Whether you’re shopping for an individual insurance policy or evaluating a health plan offered through your job, determining whether a health plan offers the right coverage for you and your family can be tricky.
Thankfully, under the Affordable Care Act (ACA), more health insurance companies and coverage options are available on the individual market than ever before. That’s why the ACA requires insurers and group plan administrators are required to provide you with a summary of benefits and coverage (SBC) to help you understand if a particular policy meets your needs.
Often mistaken for summary plan descriptions (SPDs), SBCs help consumers compare policies so they can make informed decisions when selecting a health coverage option. In this article, we’ll review what an SBC is, what it should include, who provides it, and when you must receive one.
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The SBC is a standard document that helps applicants and policyholders research, compare, and enroll in health coverage. It includes a brief outline of a specific policy’s covered services, limitations, exclusions, out-of-pocket healthcare expenses, contact information, and more.
Generally, all health insurers and group plan providers must send an SBC to plan participants. Insurers must also make an SBC available to anyone looking for health insurance on the Health Insurance Marketplace.
The ACA requires the SBC to be easy to understand. Therefore, all SBCs must be fewer than four pages, printed in 12-point font or larger, use basic terminology, and contain the same information. This helps keep comparing different policies clear, simple, and fair.
Insurers and group plan providers must also provide consumers with a Uniform Glossary1 alongside the SBC. The glossary defines common healthcare terms in plain language, like “coinsurance,” “premium,” and “copayment,” so individuals can better understand their coverage.
All major health plans must provide an SBC. This includes plans an individual purchased on their own as well as employer-sponsored health plans.
Health plans that must provide an SBC are:
However, not all plans are subject to the SBC requirement. Under the ACA, plans that cover excepted benefits are exempt.
Examples of excepted benefit plans that are exempt from providing an SBC are:
An SBC helps consumers accurately compare health policies based on the same criteria. Therefore, all SBCs include standardized information—regardless of the insurer or policy type. Self-insurers can use the template2 from the Department of Labor3 to ensure their SBC follows the proper format so you receive the same information as fully-insured plans.
All SBCs must contain the following information:
Many people confuse summary plan descriptions (SPDs) and SBCs. But they have their differences. The ACA requires major medical plans to issue SBCs to consumers describing the benefits and coverage under a particular policy.
In contrast, the Employee Retirement Income Security Act of 1974 (ERISA)4 requires employers to provide SPDs to employees with health, retirement, and other benefits. The SPD describes the plan’s details, key features, and obligations.
Your insurer or plan sponsor can’t include specific SBC information in your SPD and vice versa. But, if you have a plan that requires an SPD and SBC, you may see a notation in your SBC about where to find a copy of your SPD.
Where your SBC will come from depends on who is issuing your health insurance plan. We’ll go over each scenario in the sections below.
Because fully-insured plans involve the health insurance company and the employer, both parties are responsible for providing you with the SBC. After your employer applies for the group health plan, the insurer will send them the SBC in no later than seven business days. From there, the insurer may send the SBC directly to policyholders, or the document may come from your employer as the plan sponsor.
If you don’t receive a copy of your SBC, your health insurer and plan sponsor are out of compliance. They may be subject to a penalty under the Public Health Services Act of $1,362 per failure5 with a potential excise tax of $100 per failure per day until they comply.
If you have a self-insured health policy, like an HRA, the SBC will come from the plan sponsor, which is typically your employer.
You'll receive an SPD and SBC if you have a qualified small employer HRA (QSHERA) or individual coverage HRA (ICHRA)6. If you have an integrated HRA, you’ll receive an SPD and SBC—although the SBC may come directly from the issuer of your group health plan.
If you have an excepted benefit HRA (EBHRA), you won’t receive an SBC. This is because plans that only cover excepted benefits don’t require an SBC. However, employers must provide an SPD if you have an EBHRA.
Like fully-insured plans, your plan administrator will be subject to a fine under the Public Health Services Act if you don’t receive your SBC.
Sometimes, you may enroll in a plan with multiple issuers. For example, your plan may have one issuer that covers medical services and another that provides prescription drug coverage. However, insurers only have to provide an SBC for the services and items they cover.
Your insurers may send you one SBC with all the coverage information combined or multiple SBCs containing the portion each insurer covers. If you receive multiple SBCs, you’ll also receive a statement outlining your plan’s multiple insurers, how the coverage and items work together, and contact information if you have questions.
Insurers, employers, and plan administrators must provide you with an SBC in the following situations:
You’ll receive your SBC either in paper form or electronically.
Your insurer or plan sponsor can provide your SBC electronically if they meet the following conditions:
If you didn’t enroll in your plan online, you can only receive the SBC electronically if you consent to electronic delivery.
According to government guidelines, a policyholder’s covered dependents, or beneficiaries, must also receive an SBC. Insurers or plan sponsors can send dependents a paper copy of the SBC to the policyholder’s last known address unless they know the dependent’s address differs from the policyholder’s address.
As a consumer, it’s important to consider all the facts when shopping for health insurance plans. With an SBC, you can better understand coverage options, cost-sharing expenses, common medical terminology, network limitations, and other factors that may impact your healthcare choices. Comparing plans may seem time-consuming, but it’s worth it to help you find a plan that suits you and your family’s needs and budget.
This blog article was originally published on September 17, 2012. It was last updated on September 15, 2023.