The Life of a Claim: Navigating Care with the Summary of Benefits and Coverage

Navigating health insurance can be challenging, especially during emergencies. That’s why in this edition of the Benefits Architecture: Learn the framework. Elevate the design, we’re taking a deep dive into one of the most useful, but often overlooked, tools in your benefits toolkit: the Summary of Benefits and Coverage (SBC).

The Summary of Benefits and Coverage is a quick, reliable guide that helps employees understand what their health plan covers, what they can expect to pay, and how the plan works in the real world.

Why is the Summary of Benefits and Coverage important?

The SBC is a federally mandated document under the Affordable Care Act, designed to increase transparency and help people easily understand and compare health insurance plans.

Employees will typically receive their SBC when they become eligible for benefits, during open enrollment, or any time an employee requests it. And while the SBC is intended to help employees make more informed choices, it’s also invaluable in those unexpected moments when quick decisions have to be made.

The Summary of Benefits and Coverage: When real life happens.

Imagine an employee heads to the ER with sudden abdominal pain and ends up needing an emergency appendectomy. This is where the SBC becomes more than a compliance document – it becomes a critical reference point.

Whether the employee is enrolled in a high-deductible health plan (HDHP) or a traditional copay plan, the SBC helps clarify what emergency services are covered, what portion of the surgery and hospital stay counts toward the deductible, and what they might owe after insurance pays.

It also explains how out-of-network care is handled, an important detail if the ER or surgeon isn’t in-network. And while the structure of coverage may vary between fully insured and self-funded plans, the SBC shows this information in a consistent format, making it easier for employees to understand at a glance.

Six key sections of a Summary of Benefits and Coverage.

During a medical emergency, like an appendectomy, it’s important for employees to know what their benefits plan will cover and what they are responsible for. The Summary of Benefits and Coverage is an easily accessible tool they can refer to. For example, let’s say the emergency appendectomy costs about $30,000, including the emergency visit, imaging, surgery, and hospitalization. The patient is enrolled in an HDHP plan with a $3,000 deductible, 80/20 coinsurance, and a $6,000 out-of-pocket maximum. Let’s walk through six key sections of the SBC to see how this plan may handle those expenses:

1. The deductible. The deductible is the amount an employee pays out-of-pocket before the insurance plan starts to pay a portion of the costs. For services like lab work, outpatient surgery, or inpatient stays, expenses often go toward the deductible first. Once the deductible is met, insurance will begin paying its share. In High Deductible Health Plans (HDHPs), nearly all care is subject to this upfront cost, before coinsurance applies, but costs can be lower once that threshold is reached. 
   For example, in the case of a $30,000 emergency appendectomy, the patient would first pay the full $3,000 deductible out-of-pocket before insurance covers any part of the bill.
2. Look at the copays. A copay is a fixed fee that patients must pay out-of-pocket at the time of receiving healthcare services or prescriptions. The specific copay amount can vary depending on the type of service and the details of the insurance program. These fees don’t usually count toward the deductible, but they do count toward the plan’s out-of-pocket maximum. HDHPs typically don’t use copays until the deductible is met, whereas traditional copay plans offer more predictable, upfront costs for routine care.
   Because our example uses an HDHP, there would be no copays upfront—the patient would first meet the $3,000 deductible, and then coinsurance would apply. If a patient has a copay plan with a $250 emergency copay, and the total cost of the services done in the ER was $3000, the patient would pay $250 at the time of the visit. The remaining costs would be processed according to the plan’s deductible, coinsurance, and coverage rules.
   
3. Coinsurance. Coinsurance is the percentage of covered healthcare costs a patient is responsible for paying after the deductible is met. Coinsurance percentages vary depending on the type of insurance program. For HDHPs, coinsurance applies after the deductible is met.
   After the patient pays the $3,000 deductible, the remaining $27,000 would be subject to 80/20 coinsurance. That means the patient would pay 20% of $27,000, which is $5,400.
   
4. Out-of-Pocket Maximum. This is the most an employee will pay for covered, in-network care in a year. Once this limit has been met, the plan will pay 100% of the allowed amount of covered services for the rest of the plan year. The deductible, copays, and coinsurance all count toward this cost limit.
   The patient’s total out-of-pocket costs would reach $6,000: $3,000 for the deductible, and $3,000 of the $5,400 coinsurance (since the out-of-pocket max caps their cost). Insurance would cover the remaining $24,000.
   
5. Compare in-network vs. Out-of-network coverage. The SBC clearly shows the difference in costs between in-network and out-of-network care. In-network providers have pre-negotiated rates with the insurance provider, which can make care more affordable. Out-of-network providers do not have an agreement, potentially leading to higher deductibles, coinsurance, and out-of-pocket maximums.
   If the emergency appendectomy occurred out-of-network, the patient might face a higher deductible, a different coinsurance rate, and possibly no cap on total out-of-pocket costs, which could push their total responsibility well above $6,000.
   
6. Prescription drug coverage. Plans typically use a tiered formulary model to structure prescription drug coverage. Medications are grouped into specific tiers, typically Generic, Preferred Brand, Non-Preferred Brand, and Specialty. Each tier is assigned a different level of copayment or coinsurance. The formulary, or prescription drug tier list, in the SBC outlines which medications are covered under the health plan and determines the patient’s out-of-pocket costs.
   Generally, lower-tier medications, such as generics, involve lower cost-sharing, while higher-tier medications, such as specialty drugs, require higher copayments or coinsurance. Usually, copay plans have fixed costs for prescriptions, whereas in HDHPs, prescriptions are subject to the deductible.
   If the patient was prescribed antibiotics or pain medication after the appendectomy, those prescription costs would also apply toward the deductible and coinsurance until the $6,000 out-of-pocket max was reached.

Employees should be encouraged to verify whether a provider is in-network and to review the formulary tier of any prescribed medication before receiving care or prescriptions. These two actions, which are easily overlooked, can significantly reduce the risk of unexpected charges and help employees manage their out-of-pocket spending more effectively.

For example, if an employee fills a prescription without realizing it’s classified as a non-preferred brand or specialty drug, they may end up paying more than they expected.

An essential tool for employee benefits.

The Summary of Benefits and Coverage may not seem exciting or flashy, but it’s one of the most important tools employees have when it comes to understanding their health coverage. Whether they’re planning ahead or facing an unexpected emergency, the SBC can deliver clarity for employees.

If you have questions about your SBC, don’t hesitate to reach out. We’re here to talk with you.

Cost figures, coverage details, and plan design elements presented in this blog are for illustrative purposes only and do not reflect any specific insurance policy or provider. Actual costs will vary based on your organization’s health plan, the insurance carrier, provider contracts, and the specifics of each medical situation. Employers and employees should refer to their official plan documents or speak with their broker or benefits consultant for guidance if needed.