The most controversial single issue presented by the Affordable Care Act is arguably the regulatory requirement that group health plans and insurers cover contraceptive services. The ACA requires non-grandfathered group health plans and health insurers to offer, without cost sharing, coverage of preventive services, including women’s preventive services, that are designated by the Health Resources and Services Administration (HRSA). Based on an Institute of Medicine study, HRSA in 2011 identified as women’s preventive services “all Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity.” Pursuant to this designation, the Department of Health and Human Services (HHS) listed contraceptives services and counseling as required preventive services.
But some religious groups — most notably the Catholic Church — consider the use of contraceptives to be sinful. Other groups, including a number of Protestant groups, do not object to contraception categorically, but do object to contraceptives that they consider to be abortifacients, specifically Plan B, Ella, and IUDs. The Departments of HHS, Labor, and Treasury attempted from the beginning to accommodate the objections of religious organizations. In 2011, they published interim final rules exempting from the requirement religious employers, such as churches and other houses of worship. These rules were made final in 2012.
At the same time, the Departments issued a moratorium exempting religious organizations other than houses of worship — such as hospitals, universities, and charities — from the requirement until the Departments could determine how to ensure that the employees and students of these entities would receive contraceptive coverage. The Departments next published an advanced notice of proposed rulemaking, and then a proposed rule, addressing the situation of these religious organizations.
On June 28, 2013, the Departments issued final regulations exempting certain religious organizations and employers from providing contraceptive services to their employees and religious educational institutions from offering contraceptive services under their student health plans. The Departments had received over 400,000 comments on the proposed rule, although many of them were standardized form comments. They responded to these in the final rule.
What’s In The Final Rule?
The final rule adopts the approach suggested by the proposed rule, but attempts to simplify administration of the policy. The final rule was accompanied by two fact sheets on contraceptives and religious organizations, a guidance extending the current safe harbor shielding religious organizations from the requirement, revised Health Resources and Services Administration (HRSA) women’s health guidelines, and a form that religious organizations can use to self-certify their eligibility for the exception.
This rule is likely to not satisfy many of the employers who object to the contraceptive coverage requirement. To date, more than sixty lawsuits have been filed challenging this requirement. About half of these lawsuits have been brought by religious organizations that are likely to qualify for the exception. So far, most of these lawsuits have been either held in abeyance or dismissed on procedural grounds. Courts have tended to hold that these cases were premature until the Departments promulgated a final rule.
The issues raised by for-profit, secular employers that object to contraceptive coverage. The other half of the cases, however, have been brought by for-profit secular employers who claim that they object for religious reasons to providing all or some specific contraceptives for their employers. While few of these cases have reached a final decision, employers have been successful in about three quarters of the cases where the employer has requested a preliminary injunction to block the enforcement of the rule until the court can decide the entire case.
Although these cases raise religious freedom issues that most Americans associate with the First Amendment, they rely primarily on a statute: the Religious Freedom Restoration Act (RFRA). This statute prohibits the federal government from imposing a requirement that “substantially burdens” the free exercise of religion unless the government requirement is the least restrictive means to achieving a compelling governmental interest. As explained below, the Departments believe that the final rule meets these requirements for religious organizations.
The rule, however, makes no accommodation for for-profit, secular, employers. The courts will continue to have to struggle with whether the requirement that these employers provide contraceptive coverage for any employees for whom they provide insurance in fact substantially burdens the employers’ free exercise of religion. If so, they will need to decide whether to accept the government’s argument that the mandate is the least restrictive means of providing for compelling governmental interests in public health and gender equality.
The for-profit corporation cases also raise important questions of whether secular corporations can hold religious beliefs and whether corporations can assert the religious beliefs of their owners. A majority of judges of the Tenth Circuit Federal Court of Appeals decided on June 27, 2013, that Hobby Lobby was likely to succeed in its challenge to the mandate (which only involved Plan B and Ella). Three of the eight members of the panel, however, dissented, and a number of the judges filed separate opinions.
It is in the end, however, important to remember, however, that as important as these cases are, they cases do not pose an existential challenge to the ACA itself. The ACA nowhere explicitly provides for contraceptive coverage, and if the Supreme Court ultimately decides that certain employers are free from the requirement, the ACA itself remains in place. The cases raise fascinating and important issues of religious liberty and the authority of government to protect public health and gender equality, but however they are ultimately decided, ACA implementation will go on.
Defining religious employers. The first issue addressed by the final rule is the definition of religious employers, who are totally exempt from the requirement. The 2011 interim final and 2012 final regulations had defined religious employers as organizations that had the inculcation of religious values as their purpose, primarily employed and served persons who shared their religious beliefs, and were non-profit organizations described by a section of the Internal Revenue Code that refers to houses of worship, their associations, and the religious activities of religious orders
Commenters noted that houses of worship often serve purposes other than simply inculcating religious values, such as providing educational, charitable, and social services, and that they hire or serve people who are not adherents of their faith. The final regulation drops the requirement that religious employers have inculcation of faith as their purpose and only hire and serve people of their faith, requiring only that religious employers be nonprofit and be houses of worship, their associations, or religious orders, as defined in the Internal Revenue Code. The new simplified definition is effective August 1, 2013. It is not actually found in the final regulation, but in the HRSA guideline incorporated by reference in the rule.
Most of the final regulation deals with “eligible organizations,” entities that self-certify that they are nonprofit religious organizations that object to providing coverage for “some or all” required contraceptive services. Eligible organizations need only self-certify their exempt status once, but they must be able to present the certificate to any new insurer or third-party administrator (TPA) if they change insurers or TPAs. The self-certification need not be filed with a government agency, but must be kept available for examination on request.
The self-certification form is provided with the final regulation. Insurers that rely on a self-certification by an organization will be held harmless if it turns out later that the certification was incorrect. Similarly, eligible organizations will be held harmless if their insurer fails to provide the services.
Insurer responsibility. If an eligible organization is insured, the insurer is responsible for assuming sole responsibility for providing contraceptive coverage to insured employees. The eligible organization’s group insurance policy will exclude all or selected contraceptive services. The insurer will, nonetheless, cover the services, and will do so from the first day of the plan year. The insurer must notify plan participants and beneficiaries that such coverage is available separately from any other group plan materials.
The proposed regulation would have required the insurer to issue an individual contraceptive insurance policy to each employee. This proposal presented significant legal and state regulatory problems. The final regulation simply requires the insurer to cover contraceptive services without cost sharing as a federal regulatory requirement. The coverage is neither individual nor group coverage, but must comply with all ACA insurance reform provisions (such as the prohibition on lifetime and annual limits or internal and external requirements). Employees who themselves object to contraceptive coverage need not opt out; they simply will not use the service.
Insurers may not charge any premium, fee, or other charge to the eligible organization and must segregate the funds they receive from eligible organizations from those that they use to pay for contraceptive services. The Departments assert that insurers will be able to cover the cost of contraceptive services from savings they accrue from not having to cover pregnancies and from improved women’s health and cite studies to support his contention. How exactly the insurer will recoup these savings, however, is unclear. The preface suggests that the insurer may charge the eligible organization premiums based on the medical costs that would have been incurred were contraceptives not covered, although it is hard to see how this would square with the premium segregation requirement.
Alternatively, the insurer could treat the cost of contraceptive coverage as an administrative cost spread across the insurer’s risk pool excluding the eligible organization. Payments for contraceptive services by insurers will be treated as claims costs for medical loss ratio and risk corridor calculations.
Resolving the issue of self-insured organizations. Self-insured eligible organizations present a more difficult problem because normally the organization itself, and not the TPA which administers its benefits plan, pays for services. The proposed regulation had mooted several approaches for addressing this problem. The Departments decided to designate the TPA as an ERISA plan administrator for purposes of providing payment for contraceptive services at no cost to plan participants or beneficiaries or to the eligible organization.
The eligible organization must self-certify to the TPA that it will not act as plan administrator for contraceptive services. The TPA must then take on the responsibility of serving as plan administrator for these services if it is to continue to serve as a TPA for the organization. The TPA may either provide the services itself or contract with an insurer other entity to do so. The TPA or insurer must notify plan participants of the availability of contraceptive coverage using model language found in the regulation or substantially similar language. The notice must be provided independently of other plan materials of the eligible organization.
The cost of contraceptive services provided by TPAs that serve self-insured eligible organizations or by insurers under contract with such TPAs will be covered by reducing federally facilitated exchange user fees. If the TPA is itself an insurer that offers a QHP through the FFE or the TPA contracts with an insurer that offers a QHP through the FFE, the insurer’s own user fee will be adjusted. If the TPA or an insurer that offers contraceptive services for it does not offer a qualified health plan (QHP) through the FFE, a related insurer that is part of the same insurer group as the TPA or its contracted insurer can claim the adjustment. If neither the TPA, nor an insurer that covers contraceptive services for the TPA, nor a related insurer offers a QHP through an FFE, the TPA can contract with another insurer that does participate in the FFE to receive the benefit of a user fee adjustment to cover the cost of services provided by the TPA.
HHS believes that the use of FFE user fees in this way is consistent with the purpose of the FFE. HHS is not raising the FFE user fee to cover this cost and does not believe the cost will undermine FFE operations.
Under the final rule, an insurer seeking an FFE user fee adjustment to cover the cost of contraceptive services must give notice to HHS that it intends to do so by the beginning of 2014 or within 60 days after it receives a self-certification from a qualified entity. It must then report to HHS the actual amount that has been spent on contraceptive services on an annual basis by July 15 of the following year. The user fee adjustment will begin on the following October 15. The user fee adjustment will include not only the cost of services, but also an allowance for administrative costs and margin. This allowance will be at least ten percent and will be specified in the annual notice of benefit and payment parameters. It will normally be shared between the insurer and TPA. If the user fee adjustment exceeds the amount of user fees owed, the insurer will receive a credit.
Insurers may add any amounts paid out themselves or through a TPA for contraceptive services, plus the allowance for administrative costs and margin, to their net FFE user fee for calculations related to the index rate for the single risk pool and the medical loss ratio and risk corridor programs. The amounts will be treated as licensing or regulatory fees rather than as medical costs.
The possibility exists of an eligible organization that administers its own plan without a TPA. The Departments believe that there are no such entities in existence and no comments indicated otherwise. Such an entity would be excused from providing contraceptive services, but it would have to prove that it in fact is not using a TPA. The Departments will try to figure out how to accommodate this situation if it occurs.
Student health plans of eligible educational organizations are treated just like employer-sponsored plans and subject to the same rules as set out below. Where several employers offer coverage through a single group health plan (a multiple employer group health plan), each employer must independently meet the requirements for the religious exemption to claim its benefit.
The evidence behind the contraceptive coverage requirement. The preface to the regulation explains in some detail why the Departments believe that contraceptives should be covered as a women’s preventive service. There is evidence that planned pregnancies are more likely to result in early prenatal care and avoidance of harmful substances like alcohol and tobacco during pregnancy. Planned pregnancies present lower risks for preterm births and low birth weights. Contraceptives have medical benefits for women who are contraindicated for pregnancy and can help prevent other conditions, such as certain cancers. By preventing unintended pregnancies, contraceptives also reduce the incidence of abortions.
Contraceptives also save money. One study found that expanding access to family planning under Medicaid saved $4.26 for every dollar spent. Finally, contraceptives improve the ability of women to participate in the workforce and enhance women’s social and economic status. Providing access to contraceptives without cost sharing reduces a financial burden borne disproportionately by women.
RFRA requirements. The preface also explains why the Departments believe that the rule meets RFRA requirements. They begin by stating that they do not believe RFRA requires any accommodation. The accommodations found in the final rule, however, ensure compliance with RFRA because they do not impose a substantial burden on the religious beliefs of religious employers and eligible organizations; indeed they impose no burden at all. The only obligation imposed on eligible organizations is self-certification, but even without the rule, religious employers and eligible organizations would have to inform their insurers or TPAs that they do not intend to cover contraceptive services.
The Departments further contend that the rule serves compelling governmental interests in women’s health and gender equality, as set out above. The fact that religious employers, grandfathered plans, and small employers (who need not provide any insurance) are not required to provide contraceptive coverage does not undermine the compelling interest argument. Moreover, a less restrictive alternative is not available to the Departments, since they lack statutory authority to provide contraceptive services directly.
However the courts may resolve the challenges of for-profit employers who are offered no accommodation under the rules, it seems to me that the Departments make a powerful argument that they have met RFRA requirements for accommodating religious organizations.
The preface in its conclusion wraps up a few loose ends. It clarifies the Departments’ position that Plan B, Ella, and IUDs are contraceptives and not abortifacients, since pregnancy under current rules does not begin until implantation. Whether or not they are abortifacients is an issue that is likely to continue to be litigated in the RFRA cases. The Departments also assert that the rule violates neither the Free Exercise nor Establishment clauses of the First Amendment. Nothing about the rule judges the sincerity of employer’s religious beliefs nor restricts the ability of employers to express their beliefs. State laws that are more protective of access to contraceptive coverage are not preempted, but state laws less protective are preempted.
Finally, the guidance that accompanies the rule delays until plan years beginning after January 1, 2014, the application of the new rule to eligible organizations to give them time to comply.
Laying Out What Information Exchanges Must Provide To The IRS
June 28, 2013 also saw the publication of a proposed rule by the IRS on information that must be provided by exchanges to the IRS for the administration of the health insurance premium tax credit. Exchanges must report annually to the IRS before January 31 of the year following the calendar year of coverage the name, address, and Social Security number (or date of birth if the Social Security number is not available) of each individual enrolled in exchange coverage (whether or not her or she receives tax credits). The exchange must also report the monthly premium of the benchmark plan used to compute advance credit payments, the benchmark plan premium that would apply to each enrolled individual, the monthly premium for the plan or plans for each enrolled individual without reduction for premium tax credits, the amount of premium tax credits made on each individual’s account, and various information about qualified health plans.
Exchanges must report annually to each taxpayer who is enrolled in a QHP through the exchange, or whose family members are enrolled, the information set out above regarding himself or herself. The exchange must also report to the IRS on a monthly basis the same information plus whether or not individuals enrolled in a qualified health plan are the taxpayer’s dependents, and employment and exemption information relevant to individuals. Finally, the proposed rule contains detailed provisions on when the exchange can provide electronic notice to individuals and when it must provide paper notice.