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mid-year plan change

Health Insurance Notice Mid-Year Plan Change

The Affordable Care Act (ACA) requires employers to provide advanced notice to participants 60 days before making any material modifications to their employer-sponsored health plan. This article provides helpful information to employers about the 60-day notice of material modification.

Let’s get started.

Background on the 60-Day Notice of Material Modification

In February 2012, the Department of Health & Human Services (HHS) released the revised Summary of Benefits and Coverage (SBC) regulation. The SBC is a short document that’s meant to describe a health plan’s benefits in plain language. An SBC should help employees compare insurance coverage at a glance.

The SBC regulation now includes the notice of material modification rule. This rule states that a notice of modification should be provided when:

Changes to the health plan occur at any time other than at renewal of coverage

A change to the health benefits affects the content of the SBC

New information is not reflected in the most recent SBC

In the situations above, the notice is required to be provided to participants at least 60days before the date that the health plan change will become effective.

6 Things to Know About the 60-Day Notice of Material Modification

Here are six things employers should know about the 60-day notice of material modification:

  1. The requirement affects all health plans with start dates after September 2012.
  2. It only applies to changes made during the plan year. It doesn’t apply to renewals of coverage or any modifications made as part of the renewal.
  3. The requirement can be met by providing an updated SBC or by sending a separate written notice describing the material modification.
  4. Before a change goes into effect, all impacted participants receive at least 60 days advance written notice of the change.
  5. Plan issuers or sponsors (employers) that intentionally fail to provide the notice of material modification are subject to a fine of up to $1,000 for each failure. Each covered individual that wasn’t notified is counted as a separate offense.

According to section 102 of the Employee Retirement Income Security Act of 1974(ERISA), a material modification includes:

  1. Any coverage modification that alone or combined with other changes made at the same time would be considered by “an average participant” to be “an important change in covered benefits or other terms of coverage under the plan or policy.”
  2. An enhancement of covered benefits, services, or other more general plan or policy terms. Such as coverage of previously excluded benefits or reduced cost-sharing.
  3. A “material reduction in covered services or benefits” including:
  4. Changes or modifications that reduce or eliminate benefits
  5. Increases in cost-sharing
  6. Read the full rule via the Federal Register here (see section B).

When offering a health benefit, federal regulations are an important aspect that employers can’t ignore. Make sure to document any material modifications made to the benefit during the benefit year and provide notice to each participant of the changes. Employers should follow all benefit related regulations to avoid any financial penalties.

This article was originally published on September 16, 2013. An updated version was posted on January 5, 2021.

Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.