Effective October 6, 2017, new regulations¹ jointly issued by the Departments of Treasury, Labor, and Health and Human Services (the “Departments”) expand the exemptions to the ACA’s no-cost contraceptive coverage mandate. Now, any non-governmental employer with religious objections, as well as certain employers with objections based on moral convictions, are exempt from providing contraceptive coverage without having to file any certification or notice claiming such exemption. The regulations also eliminate the requirement that insurers or third party administrators pick up the cost of contraceptive coverage for exempt employers, although plans are still permitted to pass on the cost by use of an optional accommodation process. The Departments expect only a small number of employers will use the broadened exemptions. Public comment on the new regulations is invited until December 5, 2017.
Overview of Previous Exemption and Accommodation Process
The ACA’s contraceptive mandate is a result of regulations and guidelines developed by the Health Resources and Services Administration (“HRSA”) pursuant to authority granted by Section 2713 of the Public Health Service Act. The HRSA guidelines, when first released in 2011, included no-cost coverage for all prescribed FDA-approved contraceptives, sterilization procedures, and related patient education and counseling for women with reproductive capacity. Since then, various regulations have been issued and updated on this subject as a result of ongoing litigation and changes in administration.
The most recent iteration of the regulations, issued in July 2015, exempted churches, houses of worship, nonprofit organizations that hold themselves out as religious organizations, and closely-held for-profit organizations that adopt resolutions establishing objections to covering contraceptives on account of sincerely held religious beliefs. The July 2015 regulations required objecting organizations (other than churches and houses of worship) to self-certify to the Departments of Labor or Health and Human Services. This certification was designed to pass on the responsibility for arranging for payment for contraceptive services to the organization’s insurer or third party administrator (the “accommodation process”). The new regulations issued this month expand the list of objecting organizations and make the accommodation process optional.
New Regulations – Religious Exemption
Under the new regulations, any non-government employer plan sponsor may be exempt from coverage of all or a subset of contraceptives or sterilization and related patient education and counseling based on sincerely held religious beliefs. This expands the pool of exempt employers to include publicly traded for-profit organizations and eliminates previous conditions that closely-held for-profit organizations had to meet in order to take advantage of the exemption. Institutions of higher education that arrange for student health insurance may also object to and be exempt from contraceptive coverage.
In addition to the exemption for plan sponsors, the regulations exempt health plans sponsored by objecting employers and health insurance issuers that have their own religious objections to contraceptive coverage. These rules extend the exemption to plans sponsored by an entity other than an employer, such as a union plan. However, the departments note that the exemption for health insurance issuers does not extend to the plans purchasing that insurance, unless the plan sponsor is also exempt. Therefore, the only plan sponsors that will be eligible to purchase coverage from an exempt insurer are those that are also exempt.
Employers claiming the exemption no longer have to self-certify to the Departments. Rather, the accommodation process is optional, so employees of objecting employers that do not use the accommodation process will have to pursue other avenues, such as state programs, to obtain contraceptive coverage. Additionally, third party administrators that have their own religious objections to complying with the accommodation process may decline to enter into or continue contracts with plans that elect to use the accommodation process. Exempt employers who are currently using the accommodation process do not need to file a new self-certification or notice unless they change their insurer or third party administrator. Exempt employers can also revoke their use of the accommodation process, but must notify plan participants and beneficiaries of the elimination of the benefit. The revocation will be effective either (i) the 1st day of the 1st plan year that begins on or after 30 days after the date of the revocation, or (ii) 60 days after notice of material modification to the summary of benefits and coverage.
Note that even though an exempt employer does not have to certify that it is exempt, if the plan is subject to ERISA, the plan document, SPD, and summary of benefits and coverage still have to clearly state that some or all contraceptive coverage is excluded.
Individuals may also raise their own religious objections to contraceptive coverage under the new regulations, such that plan sponsors and insurers will not be penalized for offering those individuals plans that do not include contraceptive coverage, even if the sponsor or insurer does not have religious objections to such coverage. However, if state law requires contraceptive coverage, the individual exemption cannot be used to circumvent those laws.
New Regulations – Moral Conviction Exemption
In addition to objections based on religious beliefs, the new regulations add an exemption based on sincerely held moral convictions for nongovernmental plan sponsors that are nonprofit entities or for-profit entities with no publicly traded ownership. This is a narrower employer pool than that available under the religious exemption. As with the religious exemption, though, higher education institutions that arrange for student health coverage, health insurance issuers, and individuals may also be exempt, within the same limitations that apply to such entities under the religious exemption.
While the Departments acknowledge that the regulations do not define “moral convictions,” they indicate that they look to the description of moral convictions in a Supreme Court case (Welsh v. United States, 398 U.S. 333 (1970)) to explain the scope of protections. Moral convictions include ones: (1) that the individual deeply and sincerely holds; (2) that are purely ethical or moral in source and content; (3) that nevertheless impose upon the individual a duty; and (4) that occupy in the life of that individual a place parallel to that filled by God in traditionally religious persons, such that one could say the individual’s beliefs function as a religion in his or her life. Therefore, the Departments take the position that moral convictions are protected when they occupy a place parallel to that filled by religious beliefs in religious persons and organizations. As with the religious exemption, employers claiming the moral conviction exemption are not required to self-certify, but may elect to use the optional accommodation process that is available under the religious exemption. ERISA disclosure requirements will continue to apply.
¹ https://www.federalregister.gov/documents/2017/10/13/2017-21851/religious-exemptions-and-accommodations-for-coverage-of-certain-preventive-services-under-the and https://www.federalregister.gov/documents/2017/10/13/2017-21852/moral-exemptions-and-accommodations-for-coverage-of-certain-preventive-services-under-the-affordable
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