On July 2, 2013, the federal government published new final regulations providing relief for certain religious employers from the requirement that health plans provide contraceptive coverage under their group health plans without cost-sharing to employees. The final regulations continue to leave open several questions regarding how this relief will work in practice.
Contraceptive Coverage Rule. The Affordable Care Act (the “ACA”) requires that non-grandfathered health plans cover certain preventive services without cost-sharing. Related federal guidance states that preventive services include contraceptive coverage.
Prior Exemption for Religious Employers. The three federal agencies (Internal Revenue Service (“IRS”), Department of Labor (“DOL”) and Department of Health and Human Services (“HHS”)) that enforce the rule previously issued an exemption for religious employers, such as churches. However, that exemption did not apply to other employers with religious beliefs, such as hospitals or universities. To accommodate certain religious employers, the agencies issued proposed regulations on February 6, 2013, under which contraceptive coverage was proposed to be provided with no employer involvement and at no cost to the employer or employee (called an “accommodation” under the proposed and final regulations).
“Accommodation” Approach for Non-Exempt Religious Employers. The final regulations are similar to the proposed regulations, but there are some differences. The final regulations provide that:
- An eligible religious employer will not be required to contract, arrange, pay or refer for contraceptive coverage; and
- The third-party administrator (“TPA”) or insurer will be required to arrange for or provide payments for contraceptive services without any cost-sharing requirements. This is different from the proposed regulations, in which the insurer or TPA would have usually arranged for an individual insurance policy.
Q&B Key: TPAs in particular might object to this arrangement. TPAs might view these direct payments as a “money losing” proposition. Also, the guidance seems to anticipate that TPAs will have fiduciary liability under the arrangement — the agencies anticipate that the TPAs will be the “plan administrator” for purposes of providing the coverage. TPAs can “fire” their clients and cease providing services if they object. Will they object? Also, what happens to a non-exempt religious employer if it cannot find any TPA to assist it?
Accommodation for Fully Insured Health Plan. An employer with a fully insured health plan will, in order to receive the accommodation, provide a “self-certification” to the insurance company, confirming that the employer meets certain requirements (noted below). The insurer then provides separate direct payments for contraceptive service expenses. Insurers cannot use any employer premiums to make these payments. The insurer (not the employer) provides a notice informing employees that the contraceptive coverage is available. Insurers would expressly exclude contraceptive coverage from the employer’s health plan.
Accommodation for Self-Funded Plans. The accommodation works slightly differently for employers with self-funded health plans. For these plans, the employer must provide a “self-certification” to the TPA, confirming that the employer meets certain requirements (noted below). This self-certification explicitly states that the employer will not act as the “plan administrator” or “claims administrator” with respect to contraceptive services.
The TPA then has a somewhat difficult choice. If the TPA enters into, or continues, a contractual relationship with the employer, then the TPA apparently becomes an ERISA-covered plan administrator and claims administrator for purposes of providing the separate, direct payments of contraceptive services. The TPA (not the employer) must also provide a timely written notice to employees that the contraceptive coverage is available, and must comply with various ERISA requirements (such as the requirement to establish claims procedures and to provide participants with certain disclosures).
The TPA can provide the separate payments itself, or — in theory — can arrange for an insurance company to make such payments on its behalf. It is unclear whether an insurer would agree to make these payments (the insurer may be able to recoup the cost through an adjustment relating to certain Exchange user fees).
Which Religious Employers Qualify for Accommodation. Only “eligible organizations” can qualify for the accommodations under the final regulations. The final regulations retain the proposed definition of eligible organization as an organization that:
- Opposes providing some or all contraceptive coverage on account of religious objections;
- Is organized and operates as a nonprofit entity;
- Holds itself out as a religious organization; and
- Maintains a self-certification as described below.
Despite several requests for guidance, the final regulations do not clarify how an organization will show that it holds itself out as a religious organization.
Certification Requirement. An eligible organization must use EBSA Form 700 to self-certify that its health coverage qualifies for an accommodation under the final regulations. A religious employer must self-certify that it satisfies the definition of eligible organization prior to the beginning of the first plan year to which an accommodation applies.
Q&B Key: Form 700 is different than the certification required for purposes of invoking the temporary enforcement safe harbor described below. Employers should ensure that they complete, and retain copies of, all required certifications.
No Relief for For-Profit Employers. Neither the religious exemption nor the eligible organization accommodation are applicable to private, for-profit employers. Many of these employers have protested that they should not be required to provide contraceptive coverage due to their religious beliefs.
Q&B Key: Because the new guidance provides no relief to religious, for-profit employers which object to this requirement, we expect that these employers will continue with their challenges and, in several situations, lawsuits.
Extension of Temporary Enforcement Safe Harbor for Certain Non-Calendar Year Plans. HHS also released updated guidance regarding the temporary enforcement safe harbor for certain religious employers that was originally created on February 10, 2012. The original guidance provided that the safe harbor was applicable until the first plan year beginning on or after August 1, 2013 — meaning that employers with plan years renewing in September through December 2013 did not have any relief.
The new CMS guidance fixes this problem by extending the temporary enforcement safe harbor to plan years beginning on or after August 1, 2013 (i.e., the expiration date of the safe harbor under prior guidance), and before January 1, 2014 (the effective date of the final regulations). Employers in this category will need to send an additional notice to plan participants in 2013.
Effective Date. The provisions of the final regulations discussed in this alert are effective for plan years beginning on or after January 1, 2014.