New Developments Regarding ACA Contraception Coverage Requirements

by Amy M. Gordon, Anne W. Hance and Susan M. Nash

The U.S. Department of Health and Human Services (HHS), the U.S. Department of Labor’s Employee Benefits Security Administration and the U.S. Department of the Treasury’s Internal Revenue Service issued a proposed rule on February 1, 2013 presenting a revised approach for the coverage of women’s contraception by certain religious employers under the Affordable Care Act. The proposed rule, which is open for public comment through April 8, 2013, has significant implications for employers, health insurers and third-party administrators (TPAs). 

The Landscape

The Affordable Care Act requires non-grandfathered group health plans and health insurance issuers offering individual and group health insurance coverage to provide first-dollar coverage for select preventive services. For women with reproductive capacity, this includes FDA-approved contraceptive, sterilization procedures and patient education, as prescribed by a health care provider. The agencies adopted an exemption from this requirement for group health plans sponsored by religious employers. The agencies also established a temporary enforcement safe harbor for non-grandfathered group health plans sponsored by certain nonprofit organizations with religious objections to providing contraception coverage for plan years beginning before August 1, 2013. The proposed rule is the agencies’ latest attempt to balance access to these health care services and accommodation of organizations’ religious beliefs.

The Proposed Rule

Exemption for Religious Employers

The proposed rule simplifies the definition of a “religious employer” that is exempt from the contraceptive coverage requirement to mean any nonprofit entity referenced in Sections 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code.

Accommodation for Eligible Organizations

A separate accommodation will be established for group health plans sponsored by an “eligible organization,” defined as an organization that: (1) opposes providing coverage for some or all of any contraceptive services required to be covered on account of religious objections; (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.

Contraceptive coverage will still be made available to women participating in group health plans sponsored by an “eligible organizations” on a no-cost basis.  The proposed rule will require health insurance issuers providing fully-insured coverage to group health plans sponsored by eligible organizations to enroll participants into separate individual health insurance policies that provide contraception coverage without cost sharing or additional premiums. For self-insured group health plans, the applicable TPA would arrange for the enrollment of participants into individual health insurance policies that provide contraception coverage without cost sharing or additional premiums, whether through voluntary enrollment, automatic enrollment or by the TPA becoming the plan administrator for this purpose.

HHS proposes to recognize contraception-only policies as a new category of “excepted benefit” coverage, although certain consumer protections, such as guaranteed renewability and annual/lifetime limit prohibitions, still would apply. 

The proposed rule anticipates that health insurance issuers would offset the cost of providing contraceptive coverage under individual policies issued to participants of self-funded group health plans by claiming a reduction to user fees imposed on issuers participating in Federally Facilitated Exchanges (FFEs).

Next Steps

  • Entities that may qualify for the “eligible organization” accommodation, including religious institutions of higher learning, will need to consider whether they can self-certify to this new status. They also will have to work with their insurer or TPA to address how coverage will be provided to participants.
  • The proposed rule raises numerous legal, financial and operational issues for health insurance issuers, including development of a new type of excepted benefit coverage, coordination of enrollment and benefits with self-funded group health plans, the cost of providing this coverage, and the potential risks associated with requesting a reduced FFE user fee based on costs relating to these new policies. 
  • TPAs will need to consider how they will arrange for contraception coverage to participants of self-funded plan customers that certify to being an eligible organization, a challenging process if different customers seek different approaches. TPAs also will have consider how to recover administrative costs from issuers issuing coverage policies (and receiving FFE reductions). An additional consideration is how to fund contraception coverage from the coverage effective date, September 1, 2013, until dollars become available in connection with the FFE user fees. 

Virginia Federal Judge Rules on Constitutionality of U.S. Health Care Reform Law

On December 13, 2010, Judge Henry E. Hudson of the U.S. District Court for the Eastern District of Virginia declared portions of the Patient Protection and Affordable Care Act (PPACA) unconstitutional.  The lawsuit challenging PPACA’s “individual mandate,” which, starting in 2014, requires citizens to pay a penalty if they do not purchase health insurance, was brought by Virginia’s Attorney General, Ken Cuccinelli.

Cuccinelli argued the federal government does not have the constitutional authority to impose the individual mandate.  This marks the first decision by a judge striking down any portion of PPACA.  Final resolution on the “individual mandate” will not be immediate.  Two other federal courts recently rendered decisions upholding PPACA and observers unanimously agree the Supreme Court eventually will determine PPACA’s constitutionality.  Many commentators have suggested for months that, regardless of how the legal issues play out, the relatively modest penalties imposed by the individual mandate would prove insufficient to cause uninsured people to buy health insurance (particularly younger and healthier people) and that Congress might well delay the implementation of the mandate for political reasons.

The December 13 decision needs to be studied carefully, and in relationship to all of the components of the recently enacted U.S. health care reform law.  How and to what extent this ruling affects other aspects of the health reform bill, either directly through legal susceptibility or indirectly due to the practical interdependence of the parts, is yet to be seen.  What is critical, however, and should not be lost in the headlines, is that the result of the PPACA legislation is a transformation of how employers, consumers, insurance companies and providers work together to meet the demand for health care services that can be delivered at lower cost, with higher quality and with outcomes that can be measured that will then serve as a basis for payment.

Regardless of the constitutionality of the insurance mandate, hospitals, physicians and public and private insurers are being pushed and pulled by the market, as well as new government programs, to develop alternatives to fee-for-service payment models.  Patients, employers and public and private insurers will continue to demand that providers focus on outcomes, cost reduction and quality of care.  The underlying market reality will continue to demand that the quality curve bend up and the cost curve down.