Departments Adjust Contraceptives Rules in Response to Supreme Court Cases | Practical Law

Departments Adjust Contraceptives Rules in Response to Supreme Court Cases | Practical Law

The Internal Revenue Service (IRS), Department of Labor (DOL) and Department of Health and Human Services (HHS) have issued additional rules addressing the contraceptives mandate under the Affordable Care Act (ACA). The guidance includes interim final rules providing religious organizations with an alternative process to the EBSA Form 700 self certification method and proposed rules that would expand the religious accommodation rules to some closely held for-profit entities.

Departments Adjust Contraceptives Rules in Response to Supreme Court Cases

Practical Law Legal Update 4-578-9826 (Approx. 7 pages)

Departments Adjust Contraceptives Rules in Response to Supreme Court Cases

by Practical Law Employee Benefits & Executive Compensation
The Internal Revenue Service (IRS), Department of Labor (DOL) and Department of Health and Human Services (HHS) have issued additional rules addressing the contraceptives mandate under the Affordable Care Act (ACA). The guidance includes interim final rules providing religious organizations with an alternative process to the EBSA Form 700 self certification method and proposed rules that would expand the religious accommodation rules to some closely held for-profit entities.
On August 22, 2014, the Internal Revenue Service (IRS), Department of Labor (DOL) and Department of Health and Human Services (HHS) (collectively, the Departments) issued rules addressing the contraceptives mandate under the Affordable Care Act (ACA), including:
The Departments issued the rules in response to two recent Supreme Court cases:
For more information, see Practice Notes, Contraceptives Coverage under the ACA and Preventive Health Services under the ACA, Other Than Contraceptives. A press release announcing the rules and a Q&A fact sheet were also simultaneously released.

Background

Under the Affordable Care Act (ACA), non-grandfathered health plans and insurers must provide coverage for preventive services without imposing cost-sharing requirements (for example, copayments, coinsurance or deductibles) (see Practice Note, Grandfathered Health Plans under the ACA). Under guidelines provided by the Health Resources and Services Administration (HRSA), the preventive services rules require coverage for all Food and Drug Administration (FDA)-approved contraceptive methods, sterilization procedures and patient education and counseling for women with reproductive capacity (collectively, contraceptives coverage) (see Practice Note, Contraceptives Coverage under the ACA). Plans and insurers generally were required to provide coverage consistent with the HRSA guidelines, without cost-sharing, for plan years beginning on or after August 1, 2012. However, the contraceptives mandate is subject to:
  • An exemption for religious employers.
  • Accommodations for group health plans established by eligible organizations. An "eligible organization" is defined as a religious nonprofit that has a religious objection to providing contraceptives coverage.
The government's accommodations did not extend to for-profit entities.
Eligible organizations must provide a self-certification, on EBSA Form 700, that the organization meets the accommodations' requirements. Contraceptives coverage was still required to be provided under the ACA, but rather than the eligible organization providing the coverage, the plan's insurer or third-party administrator (TPA) were responsible for providing or arranging for the coverage, as applicable.

Interim Final Rules: Alternative to Filing EBSA Form 700

In Wheaton, Wheaton College, an eligible organization claiming an accommodation from the contraceptives mandate, sought an injunction from the required EBSA Form 700 filing. The college objected to the requirement under the Religious Freedom Restoration Act (RFRA), arguing that by submitting the form to the insurers and TPAs it was essentially permitting them to provide the contraceptives coverage in its place (see Legal Update, Supreme Court: Religious Non-profit Need Not File EBSA Form 700 Regarding Contraceptives Accommodation). The RFRA prohibits the federal government from taking action that substantially burdens a person's exercise of religion, unless the action serves a compelling governmental interest and is the least restrictive means of furthering that interest. Concluding that the form was not the least restrictive means of furthering the government's interest, the Supreme Court granted the injunction, enjoining HHS from requiring that Wheaton College file EBSA Form 700 or send copies to the organization's health insurers or any TPAs. The Court stated that Wheaton College could instead simply notify HHS of its religious beliefs in writing to receive the accommodation.
In light of Wheaton, the interim final rules provide eligible organizations with an alternative process to the EBSA Form 700 method of self certification. The alternative process, which, according to the Departments is consistent with the Wheaton order, allows an eligible organization to send HHS a simple notice of its objection to contraceptives coverage. The notice must be in writing and must include:
  • The name of the eligible organization.
  • The basis on which the organization qualifies for an accommodation.
  • The organization's objection to providing contraceptives services based on sincerely held religious beliefs (although the government will not assess this).
  • The plan name and type (for example, if the plan is a church plan).
  • The name and contact information of any TPAs or health insurers.
The notice should be sent electronically to [email protected], or by U.S. mail to Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance Oversight, 200 Independence Avenue SW, Washington, D.C. 20201, Room 739H.
After receiving the notice, HHS will send a separate notice to the plan's insurer and notify it of its obligation to provide coverage. For self-insured plans, the DOL will notify and designate a TPA to act as the ERISA plan administrator in providing contraceptive services. By removing the requirement that eligible organizations send a form directly to their insurers and TPAs, the alternative addresses the objection raised in Wheaton while still providing access to the required coverage without cost sharing.
An eligible organization may choose whether to continue to use EBSA Form 700 or to send a notice of objection to HHS. In coordination with the interim final rules, EBSA Form 700 was revised to (among other things) indicate that eligible organizations have the option of notifying HHS directly that they have religious objections to providing coverage for some or all of the contraceptives services.
HHS also issued a model notice that eligible organizations may use to inform HHS (instead of using EBSA Form 700) that they object to providing the contraceptive services.
The interim rules eliminate a non-interference provision included in the 2013 final regulations because the conduct that the provision regulates is generally prohibited under other state and federal laws.

Proposed Rules: Expanded Definition of "Eligible Organization"

In Hobby Lobby, the US Supreme Court ruled that the ACA's contraceptives coverage mandate, as applied to closely held for-profit corporations with religious objections to the mandate, violates the RFRA and is therefore unlawful (see Legal Update, Supreme Court Strikes Contraceptives Mandate as Applied to For-Profits with Religious Beliefs). The Court rejected HHS' argument that for-profit corporations were not persons protected under the RFRA, finding no meaningful basis to treat nonprofits as protected under the RFRA while for-profits were left unprotected.
In light of Hobby Lobby, the Departments' proposed rules would amend the definition of eligible organization to include closely held for-profit entities that have a religious objection to providing contraceptives coverage, thereby expanding the availability of the accommodation. Qualifying entities would not be required to provide the coverage themselves; instead the coverage would be provided by an insurer or arranged by a TPA (see Interim Final Rules: Alternative to EBSA Form 700).
In issuing the proposed rules, the Departments sought comments on how to define "closely held," and proposed two possible approaches that already have some basis in federal law:
  • The first approach would define an entity as closely held when no ownership interests are publicly traded and the entity has fewer than a specified number of shareholders or owners.
  • The second approach would define closely held as an entity in which ownership interests are not publicly traded and a specified fraction of the ownership interest is concentrated in a limited and specified number of owners. For example, more than 40% of the ownership is concentrated in three individuals.
The Departments also requested comments on whether to require closely held for-profit entities to document and disclose any religious objection to contraceptives coverage. The proposed rules would require a valid corporate action taken in accordance with the entity's governing structure to establish a religious objection.
Finally, the Departments sought comment on the approximate number of closely held for-profit entities that would seek an accommodation and the number of participants, insurers and TPAs that would be affected in order to help ensure coverage.

Practical Impact

The contraceptives mandate continues to be one of the most controversial aspects of the ACA, and it remains to be seen whether commenters will embrace the Departments' proposed approaches for defining closely held for-profit entities, or whether a broader definition will prevail. Employers that wish to submit comments on this issue (and related concerns regarding the contraceptives mandate) must do so by October 21, 2014. After that date, the Departments will review submitted comments in advance of finalizing the eligible organization definition.