On October 6, 2017, HHS announced two companion interim final regulations addressing the exemption and accommodation under the ACA's contraceptive coverage mandate for employers, insurers, other entities, and individuals (see Practice Notes, Preventive Health Services Under the ACA, Other Than Contraceptives and Contraceptives Coverage Under the ACA). The two regulations, which were issued jointly by HHS, DOL, and Treasury (the Departments) and are effective immediately, include an expanded exemption and accommodation for:

Both regulations build on a Trump Administration directive from earlier this year on religious liberty and free speech (Executive Order 13798; see Legal Update, Trump Administration Takes Aim at ACA Contraceptives).

Under the ACA, non-grandfathered group health plans and insurers must provide coverage for certain preventive health services without cost-sharing, including preventive care and screenings for women under guidelines supported by the Health Resources and Services Administration (HRSA) (42 U.S.C. § 300gg-13; Section 2713 of the Public Health Service Act (PHSA); see also Group Health Plans Toolkit). Plans and health insurers must provide coverage for all Food and Drug Administration (FDA)-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity, as prescribed by a doctor.

In implementing this requirement, the Departments provided an exemption for group health plans of religious employers and an accommodation for certain nonprofit "eligible organizations" that objected to covering contraceptives but were ineligible for the exemption (see Legal Update, Final Contraceptive Rules Include TPA Role for Providing Certain Contraceptive Coverage).

The ACA contraceptives mandate has been the topic of extensive implementing guidance and ongoing litigation, including claims under the Religious Freedom Restoration Act of 1993 (RFRA) (42 U.S.C. § 2000bb-1(a) and (b)). (For analysis of this guidance and litigation, see Practice Note, Contraceptives Coverage Under the ACA; see also Legal Updates, Supreme Court Strikes Contraceptives Mandate as Applied to For-Profits with Religious Beliefs, Departments Adjust Contraceptives Rules in Response to Supreme Court Cases, No New Religious Accommodation in ACA Contraceptives Coverage Challenge.)

The Departments' religious beliefs regulations expand the ACA's contraceptives exemption to include nongovernmental health plan sponsors that object to coverage of some or all contraceptives or sterilization and related patient education and counseling based on their religious beliefs. The exemption is also available to institutions of higher education in their arrangement of student health plans. In enacting the regulations, the Departments reasoned that the contraceptives mandate has already been the topic of exemptions, including for grandfathered health plans (see Practice Note, Grandfathered Health Plans Under the ACA). The Departments note, however, that HRSA maintains discretion to require contraceptives coverage for most entities to which the contraceptives mandate previously applied.

The expanded religious beliefs exemption applies to the group health plans of objecting plan sponsors and their health insurers that provide coverage under those plans (and regardless of whether the insurer has its own religious objections). As a result, a plan sponsor, insurer, and plan covered by the expanded exemption is not:

(Regarding the self-certification process in the ACA contraceptives accommodation context, see Practice Note, Contraceptives Coverage Under the ACA: Self-Certification Requirements: EBSA Form 700.)

The religious beliefs regulations include a non-exhaustive list of entities that might object to providing contraceptives coverage, which includes:

(45 C.F.R. § 147.132.)

In Hobby Lobby, which involved a RFRA challenge, the Supreme Court held that the ACA's contraceptives mandate substantially burdened the exercise of religion as applied to closely-held for-profit corporations that objected to providing coverage for contraceptives on religious grounds (see Legal Update, Supreme Court Strikes Contraceptives Mandate as Applied to For-Profits with Religious Beliefs). Although the Court's holding did not reach publicly traded corporations, the religious beliefs regulations permit certain publicly traded corporations to use the expanded religious exemption (though the Departments predicted that few publicly traded corporations would do so). According to the Departments, the expanded exemption also applies to a plan sponsored by a non-employer entity, such as a union.

In addition, in a change from prior guidance, the Departments will determine the scope of an exemption for a group health plan established or maintained by a house of worship or integrated auxiliary at the plan level, rather than on an employer-by-employer basis. Also, entities that object to covering some, but not all, contraceptive items are exempt only as to the items to which they object (but not as to the items to which they do not object).

The Departments' moral convictions regulations further expand the ACA contraceptives exemption and accommodation to entities and individuals that object to contraceptives based on sincerely held moral convictions. As with the religious beliefs regulations, the moral convictions regulations maintain HRSA's discretion to require contraceptive and sterilization coverage where no permitted objection exists.

The moral convictions regulations apply to non-governmental employers that sponsor group health plans and that object to coverage of some or all contraceptives or sterilization (and related patient education and counseling) based on sincerely held moral convictions. This includes group health plan and related health insurance coverage for plan sponsors that are either:

The scope of the for-profit entities rule is more narrow than under the religious beliefs exemption, which extends to for-profit entities whether or not they are closely held or publicly traded. The Departments based this distinction on the lack of ACA contraceptives litigation brought by publicly traded entities with non-religious moral convictions (though the Departments requested comments on this point).

A plan sponsor, insurer, and plan covered by the moral convictions exemption would face no penalty for omitting contraceptive coverage from the plan to participants and beneficiaries.

Independently, an objecting institution also may include health insurers and higher education institutions (regarding student health insurance). However, this exemption does not include TPAs with moral convictions objections, though the Departments requested comments on whether it should. Insurers with moral objections should:

Exempt entities need not comply with a self-certification process. However, as with the expanded religious beliefs exemption, ERISA's disclosure rules require that notice be provided regarding exclusions and reductions in covered services or benefits. In addition, entities that hold a requisite objection to covering some, but not all, contraceptive items are exempt only as to the items to which they object (but not regarding items to which they do not object).

A plan sponsor or other entity that wishes to immediately revoke its accommodated status and switch to exempt status under the Departments' expanded exemption (that is, during the plan year) will need to notify participants and beneficiaries of the resulting changes to their contraceptives coverage. As discussed above, this notice must satisfy ERISA's disclosure requirements for such situations. The plan sponsor may be able to coordinate with its insurer or TPA in providing this notice. Alternatively, a plan sponsor that waits until the start of the upcoming plan year to change to exempt status might avoid having to send a separate notice if it can timely address the change in its plan materials for the upcoming year. The Departments' revocation process for this change in status is addressed above and discussed in greater detail in the Departments' religious beliefs regulations and accompanying background information.

In a related development, the Department of Justice (DOJ) issued a memorandum on October 6, 2017, addressing federal law protections for religious liberties. The memorandum, signed by Attorney General Jeff Sessions, includes 20 principles intended to offer religious liberties guidance for the administrative agencies and executive departments in executing federal law. In its memorandum, DOJ takes the view that an HHS rule requiring employers to provide insurance coverage for contraceptives in violation of their religious beliefs – or face significant penalties – substantially burdens the employer's religious practice in violation of RFRA.