Proposed Rules Clarify Definition Of Religious Employer Under ACA’s Contraceptive Coverage Requirement

The Department of Labor’s Employee Benefit Security Administration, the Department of Health and Human Services, and the Internal Revenue Service (the Departments) have issued proposed regulations that clarify the definition of religious employer under the Patient Protection and Affordable Care Act’s (ACA) no-cost sharing contraceptive coverage requirement. In addition, the proposed rules accommodate nonprofit religious organizations that do not qualify as religious employers by providing their enrollees separate contraceptive coverage, with no copayments, but at no cost to the religious organization. The proposed rules are schedule to be published in the February 6 Federal Register.

The ACA requires that group health plans provide coverage for women’s preventive health services without cost-sharing. Regulations published in August 2011 added eight preventive services for women, and one of these preventive services included recommended contraceptive services. Beginning Aug. 1, 2012, most new and renewed health plans were required to provide contraceptive services for women without cost sharing. The law exempted certain nonprofit religious employers that offered insurance to their employees from the requirement, and others that did not qualify for the exemption have a one-year temporary safe harbor, until Aug. 1, 2013, to comply with the requirement.

Definition of “religious employer.” The proposed rules clarify the definition of “religious employer” under the contraceptive coverage requirement of the ACA. The simple definition of religious employer for purposes of the exemption would now follow the Internal Revenue Code, and would primarily include churches, other houses of worship, and their affiliated organizations, as defined by Sec. 6033(a)(3)(A)(i) or (iii). This proposed change is intended to clarify that a house of worship would not be excluded from the exemption because, for example, it provides charitable social services to persons of different religious faiths or employs persons of different religious faiths. The Departments noted that this proposal would not expand the number of employer plans that would qualify for the exemption beyond that which was intended in the 2012 final rules.

Creating accommodation for nonprofit religious organizations. The proposed rule also would accommodate nonprofit religious organizations that do not qualify as religious employers by providing their enrollees separate contraceptive coverage, with no copayments, but at no cost to the religious organization. Under the proposed accommodations, the eligible organizations would not have to contract, arrange, pay, or refer for any contraceptive coverage to which they object on religious grounds.

For insured group health plans, the eligible organization would provide the self-certification to the health insurance issuer, which in turn would automatically provide separate, individual market contraceptive coverage at no cost for plan participants. Issuers generally would find that providing such contraceptive coverage is cost neutral because they would be insuring the same set of individuals under both policies and would experience lower costs from improvements in women’s health and fewer childbirths, the Departments noted.

For self-insured group health plans, the eligible organization would notify the third party administrator, which in turn would work with a health insurance issuer to provide separate, individual health insurance policies at no cost for participants. The Departments believe that the costs of both the health insurance issuer and third party administrator would be offset by adjustments in the Exchange user fees that insurers pay.

The Departments intend that insurers and third party administrators would work to ensure a seamless enrollment process. The proposed rules lay out how the costs of both the insurer and the third party administrator would be covered, without any charge to either the religious organization or the enrollees.

Comments on the proposed rules must be received by April 8, and may be submitted electronically through http://www.regulations.gov; or mailed to Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services, Attention: CMS-9968-P, P.O. Box 8013, Baltimore, MD 21244-1850. In commenting, refer to file code CMS-9968-P.

For more information, contact Jacob Ackerman, at the CMS, at (410) 786-1565; Amy Turner or Beth Baum, at the EBSA, at (202) 693-8335; or Karen Levin, at the IRS, at (202) 927-9639.

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