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Implementing Health Reform: Contraceptive Coverage And Religious Accommodation



February 2nd, 2013

One of the most contentious, and certainly most litigated, questions that has arisen in the course of the implementation of the Affordable Care Act is the validity of the regulatory requirement that employers cover contraceptive services for their employees as a preventive women’s health service. On February 1, 2013, the Departments of Health and Human Services, Labor, and Treasury issued a joint notice of proposed rulemaking and fact sheet describing how they intend to implement this provision as it affects religious organizations.  This post discusses the proposed rule and its context.

As discussed in earlier posts, the ACA requires that insurers and group health plans cover designated preventive services without cost sharing.  The provision specifies that the Health Resources and Services Administration must determine the women’s preventive services that must be covered.  Based on recommendations from the Institute of Medicine, HRSA designated all FDA-approved contraceptives for required coverage.  This requirement was effective for the first plan year following August 1, 2012.

Some religious groups, however, most notably the Catholic Church, believe that the use of contraceptives is sinful.  Other religious groups do not object to all contraceptives, but do object to specific contraceptives that they believe to be abortifacients.  When HHS issued initial rules adopting the HRSA determination, therefore, it excluded religious employers, defined as churches, religious orders, and similar groups, from the contraceptive coverage requirement.

This did not, however, exempt from the requirement other kinds of religious organizations, such as religious hospitals, universities, or charities.  As to these entities, the agencies imposed a one-year moratorium on the effect of the rule and stated that they would come up with an accommodation so that employees of religious organizations that object to contraceptive coverage could get coverage without the organization having to provide it.  The agencies asked for comments as to how this accommodation should be achieved.  The rule made no accommodation for secular, for-profit, employers whose owners objected to contraceptive coverage.

Litigation Over The Contraceptive Coverage Requirement

Over 40 lawsuits have been filed challenging the rule.  This litigation has been reviewed in a recent post and will not be discussed in detail here.  The litigation is primarily being fought out under the Religious Freedom Restoration Act rather than the First Amendment’s free exercise clause.  The Constitution does not protect religious practices against neutral laws of general applicability, but RFRA prohibits the federal government from imposing a requirement that substantially burdens religious beliefs unless a requirement is the least restrictive means of promoting a compelling governmental interest — a much higher standard.

Most of the lawsuits have been brought by Catholic-affiliated organizations objecting to any coverage of contraceptives.  Some, however, have been brought by non-Catholic religious institutions that object to covering abortifacients but not other contraceptives.  Finally, a number of the lawsuits have been brought by secular, for-profit, employers whose owners have religious objections to contraceptive coverage.

To date, virtually all of the lawsuits brought by religious organizations have been dismissed as premature because rulemaking is still pending on the issue.  Most of the lawsuits involving secular, for-profit, employers are still in the early stages.  In several of them, however, courts have granted temporary injunctions to excuse the employer from compliance with the law until the factual and legal issues in the case can be fully resolved.  In others, temporary relief has been denied. Several cases have reached the courts of appeals, and in one case temporary relief has been denied by a Supreme Court Justice.

Important issues are being raised in these cases, including whether for-profit corporations can hold religious beliefs; whether employers’ beliefs are substantially burdened when they are required to offer benefits to their employees that the employees can choose to use or not use based on their own beliefs; and whether the public health and gender equality concerns that ground the contraception requirement are compelling interests. The lawsuits by secular employers will need to be resolved by the courts — indeed, quite possibly by the Supreme Court.

What’s In The Proposed Rule

The proposed rule that the agencies released today should address the concerns raised by religious organizations.  It responds to the 200,000 comments the agencies received on the advanced notice of proposed rulemaking. The proposed rule does several things.

First, it clarifies the definition of religious employer — those employers that are totally exempted from the rule.  The original rule had defined religious employers as entities that have the inculcation of religious values as their purpose; primarily employ and serve persons who share their religious values; and are nonprofit organizations described in certain sections of the Internal Revenue code that cover houses of worship, their auxiliaries, conventions, and associations, and religious orders.  Commenters had noted that application of this rule might exclude churches that operate soup kitchens serving non-members and would require examining the religious beliefs of employees.

The agencies, therefore, propose to drop all the requirements except that employers fit into the Internal Revenue Code categories — that is, that they be houses of worship, auxiliaries, conventions, or associations, or religious orders.  It is not necessary that these organizations in fact be tax-exempt as long as their income and assets do not benefit private individuals.

Second, the proposed rule defines who will be covered by the separate accommodation for religious organizations.  It defines eligible organizations as employers or institutions of higher learning that operate employee or student health plans where the organization:
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  • Opposes providing coverage for some or all of the contraceptive services required by the preventive services regulation on account of religious objections,
  • Is organized and operated as a nonprofit entity,
  • Holds itself out as a religious organization, and
  • Self-certifies that it meets these requirements.

Again, covered organizations need not be organized as corporations as long as their assets and income do not accrue to the benefit of private individuals or shareholders.  They also do not need to object to the coverage of all contraceptives.  The proposal would allow organizations to self-certify their eligibility under the rule and the types of contraceptives to which they object.  The government will not get into the business of determining the sincerity or legitimacy of expressed beliefs or organizational purpose.

Insured plans.  The proposed rule distinguishes between the obligations of insured and self-insured plans.  If an organization provides health benefits through an insured plan, the organization would provide the insurer (or insurers if separate insurers cover separate benefits, like pharmaceuticals) with its certification.   An insurer that receives such a certification must ensure that the coverage to which the organization objects is not included in the group policy, certificate, or contract for the organization, and that the organization does not have to pay a premium or fee for it.

The insurer would automatically enroll plan participants and beneficiaries in a separate individual health insurance policy covering contraceptives.  This would be an “excepted benefits policy,” like vision, dental, or long-term care coverage, although it would otherwise have to comply with applicable ACA requirements.  The coverage would be offered at no charge and without cost-sharing. The insurer would itself bear the cost of the coverage, based on the understanding that contraceptives save insurers more than they cost because they obviate the greater cost of maternity coverage.  The same approach would be used for insured student health plans.

Self-inured plans. Self-insured plans are more problematic in that there is no insurer to which the obligation can be passed.  Self-insured plans, however, are normally run by a third-party administrator (TPA) to whom the obligation to provide coverage can be passed. The preamble to the proposed rule suggests several ways in which this could be done, but the basic idea is that the TPA would take responsibility for providing coverage, and in turn contract with an insurer in the individual market to provide the coverage.  The insurer would in turn pass the cost of the coverage (which now will be a real cost since the insurer has no responsibility for covering maternity or any other health care costs) on to a federally facilitated exchange (FFE), which would offset the cost through a reduction in user fees — in other words, the insurer would receive a reduction in the user fee it otherwise owes to the FFE to cover both its costs and any administrative costs incurred by the TPA.

If the insurer does not participate in the FFE or is located in a state with a state exchange, the reduction would be offered to an affiliated insurer that did offer coverage through an FFE.  The insurer would be required to submit specified data to HHS to support the user fee adjustment.  This would, of course, mean less revenue for the exchange or higher costs to its users, but this was apparently the one source of revenue that HHS could find available for this purpose, which HHS views as an important benefit of the ACA.

If religious organizations offer coverage through multiple-employer group plans, the proposed accommodation would be available on an employer-by-employer basis based on certification, not to the entire group plans.  Self-insured student health plans are not subject to the ACA, and thus neither to the preventive services requirement nor to its exceptions. The accommodation does not extend to secular employers, just as the religious accommodation provisions of other civil rights laws do not extend to secular organizations.

Insurers providing contraceptive coverage would be responsible for notifying plan participants and beneficiaries of the availability of the coverage using language found in the proposed regulation.  The notice would be provided separately from any other plan information, generally on an annual basis.  The religious organization would itself have no obligation to provide any notice as to the coverage. Moreover, nothing in the proposed rule would affect any other obligations under the ACA.  It would also not preclude employers from expressing opposition to contraceptive coverage nor would it require anyone to use or prescribe contraceptives.

This proposed accommodation is unlikely to satisfy everyone (or perhaps anyone) completely.  Employees and students of religious organizations will still receive contraceptive coverage to which the organizations object.  But it will probably be more difficult for employees and students to access coverage than if it were simply available through their regular health plan.

Insurers will certainly object to having to cover contraceptives without being able to charge for it.  There is also a good argument that abortifacients should be treated differently than contraceptives.  Public funding is not permitted for abortifacients under the ACA and they are not part of the essential health benefits package under the current proposed rule.

However, the contraception accommodation is very likely to be found to comply with the requirements of the First Amendment and RFRA.  It seems to be a reasonable resolution to a serious conflict of issues and values.

Enhanced Federal Assistance For Recommended Preventive Services And Immunizations

HHS also issued on February 1, 2013, a “Dear Medicaid Director” letter providing guidance as to the implementation of another preventive care provision of the ACA.  As of January 1, 2013, states that cover without cost sharing preventive services assigned a grade of A or B by the Preventive Services Task Force, as well as immunizations and their administration recommended by the Advisory Committee on Immunization Services, can receive a one percent addition to the federal medical assistance percentage for the cost of those services.  The increased FMAP applies to services paid for on a fee-for-service or managed care basis or under a benchmark or benchmark-equivalent plan.

The letter explains the details of how the increased FMAP will work, and in particular how the provision will be coordinated with other provisions for enhanced FMAP for other services, such as family planning services or primary care services for which payment at Medicare rates and enhanced FMAP is available for 2013 and 2014.

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    July 12th, 2013 at 4:02 pm

2 Responses to “Implementing Health Reform: Contraceptive Coverage And Religious Accommodation”

  1. John Fembup Says:

    “. . . the basic idea is that the TPA would take responsibility for providing coverage, and in turn contract with an insurer in the individual market to provide the coverage. ”

    It remains to be seen whether this basic idea will persuade the courts to dismiss the objections that have been raised to all this. It also remains to be seen whether the idea is practical; it seems to me complex and anything but straightforward.

    Will objections mostly come from insurance companies? Maybe, but I think they will also arise from TPA’s including insurance companies acting solely as TPA’s for their self-insured customers. For one thing, TPA’s won’t want to accept liability for placing any insurance. That will impose on them not simply new administrative costs, but potentially new insurance costs, which may also need to include protection from liability for being sued by insured persons just like with any other insurance. It also remains to be seen how large the insurance premiums for contraceptive coverage will be. The unit cost is low but as the units are “free” to insured persons there is no restraint to utilization – so the premiums may well be consequential. [For such low-cost units, it still seems to me more efficient and not at all obstructive, simply to continue with direct purchase or with the freebies presently handed out by organizations such as Planned Parenthood - and avoid the entire Rube-Goldberg contraption of "insurance" dreamed up by HHS in this case]. Also – do FFE’s already exist or would their presence mean another bureaucracy must be created?

    A lot, it seems to me, remains to be seen.

  2. Ellen R. Shaffer Says:

    No doubt the Dred Scott decision would have elicited over 200,000 comments, including many from supportive slave owners, in its time. The fact is, contraception is not controversial among 99% of the public, including the vast majority who voted in November to oppose this mythical assertion, which nevertheless has very real, concrete and deleterious consequences, particularly for low-income women. (see Shaffer, Sarfaty and Ash in Medical Care on this point.) This decision, from an Administration that promised barely a week ago to honor the legacies of Seneca Falls, Selma, and Stonewall, is a rude awakening.

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