Continuing what has become a habit of Friday afternoon rule issuances, the Departments of the Treasury, Labor, and Health and Human Services issued a proposed rule last Friday to attempt to accommodate the objections of religious employers to the contraceptive mandate. The rule makes a few accommodations to the prior guidance.
- First, the definition of “religious employer” (i.e., an employer entirely exempt from the mandate) has been expanded by eliminating the 3 prior requirements, which resulted in widespread objections: that the organization (1) have as its purpose the inculcation of religious values, (2) primarily employ persons who share its religious beliefs, and (3) primarily serve persons who share its religious beliefs. Under the new proposal, a “religious employer” must be described in Code section 6033(a)(3)(A) (i) and (iii), which refer to churches, their integrated auxiliaries, conventions and associations of churches, and the exclusively religious activities of religious orders. For example, under the new proposal a church that has social service and outreach programs or a school that serves and employs persons of other faiths will qualify as a “religious employer” and will not be subject to the contraceptive mandate. Such employers would not have been exempt under the prior guidance.
Second, it provides an exemption for an employer that:
- Objects to one or more contraceptive services required by PPACA,
- Is a nonprofit entity,
- Holds itself out as a religious entity, and
- Self-certifies that the above conditions are met.
An employer in the second category would not have to provide coverage for contraceptive services to which it objects. Instead, if the entity’s plan is insured, the insurer would have to provide stand-alone coverage of the contraceptive services not covered by the employer’s plan to any individuals covered by the employer’s plan at no cost to the participants. The preamble states that health economists “estimate” that the provision of contraceptives will be at least cost neutral. Therefore, the Departments did not provide any mechanism for insurers to receive any kind of cost recovery (unlike the rules for self-insured plans described below).
Contraceptive Coverage as an Excepted Benefit. The coverage would be considered an “excepted benefit” as long as it complies with the health reform prohibitions on lifetime and annual limits, rules on claims and appeals, requirement of guaranteed renewability, and prohibitions on recissions of coverage. Except for these four rules, it would not have to comply with other health reform mandates. One issue the Departments did not address in this rulemaking is how, if at all, the separate contraceptive coverage would factor into any medical loss rebate calculation for the insurer. As an excepted benefit, the separate contraceptive coverage would generally not factor into the calculation. To put insurance coverage for nonprofit religious organizations on par with other nonprofits (and for profits), the Departments should consider revising the MLR rules to include the costs of this contraceptive coverage in the MLR rebate calculation.
ERISA Concerns. Additionally, the Departments did not address potential ERISA issues that this structure could implicate. Remember, the whole construct is that the employer is not arranging for, paying for, or otherwise providing the coverage. So is this individual coverage or employer coverage (or neither)? Are Forms 5500 required if more than 100 individuals select the separate contraceptive coverage? Who would be responsible for the preparation of those forms and SPDs? In fairness, this kind of structure does not exist currently, so the Departments don’t have any experience on which to draw. Still, the Department of Labor needs to address these issues. Our suspicion is that these contraceptive policies will likely be exempt from many of these ERISA reporting and disclosure requirements.
Self-Insured Plans. The Deparments requested comments on how to handle self-insured plans. They outlined some potential alternatives in the preamble, but did not include any specific rules for self-insured plans in the actual proposed regulations (except for the exchange fee offset described below). All of the potential alternatives, in one form or another, basically end up with the third-party administrator arranging for the insurance and receiveing some form of compensation for arranging for the insurance. However, under some of the alternatives, it appears the employer could still be held ultimately responsible if the TPA does not arrange for the coverage. Additional clarity in that regard would be welcome. The insurer providing the coverage would receive a reduction in its user fee that it will owe to Federally-facilitated exchanges based on an HHS-approved reimbursement rate.
For Profit Employers Will Continue to Litigate. Finally, this rule will do nothing to stem the tide of lawsuits by for profit employers who object to some or all of the contraceptive requirement on the grounds of their owners’ religious beliefs. The myraid of cases on that issue are still winding their way through the courts and likely will continue to do so, unless the Departments make further accomodations in their regulations.
So what do you think? Did the Departments go far enough? And how do you think they should deal with self-insured plans?
We acknowledge and appreciate the input of Colorado Springs Partners, Stuart Lark and John Wylie in the preparation of this post.