Agencies Issue Final Rules to Broaden Exemption from Contraceptive Coverage
On Nov. 7, 2018, the HHS, the Treasury Department and the DOL (the Departments) jointly released advanced copies of two final regulations that broaden the exemption from the ACA’s contraceptive mandate. The final rules are effective 60 days following publication in the Federal Register (expected Nov. 15, 2018).
As background, the ACA requires plans to cover certain preventive services with no cost-sharing. However, a number of religious institutions objected to being required to cover certain contraceptives, prompting the Obama administration to provide a waiver and accommodation process for those institutions. The Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc. ruled in favor of Hobby Lobby, holding that closely held for-profit employers could also choose not to cover certain contraceptives.
Then, in Oct. 2017, the Trump administration issued two interim final rules which broadened the exemption for sincerely held religious beliefs and sincerely held moral convictions. Further litigation spawned from the interim final rules and two federal courts issued preliminary injunctions blocking the federal government from enforcement of these rules as a result . It remains to be seen how the courts’ injunctions will impact the finalized rules.
After considering over 100,000 public comments, the final rules remain largely unchanged from the interim final rules issued back in Oct. 2017
Here is a general overview of both final rules:
First, the final rule on religious exemptions expands the exemption that previously applied only to churches and similar religious organizations. This particular exemption will be available to non-governmental employers and institutions of higher education, nonprofits, for-profits, insurers and individuals with religious objections where the employer plan sponsor and/or issuer (as applicable) are willing to offer a plan omitting certain contraceptive coverage. The religious exemption does not apply to governmental plans, and no publicly-traded employers are expected to invoke the religious exemption.
Second, the final rule on moral exemptions is more restrictive than the religious exemption. Under the moral exemptions rule, only nonprofits, privately held for-profit employers, insurers, institutions of higher education, and individuals can invoke an exemption to the contraceptive mandate based on sincerely held moral objections. This could encompass association health plans where the plan sponsor is a nonprofit or a privately-held for-profit entity. However, the moral final rule does not extend to governmental plans or publically traded for-profit employers.
Both rules maintain the availability of an optional accommodation where the entity’s insurer or third-party administrator is responsible for providing contraceptive services to plan participants and beneficiaries on a voluntary basis. In other words, an otherwise exempt employer could decide to take advantage of the accommodation, which would provide contraceptive coverage to its employees and their dependents on an optional basis. Businesses that object to covering some, but not all, contraceptives would be exempt with respect to only those methods to which they’re opposed.
Under both final rules, if an employer objects to contraceptive coverage on a religious or moral basis, the group health plan, the insurer, and the coverage itself are exempt from the full ACA guidelines on contraceptive methods. Those entities are not subject to a penalty for failure to cover contraceptives for plan enrollees. Employers who claim an exemption do not have to provide any sort of self-certification or notice to the government.
Several states currently require insurers to cover contraceptives and several others have religious exemptions of some kind, but it should not be assumed that these are comparable with the new federal exemption. The departments state that the final rules only apply to the federal contraceptive mandate and do not regulate, preempt or otherwise address various state contraceptive mandates or religious exemptions. Therefore, if a plan is exempt under the final rule on religious or moral exemptions that does not necessarily exempt the plan or insurer from applicable state laws. Of course, state mandates do not apply to self-funded plans, but they apply to fully-insured plans.
Importantly, though, ERISA requires employers to outline the plan’s covered services in the plan document. As such, employers should keep in mind that the rules require employers to notify employees of any change in contraceptive coverage, in accordance with current ERISA rules. So, for example, where the decision not to cover certain contraceptives is a material modification or reduction in covered services, the employer will need to provide employees with Summaries of Material Modification. In addition, if that decision is made outside of open enrollment/renewal, the employer may also be responsible for an advance notice under the summary of benefits and coverage (SBC) rules, which may require 60-days advance notice of the change.
The final rules are effective 60 days following publication on the Federal Register (presumably effective Jan. 15, 2019). However, as these various legal challenges work their way through the courts, employers wishing to avail themselves of these exemptions should work with legal counsel to ensure that they implement the exemptions in a compliant manner, paying special attention to applicable state laws.