With the goal of enforcing compliance with the Patient Protection and Affordable Care Act (PPACA), the federal government has started regular audits of group health plans. These audits extend into compliance of the Employee Retirement Income Security Act (ERISA).
“Sadly, many employers are unaware of the potentially large penalties they face for failure to prove compliance,” says Chuck Whitford, consultant at JRG Advisors.
“In 2013, more than 70 percent of audits resulted in fines or other corrective action. The most common triggers are participant complaints and incomplete or inconsistent information.”
Smart Business spoke with Whitford on what to know about health care reform compliance.
What is the most common compliance failure employers may experience?
The most common one may be having and maintaining an up-to-date Summary Plan Description (SPD). Over the past several years, the government has issued penalties in the $10,000 to $18,000 range for simply failing to provide an SPD within 30 days of a request.
Many employers, to their surprise, may think they are too small to be required to have an SPD. Nearly every employer providing benefits covered under ERISA needs an SPD. The other misconception is that the certificate of insurance from their insurance company will suffice. It does not in almost all cases.
What is an SPD document?
This document is provided to plan participants to explain the plan’s benefits, claims review procedures and participants’ rights. ERISA contains standards for the information that must be included in the SPD and for how the SPD must be distributed to participants.
Employers are responsible for providing an SPD within 120 days of starting a group health plan, within 90 days of enrollment for new participants, within 30 days of a participant’s request for an SPD, every five years if material modifications are made during that period and every 10 years if no changes have occurred.
Are there any other ERISA requirements?
In addition to the SPD document itself, ERISA requires additional notifications that must be provided to plan participants. This includes documents showing compliance with Health Insurance Portability and Accountability Act and COBRA. Last year, one employer was fined $25,000 for continuous failure to provide COBRA election notices.
The Affordable Care Act (ACA) has created additional notices that employers must provide. For example, the ACA requires plan administrators and issuers to provide participants in a group health plan with a Summary of Benefits and Coverage (SBC) during open enrollment and 60 days in advance of any change in plan terms or coverage that takes place mid-plan year.
An SBC is different from an SPD but is no less important. A willful failure to provide and SBC in the required format and delivery can trigger a $1,000 per day penalty for each affected individual. Both the insurer and plan administrator are potentially subject to this penalty.
Have there been recent changes proposed for the SBC?
On Dec. 22, 2014, the departments of Health and Human Services, Labor and Treasury issued proposed regulations for changes to the SBC. These changes clarify when and how a plan administrator or insurer must provide an SBC, shorten the SBC template, add a third cost example (simple foot fracture) and revise the uniform glossary.
The proposed SBC is 2½ double-sided pages instead of the current four double-sided pages. References to essential health benefits and pre-existing condition exclusions will be removed. These proposed changes are effective for plan years and open enrollment periods beginning on or after Sept. 1, 2015.
Every employer, regardless of size, needs to be certain it complies with these laws in the event that the DOL comes knocking on the door. Employers should consult with their benefit adviser for information to avoid DOL triggers, as well as tools to prepare for and navigate an audit.
Insights Employee Benefits is brought to you by JRG Advisors