Administration Announces Proposed Rule Regarding Religious Exemptions to Contraception Mandate

The Departments of Health and Human Services, Labor, and the Treasury (the Departments) have issued a notice of proposed rulemaking (NPRM) that defines religious employers and nonprofit religious organizations for purposes of exempting them from the preventive services coverage requirement of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). With respect to nonprofit religious organizations, the proposed rule would ensure that employees receive contraceptive benefits without cost-sharing through a party distinct from the employer, such that the employer would not have to contract, arrange, pay, or refer for insurance coverage. The proposed rule specifically does not provide an exemption for for-profit secular employers.

Background

PPACA required most employer-sponsored health plans to cover the cost of preventive care to women, which, according to an HHS Final Rule (77 FR 8275) included FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity. The Final Rule also carved out an exemption for religious employers, defining them as any organization that “(1) has the inculcation of religious values as its purpose; (2) primarily employs persons who share its religious tenets; (3) primarily serves persons who share its religious tenets;” and (4) is a nonprofit organization described in the internal revenue code, which generally refers to churches, conventions of churches, and religious orders. HHS also created a temporary enforcement safe harbor provision for nonprofit organizations with religious objections with health plans that, among other requirements, had consistently not covered contraceptive services. The provision also applied to insured student health insurance coverage arranged by nonprofit institutions of higher education with religious objections. The temporary enforcement safe harbor provision is effective until an organization’s first plan year beginning on or after August 1, 2013.

Religious Employers

The Departments are proposing to eliminate the first three prongs of the definition of religious employer as contained in the Final Rule. The proposed changes would prevent a religious employer that offers charitable services to a population beyond members of its own religion or that employ members of other religions, as may occur in parochial schools, from falling outside the exemption. A religious employer will still need to meet the definition of a religious employer under the IRS code (IRC 6033(a)(3)(A)). However, the organization is not limited to a particular form of entity and may include trusts, and public benefit corporations, provided that no assets or income benefit private individuals or shareholders.

Nonprofit Religious Organizations

The proposed rule would create a permanent exception for certain eligible organizations that (1) oppose some or all mandated contraceptive services; (2) are organized and operated as nonprofit entities; (3) hold themselves out as religious organizations; and (4) self-certify that they satisfy the first three criteria. Eligible organizations would specifically include religious institutions of higher education.

Third-Party Coverage

Unlike religious employers, eligible organizations would likely include employees who do not share the same religious objections as their employer. As a result, the proposed rule would require employees (and students) to receive mandated contraceptive services with no cost-sharing from a separate source without the need for the eligible organization to contract, arrange, pay, or refer for insurance coverage. To qualify, eligible organizations would be required create a self-certification that specifically lists the type of coverage to which they object. They would need to keep a copy of the self-certification on file and make it available for examination. Eligible entities with insured plans would need to submit a copy of the self-certification to the health insurance issuer, who would assume sole responsibility for providing contraceptive coverage without cost-sharing or other costs. Issuers would be required to automatically enroll participants. Issuers would be held harmless if they relied in good faith on an incorrect certification; eligible organizations would be held harmless if issuers failed to provide coverage. Eligible entities with self-insured plans would provide a copy of the self-certification to the third-party administrator for the health plan. The proposed rule outlines three scenarios in which a third-party administrator would either arrange for contraceptive coverage itself or arrange for an issuer to provide contraceptive coverage. The Departments seek feedback on the most appropriate scenario. The Departments also seek feedback with respect to whether issuers or third-party administrators should be required to provide all mandated contraceptive coverage, or should only be required to provide the coverage to which eligible organizations specifically object. In all self-insured scenarios, issuers or affiliated issuers providing contraception coverage at no cost could claim adjustment in Federally-facilitated Exchange (FFE) user fees.

Secular Employers

The Departments specifically stated that the proposed exemptions would not apply to for-profit secular employers. They noted that other areas of federal law that provide religious exemptions, including Title VII of the Civil Rights Act of 1964, are not available to for-profit secular organizations.

Comments

The Departments will accept comments on the proposed rule through April 8, 2013 to allow time for the rule can be finalized before the expiration of the temporary safe harbor provision. The Departments note that the definitions in the proposed rule are limited to the context of the contraception mandate.