The Patient Protection and Affordable Care Act requires non-grandfathered group health plans to cover preventive services at no cost. For women this includes all FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity. While the earlier guidance provided an exemption for employers who objected to such benefits because of religious reasons, a “religious employer” was defined very narrowly. Under this narrow definition, a religious employer is one that:
Has the inculcation of religious values as its purpose
Primarily employs persons who share its religious tenets
Primarily serves persons who share its religious tenets
Is a nonprofit organization described in Code Sections 6033(a)(1) and 6033(a)(3)(A)(i) or (iii) of the Code (These last two Code Sections refer to churches, their integrated auxiliaries, and conventions or associations of churches, as well as the exclusively religious activities of any religious order)
Employers satisfying the above definition, mainly churches with regards to their ministerial employees (i.e., “steeple churches”), enjoy a blanket exemption from the contraceptive services mandate. The group health plans sponsored by steeple churches do not have to provide first dollar coverage of contraceptive services at all.
The religious community did not react well to this definition. More than 200,000 comments were submitted to the IRS, the U.S. Department of Labor, and the U.S. Department of Health and Human Services (collectively, the Agencies). Critics were quick to point out that because many religious-affiliated charitable organizations such as hospitals, nursing homes, and universities serve all members of the community and employ individuals of various religious faiths, such entities were ineligible for the blanket exemption. In response, the Agencies issued a one-year enforcement moratorium until the first day of the first plan year beginning on or after August 1, 2013 (i.e., January 1, 2014 for calendar year plans) in order to presumably work with the religious community to refine the exemption.
Expanded Religious Employer Definition and Proposals of How Contraceptive Services Offered as Compromise
On January 30, 2013, the Agencies issued a supplemental definition to expand the definition of a religious employer, and a proposal of how to comply with the contraceptive requirement while avoiding the religious objections against such coverage. Effective for plan years beginning on or after August 1, 2013 (or January 1, 2014 for calendar year plans), a religious-affiliated employer that is able to satisfy the following definition of an “eligible organization” will be able to have a third party arrange and pay for the mandated contraceptive services. This proposal of having a third party’s involvement is the Agencies’ compromise to still be able to provide contraceptive services at no cost while avoiding a conflict with the plan sponsor’s religious objections.
An entity is an eligible organization if it satisfies the following four criteria:
Opposes providing coverage for some or all of any contraceptive services required to be covered under the Affordable Care Act because of religious objections
Is organized and operated as a nonprofit entity
Holds itself out as a religious organization*
Self-certifies that it meets these criteria and lists the specific contraceptive services that are objectionable
*This eligible organization definition augments the definition of a religious employer by going beyond steeple churches to include entities that are affiliated with churches, such as hospitals, schools, and other charitable organizations. As a general proposition, if a religious-affiliated employer is able to sponsor a “church plan” for ERISA exemption purposes, it would likely qualify as an eligible organization under the new rules, enabling it to have a third party arrange and pay for the coverage of contraceptive services. Because there is a substantial body of guidance about who is a “religious organization,” this well-established body of law will be very helpful to employers in determining if they qualify as an eligible organization, and therefore can rely on the proposal of how to provide the mandated coverage. The Agencies intend to issue guidance on the self-certification form.
How Will Contraceptive Services Be Provided at No Cost?
The proposed regulations provide guidance to address religious employers’ goal of avoiding any involvement in the arranging for or the payment of contraceptive services, while still providing contraceptive services at no additional cost in a seamless manner to participants and beneficiaries.
Insured Group Health Plans. If the religious employer sponsors a fully insured plan, the employer gives a copy of its self-certification to the plan’s insurance carrier. The insurance carrier must then (i) assure that the group policy excludes the contraceptive services identified in the self-certification, (ii) assure that the premium charged to the employer and employees do not include any charge or other fee in connection with such services, and (iii) provide the contraceptive services to all participants and beneficiaries through individual policies or contracts without any additional costs or fees. The Agencies believe that this coverage will not result in additional costs to the insurance carriers because of the savings realized by fewer childbirths and the overall improvement in women’s health.
Self-Insured Group Health Plans With Third Party Administrators. Like the insured plan scenario, a religious employer would provide a copy of the self-certification to its plan’s third-party administrator (TPA). If a plan has multiple TPAs (e.g., a prescription drug manager and a TPA for medical claims) a copy of the self-certification must be provided to each TPA. The TPA would then follow the same steps outlined above, except that instead of underwriting the contraceptive policies, the TPA would arrange for separate health insurance policies to provide the coverage. The insurance carrier would be paid in the form of reduced federally facilitated Exchange fees, which are the fees each insurance carrier pays to a state Exchange for the opportunity to offer a qualified health plan on the Exchange. A portion of the fee reduction also would be passed on to the TPA for its costs to locate and implement the individual policies to provide coverage for the contraceptive benefits. The Agencies seek comments to address a religious employer’s self-insured plan that does not use a TPA.
Advance Written Notice to Participants and Beneficiaries. Employers must provide a separate, written notice to participants and beneficiaries regarding the availability of separate contraceptive services. This notice is to be provided annually in the open enrollment and ongoing enrollment materials. The proposed new rules set out model language, which can be used for this purpose.
Expanded Definition and Proposal Has Not Resolved Controversy
The U.S. Conference of Catholic Bishops recently stated that the revised definition and compromise proposal do not resolve their concerns, because it failed to give church-affiliated hospitals and schools the same broad exemption afforded actual steeple churches. But the Conference said that it will continue in its work with the White House to reach common ground. To date, numerous suits have been filed by not only religious employers, but also secular employers with religious objections to the mandate. Different appellate courts have reached opposite conclusions. The 7th U.S. Circuit, which covers Illinois, Wisconsin, and Indiana, concluded that the contraceptive mandate violated the 1993 federal law, the Religious Freedom Restoration Act, which limits regulations that “substantially burden” religious exercise. But the 10th U.S. Circuit covering Colorado, Kansas, New Mexico, Utah, and Wyoming came to the opposite conclusion. The 10th Circuit held that the mandate didn’t impose a “substantial burden” because an employer paying for group health coverage that could lead to some third party doing something that the company’s owners found immoral was too “indirect and attenuated” to qualify under the Religious Freedom Restoration Act. Meanwhile, scores of lawsuits are wending their way through the court system. This issue may ultimately need to be resolved by the U.S. Supreme Court.
Next Steps. Religious employers that qualify as eligible organizations and that sponsor fully insured group health plans, or use a TPA for their self-insured plans, should watch for future guidance on the form of the self-certification, and to alert their insurance companies or TPAs that they intend to rely on this expanded exemption. Sponsors of self-funded plans that do not use a TPA may consider submitting comments to the Agencies with regard to how the contraceptive services can be secured and offered. It may be that unrelated TPAs will offer this service to such plans, or that such plans will look to consultants or other providers for these services.
April 8, 2013, is the deadline by which to submit comments on these proposed rules. Submitted comments will be considered and the Agencies hope to finalize the regulations before this fall, in time for open enrollment for the 2014 plan year. Comments may be submitted electronically through http://www.regulations.gov or mailed to Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services, Attention: CMS-9968-P, P.O. Box 8013, Baltimore, MD 21244-1850. In commenting, refer to file code CMS-9968-P.