The Department of Health and Human Services, Labor, and the Treasury recently released final rules on the application of the contraceptive coverage requirements under the Patient Protection and Affordable Care Act to certain religious organizations. The ACA requires non-grandfathered group health plans to provide coverage for certain preventive services without cost-sharing, including contraception and contraceptive counseling.
A religious organization will be eligible for the religious employer exemption if it is organized and operates as a nonprofit entity and is referred to in Section 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code of 1986. Therefore, the religious employer exemption is available to churches, integrated auxiliaries of churches, conventions or associations of churches, and the exclusively religious activities of any religious order.
The final rules establish accommodations with respect to the contraceptive coverage requirement under ACA for health coverage established or maintained by "eligible organizations." For these purposes, an "eligible organization" is an organization that: Opposes providing coverage for some or all of the contraceptive services required to be covered under ACA on account of religious objections; is organized and operates as a nonprofit entity; holds itself out as a religious organization; and self-certifies that it satisfies the first three criteria.
Notably, the agencies declined to clarify how an eligible organization would show that it holds itself out as a religious organization.
Nonprofit religious organizations that qualify for an accommodation are not required to contract, arrange, pay, or refer for contraceptive coverage. However, plan participants and beneficiaries will still benefit from separate payments for contraceptive services without cost-sharing or other charge in accordance with ACA.
The rules provide for a simpler method of providing direct payments for contraceptive services. Under the final rules, the process through which an accommodation is established is different based upon whether the eligible organization's group health plan is fully insured or self-insured. Each organization seeking to be treated as an eligible organization is required to self-certify, prior to the beginning of the first plan year to which an accommodation is to apply, that it meets the definition of an eligible organization. Generally, the self-certification is only required to be executed once.
In the case of a fully insured group health plan established or maintained by an eligible organization, the eligible organization must provide a copy of its self-certification to its health insurance issuer. Upon receiving a self-certification from an eligible organization, the issuer is required to expressly exclude contraceptive coverage from the eligible organization's group health insurance coverage. For participants and beneficiaries who choose to use contraceptive services, the issuer must provide payments for contraceptive services for such plan participants and beneficiaries, separate from the group health plan, without the imposition of cost-sharing, premium, fee, or other charge on plan participants or beneficiaries or on the eligible organization.
As the payments for contraceptive services derive solely from a federal regulatory requirement, not a health insurance policy, this process will not trigger certain aspects of state insurance laws, such as licensing and product approval requirements under state law. Issuers are required to segregate the premium revenue collected from eligible organizations from the monies they use to make payments for contraceptive services. In addition, in making such payments, issuers are required to ensure that they do not use any premiums collected from eligible organizations.
Generally, under the final rules, a self-insured group health plan's TPA becomes a "plan administrator" - as defined under ERISA - and claims administrator solely for the purpose of providing payments for contraceptive services for participants and beneficiaries in the plan of an eligible organization at no cost to plan participants, beneficiaries or to the eligible organization. In the case of a self-insured group health plan established or maintained by an eligible organization, the eligible organization must provide a copy of its self-certification to its TPA. Upon receiving the self-certification from the eligible organization, the TPA may decide not to enter into, or remain in, a contractual relationship with the eligible organization to provide administrative services for the self-insured plan.
A TPA that does agree to enter into, or remain in, a contractual relationship with the eligible organization to provide administrative services for the plan must provide or arrange separate payments for contraceptive services for participants and beneficiaries in the plan without cost-sharing, premium, fee, or other charge to the plan participants, beneficiaries, or to the eligible organization or its plan. The TPA can provide such payments on its own, or it can arrange for an issuer or other entity to provide such payments.
Contributing Editor Kate Bongiovanni is an associate in the tax section of Smith, Gambrell & Russell, LLP.
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