Employers could foot bill for religious objectors to contraceptive coverage

As stakeholder groups examine HHS' recent final rule on contraceptive coverage under the healthcare reform law, non-religious employers and third-party benefits administrators are worried they'll have to foot the bill for contraceptives for employees of Catholic health systems and other religiously affiliated employers that opt out of paying.

Late last week, the agency gave its final word on how mandated contraceptive coverage—considered a preventive service under the Patient Protection and Affordable Care Act—pertains to religious organizations that object to the requirement. The rule extended the effective date to Jan. 1, 2014, from its initial date of Aug. 1 of this year.

In the final rule, HHS retained its earlier definition of religious employer and also the requirements for entities that want to be considered eligible organizations. Those groups can avoid contracting, arranging, paying or referring for contraceptive coverage if they self-certify that they meet certain criteria—such as operating as a not-for-profit and also opposing providing contraceptive coverage because of religious objections—that meets the eligible organization definition.

Cardinal Timothy Dolan of New York, president of the U.S. Conference of Catholic Bishops, said in a statement that the organization is reviewing the 110-page rule. Similarly, a spokesman for the Catholic Health Association and a spokeswoman for America's Health Insurance Plans said the two organizations are studying it. Dolan said that the bishops appreciated the extension of the effective date of the rule but that his organization would need more time to analyze it.

The rule stipulates that insured health plans—including student health plans—at not-for-profit religious organizations that object to contraceptive coverage must inform their insurer, who, in turn, will notify enrollees that the insurer will provide payments for contraceptive services at no cost as long as an enrollee stays in a plan. It works in a similar way for self-insured plans, except that the religious organization would notify its third-party administrator, who would then let enrollees know that the TPA is arranging separate payments at no cost.

“I question where this coverage is coming from if there is zero cost to participants and (costs are) not attributable to the employer who objects to the rule,” said Amy Gordon, a partner with the law firm McDermott, Will and Emery in Chicago.

She predicted that other employers might bear the cost for religious employers and eligible organizations.

Meanwhile, Gordon said self-insured plans fare worse than insured plans under the final rule because in self-insured arrangements, the final rule requires self-insured plans to assume the role of an ERISA plan administrator and claims administrator for the purpose of providing payments for contraceptive coverage, which gives these plans heightened responsibility and liability.

“Under that role, there are fiduciary obligations and there is nothing in the final regulation that relieves them of that responsibility,” Gordon said, adding, “If you get sued and you're a fiduciary, it's a lot harder to get out.”

That's why Gordon said she expects religious organizations to be pleased with the final rule. But she envisions third-party administrators will heavily scrutinize their agreements with religious organizations.

“TPAs are going to look at their contracts with these entities and say, 'Is this financially such a good deal that I should assume this role, or should I just walk away?'” Gordon said. “It's going to make it a little bit harder for the smaller, less profitable religious employers to maintain coverage if they were self-insured.”

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