements set forth at 45 CFR 159.120 (75 FR 24470) for 
reporting to the Federal health care reform insurance Web portal would 
be deemed to comply with the requirement to provide the SBC to an 
individual requesting information about coverage prior to submitting an 
application. Any SBC furnished at the time of application or 
subsequently, however, would be required to be provided in a form and 
manner consistent with the rules described above.
6. Language
    PHS Act section 2715(b)(2) provides that standards shall ensure 
that the SBC ``is presented in a culturally and linguistically 
appropriate manner.'' These proposed regulations provide that, to 
satisfy the requirement to provide the SBC in a culturally and 
linguistically appropriate manner, a

[[Page 52450]]

plan or issuer follows the rules for providing appeals notices in a 
culturally and linguistically appropriate manner under PHS Act section 
2719, and paragraph (e) of its implementing regulations.\25\ In 
general, those rules provide that, in specified counties of the United 
States, plans and issuers must provide interpretive services, and must 
provide written translations of the SBC upon request in certain non-
English languages. In addition, in such counties, English versions of 
the SBC must disclose the availability of language services in the 
relevant language.\26\ The counties in which this must be done are 
those in which at least ten percent of the population residing in the 
county is literate only in the same non-English language, as determined 
in guidance. The Departments welcome comments on whether and how to 
provide written translations of the SBC in these non-English languages. 
(Note, nothing in these proposed regulations should be construed as 
limiting an individual's rights under Federal or State civil rights 
statutes, such as Title VI of the Civil Rights Act of 1964 (Title VI) 
which prohibits recipients of Federal financial assistance, including 
issuers participating in Medicare Advantage, from discriminating on the 
basis of race, color, or national origin. To ensure 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.)
---------------------------------------------------------------------------

    \25\ See 75 FR 43330 (July 23, 2010), as amended by 76 FR 37208 
(June 24, 2011).
    \26\ The SBC template, as recommended by the NAIC, does not 
include this statement; however, these proposed regulations would 
require that plans and issuers include it.
---------------------------------------------------------------------------

B. Notice of Modifications

    Section 2715(d)(4) of the PHS Act directs that a group health plan 
or health insurance issuer offering group or individual health 
insurance coverage to provide notice of a material modification if it 
makes a material modification (as defined under ERISA section 102, 29 
U.S.C. 1022) in any of the terms of the plan or coverage involved that 
is not reflected in the most recently provided SBC. The proposed 
regulations interpret the statutory reference to the SBC to mean that 
only a material modification that would affect the content of the SBC 
would require plans and issuers to provide this notice. In these 
circumstances, the notice must be provided to enrollees (or, in the 
individual market, policyholders) no later than 60 days prior to the 
date on which such change will become effective, if it is not reflected 
in the most recent SBC provided and occurs other than in connection 
with a renewal or reissuance of coverage. A material modification, 
within the meaning of section 102 of ERISA, includes any modification 
to the coverage offered under a plan or policy that, independently, or 
in conjunction with other contemporaneous modifications or changes, 
would be considered by an average plan participant (or in the case of 
individual market coverage, an average individual covered under a 
policy) to be an important change in covered benefits or other terms of 
coverage under the plan or policy.\27\ A material modification could be 
an enhancement of covered benefits or services or other more generous 
plan or policy terms. It includes, for example, coverage of previously 
excluded benefits or reduced cost-sharing. A material modification 
could also be a material reduction in covered services or benefits, as 
defined in 29 CFR 2520.104b-3(d)(3), or more stringent requirements for 
receipt of benefits. As a result, it also includes changes or 
modifications that reduce or eliminate benefits, increase premiums and 
cost-sharing, or impose a new referral requirement.
---------------------------------------------------------------------------

    \27\ See DOL Information Letter, Washington Star/Washington-
Baltimore Newspaper Guild to Munford Page Hall, II, Baker & McKenzie 
(February 8, 1985).
---------------------------------------------------------------------------

    PHS Act section 2715 and these proposed regulations describe the 
timing for when a notice of material modification must be provided in 
situations other than upon renewal at the end of a plan or policy year 
when a new SBC is provided under the rules of paragraph (a) of the 
proposed rules. To the extent a plan or policy implements a mid-year 
change that is a material modification, that affects the content of the 
SBC, and that occurs other than in connection with a renewal or 
reissuance of coverage, paragraph (b) of the proposed regulations would 
require a notice of modifications to be provided 60 days in advance of 
the effective date of the change. This notice could be satisfied either 
by a separate notice describing the material modification or by 
providing an updated SBC reflecting the modification. For ERISA-covered 
group health plans subject to PHS Act section 2715, this notice is in 
advance of the timing under the Department of Labor's regulations set 
forth at 29 CFR 2520.104b-3 that require the provision of a summary of 
material modification (SMM) (generally not later than 210 days after 
the close of the plan year in which the modification or change was 
adopted, or, in the case of a material reduction in covered services or 
benefits, not later than 60 days after the date of adoption of the 
modification or change). In situations where a complete notice is 
provided in a timely manner under PHS Act section 2715(d)(4), of 
course, an ERISA-covered plan will also satisfy the requirement to 
provide an SMM under Part 1 of ERISA. The Departments invite comments 
on this expedited notice requirement, including whether there are any 
circumstances where 60-day advance notice might be difficult. The 
Departments also solicit comments on the format of the notice of 
modification, particularly for plans and issuers not subject to ERISA.

C. Uniform Glossary

    Section 2715(g)(2) of the PHS Act directs the Departments to 
develop standards for definitions for at least the following insurance-
related terms: co-insurance, co-payment, deductible, excluded services, 
grievance and appeals, non-preferred provider, out-of-network co-
payments, out-of-pocket limit, preferred provider, premium, and UCR 
(usual, customary and reasonable) fees. Section 2715(g)(3) of the PHS 
Act directs the Departments to develop standards for definitions for at 
least the following medical terms: durable medical equipment, emergency 
medical transportation, emergency room care, home health care, hospice 
services, hospital outpatient care, hospitalization, physician 
services, prescription drug coverage, rehabilitation services, and 
skilled nursing care. Additionally, the statute directs the Departments 
to develop standards for such other terms that will help consumers 
understand and compare the terms of coverage and the extent of medical 
benefits (including any exceptions and limitations).
    The NAIC working group recommended,\28\ and the Departments are 
proposing to adopt for this purpose, inclusion of the following 
additional terms in the uniform glossary: allowed amount, balance 
billing, complications of pregnancy, emergency medical

[[Page 52451]]

condition, emergency services, habilitation services, health insurance, 
in-network co-insurance, in-network co-payment, medically necessary, 
network, out-of-network co-insurance, plan, preauthorization, 
prescription drugs, primary care physician, primary care provider, 
provider, reconstructive surgery, specialist, and urgent care. The 
uniform glossary proposed by the Departments is being issued in a 
document published elsewhere in today's Federal Register.
---------------------------------------------------------------------------

    \28\ National Association of Insurance Commissioners, Consumer 
Information Working Group, December 17, 2010 Letter to the 
Secretaries. Available at http://www.naic.org/documents/committees_b_consumer_information_ppaca_letter_to_sebelius.pdf.
---------------------------------------------------------------------------

    The Departments invite comments on the uniform glossary, including 
the content of the definitions and whether there are additional terms 
that are important to include in the uniform glossary so that 
individuals and employers may understand and compare the terms of 
coverage and the extent of medical benefits (or exceptions to those 
benefits). For example, the Departments are considering whether 
glossary definitions of any of the following terms would be helpful: 
claim, external review, maternity care, preexisting condition, 
preexisting condition exclusion period, or specialty drug. It is 
anticipated that any additional terms would be included in the uniform 
glossary prospectively, and that plans and issuers would be provided 
adequate time for compliance.
    The proposed regulations direct a plan or issuer to make the 
uniform glossary available upon request within seven days. The timing 
of disclosure is intended to be generally consistent with the proposed 
requirement, described in section II.A.2.c of this preamble. A plan or 
issuer may satisfy this disclosure requirement by providing an Internet 
address where an individual may review and obtain the uniform glossary, 
as described in section II.A.3 of this preamble. This Internet address 
may be a place the document can be found on the plan's or issuer's Web 
site. It may also be a place the document can be found on the Web site 
of either the Department of Labor or HHS. However, a plan or issuer 
must make a paper copy of the glossary available upon request. Group 
health plans and health insurance issuers will provide the uniform 
glossary in the appearance authorized by the Departments, so that the 
glossary is presented in a uniform format and uses terminology 
understandable by the average plan enrollee or individual covered under 
an individual policy.

D. Preemption

    Section 2715 of the PHS Act is incorporated into ERISA section 715, 
and Code section 9815, and is subject to the preemption provisions of 
ERISA section 731 and PHS Act section 2724 (implemented in 29 CFR 
2590.731(a) and 45 CFR 146.143(a)). These provisions apply so that the 
requirements of part 7 of ERISA and part A of title XXVII of the PHS 
Act, as amended by the Affordable Care Act, are not to be ``construed 
to supersede any provision of State law which establishes, implements, 
or continues in effect any standard or requirement solely relating to 
health insurance issuers in connection with group or individual health 
insurance coverage except to the extent that such standard or 
requirement prevents the application of a requirement'' of part A of 
title XXVII of the PHS Act. Accordingly, State laws that impose on 
health insurance issuers requirements that are stricter than those 
imposed by the Affordable Care Act will not be superseded by the 
Affordable Care Act. Moreover, PHS Act section 2715(e) provides that 
the standards developed under PHS Act section 2715(a), ``shall preempt 
any related State standards that require [an SBC] that provides less 
information to consumers than that required to be provided under this 
section, as determined by the [Departments].''
    Reading these two preemption provisions together, these proposed 
regulations would not prevent States from imposing separate, additional 
disclosure requirements on health insurance issuers. The Departments 
recognize the need to balance States' interest in information 
disclosure regarding insurance coverage with the primary objective of 
PHS Act section 2715 (as stated in the section title) of providing for 
the development and use of a short, uniform explanation of coverage 
document so that consumers may make apples-to-apples comparisons of 
plan and coverage options.

E. Failure To Provide

    PHS Act section 2715(f), incorporated into ERISA section 715 and 
Code section 9815, provides that a group health plan (including its 
administrator), and a health insurance issuer offering group or 
individual health insurance coverage, that ``willfully fails to provide 
the information required under this section shall be subject to a fine 
of not more than $1,000 for each such failure.'' In addition, under PHS 
Act section 2715(f), a separate fine may be imposed for each individual 
or entity for whom there is a failure to provide an SBC. Due to the 
different enforcement jurisdictions of the Departments, as well as 
their different underlying enforcement structures, the mechanisms for 
imposing the new penalty may vary slightly, as discussed below.
1. Department of HHS
    Enforcement of Part A of Title XXVII of the PHS Act, including 
section 2715, is generally governed by PHS Act section 2723 and 
corresponding regulations at 45 CFR 150.101 et seq. Under those 
provisions, a State has the discretion to enforce the provisions 
against health insurance issuers in the first instance, and the 
Secretary of HHS only enforces a provision after the Secretary 
determines that a State has failed to substantially enforce the 
provision. If a State enforces a provision such as PHS Act section 
2715, it uses its own enforcement mechanisms. If the Secretary 
enforces, the statute provides for penalties of up to $100 per day for 
each affected individual.
    PHS Act section 2715(f) provides that an entity that willfully 
fails to provide the information required under PHS Act section 2715 
shall be subject to a fine of not more than $1,000 for each such 
failure. Such failure with respect to each enrollee constitutes a 
separate offense. This penalty can only be imposed by the Secretary.
    Paragraph (e) of the regulations proposed by HHS clarifies that 
States have primary enforcement authority over health insurance issuers 
for any violations, whether willful or not, using their own remedies. 
These proposed regulations also clarify that PHS Act section 2715 does 
not limit the Secretary's authority to impose penalties for willful 
violations regardless of State enforcement. However, the Secretary 
intends to use enforcement discretion if the Secretary determines that 
the State is adequately addressing willful violations.
    The Secretary of HHS has direct enforcement authority for 
violations by non-Federal governmental plans, and will use the 
appropriate penalty for violations of section 2715, depending on 
whether the violation is willful. Proposed paragraph (e) of the HHS 
regulations cross references the enforcement regulations at 45 CFR 
150.101 et seq., and states that they relate to any failure, regardless 
of intent, by a health insurance issuer or non-Federal governmental 
plan, to comply with any requirement of section 2715 of the PHS Act.
2. Departments of Labor and the Treasury
    The Department of Labor enforces the requirements of part 7 of 
ERISA and the Department of the Treasury enforces the requirements of 
chapter 100 of the Code with respect to group health plans

[[Page 52452]]

maintained by an entity that is not a governmental entity. Generally 
the enforcement authority under these provisions applies to all 
nongovernmental group health plans, but the Department of Labor does 
not enforce the requirements of part 7 of ERISA with respect to church 
plans.
    On April 21, 1999, pursuant to section 104 of the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, 
the Secretaries entered into a memorandum of understanding \29\ that, 
among other things, established a mechanism for coordinating 
enforcement and avoiding duplication of effort for shared jurisdiction. 
The memorandum of understanding applies, as appropriate, to health 
legislation enacted after April 21, 1999 over which at least two of the 
Departments share jurisdiction, including section 2715 of the PHS Act 
as incorporated into ERISA and the Code. Therefore, in enforcing PHS 
Act section 2715, the Departments of Labor and the Treasury will 
coordinate to avoid duplication in the case of group health plans that 
are not church plans and that are not maintained by a governmental 
entity.
---------------------------------------------------------------------------

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

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

F. Applicability

    PHS Act section 2715 directs that the requirement for group health 
plans and health insurance issuers to provide an SBC ``prior to any 
enrollment restriction'' applies not later than 24 months after the 
date of enactment (i.e., beginning on or after March 23, 2012).\30\ As 
noted earlier, the statute also directs the Departments to consult with 
the NAIC in developing the SBC standards. The Departments are 
appreciative of the detailed and valuable work the NAIC and its working 
group has performed in developing recommended standards and materials, 
including the NAIC's extensive efforts to involve numerous stakeholder 
groups in that process for over a year and to provide drafts of its 
evolving materials to the Departments periodically. Accordingly, as 
noted, the Departments are appending to the document accompanying these 
proposed regulations the NAIC's SBC work product for public comment.
---------------------------------------------------------------------------

    \30\ Section 2715 is applicable to both grandfathered and non-
grandfathered health plans. See 26 CFR 54.9815-1251(d), 29 CFR 
2590.715-1251(d), and 45 CFR 147.120(d).
---------------------------------------------------------------------------

    The NAIC transmitted its final materials to the Departments on July 
29, 2011. In recognition of existing disclosure requirements under 29 
CFR 2520.104b-2 for those group health plans that already provide SPDs 
to participants and concerns raised about providing SBCs by the 
statutory deadline, comments are solicited on whether and, if so, how 
practical considerations might affect the timing of implementation. In 
coordination with the request for comment elsewhere in this preamble on 
a potential phase-in of the implementation of the requirement to 
provide coverage examples, comments are invited also on how any 
potential phase-in of those requirements could or should be coordinated 
with the timing of the effectiveness of the general SBC standards.
    The Departments also request comments on whether any special rules 
are necessary to accommodate expatriate plans. The Departments note 
that, in the context of group health plan coverage, section 4(b)(4) of 
ERISA provides that a plan maintained outside the United States 
primarily for the benefit of persons substantially all of whom are 
nonresident aliens is exempt from ERISA title I, including ERISA 
section 715. At the same time, in the Department of HHS's interim final 
regulations relating to medical loss ratio (MLR) provisions published 
at 75 FR 74864, a special rule was included for expatriate insurance 
policies. The Departments invite comments on whether any adjustments 
are needed under PHS Act section 2715 for expatriate plans and, if so, 
for what types of coverage.

III. Economic Impact and Paperwork Burden

A. Executive Orders 12866 and 13563--Department of Labor and Department 
of Health and Human Services

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action'' under section 3(f) of Executive Order 12866. Accordingly, the 
rule has been reviewed by the Office of Management and Budget.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). As discussed below, the Departments have concluded that these 
proposed regulations would not have economic impacts of $100 million or 
more in any one year or otherwise meet the definition of an 
``economically significant rule'' under Executive Order 12866. 
Nonetheless, consistent with Executive Orders 12866 and 13563, the 
Departments have provided an assessment of the potential benefits and 
the costs associated with this proposed regulation. The Departments 
invite comment on this assessment.
1. Current Regulatory Framework
    Health plan sponsors and issuers do not currently uniformly 
disclose information to consumers about benefits

[[Page 52453]]

and coverage in a simple and consistent way. ERISA-covered group health 
plan sponsors are required to describe important plan information 
concerning eligibility, benefits, and participant rights and 
responsibilities in a summary plan description (SPD). But as these 
documents have increased in size and complexity--for example, due to 
the insertion of more legalistic language that is designed to mitigate 
the employer's risk of litigation--they have become more difficult for 
participants and beneficiaries to understand.\31\ Indeed, a recent 
analysis of SPDs from 40 employer health plans from across the United 
States (varying based on geography, firm size, and industry sector) 
found that, on average, SPDs are generally written at a first year 
college reading level (with readability ranging from 9th grade reading 
level to nearly a college graduate reading level).\32\ Moreover, the 
formats of existing SPDs are not standardized; for example, while these 
documents could be dozens of pages long, there is no requirement that 
they include an executive summary. Additionally, group health plans not 
covered by ERISA, such as plans sponsored by State and local 
governments, are not required to comply with such disclosure 
requirements.
---------------------------------------------------------------------------

    \31\ 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.
    \32\ ``How Readable Are Summary Plan Descriptions For Health 
Care Plans?'' Employee Benefit Research Institute (EBRI) Notes. 
October 2006, Vol. 27, No. 10. Available at: http://www.ebri.org/pdf/notespdf/EBRI_Notes_10-20061.pdf.
---------------------------------------------------------------------------

    In the individual market, health insurance issuers are subject to 
various, diverse State disclosure laws. For example, States like 
Massachusetts,\33\ New York,\34\ Rhode Island,\35\ Utah \36\ and 
Vermont \37\ have established minimum standards for disclosure of 
health insurance information but even within such States, consumer 
disclosures vary widely with respect to their required content. 
Additionally, some State disclosure laws are limited to current 
enrollees, so that individuals shopping for coverage do not receive 
information about health insurance coverage options. Other State 
disclosure requirements only extend to managed care organizations, and 
not to other segments of the market.\38\
---------------------------------------------------------------------------

    \33\ M.G.L.A. 176Q Sec.  5 (2010).
    \34\ NY Ins. Law Sec.  3217-a (2010).
    \35\ 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.
    \36\ Utah Code Sec.  31A-22-613.5 (2010).
    \37\ Division of Health Care Administration, Rule 10.000: 
Quality Assurance Standards and Consumer Protections for Managed 
Care Plans, State of Vermont, September 20, 1997.
    \38\ For example, New York requires Health Maintenance 
Organizations to provide to prospective members, as well as 
policyholders, information on cost-sharing, including out-of-network 
costs, limitations and exclusions on benefits, prior authorization 
requirements, and other disclosures such as appeal rights. NY Ins. 
Law Sec.  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 Sec.  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.
---------------------------------------------------------------------------

2. Need for Regulatory Action
    Congress added new PHS Act section 2715 through the Affordable Care 
Act to ensure that plans and issuers provide benefits and coverage 
information in a more uniform format that helps consumers to better 
understand their coverage and better compare coverage options. These 
proposed regulations are necessary to provide standards for a summary 
of benefits and coverage and a uniform glossary of terms used in health 
coverage. This approach is consistent with Executive Order 13563, which 
directs agencies to ``identify and consider regulatory approaches that 
reduce burdens and maintain flexibility and freedom of choice for the 
public. These approaches include [* * *] disclosure requirements as 
well as provision of information to the public in a form that is clear 
and intelligible.''
    The patchwork of consumer disclosure requirements makes the process 
of shopping for coverage an inefficient, difficult, and time-consuming 
task. Consumers incur significant search costs while trying to locate 
reliable cost, coverage and benefit data.\39\ Such search costs arise, 
in part, due to a lack of uniform information across the various 
coverage options, particularly in the individual market but also in 
some large employer plans. Although not directly comparable, in 
Medigap, a market with standardized benefits, the average per 
beneficiary search cost was estimated at $72--far higher than in other 
insurance markets, such as auto insurance.\40\
---------------------------------------------------------------------------

    \39\ 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.
    \40\ Nicole Maestas et al., ``Price Variation in Markets with 
Homogenous Goods: The Case of Medigap,'' National Bureau of Economic 
Research (January 2009).
---------------------------------------------------------------------------

    Given this difficulty in obtaining relevant information, consumers 
may not always make informed purchase decisions that best meet the 
health and financial needs of themselves, their families, or their 
employees. Similarly, workers may overestimate or underestimate the 
value of 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 insurance works. Oftentimes, health insurance 
contracts and benefit descriptions are written in technical language 
that requires a sophisticated level of health insurance literacy many 
people do not have.\41\ One study found that consumers have particular 
difficulty understanding cost sharing and tend to underestimate their 
coverage for mental health, substance abuse and prescription drug 
benefits, while overestimating their coverage for long-term care.\42\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

3. Summary of Impacts
    Table 1 below depicts an accounting statement summarizing the 
Departments' assessment of potential benefits, costs, and transfers 
associated with this regulatory action. The Departments have limited 
the period covered by the RIA to 2011-2013. Estimates are not provided 
for subsequent years, because there will be significant changes in the 
marketplace in 2014 related to the offering of new individual and small 
group plans through the Affordable Insurance Exchanges, and the wide-
ranging scope of these changes makes it difficult to project results 
for 2014 and beyond.
    The direct benefits of these proposed regulations come from 
improved information, which will enable consumers to better understand 
the coverage they have and allow consumers choosing coverage to more 
easily compare coverage options. As a result, consumers may make better 
coverage decisions, which more closely match their preferences with 
respect to benefit design, level of financial protection, and cost. The 
Departments

[[Page 52454]]

believe that such improvements will result in a more efficient, 
competitive market. These proposed regulations would also benefit 
consumers by reducing the time they spend searching for and compiling 
health plan and coverage information.
    Under the proposed regulations, group health plans and health 
insurance issuers would incur costs to compile and provide the summary 
of benefits and coverage disclosures (that includes coverage examples 
(CEs)) and a uniform glossary of health coverage and medical terms. The 
Departments estimate that the annualized cost may be around $50 
million, although there is uncertainty arising from general data 
limitations and the degree to which economies of scale exist for 
disclosing this information. The costs estimates employ assumptions 
that we believe fully capture expected issuer and third-party 
administrator (TPA) costs, and perhaps overestimate them if, for 
example, economies of scale are achievable.
    The Departments anticipate that the provisions of these proposed 
regulations will help consumers make better health coverage choices and 
more easily understand their coverage. In accordance with Executive 
Orders 12866 and 13563, the Departments believe that the benefits of 
this regulatory action justify the costs.

                                            Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Qualitative: Improved information will enable consumers to more easily and efficiently understand and compare
 coverage, and as a result, make better choices.
----------------------------------------------------------------------------------------------------------------
                  Costs                       Estimate         Year dollar      Discount rate    Period covered
                                                                                   percent
----------------------------------------------------------------------------------------------------------------
Annualized..............................               $51              2011                 7         2011-2013
Monetized ($ millions/year).............               $47              2011                 3         2011-2013
----------------------------------------------------------------------------------------------------------------

4. Benefits
    In developing these proposed regulations, the Departments carefully 
considered their potential effects, including costs, benefits, and 
transfers. Because of data limitations, the Departments did not attempt 
to quantify expected benefits of these proposed regulations. 
Nonetheless, the Departments were able to identify several benefits, 
which are discussed below.
    These proposed regulations could generate significant economic and 
social welfare benefits to consumers. Under these proposed regulations, 
health insurance issuers and group health plans would provide clear and 
consistent information to consumers. Uniform disclosure is anticipated 
to benefit individuals shopping for, or enrolled in, group and 
individual health insurance coverage and group health plans. The direct 
benefits of these proposed regulations come from improved information, 
which will enable consumers to better understand the coverage they have 
and allow consumers choosing coverage to more easily compare options. 
As a result, consumers will make better coverage decisions, which more 
closely match their preferences with respect to benefit design, level 
of financial protection, and cost. The Departments believe that such 
improvements will result in a more efficient, competitive market.
    These proposed regulations would also benefit consumers by reducing 
the time they spend searching for and compiling health plan and 
coverage information. As stated above, consumers in the individual 
market, as well as consumers in some large 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.\43\ For example, a RAND 
study of California's individual market found that reducing barriers to 
information about health insurance products would lead to increases in 
purchase rates comparable to modest price subsidies.\44\ By ensuring 
consumers have access to readily available, concise, and understandable 
information about their coverage options, these proposed regulations 
could reduce consumers' cost of obtaining information and may increase 
health insurance purchase rates.
---------------------------------------------------------------------------

    \43\ Judith H. Hibbard and Ellen Peters, ``Supporting Informed 
Consumer Health Care Decisions: Data Presentation Approaches that 
Facilitate the Use of Information in Choice,'' 24 Annu. Rev. Public 
Health 413, 416 (2003).
    \44\ 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.
---------------------------------------------------------------------------

    Furthermore, greater transparency in pricing and benefits 
information will allow consumers to make more informed purchasing 
decisions, resulting in cost-savings for some value-conscious consumers 
who today pay higher premiums because of imperfect information about 
benefits.\45\ In particular, the use of coverage examples \46\ called 
for by these proposed regulations would better enable consumers to 
understand how key coverage provisions operate in the context of 
recognizable health care situations and more meaningfully compare the 
level of financial protection offered by a plan or coverage, resulting 
in potential cost-savings.\47\ \48\ The Departments therefore expect 
that uniform disclosures under these proposed regulations would enable 
consumers to derive more value from their health coverage and enhance 
the ability of plan sponsors, particularly small businesses, to 
purchase products that are appropriate to both their needs and the 
health and financial needs of their employees.
---------------------------------------------------------------------------

    \45\ 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.
    \46\ The NAIC recommends that the term ``coverage examples'' be 
used as reference to the statutory term ``coverage facts labels,'' 
and the Departments concur with this recommendation.
    \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).
---------------------------------------------------------------------------

    Finally, these proposed regulations are expected to facilitate 
consumers' ability to understand their coverage. As

[[Page 52455]]

stated above, research suggests that consumers do not understand how 
coverage works or the terminology used in health insurance policies. 
Consequently, consumers may face unexpected medical expenses if they 
become seriously ill. They may also become confused by a coverage or 
payment decision made by their plan or issuer, leading to inefficiency 
in the operation of employee benefit plans and health insurance 
coverage. By making it easier for consumers to understand the key 
features of their coverage, these proposed regulations would enhance 
consumers' ability to use their coverage. Additionally, the uniform 
format will make it easier for consumers who change jobs or insurance 
coverage to see how their new plan or coverage benefits are similar to 
and different from their previous coverage.
5. Costs
    Section 2715 of the PHS Act and these proposed regulations direct 
group health plans and health insurance issuers to compile and provide 
a summary of benefits and coverage (SBC) (that includes coverage 
examples (CEs)) and a uniform glossary of health coverage and medical 
terms. The Departments have attempted to quantify one-time start-up 
costs as well as maintenance costs. However, there is uncertainty 
arising from general data limitations and the degree to which economies 
of scale can be realized to reduce costs for issuers and TPAs. The 
costs estimates employ assumptions that we believe more than fully 
capture expected issuer and third-party administrator costs, and 
perhaps overestimate them if, for example, economies of scale are 
achievable. On the basis of such assumptions, the Departments estimate 
that issuers and TPAs will incur approximately $25 million in costs in 
2011, $73 million in costs in 2012, and $58 million in costs in 2013. 
These costs and the methodology used to estimate them are discussed 
below, and presented in Tables 2-5 below.
General Assumptions
    In order to assess the potential administrative costs relating to 
these proposed regulations, the Departments consulted with industry 
experts to gain insight into the tasks and level of resources required. 
Based on these discussions, the Departments estimate that there will be 
two categories of principal costs associated with the standards in 
these proposed regulations: one-time start-up costs and maintenance 
costs. The one-time start-up costs include costs to develop teams to 
review the new standards and costs to implement workflow and process 
changes, particularly the development of information technology (IT) 
systems interfaces that would generate SBC disclosures through data 
housed in a number of different systems. The maintenance costs include 
costs to maintain and update IT systems in compliance with the proposed 
standards; to produce, review, distribute, and update the SBC 
disclosures; \49\ to produce and distribute notices of modifications, 
and to provide the glossary in paper form upon request.
---------------------------------------------------------------------------

    \49\ Plans and issuers subject to ERISA or the Code may provide 
SBCs electronically only if the requirements of the Department of 
Labor's electronic disclosure safe harbor at 29 CFR 2520.104b-1 are 
met. Otherwise, by default, plans and issuers must use paper 
versions of SBCs.
---------------------------------------------------------------------------

    With respect to the individual market, issuers are responsible for 
generating, reviewing, updating, and distributing SBCs. With respect to 
employer-sponsored coverage, the Departments assume fully-insured plans 
will rely on health insurance issuers, and self-insured plans will rely 
on TPAs, to perform these functions. While plans may prepare the SBC 
disclosures internally, the Departments make this simplifying 
assumption because most plans appear to rely on issuers and TPAs for 
the purpose of administrative duties such as enrollment and claims 
processing.\50\ Thus, the Departments use health insurance issuers and 
TPAs as the unit of analysis for the purposes of estimating 
administrative costs.
---------------------------------------------------------------------------

    \50\ 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.
---------------------------------------------------------------------------

    As discussed in the Medical Loss Ratio (MLR) interim final rule (75 
FR 74918), the Departments estimate there are about 440 firms offering 
comprehensive coverage in the individual, small, or large group 
markets, and 75 million covered lives therein.\51\ The number of 
covered lives includes individuals in the individual market as well as 
those in insured group health plans.
---------------------------------------------------------------------------

    \51\ 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.
---------------------------------------------------------------------------

    With respect to the self-insured market, the Departments estimate 
there are 77 million individuals in self-insured ERISA-covered plans 
and approximately 14 million individuals in self-insured non-Federal 
governmental plans.\52\ The Departments note that, according to 2007 
Economic Census data, there are 2,243 TPAs providing administrative 
services for health and/or welfare funds. However, there is some 
uncertainty as to whether all of those TPAs serve self-insured plans; 
many issuers, for example, have subsidiary lines of business through 
administrative services only (ASO) contracts through which they perform 
third-party administrative functions for self-insured plans.\53\ Based 
on conversations with one national TPA association, the Departments 
assume that about one-third of the total number of TPAs, or about 748 
TPAs, are relevant for purposes of this analysis. However, given the 
considerable overlap between issuers and TPAs, the Departments 
recognize there may be fewer affected TPAs, so these estimates should 
be considered an upper bound of burden estimates. These estimates may 
be adjusted proportionally in the final regulations based upon 
additional information about the number of TPAs serving self-insured 
plans.
---------------------------------------------------------------------------

    \52\ 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).
    \53\ 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.
---------------------------------------------------------------------------

    Because the SBC disclosures are closely related to disclosures that 
issuers and TPAs provide today as a part of their normal operations 
(e.g., information on premiums, covered benefits, and cost sharing), 
the incremental costs of compiling and providing such readily available 
information in the proposed, standardized format is estimated to be 
modest.\54\ The per-issuer or -TPA cost will largely be determined by 
its size (based on annual premium revenues) and current practices--most 
importantly, whether the issuer or TPA maintains a robust information 
technology infrastructure, including a plan benefits design database. 
Moreover, with regard to issuers, administrative costs may be related 
to the number of markets in which it operates (that is,

[[Page 52456]]

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.
---------------------------------------------------------------------------

    \54\ 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    To account for variations among TPAs, the Departments applied the 
proportions of small, medium, and large issuers to the estimated 750 
TPAs. The Departments acknowledge that issuers and TPAs are different 
and may not have the same size variation. Nonetheless, given general 
data limitations, the Departments have adopted this methodology, and, 
on its basis, estimate that there are 240 small, 390 medium, and 120 
large TPAs. Table 2 below provides a synopsis of the number of issuers 
and TPAs.

               Table 2--Issuer and TPA Size Classification
------------------------------------------------------------------------
                                           Small      Medium     Large
------------------------------------------------------------------------
Issuers................................        140        230         70
TPAs...................................        240        390        120
------------------------------------------------------------------------

Staffing Assumptions
    Table 6 below summarizes the Departments' staffing assumptions, 
including the estimated number of hours for each task for a small, 
medium, or large issuer/TPA as well as the percentage of time that 
different professionals devote to each task. The following assumptions 
are based on the best information available to the Departments at this 
time. Particularly, the following series of assumptions are based on 
conversations with industry experts, the Departments' understanding of 
the regulated community, and previous analysis in the MLR interim final 
rule. We welcome comments that provide better information or data about 
any of the following assumptions.
    IT Systems and Workflow Process Changes
    The Departments estimate that it would take a large issuer/TPA 
about 960 hours to implement IT systems and workflow process changes, 
based on discussions with a large issuer. The Departments assume that 
these IT systems and workflow process changes would be implemented only 
by IT professionals. Furthermore, the Departments assume that a medium 
issuer/TPA would need about 75% of a large issuer's/TPA's time, and a 
small issuer would need about 50% of a large issuer's/TPA's time, to 
implement IT systems and workflow process changes.
    The Departments estimate that it would take a large issuer/TPA 
about 160 hours to develop teams to analyze the new standards in 
relation to their current workflow processes. The Departments assume 
such teams would be comprised of IT professionals (45%), benefits/sales 
professionals (50%), and attorneys (5%). We scale down the burden for 
medium and small issuers/TPAs by assuming the same relative proportion 
as above (that is, 75 percent and 50 percent, respectively).
    The Departments assume that each issuer/TPA would incur a 
maintenance cost to maintain IT systems and address changes in 
regulatory requirements. The Departments assume the maintenance cost 
would equal 15% of the total one-time burden noted above (for example, 
the Departments assume it will take a large issuer 15% of 1120 hours, 
or 168 hours). The Departments further assume that the teams to 
implement the maintenance tasks would be comprised of IT professionals 
(55%), benefits/sales professionals (40%), and attorneys (5%).
    The Departments assume that the one-time and maintenance costs to 
implement IT systems changes and to address these regulations would be 
split between the costs to produce SBCs (50%) and the costs to produce 
the CEs (50%).
    Production and Review of SBCs and CEs
    The Departments estimate that each issuer/TPA would need 3 hours to 
produce, and 1 hour to review, SBCs (not including CEs) for all 
products. The Departments assume that the 3 hours needed to produce the 
SBCs would be equally divided between IT professionals and benefits/
sales professionals. The Departments assume that the 1 hour needed to 
review the SBCs would be equally divided between financial managers for 
benefits/sales professionals and attorneys.
    In 2012 and 2013, issuers and TPAs would produce CEs for three 
benefits scenarios. The Departments estimate it will take each issuer/
TPA 90 hours to produce, and 30 hours to review, CEs for all applicable 
products. The Departments assume that the 90 hours to produce the CEs 
would be equally divided between IT professionals and benefits/sales 
professionals. The Departments also assume that the 30 hours to review 
the CEs would be equally divided between financial managers for 
benefits/sales professionals and attorneys.
    The Departments assume that in 2012 and 2013, respectively, issuers 
and TPAs would provide, upon request, a paper copy of the uniform 
glossary to 2.5% and 5% of covered individuals who receive a glossary. 
The Departments assume that individuals who do not request a paper copy 
of the glossary will access it electronically using the Internet 
address provided in the SBC.
    For each individual who receives the SBC or uniform glossary in 
paper form, the Departments estimate that printing and distributing the 
paper disclosures would take clerical staff about 1 minute (0.02 hours) 
in the group markets and about 2 minutes (0.03 hours) in the individual 
market. The Departments assume that the individual market has lower 
economies of scale and, thus, increased distribution costs.
Labor Cost Assumptions
    Table 7 below presents the Departments' hourly labor cost 
assumptions (stated in 2011 dollars) for each staff category based on 
BLS data. The Departments use mean hourly wage estimates from the 
Bureau of Labor Statistics' (BLS) May 2009 National Occupational 
Employment and Wage Estimates (accessed at http://www.bls.gov/oes/current/oes_nat.htm#00-0000) for computer systems analysts (Occupation 
Code 15-1051), insurance underwriters (Occupation Code 13-2053), 
financial managers (Occupation Code 23-1011), executive secretaries and 
administrative assistants (Occupation Code 43-6011), and attorneys 
(Occupation Code 23-1011) as the basis for estimating labor costs for 
2011 through 2013 and adjust the hourly wage rate to include a 33% 
fringe benefit estimate for private sector employees.\56\
---------------------------------------------------------------------------

    \56\ See the Technical Appendix to the MLR interim final rule, 
available at http://cciio.cms.gov.
---------------------------------------------------------------------------

Distribution Assumptions
    The Departments make the following assumptions regarding the 
distribution

[[Page 52457]]

of the SBC disclosures (including CEs).\57\ These assumptions are based 
on the best information available to the Departments at this time. 
Particularly, the following series of assumptions are based on 
conversations with industry experts, the Departments' understanding of 
the regulated community, and previous analysis in the MLR interim final 
rule. The distribution assumptions are as follows:
---------------------------------------------------------------------------

    \57\ 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.
---------------------------------------------------------------------------

     The SBCs would be limited to one per household for family 
members located at the same residence. According to one large issuer, 
there are 2.2 covered lives per family.
     The number of individuals who would receive an SBC before 
enrolling in the plan or coverage equals 20% of the number of enrollees 
at any point during the course of a year.\58\
---------------------------------------------------------------------------

    \58\ Based on this assumption, the Departments estimated that 
small issuers or TPAs have about 180,000 shoppers in a given year, 
medium issuers or TPAs have 3,700,000 shoppers in a given year, and 
large issuers or TPAs have 11,000,000 shoppers in a given year.
---------------------------------------------------------------------------

     In 2013, about 2% of covered individuals would receive a 
notice of modifications.\59\ Further, the burden and cost of providing 
such notices would be proportional to the combined burden and cost of 
providing the SBCs, including CEs. In 2012, the first year of 
implementation, the number of notices of modifications would be 
negligible.
---------------------------------------------------------------------------

    \59\ 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. As part of its 
analysis for the Department of Labor's SPD/SMM regulations (29 CFR 
2520.104b-(3)), the Department estimated that about 20 percent of 
health plans would need to distribute SMM in a given year due to 
plan amendments. However, almost all of these modification occur 
between plan years--not during a plan year; therefore, the 
modifications would be required to be disclosed in a SBC that is 
distributed upon renewal of coverage. The Departments, thus, expects 
that only two percent of plans will need to issue an updated SBC 
mid-year, because mid-year changes that would result in an update to 
the SBC are very rare. For purposes of simplification, the 
Departments extend this assumption to the individual market as well.
---------------------------------------------------------------------------

     Electronic distribution will account for 38 percent of all 
disclosures in the group market and 70 percent of all disclosures in 
the individual market. The estimate for the group market is based on 
the methodology used to analyze the cost burden for the DOL claims 
procedure regulation (OMB Control Number 1210-0053).\60\ The estimate 
for the individual market is based on statistics set forth by the 
National Telecommunications and Information Administration, which 
indicate that 30% of Americans do not use the Internet.\61\
---------------------------------------------------------------------------

    \60\ See the ERISA e-disclosure rule at 29 CFR 2520.104b-1.
    \61\ 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.
---------------------------------------------------------------------------

     SBC disclosures would be distributed with usual marketing 
and enrollment materials, thus, costs to mail the documents will be 
negligible. However, notices of modifications would require mailing and 
supply costs as follows: $0.44 postage cost per mailing and $0.05 
supply cost per mailing.
     Printing costs $0.03 cents per side of a page. Thus, it 
would cost $0.18 to print a complete SBC (which is six sides of a page 
based on the length of the NAIC sample completed SBC) and $0.12 cents 
to print the uniform glossary (which is four sides of a page, based on 
the length of the NAIC recommended uniform glossary). This cost burden 
is in addition to the 1 minute or 2 minutes it would take clerical 
staff to print and distribute the SBC or glossary.

Cost Estimate

    The Tables below present costs and burden hours for issuers and 
TPAs associated the proposed disclosure requirements of PHS Act section 
2715. Tables 3-5 contain cost estimates for 2011, 2012, and 2013, 
derived from the labor hours presented in Table 3 and the hourly rate 
estimates presented in Table 7, as well as estimates of non-labor 
costs. Labor hour estimates were developed for each one-time and 
maintenance task associated with analyzing requirements, developing IT 
systems, and producing SBCs (that include CEs).

                    Table 3--2011 Hour Burden, Equivalent Cost, and Cost Burden--2011 Dollars
----------------------------------------------------------------------------------------------------------------
                                                                Number of
                                                                affected         Hour burden     Equivalent cost
                                                                entities
----------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers--One Time.......................               440            88,000        $4,600,000
SBC Requirements--TPAs--One-Time..........................               750           150,000         7,800,000
Coverage Example Requirements--Issuers--One Time..........               440            88,000         4,600,000
Coverage Example Requirements--TPAs--One-Time.............               750           150,000         7,800,000
    Total.................................................  ................           240,000        25,000,000
----------------------------------------------------------------------------------------------------------------


                                        Table 4--2012 Hour Burden, Equivalent Cost, and Cost Burden--2011 Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Number of
                                                                    affected         Hour burden     Equivalent cost     Cost burden        Number of
                                                                    entities                                             (non-labor)       disclosures
--------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers.....................................               440           540,000       $18,000,000        $2,900,000        41,000,000
SBC Requirements--TPAs........................................               750           660,000        23,000,000         3,700,000        49,000,000
Coverage Example Requirements--Issuers........................               440           140,000         7,600,000         1,500,000        41,000,000
Coverage Example Requirements--TPAs...........................               750           240,000        13,000,000         1,800,000        49,000,000
Glossary Requests--Issuers....................................               440            11,000           330,000           370,000           610,000
Glossary Requests--TPAs.......................................               750            13,000           370,000           470,000           770,000
    Subtotal..................................................  ................         1,600,000        62,000,000        11,000,000        91,000,000
    Total 2012 Costs..........................................  ................  ................        73,000,000  ................  ................
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 52458]]


                                        Table 5--2013 Hour Burden, Equivalent Cost, and Cost Burden--2011 Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Number of
                                                                    affected         Hour burden     Equivalent cost     Cost burden        Number of
                                                                    entities                                             (non-labor)       disclosures
--------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Requirements--Issuers.....................................               440           480,000       $15,000,000        $2,900,000        41,000,000
SBC Requirements--TPAs........................................               750           560,000        17,000,000         3,700,000        49,000,000
Coverage Example Requirements--Issuers........................               440            79,000         4,300,000         1,500,000        41,000,000
Coverage Example Requirements--TPAs...........................               750           130,000         7,200,000         1,800,000        49,000,000
Notice of Material Modifications--Issuers.....................               440            10,000           320,000           330,000           820,000
Notice of Material Modifications--TPAs........................               750            12,000           400,000           400,000         1,000,000
Glossary Requests--Issuers....................................               440            23,000           660,000           700,000         1,200,000
Glossary Requests--TPAs.......................................               750            26,000           750,000           900,000         1,500,000
    Subtotal..................................................  ................         1,300,000        46,000,000        12,000,000        95,000,000
    Total 2013 Costs..........................................  ................  ................        58,000,000  ................  ................
--------------------------------------------------------------------------------------------------------------------------------------------------------


                 Table 6--Estimated Staffing Hours for Small, Medium, and Large Issuers and TPAs
----------------------------------------------------------------------------------------------------------------
                                                                                    Hours
                                          Percent of hours -----------------------------------------------------
        Staffing hour assumptions              by task                         Medium issuer/
                                                            Small issuer/TPA         TPA        Large issuer/TPA
----------------------------------------------------------------------------------------------------------------
                                   IT Development and Workflow Process Change
----------------------------------------------------------------------------------------------------------------
One-Time Develop Teams/Analyze            ................                80               120               160
 Requirements (IT, underwriting/sales)..
    IT Professionals Benefits/Sales.....                45                36                54                72
Professionals...........................                50                40                60                80
    Attorneys...........................                 5                 4                 6                 8
Implementing Systems Changes (IT and      ................               480               720               960
 workflow)..............................
    IT Professionals....................               100               480               720               960
Maintenance Updating to Address Changes   ................                84               126               168
 in Requirements........................
    IT Professionals Benefits/Sales.....                55             46.20             69.30             92.40
Professionals...........................                40             33.60             50.40             67.20
    Attorneys...........................                 5              4.20              6.30              8.40
----------------------------------------------------------------------------------------------------------------
                                          SBC Requirement (maintenance)
----------------------------------------------------------------------------------------------------------------
Producing SBCs..........................  ................                 3                 3                 3
    IT Professionals Benefits/Sales.....                50               1.5               1.5               1.5
Professionals...........................                50               1.5               1.5               1.5
Internal Review of SBCs.................  ................                 1                 1                 1
    Financial Managers--Benefits/Sales                  50               0.5               0.5               0.5
     Professionals......................
    Attorneys...........................                50               0.5               0.5               0.5
Producing and Distributing Paper Version
 of SBCs (Group Markets)................
    Clerical Staff......................               100              0.02              0.02              0.02
Producing and Distributing Paper Version
 of SBCs (Individual Market)............
    Clerical Staff......................               100              0.03              0.03              0.02
----------------------------------------------------------------------------------------------------------------
                                          CE Requirement (maintenance)
----------------------------------------------------------------------------------------------------------------
Producing 3 CEs.........................  ................                90                90                90
    IT Professionals Benefits/Sales.....                50                45                45                45
Professionals...........................                50                45                45                45
Internal Review of 3 CEs................  ................                30                30                30
    Financial Managers--Benefits/Sales..                50                15                15                15
Professionals...........................
    Attorneys...........................                50                15                15                15
----------------------------------------------------------------------------------------------------------------


       Table 7--Estimated Loaded Hourly Wages for Staff Categories
------------------------------------------------------------------------
                                                          Loaded hourly
        Staff category                 BLS code            wage (2011
                                                            Dollars)
------------------------------------------------------------------------
IT Professionals..............  Computer Systems                  $53.26
                                 Analysts (Occupation
                                 Code 15-1051).
Financial Professionals--       Insurance Underwriters             41.94
 Benefits/Sales.                 (Occupation Code 13-
                                 2053).
Financial Manager.............  Financial Managers                 75.32
                                 (Occupation Code 11-
                                 3031).
Attorneys.....................  Lawyers (Occupation                85.44
                                 Code 23-1011).
Clerical Staff................  Executive Secretaries              29.15
                                 and Administrative
                                 Assistants
                                 (Occupation Code 43-
                                 6011).
------------------------------------------------------------------------


[[Page 52459]]

6. Regulatory Alternatives
    Several provisions in these proposed regulations involved policy 
choices. A first policy choice involved determining how to minimize the 
burden of providing the SBC to individuals and employers shopping for 
health insurance coverage. The Departments recognize it may be 
difficult for issuers to provide accurate information about the terms 
of coverage prior to underwriting. Accordingly, the proposed 
regulations provide that issuers offering health insurance coverage in 
connection with the individual market that make information for their 
standard policies available on the Secretary of HHS's Web portal 
(HealthCare.gov), in compliance with 45 CFR 159.120, will have 
satisfied the requirement to provide an SBC to individuals who request 
information about coverage. The Departments believe this approach 
promotes regulatory efficiency, minimizing the administrative burden on 
health insurance issuers without lessening the protections under PHS 
Act section 2715.
    A second choice related to whether, in the case of covered 
individuals residing at the same address, one SBC would satisfy the 
disclosure requirement with respect to all such individuals, or whether 
multiple SBCs would be required to be provided. Under the proposed 
regulations, the Departments allow a plan or issuer to provide a single 
SBC in circumstances in which a participant and any beneficiaries (or, 
in the individual market, the primary subscriber and any covered 
dependents) are known to reside at the same address.
    In the group market, the proposed regulations would further limit 
burden by requiring a plan or issuer to provide, at renewal, a new SBC 
for only the benefit package in which a participant or beneficiary is 
enrolled. That is, if the plan offers multiple benefits packages, an 
SBC is not required for each benefit package offered under the group 
health plan, which the Departments believe would otherwise create an 
undue burden during open season. Participants and beneficiaries would 
be able to receive upon request an SBC for any benefits package for 
which they are eligible. The Departments believe this balanced approach 
addresses the needs of plans, issuers, and consumers, at renewal.
    A third policy choice related to the interpretation of the PHS Act 
section 2715(d)(4), which requires notice of any material modification 
(as defined for purposes of section 102 of ERISA) in any of the terms 
of the plan or coverage that is not reflected in the most recently 
provided SBC. The Departments note that a material modification, within 
the meaning of section 102 of ERISA and its implementing regulations at 
29 CFR 2520.104b-3, is broadly defined to include any modification to 
the coverage offered under the plan or policy, that independently, or 
in conjunction with other contemporaneous modifications or changes, 
would be considered by the average plan participant to be an important 
change in covered benefits or other terms of coverage under the plan or 
policy. The proposed regulations would interpret this provision as 
requiring notice only for a material modification that (1) affects the 
information in the SBC; and (2) occurs other than in connection with 
renewal or reissuance of coverage (that is, a mid-plan or -policy year 
change). This approach is consistent with the language of section 
2715(d)(4) and is more narrowly focused on what we interpret to be the 
purpose of that provision.

B. Regulatory Flexibility Act--Department of Labor and Department of 
Health and Human Services

    The Regulatory Flexibility Act (RFA) requires agencies that issue a 
regulation to analyze options for regulatory relief of small businesses 
if a proposed rule has a significant impact on a substantial number of 
small entities. The RFA generally defines a ``small entity'' as (1) a 
proprietary firm meeting the size standards of the Small Business 
Administration (SBA), (2) a nonprofit organization that is not dominant 
in its field, or (3) a small government jurisdiction with a population 
of less than 50,000. (States and individuals are not included in the 
definition of ``small entity.'') The Departments use as their measure 
of significant economic impact on a substantial number of small 
entities a change in revenues of more than 3 to 5 percent.
    As discussed in the Web Portal interim final rule (75 FR 24481), 
HHS examined the health insurance industry in depth in the Regulatory 
Impact Analysis we prepared for the proposed rule on establishment of 
the Medicare Advantage program (69 FR 46866, August 3, 2004). In that 
analysis, HHS determined that there were few if any insurance firms 
underwriting comprehensive health insurance policies (in contrast, for 
example, to travel insurance policies or dental discount policies) that 
fell below the size thresholds for ``small'' business established by 
the SBA. Currently, the SBA size threshold is $7 million in annual 
receipts for both health insurers (North American Industry 
Classification System, or NAICS, Code 524114) and TPAs (NAICS Code 
524292).
    Additionally, as discussed in the Medical Loss Ratio interim final 
rule (75 FR 74918), HHS used a data set created from 2009 National 
Association of Insurance Commissioners (NAIC) Health and Life Blank 
annual financial statement data to develop an updated estimate of the 
number of small entities that offer comprehensive major medical 
coverage in the individual and group markets. For purposes of that 
analysis, HHS used total Accident and Health (A&H) earned premiums as a 
proxy for annual receipts. HHS estimated that there were 28 small 
entities with less than $7 million in A&H earned premiums offering 
individual or group comprehensive major medical coverage; however, this 
estimate may overstate the actual number of small health insurance 
issuers offering such coverage, since it does not include receipts from 
these companies' other lines of business. These 28 small entities 
represent about 6.4 percent of the approximately 440 health insurers 
that are accounted for in this RIA. Based on this calculation, the 
Departments assume that there are an equal percentage of TPAs that are 
small entities. That is, 48 small entities represent about 6.4 percent 
of the approximately 750 TPAs that are accounted for in this RIA.
    The Departments estimate that issuers and TPAs earning less than 
$50 million in annual premium revenue, including the 76 small entities 
mentioned above, would incur costs of approximately $15,000, $26,000, 
and $15,000 per issuer/TPA in 2011, 2012 and 2013, respectively. 
Numbers of this magnitude do not approach the amounts necessary to be 
considered a ``significant economic impact'' on firms with revenues in 
the order of millions of dollars. Additionally, as discussed earlier, 
the Departments believe that these estimates overstate the number of 
small entities that will be affected by the requirements in this 
proposed regulation, as well as the relative impact of these 
requirements on these entities, because the Departments have based 
their analysis on the affected entities' total A&H earned premiums 
(rather than their total annual receipts). Accordingly, the Departments 
have determined and certify that these proposed rules will not have a 
significant economic impact on a substantial number of small entities, 
and that a regulatory flexibility analysis is not required.

[[Page 52460]]

C. Special Analyses--Department of the Treasury

    For purposes of the Department of the Treasury it has been 
determined that this notice of proposed rulemaking is not a significant 
regulatory action as defined in Executive Order 12866. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these proposed regulations. It is hereby certified 
that the collections of information contained in this notice of 
proposed rulemaking will not have a significant impact on a substantial 
number of small entities. Accordingly, a regulatory flexibility 
analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is 
not required. Section 54.9815-2715 of the proposed regulations would 
require both group health insurance issuers and group health plans to 
distribute an SBC and notice of any material modifications to the plan 
that affect the information required in the SBC. Under these proposed 
regulations, if a health insurance issuer satisfies the obligations to 
distribute an SBC and a notice of modifications, those obligations are 
satisfied not just for the issuer but also for the group health plan. 
For group health plans maintained by small entities, it is anticipated 
that the health insurance issuer will satisfy these obligations for 
both the plan and the issuer in almost all cases. For this reason, 
these information collection requirements will not impose a significant 
impact on a substantial number of small entities. Pursuant to section 
7805(f) of the Code, this regulation has been submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

D. Unfunded Mandates Reform Act--Department of Labor and Department of 
Health and Human Services

    Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 that 
agencies assess anticipated costs and benefits before issuing any 
proposed rule that includes a Federal mandate that could result in 
expenditure in any one year by State, local or Tribal governments, in 
the aggregate, or by the private sector, of $100 million in 1995 
dollars updated annually for inflation. In 2011, that threshold level 
is approximately $136 million. These proposed regulations include no 
mandates on State, local, or Tribal governments. These proposed 
regulations include directions to produce standardized consumer 
disclosures that will affect private sector firms (for example, health 
insurance issuers offering coverage in the individual and group 
markets, and third-party administrators providing administrative 
services to group health plans), but we tentatively conclude that these 
costs will not exceed the $136 million threshold. Thus, we tentatively 
conclude that these proposed regulations do not impose an unfunded 
mandate on State, local or Tribal governments or the private sector. 
Regardless, consistent with policy embodied in UMRA, this notice of 
proposed rulemaking has been designed to be the least burdensome 
alternative for State, local and Tribal governments, and the private 
sector while achieving the objectives of the Affordable Care Act.

E. Paperwork Reduction Act

1. Department of Labor and Department of the Treasury
    Section 2715 of the PHS Act directs the Departments, in 
consultation with the National Association of Insurance Commissioners 
(NAIC) and a working group comprised of stakeholders, to ``develop 
standards for use by a group health plan and a health insurance issuer 
in compiling and providing to applicants, enrollees, and policyholders 
and certificate holders a summary of benefits and coverage explanation 
that accurately describes the benefits and coverage under the 
applicable plan or coverage.'' Plans and issuers are required to begin 
providing the disclosure (herein referred to as a ``summary of benefits 
and coverage'' or SBC) no later than March 23, 2012.
    To implement this provision, collection of information requirements 
relate to the provision of the following:
     Summary of benefits and coverage.
     Coverage examples (as components of each SBC).
     A uniform glossary of health coverage and medical terms 
(uniform glossary).
     Notice of modifications.
    In developing these collections of information, the Departments 
have incorporated the documents recommended by the NAIC, including the 
SBC template (with instructions, samples and a guide for coverage 
examples calculations to be used in completing the template) and the 
uniform glossary. These collection instruments were developed over a 
period of several months and agreed to by the entire NAIC working group 
and recommended to the Departments by the NAIC.
    Currently, the Departments are soliciting public comments for 60 
days concerning these disclosures. The Departments have submitted a 
copy of these interim final regulations to OMB in accordance with 44 
U.S.C. 3507(d) for review of the information collections. The 
Departments and OMB are particularly interested in comments that:
     Evaluate whether the collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, for example, by 
permitting electronic submission of responses.

Comments should be sent to the Office of Information and Regulatory 
Affairs, Attention: Desk Officer for the Employee Benefits Security 
Administration either by fax to (202) 395-5806 or by e-mail to [email protected]. A copy of the ICR may be obtained by contacting 
the PRA addressee: G. Christopher Cosby, Office of Policy and Research, 
U.S. Department of Labor, Employee Benefits Security Administration, 
200 Constitution Avenue, NW., Room N-5718, Washington, DC 20210. 
Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free 
numbers. E-mail: [email protected]. ICRs submitted to OMB also are 
available at reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).

    The Departments estimate 858 respondents each year from 2011-2013. 
This estimate reflects approximately 220 issuers offering comprehensive 
major medical coverage in the small and large group markets, and 
approximately 638 third-party administrators (TPAs).\62\
---------------------------------------------------------------------------

    \62\ 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% of the 
TPAs (638). While the group health plans could prepare their own 
SBCs including coverage examples, the Departments assume that SBCs 
including coverage examples would be prepared by service providers, 
i.e., issuers and TPAs.

---------------------------------------------------------------------------

[[Page 52461]]

    To account for variation in firm size, the Departments estimate a 
weighted burden on the basis of issuer's 2009 total earned premiums for 
comprehensive major medical coverage.\63\ The Departments define small 
issuers as those with total earned premiums less than $50 million; 
medium issuers as those with total earned premiums between $50 million 
and $999 million; and large issuers as those with total earned premiums 
of $1 billion or more. Accordingly, the Departments estimate 
approximately 70 small, 115 medium, and 35 large issuers. Similarly, 
the Departments estimate approximately 204 small, 332 medium, and 102 
large TPAs.
---------------------------------------------------------------------------

    \63\ 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.
---------------------------------------------------------------------------

2011 Burden Estimate
    While the disclosures in these proposed regulations are not 
required until March 2012, the Departments estimate a one-time 
administrative cost of about $36,000,000 across the industry and a 
total of about 680,000 burden hours to prepare for the provisions of 
these proposed regulations. This calculation is made assuming issuers 
and TPAs will need to implement two principal tasks: (1) Develop teams 
to analyze current workflow processes against the new rules and (2) 
make appropriate changes to IT systems and processes.
    With respect to task (1), the Departments estimate about 97,000 
burden hours and an equivalent cost of about $4,800,000. The 
Departments calculate these estimates as follows:\64\
---------------------------------------------------------------------------

    \64\ For the purposes of these and other estimates in this 
section III.E, the Departments again use the assumptions outlined 
above in section III.A.5.

                                                     Task 1--Analyze Current Workflow and New Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26              36          $1,900              54          $2,900              72          $3,800
Benefits/Sales Professionals............           41.94              40           1,700              60           2,500              80           3,400
Attorneys...............................           85.44               4             340               6             510               8             680
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............              80           3,900             120           5,900             160           7,900
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............          22,000       1,100,000          53,000       2,600,000          22,000       1,100,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    With respect to task (2), the Departments estimate about 580,000 
burden hours and an equivalent cost of about $31,000,000. The 
Departments calculate these estimates as follows:

                                                                   Task 2--IT Changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26             480         $26,000             720         $38,000             960         $51,000
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............             480          26,000             720          38,000             960          51,000
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............         130,000       7,100,000         320,000      17,000,000         130,000       7,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Departments assume the total one-time administrative burden 
will be divided equally between 2011 and 2012. Thus, in 2011, the 
Departments estimate a one-time administrative cost of about 
$18,000,000 across the industry and about 340,000 hours. The 
Departments assume issuers and TPAs will incur no other costs in 2011 
related to the proposed collection of information.
2012 Burden Estimate
    The estimate hour and cost burden for the collections of 
information in 2012 are as follows:
     The Departments estimate that there will be about 
77,000,000 SBC responses.
     The Departments assume that of the total number of SBC 
responses, 38% would be sent electronically in the small and large 
group markets. Accordingly, the Departments estimate that about 
29,000,000 SBCs would be electronically distributed, and about 
48,000,000 SBCs would be distributed in paper form. The Departments 
assume there are no costs associated with electronic disclosures; there 
are costs only with regard to paper disclosures.
    Summary of Benefits and Coverage (not including coverage 
examples)--The estimated hour burden is about 820,000 hours, and the 
estimated total cost is about $30,000,000. The Departments calculate 
these estimates as follows:

[[Page 52462]]



                                                       Task 1--Equivalent Costs for Producing SBCs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26             1.5             $80             1.5             $80             1.5             $80
Benefits/Sales Professionals............           41.94             1.5              63             1.5              63             1.5              63
Financial Managers......................           75.32             0.5              38             0.5              38             0.5              38
Attorneys...............................           85.44             0.5              43             0.5              43             0.5              43
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............               4             220               4             220               4             220
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............            1100          61,000            1800         100,000             550          31,000
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                     Task 2--Equivalent Costs for Distributing SBCs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Hourly wage                     Total number of                        Total
                                                                           rate        Hours per SBC         SBCs         Total hours    equivalent cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clerical Staff.....................................................          $29.15            0.017       48,000,000          820,000      $24,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                      Task 1--Cost Burden for Printing SBCs
----------------------------------------------------------------------------------------------------------------
                                                                                                    Total cost
                                                                 Cost per SBC      Total SBCs         burden
----------------------------------------------------------------------------------------------------------------
Printing Costs...............................................           $0.12       48,000,000      $5,800,0000
----------------------------------------------------------------------------------------------------------------

    Task 2: Coverage Examples--The estimated hour burden is about 
100,000 hours, and the estimated total cost is about $8,700,000. The 
Departments calculate these estimates as follows:

                                                Task 2--Equivalent Costs for Producing Coverage Examples
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26              45          $2,400              45          $2,400              45          $2,400
Benefits/Sales Professionals............           41.94              45           1,900              45           1,900              45           1,900
Financial Managers......................           75.32              15           1,100              15           1,100              15           1,100
Attorneys...............................           85.44              15           1,300              15           1,300              15           1,300
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............             120           6,700             120           6,700             120           6,700
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............          33,000       1,900,000          53,000       3,000,000          16,000         900,000
--------------------------------------------------------------------------------------------------------------------------------------------------------


                               Task 2--Cost Burden for Printing Coverage Examples
----------------------------------------------------------------------------------------------------------------
                                                                Printing cost      Total CEs        Total cost
                                                                    per CE          printed           burden
----------------------------------------------------------------------------------------------------------------
Printing Costs...............................................           $0.06       48,000,000       $2,900,000
----------------------------------------------------------------------------------------------------------------

    Task 3: Glossary Requests--The Departments assume that in 2012, 
issuers and TPAs will begin responding to glossary requests to covered 
individuals, and that 2.5% of covered individuals, who receive paper 
SBCs, will request glossaries. The Departments further estimate that 
the burden and cost of providing the notices to be 2.5% of the burden 
and cost of distributing paper SBCs, plus an additional cost burden of 
$0.49 for each glossary (including $0.44 for first-class postage and 
$0.05 for supply costs). Accordingly, in 2012, the Departments estimate 
a total cost of about $1,300,000 and 21,000 burden hours associated 
with about 1,200,000 glossary requests.

[[Page 52463]]

    Task 4: One-Time Administrative Costs--As mentioned above, the 
Departments estimate a one-time administrative cost of about 
$36,000,000 across the industry and a total of about 680,000 burden 
hours, and assume this burden will be equally divided between 2011 and 
2012. Thus, in 2012, the Departments estimate a one-time administrative 
cost of about $18,000,000 across the industry and about 340,000 burden 
hours.
    The total 2012 burden estimate is about $58,000,000. The total 
number of burden hours is about 1,300,000.
2013 Burden Estimate
    Task 1: Summary of Benefits and Coverage (not including coverage 
examples)--The number of SBC responses is assumed to remain constant. 
Thus, in 2013, the Departments again estimate a total cost of about 
$30,000,000 and about 820,000 burden hours for SBCs (not including 
coverage examples).
    Task 2: Coverage Examples--The Departments again estimate a total 
cost of about $8,700,000 and 100,000 burden hours for coverage 
examples.
    Task 3: Notices of Modifications--The Departments assume that in 
2013, issuers and TPAs would send notices of modifications to covered 
individuals, and that 2% of covered individuals would receive such 
notice. The Departments further estimate that the burden and cost of 
providing the notices to be 2% of the combined burden and cost of the 
SBCs including the coverage examples, plus an additional cost burden 
for $0.49 for each paper notice (including $0.44 for first-class 
postage and $0.05 for supply costs). Accordingly, in 2013, the 
Departments estimate a total cost of about $1,400,000 and 18,000 burden 
hours associated with about 1,500,000 notices of modification.
    Task 4: Glossary Requests--The Departments assume that in 2013, 
issuers and TPAs will again respond to glossary requests to covered 
individuals, and that 5% of covered individuals, who receive paper 
SBCs, will request glossaries. The Departments further estimate that 
the burden and cost of providing the glossaries to be 5% of the burden 
and cost of distributing paper SBCs, plus an additional cost burden for 
$0.49 for each glossary (including $0.44 for first-class postage and 
$0.05 for supply costs). Accordingly, in 2013, the Departments estimate 
a total cost of about $2,700,000 and 41,000 burden hours associated 
with 2,400,000 glossary requests.
    Task 5: Maintenance Administrative Costs--In 2013, the Departments 
assume that issuers and TPAs will need to make updates to address 
changes in standards, and, thus, incur 15% of the one-time 
administrative burden. Accordingly, the estimated hour burden is about 
100,000 hours, and the estimated total cost is about $5,400,000. The 
Departments calculate these estimates as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26            46.2          $2,500            69.3          $3,700            92.4          $4,900
Benefits/Sales Professionals............           41.94            33.6           1,800            50.4           2,700            67.2           3,600
Attorneys...............................           85.44             4.2             220             6.3             340             8.4             450
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............              84           4,500             126           6,700             168           8,900
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............          23,000       1,200,000          56,000       3,000,000          23,000       1,200,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The total 2013 cost estimate is about $48,000,000.The total number 
of burden hours is about 1,100,000 hours.
    The Departments note that persons are not required to respond to, 
and generally are not subject to any penalty for failing to comply 
with, an ICR unless the ICR has a valid OMB control number.
    The 2012-2013 paperwork burden estimates are summarized as follows:
    Type of Review: New collection.
    Agencies: Employee Benefits Security Administration, Department of 
Labor; Internal Revenue Service, U.S. Department of the Treasury.
    Title: Affordable Care Act Uniform Explanation of Coverage 
Documents.
    OMB Number: XXXX-XXX; XXXX-XXXX.
    Affected Public: Business or other for profit; not-for-profit 
institutions.
    Total Respondents: 858.
    Total Responses: 80,000,000.
    Frequency of Response: On-going.
    Estimated Total Annual Burden Hours: 600,000 hours (Employee 
Benefits Security Administration); 600,000 hours (Internal Revenue 
Service).
    Estimated Total Annual Burden Cost: $5,100,000 (Employee Benefits 
Security Administration); $5,100,000 (Internal Revenue Service).
2. Department of Health and Human Services
    The Department estimates 333 respondents each year from 2011-2013. 
This estimate reflects the approximately 220 issuers offering 
comprehensive major medical coverage in the individual market and to 
fully-insured non-Federal governmental plans, and 113 TPAs acting as 
service providers for self-insured non-Federal governmental plans.\65\
---------------------------------------------------------------------------

    \65\ 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 calculated using half the number of issuers (221) and 15% 
of TPAs (113). While non-Federal governmental plans could prepare 
their own SBCs including Coverage Examples, the Department assumes 
that SBCs including coverage examples would be prepared by service 
providers, i.e., issuers and TPAs.
---------------------------------------------------------------------------

    To account for variation in firm size, the Department estimates a 
weighted burden on the basis of issuer's 2009 total earned premiums for 
comprehensive major medical coverage.\66\ The Department defines small 
issuers as those with total earned premiums less than $50 million; 
medium issuers as those with total earned premiums between $50 million 
and $999 million; and large issuers as those with total earned premiums 
of $1 billion or more. Accordingly, the

[[Page 52464]]

Department estimates approximately 70 small, 115 medium, and 35 large 
issuers. Similarly, the Department estimates approximately 36 small, 59 
medium, and 18 large TPAs.
---------------------------------------------------------------------------

    \66\ 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.
---------------------------------------------------------------------------

2011 Burden Estimate
    While the disclosures in these proposed regulations are not 
required until March 2012, the Department estimates a one-time 
administrative cost of about $14,000,000 across the industry and 
270,000 burden hours to prepare for the provisions of these proposed 
regulations. This calculation is made assuming issuers and TPAs will 
need to implement two principal tasks: (1) Develop teams to analyze 
current workflow processes against the new standards and (2) make 
appropriate changes to IT systems and processes.
    With respect to task (1), the Department estimates about 38,000 
burden hours, and an equivalent cost of about $1,900,000. The 
Department calculates these estimates as follows: \67\
---------------------------------------------------------------------------

    \67\ For the purposes of these and other estimates in this 
section III.E, the Departments again use the assumptions outlined 
above in section III.A.5.

                                 Task 1--Analyze Current Workflow and New Rules
----------------------------------------------------------------------------------------------------------------
                                             Small issuer/TPA        Medium issuer/TPA       Large issuer/TPA
                                Hourly   -----------------------------------------------------------------------
                               wage rate              Equivalent              Equivalent              Equivalent
                                             Hours       cost        Hours       cost        Hours       cost
----------------------------------------------------------------------------------------------------------------
IT Professionals............      $53.26          36      $1,900          54      $2,900          72      $3,800
Benefits/Sales Professionals       41.94          40       1,700          60       2,500          80       3,400
Attorneys...................       85.44           4         340           6         510           8         680
                             -----------------------------------------------------------------------------------
    Total per issuer/TPA....  ..........          80       3,900         120       5,900         160       7,900
                             -----------------------------------------------------------------------------------
    Total for all issuers/    ..........       8,500     420,000      21,000   1,000,000       8,500     450,000
     TPAs...................
----------------------------------------------------------------------------------------------------------------

    With respect to task (2), the Department estimates 230,000 burden 
hours, and an equivalent cost of out $12,000,000. The Department 
calculates these estimates as follows:

                                               Task 2--IT Changes
----------------------------------------------------------------------------------------------------------------
                                             Small issuer/TPA        Medium issuer/TPA       Large issuer/TPA
                                Hourly   -----------------------------------------------------------------------
                               wage rate              Equivalent              Equivalent              Equivalent
                                             Hours       cost        Hours       cost        Hours       cost
----------------------------------------------------------------------------------------------------------------
IT Professionals............      $53.26         480     $26,000         720     $38,000         960     $51,000
                             -----------------------------------------------------------------------------------
    Total per issuer/TPA....  ..........         480      26,000         720      38,000         960      51,000
                             -----------------------------------------------------------------------------------
Total for all issuers/TPAs..  ..........      51,000   2,700,000     125,000   6,700,000      51,000   2,700,000
----------------------------------------------------------------------------------------------------------------

    The Department assumes the total one-time administrative burden 
will be divided equally between 2011 and 2012. Thus, in 2011, the 
Department estimates a one-time administrative cost of about $7,000,000 
across the industry and 135,000 burden hours. The Department assumes 
issuers and TPAs will incur no other costs in 2011 related to the 
proposed collection of information.
2012 Burden Estimate
    The hour and cost burden for the collections of information are as 
follows:
     The Department estimates that there will be about 
13,000,000 SBC responses in 2012.
     The Department assumes that 38 percent of the SBCs would 
be sent electronically in the group market, and 70 percent of the SBCs 
would be sent electronically in the individual market. Accordingly, the 
Department estimates that about 5,900,000 SBCs would be electronically 
distributed, and about 7,400,000 SBCs would be distributed in paper 
form. The Department assumes there are no costs associated with 
electronic disclosures, and there are costs only with regard to paper 
disclosures.
    Task 1: Summary of benefits and coverage (not including coverage 
examples)--The estimated hour burden is about 170,000 hours, and the 
estimated total cost is about $5,900,000. The Department calculates 
these estimates as follows:

                                   Task 1--Equivalent Costs for Producing SBCs
----------------------------------------------------------------------------------------------------------------
                                             Small issuer/TPA        Medium issuer/TPA       Large issuer/TPA
                                Hourly   -----------------------------------------------------------------------
                               wage rate              Equivalent              Equivalent              Equivalent
                                             Hours       cost        Hours       cost        Hours       cost
----------------------------------------------------------------------------------------------------------------
IT Professionals............      $53.26         1.5         $80         1.5         $80         1.5         $80
Benefits/Sales Professionals       41.94         1.5          63         1.5          63         1.5          63
Financial Managers..........       75.32         0.5          38         0.5          38         0.5          38

[[Page 52465]]

 
Attorneys...................       85.44         0.5          43         0.5          43         0.5          43
                             -----------------------------------------------------------------------------------
    Total per issuer/TPA....  ..........           4         220           4         220           4         220
                             -----------------------------------------------------------------------------------
    Total for all issuers/    ..........         420      24,000         700      39,000         200      12,000
     TPAs...................
----------------------------------------------------------------------------------------------------------------


                                 Task 1--Equivalent Costs for Distributing SBCs
----------------------------------------------------------------------------------------------------------------
                                                                                                       Total
                                    Hourly wage    Hours per SBC   Total number     Total hours     equivalent
                                       rate                           of SBCs                          cost
----------------------------------------------------------------------------------------------------------------
Clerical Staff, Individual                $29.15           0.033       2,700,000          89,000      $2,600,000
 Market.........................
Clerical, Group Market..........           29.15           0.017       4,700,000          80,000       2,300,000
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............       7,400,000         170,000      $4,900,000
----------------------------------------------------------------------------------------------------------------


                                      Task 1--Cost Burden for Printing SBCs
----------------------------------------------------------------------------------------------------------------
                                                                 Cost per SBC      Total SBCs      Cost burden
----------------------------------------------------------------------------------------------------------------
Printing Costs...............................................           $0.12        7,400,000         $890,000
----------------------------------------------------------------------------------------------------------------

    Task 2: Coverage Examples--The estimated hour burden is about 
40,000 hours, and the estimated total cost is about $2,700,000. The 
Department calculates these estimates as follows:

                                                Task 2--Equivalent Costs for Producing Coverage Examples
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26              45          $2,400              45          $2,400              45          $2,400
Benefits/Sales Professionals............           41.94              45           1,900              45           1,900              45           1,900
Financial Managers......................           75.32              15           1,100              15           1,100              15           1,100
Attorneys...............................           85.44              15           1,300              15           1,300              15           1,300
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............             120           6,700             120           6,700             120           6,700
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............          13,000         710,000          21,000       1,200,000           6,400         350,000
--------------------------------------------------------------------------------------------------------------------------------------------------------


                               Task 2--Cost Burden for Printing Coverage Examples
----------------------------------------------------------------------------------------------------------------
                                                                Printing cost      Total CEs        Total cost
                                                                    per CE          printed           burden
----------------------------------------------------------------------------------------------------------------
Printing Costs...............................................           $0.06        7,400,000         $440,000
----------------------------------------------------------------------------------------------------------------

    Task 3: Glossary Requests--The Department assumes that in 2012, 
issuers and TPAs will begin responding to glossary requests to covered 
individuals, and that 2.5% of covered individuals, who receive paper 
SBCs, will request glossaries. The Departments further estimate that 
the burden and cost of providing the glossaries to be 2.5% of the 
burden and cost of distributing paper SBCs, plus an additional cost 
burden of $0.49 for each glossary (including $0.44 for first-class 
postage and $0.05 for supply costs). Accordingly, in 2012, the 
Department estimates a total cost of about $240,000 and 4,300 burden 
hours associated with about 190,000 glossary requests.
    Task 4: One-Time Administrative Costs: As mentioned above, the 
Department estimates a one-time administrative cost of about 
$14,000,000 across the industry and a total of 270,000 burden hours, 
and assumes this burden will be equally divided between 2011 and 2012. 
Thus, in 2012, the Department estimates a one-time administrative cost 
of about $7,000,000 across the industry and 135,000 burden hours.

[[Page 52466]]

    The total 2012 burden estimate is about $16,000,000. The total 
number of burden hours is 350,000.
2013 Burden Estimate
    Task 1: Summary of benefits and coverage (not including coverage 
examples)--The number of SBC responses is assumed to remain constant. 
Thus, in 2013, the Department again estimates a total cost of about 
$5,900,000 and 170,000 burden hours for SBCs (not including coverage 
examples).
    Task 2: Coverage Examples--In 2013, the Department again estimates 
a total cost of about $2,700,000 and 40,320 burden hours for coverage 
examples.
    Task 3: Notices of Modifications--The Department assumes that in 
2013, issuers will begin sending notices of modifications to covered 
individuals, and that 2% of covered individuals will receive such 
notice. The Department further estimates that the burden and cost of 
providing the notices to be 2% of the combined burden and cost of the 
SBCs including the coverage examples, plus an additional cost burden 
for $0.49 for each paper notice (including $0.44 for first-class 
postage and $0.05 for supply costs). Accordingly, in 2013, the 
Department estimates a total cost of about $300,000 and 4,200 burden 
hours associated with about 260,000 notices of modification.
    Task 4: Glossary Requests--The Department assumes that in 2013, 
issuers and TPAs will again respond to glossary requests to covered 
individuals, and that 5% of covered individuals, who receive paper 
SBCs, will request glossaries. The Department further estimates that 
the burden and cost of providing the glossaries to be 5% of the burden 
and cost of distributing paper SBCs, plus an additional cost burden of 
$0.49 for each glossary (including $0.44 for first-class postage and 
$0.05 for supply costs). Accordingly, in 2013, the Department estimates 
a total cost of $470,000 and 8,500 burden hours associated with 370,000 
glossary requests.
    Task 5: Maintenance Administrative Costs--In 2013, the Departments 
assume that issuers and TPAs will need to make updates to address 
changes in standards, and, thus, incur 15% of the one-time 
administrative burden. Accordingly, the estimated hour burden is about 
40,000 hours, and the estimated total cost is about $2,000,000. The 
Departments calculate these estimates as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Small issuer/TPA                Medium issuer/TPA               Large issuer/TPA
                                            Hourly wage  -----------------------------------------------------------------------------------------------
                                               rate                         Equivalent                      Equivalent                      Equivalent
                                                               Hours           cost            Hours           cost            Hours           cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
IT Professionals........................          $53.26            46.2          $2,500            69.3          $3,700            92.4          $4,900
Benefits/Sales Professionals............           41.94            33.6           1,800            50.4           2,700            67.2           3,600
Attorneys...............................           85.44             4.2             220             6.3             340             8.4             450
                                         ---------------------------------------------------------------------------------------------------------------
    Total per issuer/TPA................  ..............              84           4,500             126           6,700             168           8,900
                                         ---------------------------------------------------------------------------------------------------------------
    Total for all issuers/TPAs..........  ..............           8,900         470,000          22,000       1,100,000           8,900         470,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The total 2013 cost estimate is about $11,000,000. The total number 
of burden hours is about 260,000 hours.
    The Department notes that persons are not required to respond to, 
and generally are not subject to any penalty for failing to comply 
with, an ICR unless the ICR has a valid OMB control number.
    The 2012-2013 paperwork burden estimates are summarized as follows:
    Type of Review: New collection.
    Agency: Department of Health and Human Services.
    Title: Affordable Care Act Uniform Explanation of Coverage 
Documents.
    OMB Number: 0938-New.
    Affected Public: Business; State, Local, or Tribal Governments.
    Total Respondents: 333.
    Total Responses: 13,000,000.
    Frequency of Response: On-going.
    Estimated Total Annual Burden Hours: 310,000 hours.
    Estimated Total Annual Burden Cost: $1,600,000.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access CMS' 
Web site at http://www.cms.gov/PaperworkReductionActof1995/PRAL/list.asp#TopOfPage or e-mail your request, including your address, 
phone number, OMB number, and CMS document identifier, to 
[email protected], or call the Reports Clearance Office at 410-786-
1326.
    If you comment on this information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-9982-P. Fax: 202-395-5806; or E-mail: [email protected]

E. Federalism Statement--Department of Labor and Department of Health 
and Human Services

    Executive Order 13132 outlines fundamental principles of 
federalism, and requires the adherence to specific criteria by Federal 
agencies in the process of their formulation and implementation of 
policies that have ``substantial direct effects'' on the States, the 
relationship between the national government and States, or on the 
distribution of power and responsibilities among the various levels of 
government. Federal agencies promulgating regulations that have 
federalism implications must consult with State and local officials and 
describe the extent of their consultation and the nature of the 
concerns of State and local officials in the preamble to the 
regulation.
    In the Departments' view, these proposed rules have federalism 
implications, because it would have direct effects on the States, the 
relationship between national governments and States, or on the 
distribution of power and responsibilities among various levels of 
government relating to the disclosure of health insurance coverage 
information to consumers. Under these proposed rules, all group health 
plans and health insurance issuers offering group or individual health 
insurance coverage, including self-funded non-Federal

[[Page 52467]]

governmental plans as defined in section 2791 of the PHS Act, would be 
required to follow uniform standards for compiling and providing a 
summary of benefits and coverage to consumers. Such Federal standards 
developed under PHS Act section 2715(a) would preempt any related State 
standards that require a summary of benefits and coverage that provides 
less information to consumers than that required to be provided under 
PHS Act section 2715(a).
    In general, through section 514, ERISA supersedes State laws to the 
extent that they relate to any covered employee benefit plan, and 
preserves State laws that regulate insurance, banking, or securities. 
While ERISA prohibits States from regulating a plan as an insurance or 
investment company or bank, the preemption provisions of section 731 of 
ERISA and section 2724 of the PHS Act (implemented in 29 CFR 
2590.731(a) and 45 CFR 146.143(a)) apply so that the HIPAA requirements 
(including those of the Affordable Care Act) are not to be ``construed 
to supersede any provision of State law which establishes, implements, 
or continues in effect any standard or requirement solely relating to 
health insurance issuers in connection with group health insurance 
coverage except to the extent that such standard or requirement 
prevents the application of a requirement'' of a Federal standard. The 
conference report accompanying HIPAA indicates that this is intended to 
be the ``narrowest'' preemption of State laws (See House Conf. Rep. No. 
104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018). 
States may continue to apply State law requirements except to the 
extent that such requirements prevent the application of the Affordable 
Care Act requirements that are the subject of this rulemaking. 
Accordingly, States have significant latitude to impose requirements on 
health insurance issuers that are more restrictive than the Federal 
law. However, under these proposed rules, a State would not be allowed 
to impose a requirement that modifies the summary of benefits and 
coverage required to be provided under PHS Act section 2715(a), because 
it would prevent the application of this proposed rule's uniform 
disclosure requirement.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have federalism 
implications or limit the policy making discretion of the States, the 
Departments have engaged in efforts to consult with and work 
cooperatively with affected States, including consulting with, and 
attending conferences of, the National Association of Insurance 
Commissioners and consulting with State insurance officials on an 
individual basis. It is expected that the Departments will act in a 
similar fashion in enforcing the Affordable Care Act, including the 
provisions of section 2715 of the PHS Act. Throughout the process of 
developing these proposed regulations, to the extent feasible within 
the specific preemption provisions of HIPAA as it applies to the 
Affordable Care Act, the Departments have attempted to balance the 
States' interests in regulating health insurance issuers, and Congress' 
intent to provide uniform minimum protections to consumers in every 
State. By doing so, it is the Departments' view that they have complied 
with the requirements of Executive Order 13132.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to this proposed rule, the 
Departments certify that the Employee Benefits Security Administration 
and the Centers for Medicare & Medicaid Services have complied with the 
requirements of Executive Order 13132 for the attached proposed rule in 
a meaningful and timely manner.

IV. Statutory Authority

    The Department of the Treasury proposed regulations are proposed to 
be adopted pursuant to the authority contained in sections 7805 and 
9833 of the Code.
    The Department of Labor proposed regulations are proposed to be 
adopted pursuant to the authority contained in 29 U.S.C. 1027, 1059, 
1135, 1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1185d, 
1191, 1191a, 1191b, and 1191c; sec. 101(g), Public Law 104-191, 110 
Stat. 1936; sec. 401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C. 
651 note); sec. 512(d), Public Law 110-343, 122 Stat. 3881; sec. 1001, 
1201, and 1562(e), Public Law 111-148, 124 Stat. 119, as amended by 
Public Law 111-152, 124 Stat. 1029; Secretary of Labor's Order 3-2010, 
75 FR 55354 (September 10, 2010).
    The Department of Health and Human Services proposed regulations 
are proposed to be adopted pursuant to the authority contained in 
sections 2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 
300gg through 300gg-63, 300gg-91, and 300gg-92), as amended.

List of Subjects

26 CFR Part 54

    Excise taxes, Health care, Health insurance, Pensions, Reporting 
and recordkeeping requirements.

29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, and State regulation of health insurance.

Sarah Hall Ingram,
Acting Deputy Commissioner for Services and Enforcement, Internal 
Revenue Service.

    Signed this 15th day of August, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.

    Dated: July 28, 2011.
Donald Berwick,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: August 9, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Chapter I

    Accordingly, 26 CFR parts 54 and 602 are proposed to be amended as 
follows:

PART 54--PENSION EXCISE TAXES

    Paragraph 1. The authority citation for Part 54 is amended by 
adding an entry for Sec.  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:


Sec.  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

[[Page 52468]]

(a)(1) in accordance with the rules of this section.
    (i) By a group health insurance issuer to a group health plan--(A) 
A health insurance issuer offering group health insurance coverage must 
provide the SBC to a group health plan (or its sponsor) upon 
application or request for information about the health coverage as 
soon as practicable following the request, but in no event later than 
seven days following the request. If an SBC is provided upon request 
for information about health coverage and the plan (or its sponsor) 
subsequently applies for health coverage, a second SBC must be provided 
under this paragraph (a)(1)(i)(A) only if the information required to 
be in the SBC has changed.
    (B) If there is any change in the information required to be in the 
SBC before the coverage is offered, or before the first day of 
coverage, the issuer must update and provide a current SBC to the plan 
(or its sponsor) no later than the date of the offer (or no later than 
the first day of coverage, as applicable).
    (C) If the issuer renews or reissues the policy, certificate, or 
contract of insurance (for example, for a succeeding policy year), the 
issuer must provide a new SBC when the policy, certificate, or contract 
is renewed or reissued.
    (1) In the case of renewal or reissuance, if written application is 
required for renewal (in either paper or electronic form), the SBC must 
be provided no later than the date the materials are distributed.
    (2) If renewal or reissuance is automatic, the SBC must be provided 
no later than 30 days prior to the first day of the new policy year.
    (D) If a group health plan (or its sponsor) requests an SBC from a 
health insurance issuer offering group health insurance coverage, it 
must be provided as soon as practicable, but in no event later than 
seven days following the request for an SBC.
    (ii) By a group health insurance issuer and a group health plan to 
participants and beneficiaries--(A) A group health plan (including its 
administrator, as defined under section 3(16) of ERISA), and a health 
insurance issuer offering group health insurance coverage, must provide 
an SBC to a participant or beneficiary (as defined under sections 3(7) 
and 3(8) of ERISA), and consistent with the rules of paragraph 
(a)(1)(iii) of this section) with respect to each benefit package 
offered by the plan or issuer for which the participant or beneficiary 
is eligible.
    (B) The SBC must be provided as part of any written application 
materials that are distributed by the plan or issuer for enrollment. If 
the plan does not distribute written application materials for 
enrollment, the SBC must be distributed no later than the first date 
the participant is eligible to enroll in coverage for the participant 
or any beneficiaries.
    (C) If there is any change to the information required to be in the 
SBC before the first day of coverage, the plan or issuer must update 
and provide a current SBC to a participant or beneficiary no later than 
the first day of coverage.
    (D) The plan or issuer must provide the SBC to special enrollees 
(as described in Sec.  54.9801-6) within seven days of a request for 
enrollment pursuant to a special enrollment right.
    (E) If the plan or issuer requires participants or beneficiaries to 
renew in order to maintain coverage (for example, for a succeeding plan 
year), the plan or issuer must provide a new SBC when the coverage is 
renewed.
    (1) If written application is required for renewal (in either paper 
or electronic form), the SBC must be provided no later than the date 
the materials are distributed.
    (2) If renewal is automatic, the SBC must be provided no later than 
30 days prior to the first day of coverage under the new plan year.
    (F) A plan or issuer must provide the SBC to participants or 
beneficiaries upon request, as soon as practicable, but in no event 
later than seven days following the request.
    (iii) Special rules to prevent unnecessary duplication with respect 
to group health coverage--(A) An entity required to provide an SBC 
under paragraph (a)(1) of this section with respect to an individual 
satisfies that requirement if another party provides the SBC, but only 
to the extent that the SBC is timely and complete in accordance with 
the other rules of this section. Therefore, for example, in the case of 
a group health plan funded through an insurance policy, the plan 
satisfies the requirement to provide an SBC with respect to an 
individual if the issuer provides a timely and complete SBC to the 
individual.
    (B) If a participant and any beneficiaries are known to reside at 
the same address, and a single SBC is provided to that address, the 
requirement to provide the SBC is satisfied with respect to all 
individuals residing at that address. If a beneficiary's last known 
address is different than the participant's last known address, a 
separate SBC is required to be provided to the beneficiary at the 
beneficiary's last known address.
    (C) With respect to a group health plan that offers multiple 
benefit packages, the plan or issuer is required to provide a new SBC 
automatically upon renewal only with respect to the benefit package in 
which a participant or beneficiary is enrolled; SBCs are not required 
to be provided automatically with respect to benefit packages in which 
the participant or beneficiary are not enrolled. However, if a 
participant or beneficiary requests an SBC with respect to another 
benefit package (or more than one other benefit package) for which the 
participant or beneficiary is eligible, the SBC (or SBCs, in the case 
of a request for SBCs relating to more than one benefit package) must 
be provided upon request in accordance with the rules of paragraph 
(a)(1)(ii) of this section, which requires the SBC to be provided as 
soon as practicable, but in no event later than seven days following 
the request.
    (2) Content--(i) In general. The SBC must include the following:
    (A) Uniform definitions of standard insurance terms and medical 
terms so that consumers may compare health coverage and understand the 
terms of (or exceptions to) their coverage;
    (B) A description of the coverage, including cost sharing, for each 
category of benefits identified by the Secretary in guidance;
    (C) The exceptions, reductions, and limitations of the coverage;
    (D) The cost-sharing provisions of the coverage, including 
deductible, coinsurance, and copayment obligations;
    (E) The renewability and continuation of coverage provisions;
    (F) Coverage examples, in accordance with the rules of paragraph 
(a)(2)(ii) of this section;
    (G) With respect to coverage beginning on or after January 1, 2014, 
a statement about whether the plan or coverage provides minimum 
essential coverage as defined under section 5000A(f) and whether the 
plan's or coverage's share of the total allowed costs of benefits 
provided under the plan or coverage meets applicable requirements;
    (H) A statement that the SBC is only a summary and that the plan 
document, policy, or certificate of insurance should be consulted to 
determine the governing contractual provisions of the coverage;
    (I) Contact information for questions and obtaining a copy of the 
plan document or the insurance policy, certificate, or contract of 
insurance (such as a telephone number for customer service and an 
Internet address for obtaining a copy of the plan

[[Page 52469]]

document or the insurance policy, certificate, or contract of 
insurance);
    (J) For plans and issuers that maintain one or more networks of 
providers, an Internet address (or similar contact information) for 
obtaining a list of network providers;
    (K) For plans and issuers that use a formulary in providing 
prescription drug coverage, an Internet address (or similar contact 
information) for obtaining information on prescription drug coverage;
    (L) An Internet address for obtaining the uniform glossary, as 
described in paragraph (c) of this section; and
    (M) Premiums (or in the case of a self-insured group health plan, 
cost of coverage).
    (ii) Coverage examples. The SBC must include coverage examples that 
illustrate benefits provided under the plan or coverage for common 
benefits scenarios (including pregnancy and serious or chronic medical 
conditions) that are identified by the Secretary in accordance with the 
following:
    (A) Number of examples. The Secretary may identify up to six 
coverage examples that may be required in an SBC.
    (B) Benefits scenarios. For purposes of this section, a benefits 
scenario is a hypothetical situation, consisting of a sample treatment 
plan for a specified medical condition during a specific period of 
time, based on recognized clinical practice guidelines available 
through the National Guideline Clearinghouse, Agency for Healthcare 
Research and Quality. The Secretary will specify, in guidance, the 
types of services, dates of service, applicable billing codes, and 
allowed charges for each claim in the benefits scenario.
    (C) Demonstration of benefit provided. To demonstrate benefits 
provided under the plan or coverage, a plan or issuer simulates how 
claims would be processed under the scenarios provided by the Secretary 
to generate an estimate of cost sharing a consumer could expect to pay 
under the benefit package. The demonstration of benefits will take into 
account any cost sharing, excluded benefits, and other limitations on 
coverage, as described by the Secretary in guidance.
    (3) Appearance. A group health plan and a health insurance issuer 
must provide an SBC as a stand-alone document in the form authorized by 
the Secretary and completed in accordance with the instructions for 
completing the SBC that are authorized by the Secretary in guidance. 
The SBC must be presented in a uniform format, use terminology 
understandable by the average plan enrollee, not exceed four double-
sided pages in length, and not include print smaller than 12-point 
font.
    (4) Form--(i) An SBC provided by an issuer offering group health 
insurance coverage to a plan (or its sponsor), may be provided in paper 
form. Alternatively, the SBC may be provided electronically (such as e-
mail or an Internet posting) if the following three conditions are 
satisfied--
    (A) The format is readily accessible by the plan (or its sponsor);
    (B) The SBC is provided in paper form free of charge upon request, 
and
    (C) If the electronic form is an Internet posting, the issuer 
timely advises the plan (or its sponsor) in paper form or e-mail that 
the documents are available on the Internet and provides the Internet 
address.
    (ii) An SBC provided by a plan or issuer to a participant or 
beneficiary may be provided in paper form. Alternatively, the SBC may 
be provided electronically if the requirements of 29 CFR 2520.104b-1 
are met.
    (5) Language. A group health plan or health insurance issuer must 
provide the SBC in a culturally and linguistically appropriate manner. 
For purposes of this paragraph (a)(5), a plan or issuer is considered 
to provide the SBC in a culturally and linguistically appropriate 
manner if the thresholds and standards of Sec.  54.9815-2719T(e) are 
met as applied to the SBC.
    (b) Notice of modifications. If a group health plan, or health 
insurance issuer offering group health insurance coverage, makes any 
material modification (as defined under section 102 of ERISA) in any of 
the terms of the plan or coverage that would affect the content of the 
SBC, that is not reflected in the most recently provided SBC, and that 
occurs other than in connection with a renewal or reissuance of 
coverage, the plan or issuer must provide notice of the modification to 
enrollees not later than 60 days prior to the date on which such 
modification will become effective. The notice of modification must be 
provided in a form that is consistent with the rules of paragraph 
(a)(4) of this section.
    (c) Uniform glossary--(1) In general. A group health plan, and a 
health insurance issuer offering group health insurance coverage, must 
make available to participants and beneficiaries the uniform glossary 
described in paragraph (c)(2) of this section in accordance with the 
appearance and format requirements of paragraphs (c)(3) and (c)(4) of 
this section.
    (2) Health-coverage-related terms and medical terms. The uniform 
glossary must provide uniform definitions, specified by the Secretary 
in guidance, for the following health-coverage-related terms and 
medical terms:
    (i) Allowed amount, appeal, balance billing, co-insurance, 
complications of pregnancy, co-payment, deductible, durable medical 
equipment, emergency medical condition, emergency medical 
transportation, emergency room care, emergency services, excluded 
services, grievance, habilitation services, health insurance, home 
health care, hospice services, hospitalization, hospital outpatient 
care, in-network co-insurance, in-network co-payment, medically 
necessary, network, non-preferred provider, out-of-network co-
insurance, out-of-network co-payment, out-of-pocket limit, physician 
services, plan, preauthorization, preferred provider, premium, 
prescription drug coverage, prescription drugs, primary care physician, 
primary care provider, provider, reconstructive surgery, rehabilitation 
services, skilled nursing care, specialist, usual customary and 
reasonable (UCR), and urgent care; and
    (ii) Such other terms as the Secretary determines are important to 
define so that individuals and employers may compare and understand the 
terms of coverage and medical benefits (including any exceptions to 
those benefits), as specified in guidance.
    (3) Appearance. A group health plan, and a health insurance issuer, 
must provide the uniform glossary with the appearance authorized in 
guidance, ensuring that the uniform glossary is presented in a uniform 
format and utilizes terminology understandable by the average plan 
enrollee.
    (4) Form and manner. A plan or issuer must make the uniform 
glossary described in this paragraph (c) available upon request, in 
either paper or electronic form (as requested), within seven days of 
the request. (Under the rules of paragraph (a) of this section, the 
form authorized in guidance for the SBC will disclose to participants 
and beneficiaries their rights to request a copy of the uniform 
glossary.)
    (d) Preemption. With respect to the standards for providing an SBC 
required under paragraph (a) of this section, State laws that require a 
health insurance issuer to provide an SBC that supplies less 
information than required under paragraph (a) of this section are 
preempted.
    (e) Failure to provide. A group health plan or health insurance 
issuer that willfully fails to provide information required under this 
section to a participant or beneficiary is subject to a fine of not 
more than $1,000 for each such failure. A failure with respect to each 
participant or beneficiary

[[Page 52470]]

constitutes a separate offense for purposes of this paragraph (e).
    (f) Applicability date. This section is applicable beginning March 
23, 2012. See Sec.  54.9815-1251T(d), providing that this section 
applies to grandfathered health plans.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 3. The authority citation for part 602 continues to read in 
part as follows:

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

    Par. 4. Section 602.101(b) is amended by adding the following entry 
in numerical order to the table to read as follows:


Sec.   602.101 OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                                * * * * *
54.9815-2715............................................           1545-
 
                                * * * * *
------------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Chapter XXV

    29 CFR part 2590 is proposed to be amended as follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

    1. The authority citation for part 2590 continues to read as 
follows:

    Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b, and 
1191c; sec. 101(g), Pub. L.104-191, 110 Stat. 1936; sec. 401(b), 
Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), 
Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. 
L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 
1029; Secretary of Labor's Order 3-2010, 75 FR 55354 (September 10, 
2010).

Subpart C--Other Requirements

    2. Section 2590.715-2715 is added to Subpart C to read as follows:


Sec.  2590.715-2715  Summary of benefits and coverage and uniform 
glossary.

    (a) Summary of benefits and coverage--(1) In general. A group 
health plan (and its administrator as defined in section 3(16)(A) of 
ERISA), and a health insurance issuer offering group health insurance 
coverage, is required to provide a written summary of benefits and 
coverage (SBC) for each benefit package without charge to entities and 
individuals described in this paragraph (a)(1) in accordance with the 
rules of this section.
    (i) By a group health insurance issuer to a group health plan--(A) 
A health insurance issuer offering group health insurance coverage must 
provide the SBC to a group health plan (or its sponsor) upon 
application or request for information about the health coverage as 
soon as practicable following the request, but in no event later than 
seven days following the request. If an SBC is provided upon request 
for information about health coverage and the plan (or its sponsor) 
subsequently applies for health coverage, a second SBC must be provided 
under this paragraph (a)(1)(i)(A) only if the information required to 
be in the SBC has changed.
    (B) If there is any change in the information required to be in the 
SBC before the coverage is offered, or before the first day of 
coverage, the issuer must update and provide a current SBC to the plan 
(or its sponsor) no later than the date of the offer (or no later than 
the first day of coverage, as applicable).
    (C) If the issuer renews or reissues the policy, certificate, or 
contract of insurance (for example, for a succeeding policy year), the 
issuer must provide a new SBC when the policy, certificate, or contract 
is renewed or reissued.
    (1) In the case of renewal or reissuance, if written application is 
required for renewal (in either paper or electronic form), the SBC must 
be provided no later than the date the materials are distributed.
    (2) If renewal or reissuance is automatic, the SBC must be provided 
no later than 30 days prior to the first day of the new policy year.
    (D) If a group health plan (or its sponsor) requests an SBC from a 
health insurance issuer offering group health insurance coverage, it 
must be provided as soon as practicable, but in no event later than 
seven days following the request for an SBC.
    (ii) By a group health insurance issuer and a group health plan to 
participants and beneficiaries--(A) A group health plan (including its 
administrator, as defined under section 3(16) of ERISA), and a health 
insurance issuer offering group health insurance coverage, must provide 
an SBC to a participant or beneficiary (as defined under sections 3(7) 
and 3(8) of ERISA), and consistent with the rules of paragraph 
(a)(1)(iii) of this section) with respect to each benefit package 
offered by the plan or issuer for which the participant or beneficiary 
is eligible.
    (B) The SBC must be provided as part of any written application 
materials that are distributed by the plan or issuer for enrollment. If 
the plan does not distribute written application materials for 
enrollment, the SBC must be distributed no later than the first date 
the participant is eligible to enroll in coverage for the participant 
or any beneficiaries.
    (C) If there is any change to the information required to be in the 
SBC before the first day of coverage, the plan or issuer must update 
and provide a current SBC to a participant or beneficiary no later than 
the first day of coverage.
    (D) The plan or issuer must provide the SBC to special enrollees 
(as described in Sec.  2590.701-6 of this Part) within seven days of a 
request for enrollment pursuant to a special enrollment right.
    (E) If the plan or issuer requires participants or beneficiaries to 
renew in order to maintain coverage (for example, for a succeeding plan 
year), the plan or issuer must provide a new SBC when the coverage is 
renewed.
    (1) If written application is required for renewal (in either paper 
or electronic form), the SBC must be provided no later than the date 
the materials are distributed.
    (2) If renewal is automatic, the SBC must be provided no later than 
30 days prior to the first day of coverage under the new plan year.
    (F) A plan or issuer must provide the SBC to participants or 
beneficiaries upon request, as soon as practicable, but in no event 
later than seven days following the request.
    (iii) Special rules to prevent unnecessary duplication with respect 
to group health coverage--(A) An entity required to provide an SBC 
under paragraph (a)(1) of this section with respect to an individual 
satisfies that requirement if another party provides the SBC, but only 
to the extent that the SBC is timely and complete in accordance with 
the other rules of this section. Therefore, for example, in the case of 
a group health plan funded through an insurance policy, the plan 
satisfies the requirement to provide an SBC with respect to an 
individual if the issuer provides a timely and complete SBC to the 
individual.
    (B) If a participant and any beneficiaries are known to reside at 
the same address, and a single SBC is provided to that address, the 
requirement to provide the SBC is satisfied with respect to all 
individuals residing at that address. If a

[[Page 52471]]

beneficiary's last known address is different than the participant's 
last known address, a separate SBC is required to be provided to the 
beneficiary at the beneficiary's last known address.
    (C) With respect to a group health plan that offers multiple 
benefit packages, the plan or issuer is required to provide a new SBC 
automatically upon renewal only with respect to the benefit package in 
which a participant or beneficiary is enrolled; SBCs are not required 
to be provided automatically with respect to benefit packages in which 
the participant or beneficiary are not enrolled. However, if a 
participant or beneficiary requests an SBC with respect to another 
benefit package (or more than one other benefit package) for which the 
participant or beneficiary is eligible, the SBC (or SBCs, in the case 
of a request for SBCs relating to more than one benefit package) must 
be provided upon request in accordance with the rules of paragraph 
(a)(1)(ii) of this section, which requires the SBC to be provided as 
soon as practicable, but in no event later than seven days following 
the request.
    (2) Content--(i) In general. The SBC must include the following:
    (A) Uniform definitions of standard insurance terms and medical 
terms so that consumers may compare health coverage and understand the 
terms of (or exceptions to) their coverage;
    (B) A description of the coverage, including cost sharing, for each 
category of benefits identified by the Secretary in guidance;
    (C) The exceptions, reductions, and limitations of the coverage;
    (D) The cost-sharing provisions of the coverage, including 
deductible, coinsurance, and copayment obligations;
    (E) The renewability and continuation of coverage provisions;
    (F) Coverage examples, in accordance with the rules of paragraph 
(a)(2)(ii) of this section;
    (G) With respect to coverage beginning on or after January 1, 2014, 
a statement about whether the plan or coverage provides minimum 
essential coverage as defined under section 5000A(f) of the Internal 
Revenue Code and whether the plan's or coverage's share of the total 
allowed costs of benefits provided under the plan or coverage meets 
applicable requirements;
    (H) A statement that the SBC is only a summary and that the plan 
document, policy, or certificate of insurance should be consulted to 
determine the governing contractual provisions of the coverage;
    (I) Contact information for questions and obtaining a copy of the 
plan document or the insurance policy, certificate, or contract of 
insurance (such as a telephone number for customer service and an 
Internet address for obtaining a copy of the plan document or the 
insurance policy, certificate, or contract of insurance);
    (J) For plans and issuers that maintain one or more networks of 
providers, an Internet address (or similar contact information) for 
obtaining a list of network providers;
    (K) For plans and issuers that use a formulary in providing 
prescription drug coverage, an Internet address (or similar contact 
information) for obtaining information on prescription drug coverage;
    (L) An Internet address for obtaining the uniform glossary, as 
described in paragraph (c) of this section; and
    (M) Premiums (or in the case of a self-insured group health plan, 
cost of coverage).
    (ii) Coverage examples. The SBC must include coverage examples that 
illustrate benefits provided under the plan or coverage for common 
benefits scenarios (including pregnancy and serious or chronic medical 
conditions) that are identified by the Secretary in accordance with the 
following:
    (A) Number of examples. The Secretary may identify up to six 
coverage examples that may be required in an SBC.
    (B) Benefits scenarios. For purposes of this section, a benefits 
scenario is a hypothetical situation, consisting of a sample treatment 
plan for a specified medical condition during a specific period of 
time, based on recognized clinical practice guidelines available 
through the National Guideline Clearinghouse, Agency for Healthcare 
Research and Quality. The Secretary will specify, in guidance, the 
types of services, dates of service, applicable billing codes, and 
allowed charges for each claim in the benefits scenario.
    (C) Demonstration of benefit provided. To demonstrate benefits 
provided under the plan or coverage, a plan or issuer simulates how 
claims would be processed under the scenarios provided by the Secretary 
to generate an estimate of cost sharing a consumer could expect to pay 
under the benefit package. The demonstration of benefits will take into 
account any cost sharing, excluded benefits, and other limitations on 
coverage, as described by the Secretary in guidance.
    (3) Appearance. A group health plan and a health insurance issuer 
must provide an SBC as a stand-alone document in the form authorized by 
the Secretary and completed in accordance with the instructions for 
completing the SBC that are authorized by the Secretary in guidance. 
The SBC must be presented in a uniform format, use terminology 
understandable by the average plan enrollee, not exceed four double-
sided pages in length, and not include print smaller than 12-point 
font.
    (4) Form--(i) An SBC provided by an issuer offering group health 
insurance coverage to a plan (or its sponsor), may be provided in paper 
form. Alternatively, the SBC may be provided electronically (such as e-
mail or an Internet posting) if the following three conditions are 
satisfied--
    (A) The format is readily accessible by the plan (or its sponsor);
    (B) The SBC is provided in paper form free of charge upon request, 
and
    (C) If the electronic form is an Internet posting, the issuer 
timely advises the plan (or its sponsor) in paper form or e-mail that 
the documents are available on the Internet and provides the Internet 
address.
    (ii) An SBC provided by a plan or issuer to a participant or 
beneficiary may be provided in paper form. Alternatively, the SBC may 
be provided electronically if the requirements of 29 CFR 2520.104b-1 
are met.
    (5) Language. A group health plan or health insurance issuer must 
provide the SBC in a culturally and linguistically appropriate manner. 
For purposes of this paragraph (a)(5), a plan or issuer is considered 
to provide the SBC in a culturally and linguistically appropriate 
manner if the thresholds and standards of Sec.  2590.715-2719(e) of 
this Part are met as applied to the SBC.
    (b) Notice of modifications. If a group health plan, or health 
insurance issuer offering group health insurance coverage, makes any 
material modification (as defined under section 102 of ERISA) in any of 
the terms of the plan or coverage that would affect the content of the 
SBC, that is not reflected in the most recently provided SBC, and that 
occurs other than in connection with a renewal or reissuance of 
coverage, the plan or issuer must provide notice of the modification to 
enrollees not later than 60 days prior to the date on which such 
modification will become effective. The notice of modification must be 
provided in a form that is consistent with the rules of paragraph 
(a)(4) of this section.
    (c) Uniform glossary--(1) In general. A group health plan, and a 
health insurance issuer offering group health insurance coverage, must 
make available to participants and beneficiaries the uniform glossary 
described in paragraph (c)(2) of this section in accordance with the 
appearance and format requirements of

[[Page 52472]]

paragraphs (c)(3) and (c)(4) of this section.
    (2) Health-coverage-related terms and medical terms. The uniform 
glossary must provide uniform definitions, specified by the Secretary 
in guidance, for the following health-coverage-related terms and 
medical terms:
    (i) Allowed amount, appeal, balance billing, co-insurance, 
complications of pregnancy, co-payment, deductible, durable medical 
equipment, emergency medical condition, emergency medical 
transportation, emergency room care, emergency services, excluded 
services, grievance, habilitation services, health insurance, home 
health care, hospice services, hospitalization, hospital outpatient 
care, in-network co-insurance, in-network co-payment, medically 
necessary, network, non-preferred provider, out-of-network co-
insurance, out-of-network co-payment, out-of-pocket limit, physician 
services, plan, preauthorization, preferred provider, premium, 
prescription drug coverage, prescription drugs, primary care physician, 
primary care provider, provider, reconstructive surgery, rehabilitation 
services, skilled nursing care, specialist, usual customary and 
reasonable (UCR), and urgent care; and
    (ii) Such other terms as the Secretary determines are important to 
define so that individuals and employers may compare and understand the 
terms of coverage and medical benefits (including any exceptions to 
those benefits), as specified in guidance.
    (3) Appearance. A group health plan, and a health insurance issuer, 
must provide the uniform glossary with the appearance authorized in 
guidance, ensuring that the uniform glossary is presented in a uniform 
format and utilizes terminology understandable by the average plan 
enrollee.
    (4) Form and manner. A plan or issuer must make the uniform 
glossary described in this paragraph (c) available upon request, in 
either paper or electronic form (as requested), within seven days of 
the request. (Under the rules of paragraph (a) of this section, the 
form authorized in guidance for the SBC will disclose to participants 
and beneficiaries their rights to request a copy of the uniform 
glossary.)
    (d) Preemption. See Sec.  2590.731 of this Part. In addition, with 
respect to the standards for providing an SBC required under paragraph 
(a) of this section, State laws that require a health insurance issuer 
to provide an SBC that supplies less information than required under 
paragraph (a) of this section are preempted.
    (e) Failure to provide. A group health plan that willfully fails to 
provide information required under this section to a participant or 
beneficiary is subject to a fine of not more than $1,000 for each such 
failure. A failure with respect to each participant or beneficiary 
constitutes a separate offense for purposes of this paragraph (e).
    (f) Applicability date. This section is applicable beginning March 
23, 2012. See Sec.  2590.715-1251(d) of this Part, providing that this 
section applies to grandfathered health plans.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Subtitle A

    The Department of Health and Human Services proposes to amend 45 
CFR part 147 as follows:

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

    1. The authority citation for part 147 continues to read as 
follows:

    Authority: Sections 2710 through 2763, 2791, and 2792 of the 
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.

    2. Add Sec.  147.200 to read as follows:


Sec.  147.200  Summary of benefits and coverage and uniform glossary.

    (a) Summary of benefits and coverage--(1) In general. A group 
health plan (and its administrator as defined in section 3(16)(A) of 
ERISA), and a health insurance issuer offering group or individual 
health insurance coverage, is required to provide a written summary of 
benefits and coverage (SBC) for each benefit package without charge to 
entities and individuals described in this paragraph (a)(1) in 
accordance with the rules of this section.
    (i) By a group health insurance issuer to a group health plan--(A) 
A health insurance issuer offering group health insurance coverage must 
provide the SBC to a group health plan (or its sponsor) upon 
application or request for information about the health coverage as 
soon as practicable following the request, but in no event later than 
seven days following the request. If an SBC is provided upon request 
for information about health coverage and the plan (or its sponsor) 
subsequently applies for health coverage, a second SBC must be provided 
under this paragraph (a)(1)(i)(A) only if the information required to 
be in the SBC has changed.
    (B) If there is any change in the information required to be in the 
SBC before the coverage is offered, or before the first day of 
coverage, the issuer must update and provide a current SBC to the plan 
(or its sponsor) no later than the date of the offer (or no later than 
the first day of coverage, as applicable).
    (C) If the issuer renews or reissues the policy, certificate, or 
contract of insurance (for example, for a succeeding policy year), the 
issuer must provide a new SBC when the policy, certificate, or contract 
is renewed or reissued.
    (1) In the case of renewal or reissuance, if written application is 
required for renewal (in either paper or electronic form), the SBC must 
be provided no later than the date the materials are distributed.
    (2) If renewal or reissuance is automatic, the SBC must be provided 
no later than 30 days prior to the first day of the new policy year.
    (D) If a group health plan (or its sponsor) requests an SBC from a 
health insurance issuer offering group health insurance coverage, it 
must be provided as soon as practicable, but in no event later than 
seven days following the request for an SBC.
    (ii) By a group health insurance issuer and a group health plan to 
participants and beneficiaries--(A) A group health plan (including its 
administrator, as defined under section 3(16) of ERISA), and a health 
insurance issuer offering group health insurance coverage, must provide 
an SBC to a participant or beneficiary (as defined under sections 3(7) 
and 3(8) of ERISA), and consistent with the rules of paragraph 
(a)(1)(iii) of this section) with respect to each benefit package 
offered by the plan or issuer for which the participant or beneficiary 
is eligible.
    (B) The SBC must be provided as part of any written application 
materials that are distributed by the plan or issuer for enrollment. If 
the plan does not distribute written application materials for 
enrollment, the SBC must be distributed no later than the first date 
the participant is eligible to enroll in coverage for the participant 
or any beneficiaries.
    (C) If there is any change to the information required to be in the 
SBC before the first day of coverage, the plan or issuer must update 
and provide a current SBC to a participant or beneficiary no later than 
the first day of coverage.
    (D) The plan or issuer must provide the SBC to special enrollees 
(as described in 45 CFR 146.117) within seven days of a request for 
enrollment pursuant to a special enrollment right.
    (E) If the plan or issuer requires participants or beneficiaries to 
renew in order to maintain coverage (for example, for a succeeding plan 
year), the plan or issuer must provide a new SBC when the coverage is 
renewed.

[[Page 52473]]

    (1) If written application is required for renewal (in either paper 
or electronic form), the SBC must be provided no later than the date 
the materials are distributed.
    (2) If renewal is automatic, the SBC must be provided no later than 
30 days prior to the first day of coverage under the new plan year.
    (F) A plan or issuer must provide the SBC to participants or 
beneficiaries upon request, as soon as practicable, but in no event 
later than seven days following the request.
    (iii) Special rules to prevent unnecessary duplication with respect 
to group health coverage--(A) An entity required to provide an SBC 
under paragraph (a)(1) of this section with respect to an individual 
satisfies that requirement if another party provides the SBC, but only 
to the extent that the SBC is timely and complete in accordance with 
the other rules of this section. Therefore, for example, in the case of 
a group health plan funded through an insurance policy, the plan 
satisfies the requirement to provide an SBC with respect to an 
individual if the issuer provides a timely and complete SBC to the 
individual.
    (B) If a participant and any beneficiaries are known to reside at 
the same address, and a single SBC is provided to that address, the 
requirement to provide the SBC is satisfied with respect to all 
individuals residing at that address. If a beneficiary's last known 
address is different than the participant's last known address, a 
separate SBC is required to be provided to the beneficiary at the 
beneficiary's last known address.
    (C) With respect to a group health plan that offers multiple 
benefit packages, the plan or issuer is required to provide a new SBC 
automatically upon renewal only with respect to the benefit package in 
which a participant or beneficiary is enrolled; SBCs are not required 
to be provided automatically with respect to benefit packages in which 
the participant or beneficiary are not enrolled. However, if a 
participant or beneficiary requests an SBC with respect to another 
benefit package (or more than one other benefit package) for which the 
participant or beneficiary is eligible, the SBC (or SBCs, in the case 
of a request for SBCs relating to more than one benefit package) must 
be provided upon request in accordance with the rules of paragraph 
(a)(1)(ii) of this section, which requires the SBC to be provided as 
soon as practicable, but in no event later than seven days following 
the request.
    (iv) By a health insurance issuer offering individual health 
insurance coverage--(A) Individuals prior to coverage. A health 
insurance issuer offering individual health insurance coverage must 
provide an SBC to an individual upon receiving an application for, or a 
request for information about, any health insurance policy, as soon as 
practicable following the application or request, but in no event later 
than seven days following the application or request.
    (1) If an SBC is provided upon request for information about a 
particular health insurance policy and the individual subsequently 
submits an application for the same policy, a second SBC must be 
provided under this paragraph (a)(1)(iv)(A) only if the information 
required to be in the SBC has changed.
    (2) If the issuer modifies the terms of coverage after receiving an 
application for any health insurance policy (including modifications as 
a result of medical underwriting) so that the information required to 
be in the SBC has changed, the issuer must provide an updated SBC that 
reflects these changes to the terms of coverage to the applicant, for 
each policy for which an application was received, as soon as 
practicable, but in no event later than the date on which the offer of 
coverage is made.
    (B) Individuals covered under individual health insurance 
coverage--(1) A health insurance issuer offering individual health 
insurance coverage must generally provide an SBC to an individual who 
accepts an offer of coverage no later than the first day of coverage. 
However, if the SBC is provided upon request for information about 
health insurance coverage or at the time that an offer of coverage is 
made under paragraph (a)(1)(iv)(A) of this section, the SBC must be 
provided under this paragraph (a)(1)(iv)(B) only if the information 
required to be in the SBC has changed.
    (2) The issuer must provide the SBC to policyholders annually at 
renewal, no later than 30 days prior to the first day of coverage under 
the new policy year. The SBC must reflect any modified policy terms 
that would be effective on the first day of the new policy year.
    (C) Upon request. A health insurance issuer offering individual 
health insurance coverage must provide an SBC to any policyholder or 
covered dependent, upon request, as soon as practicable, but in no 
event later than seven days following the request.
    (v) Special rule to prevent unnecessary duplication with respect to 
individual health insurance coverage. If the policy covers more than 
one individual (or if an application for coverage is being made for 
more than one individual); all those individuals are known to reside at 
the same address; and a single SBC is provided to that address, then 
the requirement to provide the SBC is satisfied with respect to all 
individuals residing at that address. If an individual's last known 
address is different than the last known address of the policyholder, 
the issuer is required to provide an SBC to the individual at the 
individual's last known address.
    (2) Content--(i) In general. The SBC must include the following:
    (A) Uniform definitions of standard insurance terms and medical 
terms so that consumers may compare health coverage and understand the 
terms of (or exceptions to) their coverage;
    (B) A description of the coverage, including cost sharing, for each 
category of benefits identified by the Secretary in guidance;
    (C) The exceptions, reductions, and limitations of the coverage;
    (D) The cost-sharing provisions of the coverage, including 
deductible, coinsurance, and copayment obligations;
    (E) The renewability and continuation of coverage provisions;
    (F) Coverage examples, in accordance with the rules of paragraph 
(a)(2)(ii) of this section;
    (G) With respect to coverage beginning on or after January 1, 2014, 
a statement about whether the plan or coverage provides minimum 
essential coverage as defined under section 5000A(f) of the Internal 
Revenue Code and whether the plan's or coverage's share of the total 
allowed costs of benefits provided under the plan or coverage meets 
applicable requirements;
    (H) A statement that the SBC is only a summary and that the plan 
document, policy, or certificate of insurance should be consulted to 
determine the governing contractual provisions of the coverage;
    (I) Contact information for questions and obtaining a copy of the 
plan document or the insurance policy, certificate, or contract of 
insurance (such as a telephone number for customer service and an 
Internet address for obtaining a copy of the plan document or the 
insurance policy, certificate, or contract of insurance);
    (J) For plans and issuers that maintain one or more networks of 
providers, an Internet address (or similar contact information) for 
obtaining a list of network providers;
    (K) For plans and issuers that use a formulary in providing 
prescription drug coverage, an Internet address (or similar contact 
information) for

[[Page 52474]]

obtaining information on prescription drug coverage;
    (L) An Internet address for obtaining the uniform glossary, as 
described in paragraph (c) of this section; and
    (M) Premiums (or in the case of a self-insured group health plan, 
cost of coverage).
    (ii) Coverage examples. The SBC must include coverage examples that 
illustrate benefits provided under the plan or coverage for common 
benefits scenarios (including pregnancy and serious or chronic medical 
conditions) that are identified by the Secretary in accordance with the 
following:
    (A) Number of examples. The Secretary may identify up to six 
coverage examples that may be required in an SBC.
    (B) Benefits scenarios. For purposes of this section, a benefits 
scenario is a hypothetical situation, consisting of a sample treatment 
plan for a specified medical condition during a specific period of 
time, based on recognized clinical practice guidelines available 
through the National Guideline Clearinghouse, Agency for Healthcare 
Research and Quality. The Secretary will specify, in guidance, the 
types of services, dates of service, applicable billing codes, and 
allowed charges for each claim in the benefits scenario.
    (C) Demonstration of benefit provided. To demonstrate benefits 
provided under the plan or coverage, a plan or issuer simulates how 
claims would be processed under the scenarios provided by the Secretary 
to generate an estimate of cost sharing a consumer could expect to pay 
under the benefit package. The demonstration of benefits will take into 
account any cost sharing, excluded benefits, and other limitations on 
coverage, as described by the Secretary in guidance.
    (3) Appearance. A group health plan and a health insurance issuer 
must provide an SBC as a stand-alone document in the form authorized by 
the Secretary and completed in accordance with the instructions for 
completing the SBC that are authorized by the Secretary in guidance. 
The SBC must be presented in a uniform format, use terminology 
understandable by the average plan enrollee (or, in the case of 
individual market coverage, the average individual covered a health 
insurance policy), not exceed four double-sided pages in length, and 
not include print smaller than 12-point font.
    (4) Form--(i) An SBC provided by an issuer offering group health 
insurance coverage to a plan (or its sponsor), may be provided in paper 
form. Alternatively, the SBC may be provided electronically (such as e-
mail or an Internet posting) if the following three conditions are 
satisfied--
    (A) The format is readily accessible by the plan (or its sponsor);
    (B) The SBC is provided in paper form free of charge upon request, 
and
    (C) If the electronic form is an Internet posting, the issuer 
timely advises the plan (or its sponsor) in paper form or e-mail that 
the documents are available on the Internet and provides the Internet 
address.
    (ii) An SBC provided by a plan or issuer to a participant or 
beneficiary may be provided in paper form. Alternatively, for non-
Federal governmental plans, the SBC may be provided electronically if 
the plan conforms to either the substance of the ERISA provisions at 29 
CFR 2520.104b-1, or the provisions governing electronic disclosure for 
individual health insurance issuers set forth in paragraph 
(a)(4)(iii)(B) of this section.
    (iii) With respect to an SBC provided by an issuer offering 
individual health insurance coverage, the SBC may be provided in either 
electronic or paper form.
    (A) Paper disclosure. Unless specified otherwise by an individual, 
an issuer must provide an SBC (and any subsequent SBC) in paper form 
if:
    (1) Upon the individual's request for information or request for an 
application for coverage, the individual makes the request in person, 
by phone, or by mail; or
    (2) When submitting an application for coverage, the individual 
completes the application by phone or mail.
    (B) Electronic disclosure--(1) An issuer may provide an SBC (and 
any SBC provided thereafter) in electronic form (such as through an 
Internet posting or via electronic mail) if:
    (i) Upon an individual's request for information or request for an 
application for coverage, the individual makes a request 
electronically; or
    (ii) When submitting an application, an individual completes an 
application for coverage electronically.
    (2) If an issuer provides an SBC in electronic form, the issuer 
must:
    (i) Request that an individual acknowledge receipt of the SBC;
    (ii) Make the SBC available in an electronic format that is readily 
usable by the general public;
    (iii) If the SBC is posted on the Internet, display the SBC in a 
location that is prominent and readily accessible to the individual and 
provide timely notice, in electronic or non-electronic form, to each 
individual who requests information or applies for coverage that 
apprises the individual the SBC is available on the Internet and 
includes the applicable Internet address;
    (iv) Promptly provide in accordance with the rules of paragraph 
(iii), without charge, penalty, or the imposition of any other 
condition or consequence, a paper copy of the SBC upon request. An 
issuer must provide an individual with the ability to request a paper 
copy of the SBC both by using the issuer's Web site (such as by 
clicking on a clearly identified box to make the request) and by 
calling a readily available telephone line, the number for which is 
prominently displayed on the issuer's Web site, policy documents, and 
other marketing materials related to the policy and clearly identified 
as to purpose; and
    (v) Ensure an SBC provided in electronic form is provided in 
accordance with the appearance, content, and language requirements of 
this section.
    (C) Deemed compliance. A health insurance issuer offering 
individual health insurance coverage that complies with the 
requirements set forth at 45 CFR Sec.  159.120 (relating to the Federal 
health reform Web portal) is deemed to comply with the requirement to 
provide the SBC to an individual requesting information prior to 
applying for coverage. However, an issuer must provide any SBC provided 
at the time of application or subsequently in a form and manner 
compliant with the requirements of paragraphs (a)(4)(iii)(A) and 
(a)(4)(iii)(B) of this section.
    (5) Language. A group health plan or health insurance issuer must 
provide the SBC in a culturally and linguistically appropriate manner. 
For purposes of this paragraph (a)(5), a plan or issuer is considered 
to provide the SBC in a culturally and linguistically appropriate 
manner if the thresholds and standards of Sec.  147.136(e) of this 
chapter are met as applied to the SBC.
    (b) Notice of modifications. If a group health plan, or health 
insurance issuer offering group or individual health insurance 
coverage, makes any material modification (as defined under section 102 
of ERISA, 29 U.S.C. 1022) in any of the terms of the plan or coverage 
that would affect the content of the SBC, that is not reflected in the 
most recently provided SBC, and that occurs other than in connection 
with a renewal or reissuance of coverage, the plan or issuer must 
provide notice of the modification to enrollees (or, in the case of 
individual market coverage, an individual covered a health insurance 
policy), not later than 60 days prior to the date on which such 
modification will become effective. The notice of modification must be 
provided in a form

[[Page 52475]]

that is consistent with the rules of paragraph (a)(4) of this section.
    (c) Uniform glossary--(1) In general. A group health plan, and a 
health insurance issuer offering group health insurance coverage, must 
make available to participants and beneficiaries, and a health 
insurance issuer offering individual health insurance coverage must 
make available to applicants, policyholders, and covered dependents, 
the uniform glossary described in paragraph (c)(2) of this section in 
accordance with the appearance and format requirements of paragraphs 
(c)(3) and (c)(4) of this section.
    (2) Health-coverage-related terms and medical terms. The uniform 
glossary must provide uniform definitions, specified by the Secretary 
in guidance, for the following health-coverage-related terms and 
medical terms:
    (i) Allowed amount, appeal, balance billing, co-insurance, 
complications of pregnancy, co-payment, deductible, durable medical 
equipment, emergency medical condition, emergency medical 
transportation, emergency room care, emergency services, excluded 
services, grievance, habilitation services, health insurance, home 
health care, hospice services, hospitalization, hospital outpatient 
care, in-network co-insurance, in-network co-payment, medically 
necessary, network, non-preferred provider, out-of-network co-
insurance, out-of-network co-payment, out-of-pocket limit, physician 
services, plan, preauthorization, preferred provider, premium, 
prescription drug coverage, prescription drugs, primary care physician, 
primary care provider, provider, reconstructive surgery, rehabilitation 
services, skilled nursing care, specialist, usual customary and 
reasonable (UCR), and urgent care; and
    (ii) Such other terms as the Secretary determines are important to 
define so that individuals and employers may compare and understand the 
terms of coverage and medical benefits (including any exceptions to 
those benefits), as specified in guidance.
    (3) Appearance. A group health plan, and a health insurance issuer, 
must provide the uniform glossary with the appearance authorized in 
guidance, ensuring that the uniform glossary is presented in a uniform 
format and utilizes terminology understandable by the average plan 
enrollee (or, in the case of individual market coverage, an average 
individual covered under a health insurance policy).
    (4) Form and manner. A plan or issuer must make the uniform 
glossary described in this paragraph (c) available upon request, in 
either paper or electronic form (as requested), within seven days of 
the request. (Under the rules of paragraph (a) of this section, the 
form authorized in guidance for the SBC will disclose to participants, 
beneficiaries, and individuals covered under an individual policy their 
rights to request a copy of the uniform glossary.)
    (d) Preemption. For purposes of this section, the provisions of 
section 2724 of the PHS Act continue to apply with respect to 
preemption of State law. In addition, with respect to the standards for 
providing an SBC required under paragraph (a) of this section, State 
laws that require a health insurance issuer to provide an SBC that 
supplies less information than required under paragraph (a) of this 
section are preempted.
    (e) Failure to provide. A health insurance issuer or a non-Federal 
governmental health plan that willfully fails to provide information 
required under this section is subject to a fine of not more than 
$1,000 for each such failure. A failure with respect to each covered 
individual constitutes a separate offense for purposes of this 
paragraph (e). HHS will enforce these provisions in a manner consistent 
with 45 CFR 150.101 through 150.465.
    (f) Applicability date. This section is applicable beginning March 
23, 2012. See Sec.  147.140(d) of this chapter, providing that this 
section applies to grandfathered health plans.

[FR Doc. 2011-21193 Filed 8-17-11; 11:15 am]
BILLING CODE 4120-01-P