Final Affordable Care Act Regulations on the Exemption of Contraceptives Coverage by Religious Employers and Student Health Insurance

by McDermott Will & Emery
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The final regulations retain the definition of a religious employer, modify the accommodations provided for eligible organizations that object to contraception coverage on religious grounds, and describe how contraceptives will be provided and paid for under both a fully insured and a self-insured group health plan.

The U.S. Departments of Labor, Health and Human Services, and the Treasury (the regulators) released final regulations on July 2, 2013, regarding coverage of certain women’s preventive services under the Affordable Care Act.

The applicability date of these final regulations, with the exception of the amendments to the religious employer exemption, apply to group health plans and health insurance issuers for plan years beginning on or after January 1, 2014.  The amendments to the religious employer exemption apply to group health plans and health insurance issuers for plan years beginning on or after August 1, 2013.

The final regulations retain the definition of a religious employer, modify the accommodations provided for eligible organizations that object to contraception coverage on religious grounds, and describe how contraceptives will be provided and paid for under both a fully insured and a self-insured group health plan.

Definition of Religious Employer

The final regulations maintain the February 2013 proposed regulation’s definition of a religious employer.  A religious employer continues to be defined as one that is organized and operates as a nonprofit entity and is described in sections 6033(a)(1) and 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code (Code).  Sections 6033(a)(3)(A)(i) and (iii) of the Code refer to churches, their integrated auxiliaries, and conventions or associations of churches, as well as to the exclusively religious activities of any religious order.

Accommodations for Eligible Organizations

In addition to religious employers, the final regulations establish accommodations for eligible organizations that meet the self-certification standard.  Each organization seeking to be treated as an eligible organization can avoid contracting, arranging, paying or referring for contraceptive coverage as long as it self-certifies, prior to the beginning of the first plan year to which an accommodation is to apply, that it meets the definition of an eligible organization.

Definition of Eligible Organization

The final regulations retain the definition of an eligible organization set forth in the proposed regulations.  An eligible organization is an organization that (1) opposes providing coverage for some or all of the contraceptive services required to be covered under section 2713 of the Public Health Service Act (PHSA) and the companion provisions of the Employee Retirement Income Security Act (ERISA) and the Code on account of religious objections; (2) is organized and operates as a nonprofit entity; (3) holds itself out as a religious organization; and (4) self-certifies that it satisfies the first three criteria (as discussed in more detail later in this section).  The final rule makes no accommodation for secular or for-profit employers.

Self-Certification

The self-certification only needs to be executed once. A copy of the self-certification then must be provided to any new health insurance issuers or third-party administrators if the eligible organization changes issuers or third-party administrators.  An issuer or third-party administrator may not require any documentation from the organization beyond its self-certification as to its status as an eligible organization.  EBSA Form 700, which should be used for the self-certification, also has been published.  The self-certification does not have to be submitted to regulators but must be available for examination upon request.  A copy of the self-certification must be maintained for at least six years pursuant to ERISA record retention requirements.

Contraceptive Services for Participants, Beneficiaries, Student Enrollees and Their Covered Dependents in Insured Group Health Plans

With respect to an insured health plan (including a student health plan), if an eligible organization provides the self-certification form to its insurance issuer, the issuer must exclude contraceptive coverage from the religious organization’s group health coverage.  The final regulations permit issuers to use a standard exclusion from a group health insurance policy for all recommended contraceptive services.  Alternatively, issuers may, at their option, choose to offer customized exclusions from group health insurance policies based on the differing religious objections to contraceptive coverage of each eligible organization (or to offer several different but standardized exclusions from group health insurance policies from which eligible organizations may choose).

Regardless of whether an issuer uses a standard or customized exclusion from a group health insurance policy (or student health insurance coverage), the issuer must separately provide payment for preventive care contraceptive services excluded under the insurance coverage at no cost to plan participants and beneficiaries (or student enrollees and their covered dependents) for as long as they remain enrolled in the coverage.  The proposed regulations required the issuer to provide individual health insurance policies covering contraceptive services without cost-sharing, premium, fee or other charge to plan participants or beneficiaries (or student enrollees and their covered dependents) or to the eligible organization or its plan.  Under the final regulations, the issuer is not required to issue to plan participants and beneficiaries (and student enrollees and their covered dependents) individual health insurance policies covering contraceptive services.  The issuer must, however, as a federal regulatory requirement, provide payments for contraceptive services for plan participants and beneficiaries (and student enrollees and their covered dependents), separate from the group insurance coverage.  Issuers have flexibility in how to structure these payments and achieve cost neutrality, provided that they are able to show that eligible organization premiums were not used to pay for contraceptive care.  The regulators referred to this change as a simplified approach.

Contraceptive Services for Participants and Their Covered Dependents in Self-Insured Group Health Plans

For eligible organizations with self-insured health plans, if the eligible organization provides its third-party administrator with the self-certification form indicating its objection to contraception coverage, the third-party administrator is itself obligated to pay for preventive care contraceptive services at no cost to plan participants or covered dependents or to the eligible organization.  The third-party administrator becomes an ERISA section 3(16) plan administrator and claims administrator solely with respect to contraceptive services for plan participants and their covered dependents.  The final regulations specifically require the third-party administrator to take on the statutory responsibilities of a plan administrator under ERISA, including the provision of a Summary Plan Description, the filing of annual Form 5500 filings, and other disclosures required under ERISA section 104, although it is unclear how that would be done in practice (for example, the regulations do not require the creation of a separate ERISA-covered “plan” to provide contraception benefits).

An eligible organization is considered to comply with section 2713 of the PHSA and the companion provisions in ERISA and the Code if it provides a copy of its self-certification (described previously) to all third-party administrators with which it or its plan has contracted.  The self-certification for a self-insured plan must also (1) state that the eligible organization will not act as the plan administrator or claims administrator with respect to contraceptive services or contribute to the funding of contraceptive services; and (2) cite ERISA regulations sections, 29 CFR 2510.3-16 and 26 CFR 54.9815-2713A and 29 CFR 2590.715-2713A, which explain the obligations of the third-party administrator.  Upon receipt of the copy of the self-certification, the third-party administrator has the right to decide not to enter into, or remain in, a contractual relationship with the eligible organization to provide administrative services for the plan.

Assuming the third-party administrator agrees to enter into, or remain in, the contractual relationship with the eligible organization, the third-party administrator must then provide or arrange separate payments for contraceptive services without cost-sharing, premium, fee or other charge to plan participants or their covered dependents, or to the eligible organization or its plan.  The third-party administrator can provide such payments on its own, or it can arrange for an issuer or other entity to provide such payments.  In either case, like the payments for contraceptive services under the accommodation for insured plans of eligible organizations discussed previously, the payments are not considered health insurance policies.

With respect to these types of self-insured arrangements, the eligible organization may not directly or indirectly interfere with the third-party administrator’s efforts to provide or arrange separate payments for contraceptive services for participants or their covered dependents in the plan, or directly or indirectly seek to influence the third-party administrator’s decision to provide or arrange such payments.

The cost of preventive care contraceptive services paid by a third-party administrator (or by an insurer under contract with the third-party administrator to provide the coverage) will be funded through an adjustment to the federally facilitated exchange (FFE) user fees paid by a participating insurance issuer.  An insurance issuer that offers a plan through an FFE may qualify for a reduction to the FFE user fee to the extent that the issuer either (1) made payments for contraceptive services on behalf of a third-party administrator; or (2) is seeking a fee adjustment with respect to a third-party administrator that itself paid for preventive care contraceptive services for an eligible organization.  An insurance issuer that intends to seek an FFE user fee adjustment must give notice to the U.S. Department of Health and Human Services by the later of January 1, 2014, or the 60th calendar day after it receives a self-certification from an eligible organization.  The final regulations describe the process for claiming the FFE fee adjustment.

Notice of Availability of Separate Payments for Contraceptive Services

Consistent with the proposed regulations, the final regulations direct that, for any plan year to which an accommodation is to apply, a health insurance issuer providing separate payments for contraceptive services pursuant to the accommodation, or a third-party administrator arranging or providing such payments (or its agent), must provide timely written notice about this fact to plan participants and beneficiaries in insured or self-insured group health plans (or student enrollees and their covered dependents in student health insurance coverage) of eligible organizations.  The notice must be provided contemporaneous with (to the extent possible), but separate from, any application materials distributed in connection with enrollment (or re-enrollment) in coverage that is effective beginning on the first day of each plan year to which the accommodation applies.  The notice must indicate that the eligible organization does not fund or administer contraceptive benefits, but that the issuer or third-party administrator will provide separate payments for contraceptive services at no cost.  The final regulations provide model language that may be used to satisfy this notice requirement.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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