The U.S. Departments of Health and Human Services (HHS), Labor, and the Treasury have released their much-anticipated proposed rule outlining how religious-affiliated entities are to comply with the Affordable Care Act’s requirement that employers, non-exempt, non-grandfathered group health plans, and group health insurance issuers cover contraception services without cost sharing. In general, the proposal clarifies the definition of a “religious employer” that is exempt from the contraceptive coverage requirement, and outlines how non-profit religious-affiliated organizations, such as certain hospitals and universities that object to contraception on religious grounds, can seek an accommodation that absolves them from paying for contraceptive services while still ensuring that enrollees receive such coverage without providing a co-pay.

Definition of Religious Employer

The agencies initially proposed that a religious employer would be defined as a non-profit entity 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. After reviewing public comments on this proposed definition, the agencies have eliminated these requirements and instead propose using the definition of “religious employer” set forth in the Internal Revenue Code. Under this proposal, “an employer that is organized and operates as a nonprofit entity and referred to in section 6033(a)(3)(A)(i) or (iii) of the Code would be considered a religious employer for purposes of the religious employer exemption.” Religious employers, therefore, would primarily include churches, other houses of worship, and their affiliated organizations. As discussed in the proposal, eliminating the three-part test “would avoid any inquiry into an employer’s purposes, as well as any inquiry into the religious beliefs of its employees and the religious beliefs of those it serves.” According to a fact sheet on this proposal, the simplified definition “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 believe that this proposal would not expand the universe of employer plans that would qualify for the exemption beyond that which was intended in the 2012 final rules.”

Religious Accommodation

Under the proposal, certain religious-affiliated organizations may seek an accommodation to avoid having to contract for, arrange, refer or pay for any contraceptive coverage ordinarily required under the new health care law if they object to doing so on religious grounds. An organization eligible for this accommodation is one that: (1) objects on religious grounds to providing coverage for some or all of any contraceptive services required by the health care law; (2) is organized and operates as a nonprofit entity; (3) holds itself out as a religious organization; and (4) self-certifies that it meets these criteria and specifies the contraceptive services for which it objects to providing coverage. The proposal emphasizes that the accommodation would not be available to for-profit, secular employers.

Enrollees would still be entitled to receive contraceptive coverage through separate individual health insurance policies, without cost sharing or additional premiums.

If an objecting organization establishes or maintains an insured group health plan, it would be able to provide the self-certification discussed above to the health insurance issuer, which would automatically provide separate, individual market contraceptive coverage at no cost to plan participants. The agencies note that “if the plan uses a separate issuer for certain coverage, such as prescription drug coverage, the eligible organization may also need to provide a copy of its self-certification to the separate issuer. Nothing more would be required of the eligible organization to qualify for the accommodation.”

The proposal would also allow eligible religious non-profit universities to take advantage of this type of accommodation.

If the religious entity is self-insured, the fact sheet explains that it would be able to notify the third party administrator, “which in turn would automatically work with a health insurance issuer to provide separate, individual health insurance policies at no cost for participants. The costs of both the health insurance issuer and third party administrator would be offset by adjustments in Federally-facilitated Exchange user fees that insurers pay.” The agencies seek comment on, among other issues, “whether there is a need to provide an accommodation for self-insured plans of eligible organizations without third party administrators, and, if so, how best to ensure that participants and beneficiaries in such plans receive separate contraception coverage without cost sharing.”

The accommodation and the religious employer exemption would be available on an employer-by-employer basis. Therefore, religious entities participating in multiple employer group health plans would have to individually seek an accommodation/exemption.

Comments on this proposal must be received by April 8, 2013 and refer to file code CMS-9968-P. Comments may be submitted electronically through the federal eRulemaking portal, or sent by regular mail to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9968-P, P.O. Box 8013, Baltimore, MD 21244-1850. Alternatively, written comments may be hand-delivered to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, S.W., Washington, DC 20201.

Photo credit: Melton Media