Earlier this month, the Obama administration announced a proposed rule change under the Patient Protection and Affordable Care Act (PPACA) that would relieve certain religious employers from paying for contraceptives for their female employees.
The proposed regulation, published by the U.S. Department of Health and Human Services (HHS) in the Federal Register, further expands and defines the groups that would be exempt from covering the costs of female contraception. The rule also addresses where the money to pay for the guaranteed coverage would come from, ensuring that religious groups will not be paying any portion.
The proposed rule states:
The guidance provides that, under the temporary enforcement safe harbor, the Departments will not take any enforcement action against an employer, group health plan, or health insurance issuer for failing to cover some or all recommended contraceptive services in a non-grandfathered group health plan (or any group health insurance coverage provided in connection with such a plan) where the plan is established or maintained by an organization meeting all of the following criteria:
- The organization is organized and operates as a nonprofit entity.
- From February 10, 2012, onward, the group health plan established or maintained by the organization has consistently not covered all or the same subset of recommended contraceptive services, consistent with any applicable state law, because of the religious beliefs of the organization.
- The group health plan established or maintained by the organization (or another entity on behalf of the plan, such as a health insurance issuer or third party administrator) provides to participants a notice indicating that some or all contraceptive services will not be covered under the plan for the first plan year beginning on or after August 1, 2012, as set forth in the guidance.
- The organization self-certifies that it satisfies the foregoing three criteria and documents its self-certification, as set forth in the guidance.
The temporary enforcement safe harbor is also available for insured student health insurance coverage arranged by nonprofit institutions of higher education with religious objections to contraceptive coverage that similarly meets the four criteria.
It appears that by changing the definition of a “religious employer,” the proposed rule ensures more organizations will be able to claim the exemption. Furthermore, an exempted organization will not be disqualified from claiming the exemption when:
1) Its express purpose extends beyond the inculcation of religious values;
2) It employs people of different religions; and
3) It does not primarily serve people with the same religious values. The revised regulation raises a new set of questions in terms of the expanded scope that will need to be addressed in the final rule.
Although the final details will need to be sorted out, female employees of exempt organizations will qualify for a separate insurance policy that only covers contraception and is not paid for by the employer or the employee. The proposed regulations imply that commercial insurers would cover the costs for standalone conception coverage because such coverage is “cost neutral” for the underwriter. For self-funded plans, the third party administrator (TPA) would help coordinate the funding of the coverage by claiming an adjustment in Federally-facilitated Exchange (FFE) user fees.
The original PPACA requirement that employers cover the cost of contraceptives as a preventive service was strongly opposed by religious employers who feel the requirement violated their 1st Amendment Rights and religious beliefs. Churches have been exempt from the requirement for some time, and recently the exemption was expanded to include some religiously affiliated institutions. The exemption will not extend to private businesses whose owners express moral reservations about the requirement. Several lawsuits challenging the provision are currently in litigation, and it is anticipated the issue will ultimately reach the U.S. Supreme Court.
President Obama supports the new regulation under the premise it guarantees contraception for women while respecting religious beliefs. HHS Secretary Kathleen Sebelius mirrored this sentiment, stating, “Today, the administration is taking the next step in providing women across the nation with coverage of recommended preventive care at no cost, while respecting religious concerns. We will continue to work with faith-based organizations, women’s organizations, insurers and others to achieve these goals.”
While the proposed rule is being praised by some, critics say the compromise is not enough. The president of the U.S. Conference of Catholic Bishops, Cardinal Timothy Dolan of New York, expressed his dissatisfaction with the regulation saying, “Throughout the year, we have been assured by the Administration that we will not have to refer, pay for, or negotiate for the mandated coverage. We remain eager for the Administration to fulfill that pledge and to find acceptable solutions – we will affirm any genuine progress that is made, and we will redouble our efforts to overcome obstacles or setbacks.”
Similar sentiments were echoed by parties to current litigation challenging the mandate. “After over a year of litigation, our clients and many others like them were hoping for much, much more from the administration,” Kyle Duncan, general counsel for the Becket Fund for Religious Liberty, stated on a conference call. “The rights of family businesses like Hobby Lobby are still being violated.”
The proposed regulation remains open for public comment through April 8, 2013.
The views expressed in this post do not necessarily reflect the official policy, position, or opinions of Be Well Insurance Solutions. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.