Interim Rules Amending ERISA Disclosure Requirements for Group Health Plans

SUMMARY: This document contains interim rules governing the content of

the summary plan description (SPD) for group health plans, the

furnishing of summaries of material reductions in covered services or

benefits by group health plans, and the disclosure of SPD and related

information through electronic media. The rules contained in this

document implement amendments to the disclosure provisions of the

Employee Retirement Income Security Act of 1974 (ERISA) enacted as part

of the Health Insurance Portability and Accountability Act of 1996

(HIPAA) and the Newborns' and Mothers' Health Protection Act of 1996

(NMHPA).

Interested persons are invited to submit comments on the interim

rules for consideration by the Department in developing final rules.

The rules contained in this document are being adopted on an interim

basis to accommodate statutorily established time frames intended to

ensure that sponsors and administrators of group health plans, as well

as participants and beneficiaries covered by such plans, have timely

guidance concerning compliance with the recently enacted amendments to

ERISA.

DATES: Comments. Written comments on these interim rules must be

received by the Department of Labor on or before May 31, 1997.

Effective date. This regulation is effective on June 1, 1997.

However, affected parties do not have to comply with the information

collection requirements in the amendments to 29 CFR 2520.102-3,

2520.104b-1, and 2520.104b-3 made by these interim rules until the

Department publishes in the Federal Register the control numbers

assigned by the Office of Management and Budget (OMB) to these

information collection requirements. Publication of the control numbers

notifies the public that OMB has approved these information collection

requirements under the Paperwork Reduction Act of 1995. The Department

has asked for OMB clearance as soon as possible, and OMB approval is

anticipated by or before June 1, 1997.

Applicability dates. The regulatory amendments implementing

provisions enacted as part of HIPAA generally apply as of the first day

of the first plan year beginning after June 30, 1997. The regulatory

amendments implementing provisions enacted as part of NMHPA generally

apply as of the first day of the first plan year beginning on or after

January 1, 1998.

ADDRESSES: Interested persons are invited to submit written comments

(preferably three copies) on these interim rules to: Pension and

Welfare Benefits Administration, Room N-5669, U.S. Department of Labor,

200 Constitution Avenue, N.W., Washington D.C. 20210. Attention:

Interim Disclosure Rules. All submissions will be open to public

inspection at the Public Documents Room; Pension and Welfare Benefits

Administration; U.S. Department of Labor; Room N-5638; 200 Constitution

Avenue N.W.; Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Eric A. Raps, Office of Regulations

and Interpretations, Pension and Welfare Benefits Administration, (202)

219-8515 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

A. Background

The rules contained in this document implement amendments to the

disclosure provisions of ERISA enacted as part of HIPAA 1 and

NMHPA. 2 The amendments affect group health plans as defined in

section 733 of ERISA. 3 ERISA section 733(a) defines a ``group

health plan'' as an ``employee welfare benefit plan to the extent that

the plan provides medical care (as defined in paragraph (2) and

including items and services paid for as medical care) to employees or

their dependents (as defined under the terms of the plan) directly or

through insurance, reimbursement or otherwise.'' 4

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\1\ Pub. L. 104-191, enacted on August 21, 1996.

\2\ Pub. L. 104-204, enacted on September 26, 1996.

\3\ Section 733 was enacted as section 706 of ERISA by section

101(a) of HIPAA and subsequently redesignated as section 733 of

ERISA pursuant to section 603(a)(3) of NMHPA.

\4\ ``Medical care'' is defined in paragraph (a)(2) of section

733 to mean ``amounts paid for--(A) the diagnosis, cure, mitigation,

treatment, or prevention of disease, or amounts paid for the purpose

of affecting any structure or function of the body, (B) amounts paid

for transportation primarily for and essential to medical care

referred to in subparagraph (A), and (C) amounts paid for insurance

covering medical care referred to in subparagraphs (A) and (B).''

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As discussed herein, these rules affect the content of SPDs, the

furnishing of summaries of material reductions in covered services or

benefits to participants, and the disclosure of SPD and related

information through electronic media. As also discussed herein, these

rules are being adopted on an interim basis in order to accommodate

statutorily established time frames for provision of regulatory

guidance. The Department, however, is inviting public comment on the

interim rules to assist in the formulation of final rules in this area.

B. Content of SPDs

Pursuant to ERISA section 101(a)(1), the administrator of an

employee benefit plan is required to furnish an SPD to each participant

covered under the plan and to each beneficiary who is receiving

benefits under the plan. Section 102(b) and the Department's

regulations issued thereunder, 29 CFR 2520.102-3, describe the

information required to be contained in the SPD.

Section 101(c)(2) of HIPAA amended ERISA section 102(b) to require

SPDs of group health plans to include information indicating whether a

health insurance issuer (as defined in section 733(b)(2)) 5 is

responsible for the financing or administration of the plan. This

amendment, in the view of the Department, is intended to ensure that

SPDs clearly inform participants and beneficiaries about the role of

insurance issuers with respect to their group health plan, particularly

in those cases when the plan is self-funded and an insurance issuer is

serving as a contract administrator or claims payor, rather than an

insurer. In such instances, it is important that participants and

beneficiaries understand that the insurance issuer is not acting as

insurer of their health benefits under the plan. In this regard, the

Department is amending paragraph (q) of Sec. 2520.102-3, relating to

the identification of funding media through which benefits are

provided, to add at the end thereof a requirement that, where a health

insurance issuer is responsible, in whole or in part, for the financing

or administration of a group health plan, the SPD of such plan include

the name and address of the issuer, whether and to what extent benefits

under the plan

[[Page 16980]]

are guaranteed under a contract or policy of insurance issued by the

issuer, and the nature of any administrative services (e.g., payment of

claims) provided by the issuer.

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5 ``Health insurance issuer'' is defined in section

733(b)(2) to mean ``an insurance company, insurance service, or

insurance organization (including a health maintenance organization,

as defined in paragraph (3)) which is licensed to engage in the

business of insurance in a State and which is subject to State law

which regulates insurance (within the meaning of section 514(b)(2)).

Such term does not include a group health plan.''

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Section 101(c)(2) of HIPAA also amended ERISA section 102(b) to

require SPDs of group health plans to include the office at the

Department of Labor through which participants and beneficiaries may

seek assistance or information regarding their rights under ERISA and

HIPAA with respect to health benefits. Currently, individualized

participant assistance on all aspects of ERISA is offered through the

Pension and Welfare Benefits Administration's field offices and, in the

national office, the Division of Technical Assistance and Inquiries. To

ensure that participants and beneficiaries are provided assistance

information consistent with HIPAA section 101(c)(2), the Department is

amending the model statement of ERISA rights, at Sec. 2520.102-3(t)(2),

to replace for group health plans the last sentence of that statement

with an updated sentence that reads as follows: ``If you have any

questions about this statement or about your rights under ERISA, you

should contact the nearest office of the Pension and Welfare Benefits

Administration, U.S. Department of Labor, listed in your telephone

directory or the Division of Technical Assistance and Inquiries,

Pension and Welfare Benefits Administration, U.S. Department of Labor,

200 Constitution Avenue, N.W., Washington, D.C. 20210.'' Administrators

may include in the statement the address and telephone number of the

nearest office or offices of the Pension and Welfare Benefits

Administration (PWBA). A directory of current PWBA regional and

district offices is printed below.

PWBA Offices

Atlanta Regional Office, 61 Forsyth St., S.W., Suite 7B54, Atlanta,

Georgia 30303, Phone: 404/562-2156

Boston Regional Office, One Bowdoin Square, 7th Floor, Boston, MA

02114, Phone: 617/424-4950

Chicago Regional Office, 200 West Adams Street, Suite 1600, Chicago, IL

60606, Phone: 312/353-0900

Cincinnati Regional Office, 1885 Dixie Highway, Suite 210, Ft. Wright,

KY 41011-2664, Phone: 606/578-4680

Dallas Regional Office, 525 Griffin Street, Rm. 707, Dallas, Texas

75202-5025, Phone: 214/767-6831

Detroit District Office, 211 West Fort Street, Suite 1310, Detroit, MI

48226-3211, Phone: 313/226-7450

Kansas City Regional Office, City Center Square, 1100 Main, Suite 1200,

Kansas City, MO 64105-2112, Phone: 816/426-5131

Los Angeles Regional Office, 790 E. Colorado Boulevard, Suite 514,

Pasadena, CA 91101, Phone: 818/583-7862

Miami District Office, 111 NW 183rd St., Suite 504, Miami, Florida

33169, Phone: 305/651-6464

New York Regional Office, 1633 Broadway, Rm. 226, New York, N.Y. 10019,

Phone: 212/399-5191

Philadelphia Regional Office, Gateway Bldg., 3535 Market Street, Room

M300, Philadelphia, PA 19104, Phone: 215/596-1134

St. Louis District Office, 815 Olive Street, Rm. 338, St. Louis, MO

63101-1559, Phone: 314/539-2691

San Francisco Regional Office, 71 Stevenson St., Suite 915, P.O. Box

190250, San Francisco, CA 94119-0250, Phone: 415/975-4600

Seattle District Office, 1111 Third Avenue, Suite 860, MIDCOM Tower,

Seattle, Washington 98101-3212, Phone: 206/553-4244

Washington D.C. District Office, 1730 K Street, N.W., Suite 556,

Washington, D.C. 20006, Phone: 202/254-7013

The Department notes that, in the case of group health plans not

utilizing the model statement in Sec. 2520.102-3(t)(2), the foregoing

information is required to be included in a statement of ERISA rights

intended to satisfy the requirements of paragraph (t)(1) of that

section.

Pursuant to HIPAA section 101(g), the foregoing amendments to the

SPD content requirements apply with respect to group health plans for

plan years beginning after June 30, 1997. The Department is amending

Sec. 2520.102-3 to add a new paragraph (v), ``applicability dates'',

that treats the HIPAA content changes as changes in the information

required to be contained in the SPD and applies the requirements of 29

CFR 2520.104b-3 6 to the disclosure of such changes, except that

the changes have to be disclosed to participants and beneficiaries not

later than 60 days after the first day of the first plan year for which

the changes are applicable to the plan.

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\6\ Section 2520.104b-3 prescribes the requirements applicable

to the furnishing of summaries of material modifications to the plan

and changes in the information required to be included in the

summary plan description.

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While the interim rule amendment of the model statement of ERISA

rights corrects outdated name and address information for contacting

the U.S. Department of Labor, and therefore has obvious applicability

beyond group health plans, the Department is limiting the interim rule

to group health plans in view of directive under HIPAA section

101(c)(2). The Department, however, specifically invites public comment

on the extent to which application of the rule should be extended to

other plans.

Section 603(a) of the NMHPA also amended ERISA by adding a new

section 711 establishing restrictions on the extent to which group

health plans and health insurance issuers may limit hospital lengths of

stay for mothers and newborn children following delivery. In an effort

to ensure that participants and beneficiaries are apprised of the

limitations established under NMHPA, paragraph (d) of section 711

provides that ``[t]he imposition of the requirements of this section

[section 711] shall be treated as a material modification in the terms

of the plan * * * except that the summary description required to be

provided under the last sentence of section 104(b)(1) with respect to

such modification shall be provided by not later than 60 days after the

first day of the first plan year in which such requirements apply.''

7 Pursuant to NMHPA section 603(c), the provisions of section 603

apply to group health plans for plan years beginning on or after

January 1, 1998. In this regard, the Department is amending

Sec. 2520.102-3, the SPD content regulations, by adding a new paragraph

(u) requiring that the SPDs of group health plans offering maternity

benefits include a statement indicating that ``group health plans and

health insurance issuers offering group health insurance coverage

generally may not, under Federal law, restrict benefits for any

hospital length of stay in connection with childbirth for the mother or

newborn child to less than 48 hours following a normal vaginal

delivery, or less than 96 hours following a caesarean section, or

require that a provider obtain authorization from the plan or insurance

issuer for prescribing a length of stay not in excess of the above

periods.'' To facilitate compliance, the Department views the statement

included in this new paragraph (u) of the regulation as sample language

that may be used by administrators to satisfy this content requirement

for group health plan SPDs.

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\7\ Section 104(b)(1) generally requires summary descriptions of

material modifications to the plan to be furnished to participants

and beneficiaries not later than 210 days after the end of the plan

year in which the change is adopted.

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Consistent with NMHPA section 603(c), new paragraph (v) of

Sec. 2520.102-3, relating to applicability dates, provides that the

information described in paragraph (u) of Sec. 2520.102-3 shall be

furnished to each participant covered

[[Page 16981]]

under the plan and each beneficiary receiving benefits under the plan

not later than 60 days after the first day of the first plan year

beginning on or after January 1, 1998.

C. Material Reductions In Covered Services or Benefits

Section 104(b)(1) of ERISA requires, among other things, that

participants and beneficiaries be furnished summary descriptions of

material modifications in the terms of their plans and changes in the

information required to be included in the SPD not later than 210 days

after the end of the plan year in which the change is adopted. Section

101(c)(1) of HIPAA amended ERISA section 104(b)(1) to provide that in

the case of any modification or change that is a ``material reduction

in covered services or benefits provided under a group health plan'',

participants and beneficiaries must be furnished the summary of such

modification or change not later than 60 days after the adoption of the

modification or change, unless plan sponsors provide summaries of

modifications or changes at regular intervals of not more than 90 days.

The interim rules contained herein amend the regulations governing

the furnishing of summaries of material modifications, at 29 CFR

2520.104b-3, to establish a special rule for the furnishing of

summaries of material modifications and changes by group health plans

when such modifications or changes constitute a material reduction in

covered services or benefits under the plan. The rules governing the

furnishing of such summaries are contained in a new paragraph (d) of

Sec. 2520.104b-3.

Section 2520.104b-3(d)(1) provides, consistent with HIPAA section

101(c)(1), that the administrator of a group health plan must furnish

to each participant covered under the plan and each beneficiary

receiving benefits under the plan, a summary of any modification to the

plan or change in the information required to be included in the SPD

that is a material reduction in covered services or benefits not later

than 60 days after the date of adoption of the modification or change.

Section 2520.104b-3(d)(2) provides that the 60-day period for

furnishing summaries of modifications or changes, described in

paragraph (d)(1), does not apply to any participant covered by the plan

or any beneficiary receiving benefits who would reasonably be expected

to be furnished such summary in connection with a system of

communication maintained by the plan sponsor or administrator, with

respect to which plan participants and beneficiaries are provided

information concerning their plan, including modifications and changes

thereto, at regular intervals of not more than 90 days. For example, a

summary of material reduction in services or benefits would not have to

be furnished to participants within the prescribed 60-day period if

such summary is included as an insert in a union newspaper or a company

publication regularly furnished to participants at intervals of not

more than 90 days. It should be noted that the use of such periodicals

must otherwise meet the requirements of 29 CFR 2520.104b-1.8 It

should also be noted that if a plan has participants or beneficiaries

(e.g., separated participants, qualified beneficiaries with

continuation coverage, etc.) that do not receive the newspaper, company

publication or periodic disclosure, such participants and beneficiaries

must be furnished the summaries of material reductions in services or

benefits under the group health plan not later than 60 days after the

date of adoption.

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\8\ Section 2520.104b-1 permits the disclosure of plan

information through periodicals, such as union newspapers and

company publications, if the distribution list for the periodical is

comprehensive and up-to-date and a prominent notice on the front

page of the periodical advises the reader that the issue contains an

insert with important information about the plan which should be

read and retained for future reference.

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Section 2520.104b-3(d)(3) defines the term ``material reduction in

covered services or benefits'' provided under a group health plan. For

purposes of furnishing summaries of material modifications or changes,

paragraph (d)(3)(i) defines a ``material reduction in covered services

or benefits'' to mean any modification to the plan or change in the

information required to be included in the SPD that, independently or

in conjunction with other contemporaneous modifications or changes,

would be considered by the average plan participant to be an important

reduction in covered services or benefits.

While it is the view of the Department that determinations as to

whether a particular plan modification or SPD change constitutes a

``material reduction in covered services or benefits'' generally will

depend on the facts of each case, the Department believes that in

making such determinations it is appropriate, given the nature of the

required disclosure, to assess in each case whether the average

participant in the plan would view the modification or change as an

important reduction in covered services or benefits under the plan.

Also, recognizing that the significance of plan modifications or

changes may be affected by other contemporaneous modifications or

changes, it is the view of the Department that plan modifications and

SPD changes must be viewed in the aggregate for purposes of determining

whether such modifications or changes, individually or together, result

in a ``material reduction in covered services or benefits.''

To facilitate compliance, paragraph (d)(3)(ii) sets forth a listing

of modifications or changes that generally would constitute a

``reduction in covered services or benefits.'' In this regard,

paragraph (d)(3)(ii) provides that a ``reduction in covered services or

benefits'' generally would include any modification or change that:

eliminates benefits payable under the plan; reduces benefits payable

under the plan, including a reduction that occurs as a result of a

change in formulas, methodologies or schedules that serve as the basis

for making benefit determinations; increases deductibles, co-payments,

or other amounts to be paid by a participant or beneficiary; reduces

the service area covered by a health maintenance organization;

establishes new conditions or requirements (e.g., preauthorization

requirements) to obtaining services or benefits under the plan.

The interim rules add a new paragraph (e) to Sec. 2520.104b-3

setting forth the dates on which the requirements of Sec. 2520.104b-

3(d) take effect. Under Sec. 2520.104b-3(e), the requirements of

paragraph (d) apply to material reductions in covered services or

benefits under a group health plan adopted on or after the first day of

the first plan year beginning after June 30, 1997.

D. Alternative Delivery Mechanisms--Disclosure Through Electronic

Media

In addition to amending ERISA section 104(b)(1) to provide for the

furnishing of summaries of material reductions in covered services or

benefits, section 101(c) of HIPAA amended section 104(b)(1) to provide

that ``[t]he Secretary shall issue regulations within 180 days after

the date of enactment of the Health Insurance Portability and

Accountability Act of 1996, providing alternative mechanisms to

delivery by mail through which group health plans (as so defined) may

notify participants and beneficiaries of material reductions in covered

services or benefits.''

The Department has issued a regulation, at 29 CFR 2520.104b-1,

governing the delivery of information required to be furnished to

participants

[[Page 16982]]

and beneficiaries under ERISA. The Department notes that the regulation

does not require delivery by mail where other methods of delivery are

reasonably calculated to ensure actual receipt of materials by

participants and beneficiaries and likely to result in full

distribution of the information. See Sec. 2520.104b-1(b). In this

regard, paragraph (b) of Sec. 2520.104b-1 cites, as an example, in-hand

delivery of materials to employees at their worksite locations. The

regulation also references the use of union newsletters and company

publications as a means by which an administrator may satisfy its

disclosure obligation. An alternative to mail delivery not specifically

referenced in the current regulation is delivery of disclosure

materials through electronic media. Accordingly, the Department is

amending Sec. 2520.104b-1 to clarify the circumstances under which a

group health plan administrator will be deemed to satisfy its

disclosure obligation under Sec. 2520.104b-1 with respect to the

delivery of SPDs, summaries of material reductions in covered services

or benefits and other summaries of plan modifications and SPD changes

through electronic media.9 This amendment is intended to

establish, on an interim basis, a ``safe harbor'' on which

administrators of group health plans may rely in delivering plan

disclosures through electronic media. The amendment is not intended to

represent the exclusive means by which the requirements of

Sec. 2520.104b-1 may be satisfied in using electronic media as a method

of delivering plan disclosures.

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\9\ In the Department's view, a method of delivery, and

conditions applicable thereto, appropriate for furnishing summaries

of material reductions in covered services or benefits is

necessarily appropriate to the furnishing by group health plans of

other types of material modifications, SPDs and updated SPDs, given

the similar, if not identical, nature of the information being

provided.

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Under the interim rule, Sec. 2520.104b-1 is amended by adding a new

paragraph (c) setting forth the conditions under which the use by a

group health plan of electronic media for furnishing documents

described in ERISA section 104(b)(1), i.e., SPDs and summaries of

material modifications and changes, will be deemed to be a method of

delivery that is calculated to ensure actual receipt and result in full

distribution, within the meaning of paragraph of Sec. 2520.104b-1. New

paragraph (c)(1) of Sec. 2520.104b-1 sets forth criteria that are

generally intended to ensure that the system of electronic

communication utilized by a plan administrator for distribution of

disclosure information results in the actual delivery of such

information to participants and that the information delivered is

equivalent in both substance and form to the disclosure information the

participants would have received had they been furnished the

information in paper form. In general, paragraph (c)(1) (i)-(ii)

provides for the utilization of an electronic delivery system that: (i)

the administrator takes appropriate and necessary steps to ensure

results in actual receipt by participants of transmitted information,

such as through the use of a return-receipt electronic mail feature or

periodic reviews or surveys by the plan administrator to confirm the

integrity of the delivery system; and (ii) results in the furnishing of

disclosure information that is consistent with the style, format and

content requirements applicable to the disclosure (See 29 CFR 2520.102-

2 et seq.). New paragraph (c)(1)(iii) requires notification to each

participant, through electronic or other means, apprising the

participant of the disclosure documents furnished electronically (e.g.,

SPDs, summaries of material changes to the plan and changes to

information included in the SPD), the significance of the documents

(e.g., the document contains summary descriptions of changes in the

benefits described in your SPD), and the participant's right to request

and receive, free of charge, a paper copy of each such document from

the plan administrator. The Department believes such notification is

necessary so that participants who, for example, receive a disclosure

document as an attachment to an electronically transmitted message will

be put on notice that the attachment contains important plan

information.

It is the view of the Department that participants have a general

right to receive required plan disclosures in paper form from the plan

administrator. Accordingly, the Department believes that where a plan

administrator elects to utilize electronic media as the method for

delivering required plan disclosures, participants must be afforded the

opportunity to obtain the disclosures from the plan administrator in

paper form, free of charge. The obligation to furnish paper copies of

documents furnished through electronic media is set forth in paragraph

(c)(1)(iv). The Department specifically invites public comment on the

relative costs and benefits of this requirement to furnish paper copies

to participants on request of documents furnished through electronic

media.

New paragraph (c)(2) describes the participants with respect to

whom the electronic delivery of plan disclosures will be deemed to be

an acceptable method of delivery for fulfilling the disclosure

obligation described in Sec. 2520.104b-1(b)(1). Such participants, in

the view of the Department, must have: the ability to effectively

access at their worksite documents furnished in electronic form; and

the opportunity at their worksite to readily convert furnished

documents from electronic form to paper form, free of charge. In this

regard, the Department believes that, however effective an electronic

system may be for delivering plan disclosures, the critical

determination in assessing the adequacy of the system, as a means for

communicating to plan participants, will be the extent to which

participants can readily access and retain the delivered information.

While the Department believes the criteria set forth in the interim

rule have applicability beyond group health plans, the Department is

limiting the interim rule ``safe harbor'' to group health plans in view

of directive under HIPAA section 101(c)(1) and the absence of a public

record on the matter. The Department, however, specifically invites

public comment on the criteria established by the interim rule, the

extent to which application of the rule should be extended to other

plans, the extent to which application of the rule should be expanded

to other plan disclosures (e.g., summary annual reports, individual

benefit statements) and, if expanded, whether additional criteria may

be necessary to ensure private, confidential communications of

individual account or benefit-related information.

Administrators of group health plans may rely on this interim

amendment on or after June 1, 1997.

E. Interim Rules and Request for Comments

The rules contained herein are being adopted on an interim basis in

order to ensure that plan sponsors and administrators of group health

plans, as well as participants and beneficiaries, are provided timely

guidance concerning compliance with recently enacted amendments to

ERISA. Specifically, HIPAA section 101(a) adds a new ERISA part 7, and

within this new part, section 707 (redesignated as section 734 by

section 603(a)(3) of the NMHPA) provides that the Secretary of Labor

may promulgate any interim final rules as the Secretary determines are

appropriate to carry out this part. The rules herein complement changes

made in the new part 7 of ERISA and are being adopted on an interim

basis because the Department finds that issuance of such regulations in

interim

[[Page 16983]]

final form with a request for comments is appropriate to carry out the

new regulatory structure imposed by HIPAA on group health plans and

health insurance issuers, and is necessary to ensure that plan sponsors

and administrators of group health plans, as well as participants and

beneficiaries, are provided timely guidance concerning compliance with

new and important disclosure obligations imposed by HIPAA. The

Department also finds for the above reasons that the publication of a

proposed regulation would be impracticable, unnecessary, and contrary

to the public interest.

The statutory provisions of HIPAA and NMHPA implemented by the

pertinent regulatory amendments in this document are generally

applicable for group health plans for plan years beginning on or after

July 1, 1997, and January 1, 1998, respectively. Plan administrators

and sponsors, and participants and beneficiaries, will need guidance on

how to comply with the new statutory provisions before these effective

dates. Pursuant to section 101(g) of HIPAA, the Secretary must first

issue regulations necessary to carry out the amendments made by section

101 by April 1, 1997. Issuance of a notice of proposed rulemaking with

a period for comments prior to issuing a final rule could delay the

issuance of essential guidance and prevent the Department from

complying with its deadline. Furthermore, although the rules herein are

being adopted on an interim basis, the Department is inviting

interested persons to submit written comments on the rules for

consideration in the development of final rules in this area. Such

final rules may be issued in advance of the above July 1, 1997, and

January 1, 1998, dates.

Executive Order 12866 Statement

Under Executive Order 12866 (58 FR 51735, Oct. 4, 1993), it must be

determined whether a departmental action is ``significant'' and

therefore subject to review by the Office of Management and Budget

(OMB) and the requirements of the Executive Order. Under section 3(f),

the order defines a ``significant regulatory action'' as an action that

is likely to result in a rule (1) having an annual effect on the

economy of $100 million or more, or adversely and materially affecting

a sector of the economy, productivity, competition, jobs, the

environment, public health or safety, or State, local or tribal

governments or communities (also referred to as ``economically

significant''); (2) creating a serious inconsistency or otherwise

interfering with an action taken or planned by another agency; (3)

materially altering the budgetary impacts of entitlement, grants, user

fees, or loan programs or the rights and obligations of recipients

thereof; or (4) raising novel legal or policy issues arising out of

legal mandates, the President's priorities, or the principles set forth

in the Executive Order.

Pursuant to the terms of the Executive Order, it has been

determined that the action that is the subject of the interim rules is

``significant'' under category (4), supra, and subject to OMB review on

that basis. The estimated cost of compliance with HIPAA and the interim

rules are set forth in the Paperwork Reduction Act Analysis, below. The

benefits of the interim rules, as yet unquantified, will arise as

participants and beneficiaries become better informed about their

health care coverage because of additional disclosures and more timely

distribution of plan information.

Paperwork Reduction Act Analysis

The Department of Labor has submitted this emergency processing

public information collection request (ICR) to the Office of Management

and Budget for review and clearance under the Paperwork Reduction Act

of 1995 (Pub. L. 104-13, 44 U.S.C. Chapter 35). The Department has

asked for OMB clearance as soon as possible, and OMB approval is

anticipated by or before June 1, 1997. As part of its continuing effort

to reduce paperwork and respondent burden, the Department conducts a

pre-clearance consultation program to provide the general public and

Federal agencies with an opportunity to comment on ICRs in accordance

with the Paperwork Reduction Act of 1995 (PRA 95)(Pub. L. 104-13, 44

U.S.C. Chapter 35) and 5 CFR 1320.11. This program helps to ensure that

requested data can be provided in the desired format, reporting burden

(time and financial resources) is minimized, collection instruments are

clearly understood, and the impact of collection requirements on

respondents can be properly assessed. Currently, the Pension and

Welfare Benefits Administration is soliciting comments concerning the

revised collection of Summary Plan Description Requirements under

ERISA.

Dates: Written comments must be submitted to the offices listed in the

addressee section below on or before May 31, 1997. In light of the

request for OMB clearance by June 1, 1997, submission of comments

within the first 30 days is encouraged to ensure their consideration.

The Department and the Office of Management and Budget are

particularly interested in comments which:

evaluate whether the proposed collection 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 proposed collection of information, including the

validity of the methodology and assumptions used;

enhance the quality, utility, and clarify 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, e.g., permitting

electronic submissions of responses.

ADDRESSES: Comments and questions about the ICR should be forwarded to:

Gerald B. Lindrew, Office of Policy and Research, U.S. Department of

Labor, Pension and Welfare Benefits Administration, 200 Constitution

Avenue, Room N-5647, Washington, D.C. 20210, Telephone: (202) 219-4782

(this is not a toll-free number), Fax: (202) 219-4745; and the Office

of Information and Regulatory Affairs, Attn: OMB Desk Officer for the

Pension and Welfare Benefits Administration, Office of Management and

Budget, Room 10235, Washington, D.C. 20503, Telephone: (202) 395-7316.

Additional PRA 95 Information:

I. Background: The administrator of an employee benefit plan is

required to furnish an SPD to each participant covered under the plan

and to each beneficiary who is receiving benefits under the plan. The

SPD must be written in a manner calculated to be understood by the

average plan participant and must be sufficiently comprehensive to

apprise the plan's participants and beneficiaries of their rights and

obligations under the plan. To the extent that there is a material

modification in the terms of the plan or a change in the information

required to be contained in the SPD, ERISA requires that the

administrator furnish participants covered under the plan and

beneficiaries receiving benefits with a summary of such changes.

II. Current Actions: HIPAA and NMHPA amend certain reporting and

disclosure provisions of ERISA

Type of Review: Revision of currently approved collection.

[[Page 16984]]

Agency: Pension and Welfare Benefits Administration.

Title: The title of the interim rule is Amendment of Summary Plan

Description and Related ERISA Regulations To Implement Statutory

Changes In the Health Insurance Portability and Accountability Act of

1996 (HIPAA).

OMB Number: 1210-0039.

Affected Public: Business or other for-profit, not-for-profit.

Total Responses (annual): 43,952,715 (1997), 62,728,915 (1998),

31,896,715 (1999).

Total Respondents (annual): 176,315 (1997), 194,235 (1998), 163,515

(1999).

Frequency: On occasion.

Average Time per Response:

Average SPD/SMM--We estimate it takes an average of 6 hours for

preparation of SPDs/SMMs, including the time to copy, assemble, and

mail the document to the Department of Labor.

SMM Compliance--We estimate that preparation of an SMM sufficient

to satisfy the requirements of this regulation will take an average of

1 hour.

Distribution--We estimate that 2 minutes per participant is the

time needed to distribute an SMM/SPD, including time spent reproducing

the document and mailing the document.

Estimated Total Burden Hours: 1,007,425 (1997), 1,130,282 (1998),

942,980 (1999).

There is estimated to be no capital/start-up cost. Total Burden

Cost for operating/maintenance is estimated to be $72,310,858 in 1997,

$82,338,958 in 1998 and $65,002,858 in 1999.

Note: The Average Time Per Response, Estimated Total Burden

Hours, and Total Burden Cost have been estimated without accounting

for those respondents that will implement the ``alternative

mechanisms to delivery by mail'' provision contained in the interim

rule. It is expected that some respondents will use these

alternatives, and that these alternatives will reduce burden hours

and costs.

Comments submitted in response to this notice will be summarized

and/or included in the request for OMB approval of the information

collection request; they will also become a matter of public record.

Congressional Review

This interim rule has been transmitted to Congress and the

Comptroller General for review under section 801(a)(1)(A) of the Small

Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et

seq.).

Unfunded Mandates Reform Act

For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.

104-4), as well as Executive Order 12875, this interim rule does not

include any Federal mandate that may result in expenditures by State,

local or tribal governments, and does not impose an annual burden

exceeding $100 million on the private sector.

Statutory Authority

This interim regulation is adopted pursuant to authority contained

in section 505 of ERISA (Pub. L. 93-406, 88 Stat. 894, 29 U.S.C. 1135)

and sections 104(b) and 734 of ERISA, as amended, (Pub. L. 104-191, 110

Stat. 1936, 1951 and Pub. L. 104-204, 110 Stat. 2935, 29 U.S.C. 1024

and 1191c) and under Secretary of Labor's Order No. 1-87, 52 FR 13139,

April 21, 1987.

List of Subjects in 29 CFR Part 2520

Employee benefit plans, Employee Retirement Income Security Act,

Group health plans, Pension plans, Welfare benefit plans.

For the reasons set forth above, Part 2520 of Title 29 of the Code

of Federal Regulations is amended as follows:

PART 2520--[AMENDED]

1. The authority for Part 2520 is revised to read as follows:

Authority: Secs. 101, 102, 103, 104, 105, 109, 110, 111(b)(2),

111(c), and 505, Pub. L. 93-406, 88 Stat. 840-52 and 894 (29 U.S.C.

1021-1025, 1029-31, and 1135); Secretary of Labor's Order No. 27-74,

13-76, 1-87, and Labor Management Services Administration Order 2-6.

Sections 2520.102-3, 2520.104b-1 and 2520.104b-3 also are issued

under sec. 101 (a), (c) and (g)(4) of Pub. L. 104-191, 110 Stat. 1936,

1939, 1951 and 1955 and, sec. 603 of Pub. L. 104-204, 110 Stat. 2935

(29 U.S.C. 1185 and 1191c).

2. Section 2520.102-3 is amended by adding a sentence at the end of

paragraph (q) to read as follows:

Sec. 2520.102-3 Contents of summary plan description.

* * * * *

(q) * * * If a health insurance issuer, within the meaning of

section 733(b)(2) of the Act, is responsible, in whole or in part, for

the financing or administration of a group health plan, the summary

plan description shall indicate the name and address of the issuer,

whether and to what extent benefits under the plan are guaranteed under

a contract or policy of insurance issued by the issuer, and the nature

of any administrative services (e.g., payment of claims) provided by

the issuer.

* * * * *

3. Section 2520.102-3 is further amended by revising the last

sentence of the undesignated paragraph following paragraph (t)(2) to

read as follows:

Sec. 2520.102-3 Contents of summary plan description.

* * * * *

(t) * * *

(2) * * *

If you have any questions about this statement or about your rights

under ERISA, you should contact the nearest office of the Pension and

Welfare Benefits Administration, U.S. Department of Labor, listed in

your telephone directory or the Division of Technical Assistance and

Inquiries, Pension and Welfare Benefit Administration, U.S. Department

of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.

4. Section 2520.102-3 is further amended by adding paragraphs (u)

and (v) to read as follows:

Sec. 2520.102-3 Contents of summary plan description.

* * * * *

(u) In the case of a group health plan, as defined in section

733(a)(1) of the Act, that provides maternity or newborn infant

coverage, a statement indicating that group health plans and health

insurance issuers offering group insurance coverage generally may not,

under Federal law, restrict benefits for any hospital length of stay in

connection with childbirth for the mother or newborn child to less than

48 hours following a normal vaginal delivery, or less than 96 hours

following a caesarean section, or require that a provider obtain

authorization from the plan or the insurance issuer for prescribing a

length of stay not in excess of the above periods.

(v) Applicability dates. (1) The information described in the last

sentence of paragraph (q) and in the last two sentences of paragraph

(t)(2) shall be treated as a change in the information required to be

included in the summary plan description for a group health plan for

purposes of 29 CFR 2520.104b-3, except that such information shall be

furnished to each participant covered under the plan and each

beneficiary receiving benefits under the plan not later than 60 days

after the first day of the first plan year beginning after June 30,

1997.

(2) The information described in paragraph (u) of this section

shall be furnished to each participant covered under a group health

plan and each beneficiary receiving benefits under a group health plan

not later than 60 days after the first day of the first plan year

beginning on or after January 1, 1998.

[[Page 16985]]

5. Section 2520.104b-3 is amended by revising the second sentence

of paragraph (a), redesignating paragraphs (d) and (e) as paragraphs

(f) and (g), respectively, and adding new paragraphs (d) and (e) to

read as follows:

Sec. 2520.104b-3 Summary of material modifications to the plan and

changes in the information required to be included in the summary plan

description.

(a) * * * Except as provided in paragraph (d) of this section, the

plan administrator shall furnish this summary, written in a manner

calculated to be understood by the average plan participant, not later

than 210 days after the close of the plan year in which the

modification or change was adopted. * * *

* * * * *

(d) Special rule for group health plans. (1) General. Except as

provided in paragraph (d)(2) of this section, the administrator of a

group health plan, as defined in section 733(a)(1) of the Act, shall

furnish to each participant covered under the plan and each beneficiary

receiving benefits under the plan a summary, written in a manner

calculated to be understood by the average plan participant, of any

modification to the plan or change in the information required to be

included in the summary plan description, within the meaning of

paragraph (a) of this section, that is a material reduction in covered

services or benefits not later than 60 days after the date of adoption

of the modification or change.

(2) 90-day alternative rule. The administrator of a group health

plan shall not be required to furnish a summary of any material

reduction in covered services or benefits within the 60-day period

described in paragraph (d)(1) of this section to any participant

covered under the plan or any beneficiary receiving benefits who would

reasonably be expected to be furnished such summary in connection with

a system of communication maintained by the plan sponsor or

administrator, with respect to which plan participants and

beneficiaries are provided information concerning their plan, including

modifications and changes thereto, at regular intervals of not more

than 90 days and such communication otherwise meets the disclosure

requirements of 29 CFR 2520.104b-1.

(3) ``Material reduction''. (i) For purposes of this paragraph (d),

a ``material reduction in covered services or benefits'' means any

modification to the plan or change in the information required to be

included in the summary plan description that, independently or in

conjunction with other contemporaneous modifications or changes, would

be considered by the average plan participant to be an important

reduction in covered services or benefits under the plan.

(ii) A ``reduction in covered services or benefits'' generally

would include any plan modification or change that: eliminates benefits

payable under the plan; reduces benefits payable under the plan,

including a reduction that occurs as a result of a change in formulas,

methodologies or schedules that serve as the basis for making benefit

determinations; increases deductibles, co-payments, or other amounts to

be paid by a participant or beneficiary; reduces the service area

covered by a health maintenance organization; establishes new

conditions or requirements (e.g., preauthorization requirements) to

obtaining services or benefits under the plan.

(e) Applicability date. Paragraph (d) of this section is applicable

as of the first day of the first plan year beginning after June 30,

1997.

* * * * *

6. Section 2520.104b-1 is amended by redesignating paragraph (c) as

paragraph (d) and adding a new paragraph (c) to read as follows:

Sec. 2520.104b-1 Disclosure.

* * * * *

(c) Disclosure through electronic media. (1) The administrator of a

group health plan furnishing documents described in section 104(b)(1)

of the Act through electronic media will be deemed to satisfy the

requirements of paragraph (b)(1) of this section with respect to

participants described in paragraph (c)(2) of this section if:

(i) The administrator takes appropriate and necessary measures to

ensure that the system for furnishing documents results in actual

receipt by participants of transmitted information and documents (e.g.,

uses return-receipt electronic mail feature or conducts periodic

reviews or surveys to confirm receipt of transmitted information);

(ii) Electronically delivered documents are prepared and furnished

in a manner consistent with the applicable style, format and content

requirements (See 29 CFR 2520.102-2 through 2520.102-5);

(iii) Each participant is provided notice, through electronic means

or in writing, apprising the participant of the document(s) to be

furnished electronically, the significance of the document (e.g., the

document describes changes in the benefits provided by your plan) and

the participant's right to request and receive, free of charge, a paper

copy of each such document; and

(iv) Upon request of any participant, the administrator furnishes,

free of charge, a paper copy of any document delivered to the

participant through electronic media.

(2) For purposes of paragraph (c)(1) of this section, the

furnishing of documents through electronic media satisfies the

requirements of paragraph (b)(1) of this section only with respect to

participants:

(i) Who have the ability to effectively access at their worksite

documents furnished in electronic form; and

(ii) Who have the opportunity at their worksite location to readily

convert furnished documents from electronic form to paper form free of

charge.

(3) This paragraph (c) applies on or after June 1, 1997.

* * * * *

Signed at Washington, D.C., this 27th day of March, 1997.

Olena Berg,

Assistant Secretary, Pension and Welfare Benefits Administration, U.S.

Department of Labor.

[FR Doc. 97-8173 Filed 4-1-97; 12:52 pm]

BILLING CODE 4510-29-P