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Can We Use the Same SPD When Our Health Plan Changes From Insured to Self-Insured?



QUESTION: Our company is planning to change our ERISA-covered health plan from an insured plan to a self-insured plan. If we keep the same plan design, and the insurance company that currently insures the plan will administer the self-insured plan under an “administrative services only” (ASO) contract, can we keep using the same summary plan description (SPD)?

ANSWER: Probably not. Even if you intend to keep the covered benefits the same, certain information in the SPD must change to reflect the plan’s self-insured status. While it might be possible to update this information by distributing a summary of material modifications (SMM) to supplement your current SPD, it is crucial to review the entire SPD for consistency with the self-insured plan document. You may find that some provisions—particularly definitions—are changing, even if you intend the benefit design to stay the same. And if you previously used a “wrap” approach to supplement the insured plan’s certificate of coverage with your company’s plan-specific information, this is an opportunity to create one comprehensive SPD for the self-insured plan. Also, there may be provisions the company wants to add (to both the plan document and the SPD) in light of the greater responsibilities of sponsoring a self-insured plan. Distributing new SPDs, rather than merely SMMs, should reduce potential confusion among employees and your benefits staff.

When changing from an insured to a self-insured health plan, some SPD changes are obvious: the “type of administration” under the plan’s identifying information, and any changes to contact information (for example, if the insurance company uses a different name or business address for its ASO business). And an insured plan’s SPD may reflect state-law mandates that do not apply to self-insured plans, such as required coverage of certain conditions, continuation requirements more generous than COBRA, or conversion rights. But also pay careful attention to the following:

  • Defined terms (for example, medical necessity, experimental or investigational, and emergency—including any references to internal guidelines or standards);
  • Coverage exclusions;
  • Preauthorization or utilization review requirements;
  • Eligibility;
  • Claims and appeals procedures;
  • Statement of plan administrator’s discretionary authority (including clear delegation to the appropriate party, if necessary);
  • Plan-imposed deadline for filing a lawsuit; and
  • Provisions addressing the plan’s rights regarding subrogation, reimbursement, overpayments, and similar matters.

The above list is not intended to be exhaustive, and plan provisions can vary widely. Someone knowledgeable about the company’s plan (e.g., a member of the company’s HR or legal department, outside counsel, or a similar outside advisor) should review the SPD and the plan document together to confirm consistency before the new SPD is finalized and distributed. Lastly, keep in mind that the revised SPD must be distributed within 210 days after the end of the plan year in which the change is adopted (the deadline for furnishing a description of any material modification to the plan)—although, as a practical matter, earlier distribution is recommended. For more information, see EBIA’s Self-Insured Health Plans manual at Section XXVIII.B (“Summary Plan Description (SPD) and Summary of Material Modifications (SMM)”). See also EBIA’s ERISA Compliance manual at Section XXIV (“Summary Plan Descriptions & Summaries of Material Modifications”).

Contributing Editors: EBIA Staff.

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