On August 27, 2014, new interim final regulations were published by several administrative agencies entitled "Coverage of Certain Preventive Services Under the Affordable Care Act." On the same day, the agencies released a Notice of Proposed Rulemaking with the same title.  As we have previously written, the Patient Protection and Affordable Care Act (ACA) imposes insurance coverage obligations on both non-profit and for-profit religious organizations.  These coverage mandates have been the subject of extensive litigation.

Both the final interim and proposed regulations were published in response to two Supreme Court opinions handed down in the Summer 2014.  In the first of those opinions, Burwell v. Hobby Lobby, 134 S.Ct. 2751 (2014), the Court held that closely held for-profit corporations could decline to provide insurance plans offering certain forms of contraception due to their owners' religious beliefs.  In the second, Wheaton College v. Burwell, 134 S. Ct. 2806 (2014), the Court issued an interim order addressing the objections of religious non-profits to cover contraception.  The Court held that while the action was pending, the non-profit religious objectors did not need to submit an EBSA Form 700, but could instead notify the Secretary of Health and Human Services that they were declining to provide contraception coverage; in turn, HHS could rely on that notice to facilitate the provision of contraception coverage to the non-profit's employees.

With respect to for-profit entities after Hobby Lobby, the proposed rule seeks to limit the types of for-profit entities that may raise religious objections under the Hobby Lobby decision.  While in that case the Supreme Court expressly reserved judgment on corporate entities that are not closely held, the proposal assumes the limitation of the Hobby Lobby decision to closely held entities, and merely seeks comments as to the appropriate definition of what constitutes a closely held entity.  It offers two possibilities:

  1. Under the first proposed approach, a qualifying closely held for-profit entity would be an entity where none of the ownership interests in the entity is publicly traded and where the entity has fewer than a specified number of shareholders or owners.
  2. Under a second, alternative approach, a qualifying closely held entity would be a for-profit entity in which the ownership interests are not publicly traded, and in which a specified fraction of the ownership interest is concentrated in a limited and specified number of owners.

The key difference between these approaches appears to be whether an entity with a large number of shareholders or owners—in which a significant percentage of the ownership interest is nevertheless concentrated in very few owners—can be described as closely held.  Under the first approach, it is less likely; under the second, more likely.  Comments are sought regarding which approach is more appropriate, as well as to the "specified fraction" of ownership interests that should be required under the second approach.

With respect to non-profit entities, the final interim regulations alter the method by which religious objectors provide written notice of their objections.  The prior regulations are discussed here.  Under those regulations, the non-profit would inform its insurance issuer or third-party administrator with the EBSA Form 700 that it was raising religious objections to the birth control mandates under the ACA, such that contraception could be provided without co-payments or other cost sharing to employees.  Religious non-profits have asserted that the form essentially "deputizes" another agency to merely do what it objects to doing:  providing birth control to its employees.  Under the new regulations, however, the religious non-profit need not use the EBSA Form 700, though it can if it likes; instead it need only inform the Secretary of Health and Human Services that it is invoking its religious objections, and HHS and DOL will facilitate coverage for that employee.  The issuer or third-party administrator would cover the employee's contraception without cost-sharing, and that entity would then recoup the amount spent through a reduction in its assessed user fees for the ACA exchanges.  Essentially, the government now bears the burden of the expense of the coverage, rather than the insurance company.

Although the regulations appear to rely on language in Hobby Lobby that the EBSA Form 700 compliance regime has been conclusively approved by the Supreme Court for for-profit entities, there remains the possibility of tension between Hobby Lobby and Wheaton College.  The Religious Freedom and Restoration Act—on which both of the Court's decisions were based—requires the government to use the least restrictive means to achieve its goals.  As we noted in our ASAP regarding these two cases, the Court relied upon the existence of a "less restrictive" method of providing birth control for non-profits in order to hold invalid the requirements placed on for-profit entities.  If the new compliance regimes promulgated by administrative agencies include an even lesser restrictive means for non-profits, it is likely that a for-profit entity will seek relief on the same basis that the Court ruled in favor of in Hobby Lobby.

Written comments on the proposed rule must be submitted by October 21, 2014.  Written comments to interim final rule must be provided to the Department of Labor by October 27, 2014.