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August 7, 2014

First Guidance Published on Contraceptive Coverage Cases

Update: On August 27, 2014, the federal government published two rules related to the issues discussed in this Capital Checkup: (1) a final rule on how a nonprofit religious entity (including, with respect to student health insurance coverage, an institution of higher education) may notify the federal government of its religious objection to coverage of some or all contraceptive services; and (2) a proposed rule seeking comments on how to define a closely held for-profit corporation in light of theHobby Lobby decision. (The proposal would also apply to a closely held for-profit higher education institution that arranges for student health insurance coverage.) The government also released a new model notice that an eligible plan sponsor may use to notify the federal government of its religious objection. Plan sponsors may continue to use EBSA Form 700 (slightly revised in August 2014) to notify their insurers or third party administrators (TPAs) of their objection to the coverage and of the insurer’s or TPA’s obligation to provide the coverage.

On July 17, 2014, the Departments of Treasury, Health and Human Services, and Labor, the federal agencies responsible for implementing the Affordable Care Act1 (collectively, the “Departments”), published the guidance implementing the United States Supreme Court decision concerning contraceptive coverage and the Affordable Care Act.2 The guidance is the first development as the agencies start to revise regulations that were found by the Supreme Court, in part, to violate the Religious Freedom Restoration Act (RFRA).

This Capital Checkup reviews the Court’s decision, the new guidance and how the decision and the guidance affect various employers and plan sponsors. (For background on the Affordable Care Act’s contraceptive coverage requirement, the exemption for religious employers and the opt-out for certain religious nonprofit organizations, see the text box near the end of this publication.)

The Supreme Court Decision

In Burwell v. Hobby Lobby Stores, Inc., the plaintiffs challenged the requirement that their non-grandfathered plans must provide the full range of contraceptive coverage to plan participants. The Court held that, with respect to a for-profit closely held corporation, the contraceptive coverage mandate violated RFRA because it imposed a substantial burden on the exercise of religious beliefs, and was not the least restrictive means of furthering the government’s interest. The Court cited the accommodation that the regulatory agencies had already created for certain religious nonprofits as evidence that a less restrictive means of fulfilling the government’s interest existed.3 (See the text box near the end of this publication for an overview of this accommodation.)

Four days later, the Court issued an Order in the case of Wheaton College v. Burwell, in which a religious nonprofit entity challenged the opt-out process set out in the agencies’ accommodation regulation. Wheaton College had applied to the Court for an injunction while their court case is pending before lower federal courts. Wheaton College claimed that filing the self-certification form developed by the government impermissibly burdened its religious freedom in violation of RFRA. The Court issued an Order holding that Wheaton College was not required to use the self-certification form in order to opt-out of the contraceptive coverage requirement. The Wheaton College Order was only two pages, and is not a final decision on the merits of the college’s claims. The Order was followed by a strenuous dissent from Justices Sotomayor, Ginsburg, and Kagan.4

Recent Guidance

On July 17, 2014, the Departments issued an answer to a frequently asked question (FAQ) addressing the Supreme Court’s decision.5 The FAQ answer addresses the limited situation in which a closely held for-profit corporation determines to cease to provide coverage for some or all contraceptive services mid-plan year. In that case, the plan would be subject to various disclosure requirements under both the Employee Retirement Income Security Act (ERISA) and, if insured, applicable state law. The FAQ answer points out that the summary plan description (SPD) must include a description of the extent to which contraceptive services are covered under the plan, including any exclusions or limitations. In addition, if contraceptive services are reduced or eliminated, expedited disclosure requirements apply. These requirements, known as the Summary of Material Reductions (SMR), require that plan sponsors disclose a material reduction in covered services or benefits no later than 60 days after the date of adoption of the change.6

Implications for Plan Sponsors

The Hobby Lobby and Wheaton College decisions have limited application to most plan sponsors. In particular, the requirement to cover contraceptive services does not apply if a plan is grandfathered. The following list indicates which non-grandfathered plans may be affected, and what these plan sponsors should consider:

  • Religious Employers  Churches and their related religious organizations continue to be exempt from the contraceptive requirement.
  • Nonprofit Religious Entities  Nonprofit religious entities are those that hold themselves out as a religious organization, but do not meet the strict definition of a “religious employer.” The Hobby Lobby decision endorsed the self-certification accommodation for nonprofit religious entities that do not wish to provide contraceptive coverage because of religious beliefs, and that process remains available to an eligible entity that wishes to exclude contraceptives from coverage under its plan. The Order exempting Wheaton College from having to use the self-certification form applies to Wheaton College. The agencies that established the accommodation regulation have not issued guidance regarding the Wheaton College ruling, but are reported to be considering changes. Consequently, at this time, a nonprofit religious entity should review its options with counsel if it wishes to exclude contraceptives from coverage under its plan.
  • For-Profit Closely Held Corporations  The Court in Hobby Lobby held that closely held corporations are not required to comply with the contraceptive mandate if it violates the sincerely held religious beliefs of the company’s owners. The decision does not define the term “closely held corporation” or cite to any particular definition in the Internal Revenue Code or elsewhere.7 The Court appears to limit this for-profit exemption to companies whose owners comprise a small set of individuals with strongly held religious beliefs.

    For-profit closely held corporations that wish to exclude contraceptive coverage because of a sincerely held religious belief of the owner must carefully consider both which contraceptive benefits they wish to cover, and how they notify the government and their employees of the decision. The Court does not appear to permit exclusion of any other health services other than contraceptives under this decision, but it appears that an entity could exclude some or all contraceptives. Any decision to exclude contraceptives mid-year would require appropriate notice including, for plans subject to ERISA, an SMR. According to the FAQ answer, the SMR must be issued within 60 days of adoption of the decision to exclude coverage.
  • Publicly Held Corporations  Publicly held corporations do not appear to be able to utilize a religious exemption. The Court stated that its decision did not involve publicly traded corporations, and it would be unlikely that “corporate giants” would often assert RFRA claims.


It is unlikely that these decisions and guidance represent the final word on coverage of contraceptives by religious entities. The federal agencies responsible for implementing the Affordable Care Act will also be required to consider the implications of the Court’s decisions for employer-sponsored plans. At this time, plan sponsors of non-grandfathered plans should assure that the full range of FDA-approved contraceptives is provided to plan participants without cost sharing unless they fall within one of the narrow exceptions to the law. All plan sponsors that are considering excluding some or all contraceptive coverage should seek input from legal counsel on whether this would violate other applicable federal and state laws.

• • •

As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.

The Affordable Care Act’s Contraceptive Coverage Requirement, the Exemption for Religious Employers and the Opt-Out Process for Certain Religious Nonprofit Organizations

The Affordable Care Act requires that non-grandfathered group health plans and health insurers cover certain preventive services at no cost to participants when those services are obtained from a network provider.* Among the women’s services required to be provided by non-grandfathered plans are contraceptive methods and counseling for all FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity.**


Religious employers are exempt from the contraceptive coverage requirement. However, religious employers are narrowly defined to include only those entities that are organized and operated as a nonprofit entity, and are described in Internal Revenue Code Sections 6033(a)(3)(A)(i) or (iii). Consequently, religious employers include only churches, their integrated auxiliaries, conventions or associations of churches, as well as the exclusively religious activities of any religious order, and not religiously affiliated colleges or universities.


The Departments also issued regulations that created an accommodation that exempts certain religious nonprofit organizations, such as religiously affiliated colleges or universities, from the contraceptive requirements.*** These regulations provide that a nonprofit organization may obtain an accommodation with respect to its group health plan if the organization opposes providing coverage for some or all of any otherwise required contraceptive service because of religious objections; holds itself out as a religious organization, and self-certifies that it qualifies for the accommodation. When an eligible religious nonprofit certifies to its insurer or third party administrator (TPA) that it meets the criteria for exemption, the insurer or TPA must exclude contraceptive coverage from the plan but nonetheless provide contraceptive services for plan participants, without charging participants any cost sharing for those services. The regulations provide guidance on the process for providing these services separately from the group health plan. The certification form, EBSA Form 700, was made available to religious nonprofits, including religiously affiliated colleges and universities.**** HHS provided no comparable exemption for for-profit entities.

* The preventive services that must be provided without cost-sharing fall into four different categories: services with an “A” or “B” recommendation from the U.S. Preventive Services Task Force (USPSTF), vaccines recommended by the Centers for Disease Control and Prevention (CDC), the Bright Futures guidelines developed by the American Academy of Pediatrics with support from the Health Resources and Services Administration (HRSA) and certain women’s services listed in HRSA guidelines (supplementing some of the USPSTF recommendations).

** For information about that guidance, see Sibson Consulting’s August 11, 2011 Capital Checkup, “Affordable Care Act Expands Preventive Services for Women” and March 12, 2013 Capital Checkup, “New Guidelines on Preventive Care Benefits for Non-Grandfathered Plans.”

*** Those regulations were published in the July 2, 2013 Federal Register.

**** The form is available on the DOL website.


1 The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. The guidance is on the Department of Labor (DOL) website. (Return to the Capital Checkup.)

2 The answer to the FAQ is on the DOL website. (Return to the Capital Checkup.)

3 The decision is on the Court’s website. (Return to the Capital Checkup.)

4 The decision is on the Court’s website. (Return to the Capital Checkup.)

5 The answer to the FAQ is on the DOL website. (Return to the Capital Checkup.)

6 Requirements for the SMR are noted in Sibson’s Reporting & Disclosure Calendar for Benefit Plans.

7 Generally, the Internal Revenue Service defines “closely held corporations” to include a corporation that has more than 50 percent of the value of its outstanding stock owned (directly or indirectly) by five or fewer individuals at any time during the last half of the tax year, and that is not a personal service corporation. The definition is on the IRS website. (Return to the Capital Checkup.)


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