Proposed Regulations Released on Contraceptive Coverage Exemption and Accommodation for Nonprofit Religious Employers

by Ropes & Gray LLP
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On January 30, the Departments of Treasury, Labor, and Health and Human Services (the “Departments”) released proposed regulations regarding contraceptive coverage for employees of religious employers. This guidance is the latest in a series of guidance and proposals from the Departments on the requirement under the Affordable Care Act (ACA) that issuers and group health plans offer contraceptive coverage without cost-sharing. While the proposed rules modestly expand the categories of religious employers that may be exempted entirely from the contraceptive coverage requirement or that may be eligible for an accommodation under which they would not be required to provide contraceptive coverage directly, for the most part, the proposed rules reflect a continuation of existing policies.

Background -

Under federal guidelines implementing the ACA’s requirement that group health plans and health insurance issuers cover preventative services for participants without cost sharing, group health plans and health insurance issuers must provide participants access to all FDA-approved contraceptives, sterilization, and reproductive counseling for women (“contraceptive coverage requirement”). This requirement was generally effective for plan years beginning on or after August 1, 2012. After considerable debate, however, the Departments issued final rules in February 2012 that exempted a limited category of religious institutions from the contraceptive coverage requirement. The exemption in the final rules covered only institutions that qualify under a provision of the Internal Revenue Code as nonprofit churches, associations of churches or religious orders, primarily employ and serve members of the same faith, and have a primary purpose of inculcating religious values. This standard excluded many church-affiliated organizations, such as certain charities, hospitals and universities whose mission is not primarily religious and that are open to, and employ, members of the public generally. In order to further consider the application of the contraceptive coverage requirement to these institutions, the Department of Health and Human Services (HHS) simultaneously announced a one-year moratorium on enforcement of the requirement against employers that self-certify that they are nonprofit entities that object to the contraceptive coverage requirement on religious grounds and notify participants that they will not be providing contraceptive services.

As the next step in the guidance process, in March 2012, the Departments provided an advanced notice of proposed rule making (the “March 2012 Notice”) indicating an intent to use a three-prong test to determine whether an employer was an “eligible organization.” Eligible organizations would still be subject to the contraceptive coverage requirement, but would be provided with an accommodation under which they would not be required to directly provide or pay for contraceptive coverage. Instead, under the Departments’ proposal, the insurer or, in the case of self-insured plans, the third-party administrator would provide a separate stand-alone contraceptive policy that would not be funded by the employer. To qualify as an “eligible organization,” an employer would be required to self-certify that it is a nonprofit, religious organization that has a bona fide religious objection to covering contraceptives. The March 2012 Notice requested comments on a number of issues, including how best to determine whether an employer would be considered “religious” for this purpose.

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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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