Insurance Companies and SPDs

[KJohnson]

Our Human Resources Department was informed that Blue Cross would not put all required SPD information in the health benefit "booklet" or certificate of insurance unless the employer has over 500 employees.

Is this a common response? If so, I would think that there are a number of employers out there who are not meeting SPD requirements for fully insured plans (especially those of under 100 lives who have no 5500 requirement). Do these insurance companies try and inform employers of their SPD requirements?

[Linda]

This is easy enough to fix. The employer (or its benefits attorney) can simply create a 2 or 3 page supplement to the insurance company materials. The supplement would list all of the information required by ERISA that is not in the insurance company materials. Then, the employer can distribute the insurance company materials with the supplement to employees. I think that is a relatively inexpensive way for a small employer to deal with this issue.

[KJohnson]

I agree with Linda that it is fairly easy to fix, but I would guess that the majority of employers with 10 to 20 employees do not have benefits counsel and do not know enough to ask about the SPD requirement.

I was just wondering if most insurers would give an employer a "heads up" regarding the need for an SPD. In the case of our firm's own fully insured health plan, we needed to go through two "levels" at the insurer to find someone who even knew what we were talking about when we requested that all required SPD information be included in our booklets.

[Guest Mfcavo]

As a benefits attorney and a former insurance company employee, I would not recommend that anyone rely on the insurance company to satisfy your documentation and disclosure requirements. Typically, the description of benefits provided by the insurance company is just that and only that. ERISA, HIPAA, COBRA all require that additional information about participant rights and benefits be included in a Summary Plan Descriptions that must be written in an understandable manner.

The DOL is currently reviewing the disclosure requirements and there have been many recent changes. I am not suprised that you had trouble finding someone at the insurance company who is knowledgable on the subject.

[Brigid Anderson]

In this regard, check out Community Ins. Co. v. Ohayon, 73 F. Supp. 2d 862 (N.D.Ohio 1999), in which the district court enjoined further distribution of insurance company booklets until they were revised to conform with ERISA's SPD requirements. (For reasons that were not explained in the opinion, the insurer in this case was the ERISA "plan administrator" and thus responsible for SPD compliance. In most single-employer plans, the plan administrator will be the employer/sponsor of the plan, and the insurer will technically not be required to comply with the SPD rules. This may be why your insurer is refusing unless the group is big enough--an insurer that includes the required information is agreeing to do more than it is legally required to do.)

Many employers use what is also called a "wrap document" that, combined with the insurance company's booklet, constitutes the plan's SPD. The wrap document adds the ERISA-required terms and information often missing from the booklet prepared by the insurer. (A similar wrap document may be combined with the

insurer's full policy to constitute the ERISA plan document.) Our publication, ERISA Compliance for Health and Welfare Plans, by Brigid Carroll Anderson, Darcy L. Hitesman & Sophia E. Chrusciel (EBIA 1992-2000) contains two sample wrap documents that may be used as the starting point for drafting by an employer that wishes to use this approach.

[KJohnson]

Just as a note, we only got resistance from the health insurance carrier.

Life insurance and STD carriers were more than happy to put SPD language in the certificates/booklets if we gave them the plan number etc.