Expanded Exemption from ACA’s Contraceptive Coverage Mandate

The Trump Administration made waves last Friday by issuing new guidance that greatly expands the employers eligible for an exemption from the mandate to provide contraceptive coverage under its group health plan. Under the Affordable Care Act, an employer must provide certain preventive services—including contraceptive services—at no out-of-pocket cost. Previously, a limited class of employers that objected to providing contraceptive services based on sincerely held religious beliefs were exempt from the contraceptive services mandate. This mandate, and the exemption’s scope, has been the subject of great controversy and litigation. In response to President Trump’s Executive Order, the Departments of Treasury, Labor, and Health and Human Services (the “Departments”) released joint interim final rules, effective October 6, 2017 (the “Rules”) that expand the grounds for claiming the contraceptive services exemption and the entities eligible to claim it, and that make a number of other key changes to the exemption.Under the new Rules, an eligible employer may claim the exemption based on sincerely held religious beliefs or sincerely held moral convictions. Based on either of these grounds, the employer must object to establishing, maintaining, providing, offering, or arranging coverage, payments, or a plan that provides coverage or payments for some or all contraceptive services. An open question, however, is precisely what it takes to have “sincerely held moral convictions” or “sincerely held religious beliefs.” Rather than providing a standard for employers to meet, the Rules say that the question turns on whether an employer has adopted and documented these convictions or beliefs in accordance with state law. The Rules also largely expand the classes of entities eligible for the exemption. The religious-based exemption is available to virtually all non-governmental plan sponsors including for-profit entities (both closely held and non-closely held entities), nonprofit organizations, and churches. However, the conscious-based exemption is available only to nonprofit organizations and non-publically traded for-profit entities. Certain institutions of higher education may also qualify for the exemption. Individuals participating in a non-exempt group health plan may also receive an exemption. A sponsoring employer with no objection to providing contraceptive services may—but is not required to—offer a separate benefit package option that excludes contraceptive services to an individual objecting to coverage or payment of contraceptive services based on a sincerely held religious belief or moral conviction. Employers agreeing to provide this exemption will, in essence, provide two different sets of covered services: one that covers contraceptive services, generally applicable to all of its employees, and a second that excludes contraceptive services, applicable only to those eligible objecting individuals. Finally, exempt employers may—but no longer have to—shift the responsibility of providing contraceptive services to its plan’s insurer or third-party administrator. Exempt employers currently providing this accommodation may revoke it—effectively shutting off access to no-cost contraceptive services under the plan (and it’s possible that insurers or third-party administrators will require that the employer revoke the coverage as a condition for the insurer/TPA to continue providing services). Exempt employers also no longer have to file notice of exempt status with the federal government. We expect that there will be numerous challenges to these new, interim final rules. Already, the ACLU and the attorneys general for the states of California and Massachusetts have announced their intent to challenge the new rules. Courts may at least temporarily block the rules from going into effect while they sort through the legal issues. If you have any questions about the new, interim rules, please contact Norbert Kugele, Stephanie Grant, Kent Sparks or any other member of the Warneramp; Employee Benefits Practice Group.