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Is the New Moral Exemption From ACA Contraceptive Coverage a Game Changer?

Authors: Timothy J. Stanton (Chicago), Malaika K. Caldwell (Chicago)

Published Date: October 18, 2017

Any privately held, for-profit company could potentially be exempt from the Affordable Care Act’s (ACA) requirement to provide comprehensive contraceptive coverage without cost-sharing based on the company’s “sincerely held moral convictions,” under interim final regulations published in the Federal Register on October 13, 2017.

Issued jointly by the U.S. Department of Labor (DOL), U.S. Department of Health and Human Services (HHS), and the Internal Revenue Services (IRS), the regulations build on a 2014 case in which the Supreme Court of the United States found that a closely held company was exempt from the contraceptive coverage requirement based on its owners’ sincerely held religious beliefs. (The agencies also issued a parallel set of interim final regulations covering specifically religious objections.) This separate and new “moral exemption” would also be available to nonprofits, certain colleges and universities with respect to their student plans, and health insurers.

By removing the religious element, the agencies have broadened the potential pool of employers that could be exempt from the ACA’s rules. The new regulations do not describe any process that a privately held company would have to go through to qualify for the exemption or give any examples of the type of moral convictions that the regulations are designed to accommodate.

Four types of nongovernmental employers are eligible under the moral exemption regulations: (1) for-profit entities that have no publicly traded ownership interests; (2) nonprofit organizations; (3) institutions of higher education that arrange for student coverage; and (4) insurers or third-party administrators (TPAs). There are no blanket moral objections. Entities that have a moral objection to covering some, but not all, contraceptives items would be exempt only with respect to the items to which they object. The new regulations also permit plan sponsors and insurers to offer health coverage, not including contraceptive coverage, to an individual based on the sincerely held moral convictions of that individual.

Employers would not be required to issue any additional notices to participants under these rules, but existing rules on updating summary plan descriptions and summaries of material modifications would apply to any Employee Retirement Income Security Act (ERISA) plans considering narrowing their existing contraceptive coverage. Comments are being sought by the agencies until December 5, 2017, including comments on whether the moral exemption should be extended to public companies.

Such potentially broad rules could reignite a contentious battle over one of the best-known ACA requirements. The American Civil Liberties Union, the California Attorney General, and the Center for Reproductive Rights have all filed legal challenges.

Timothy J. Stanton  (Chicago)

Timothy J. Stanton
Inside counsel and HR and benefits leaders alike turn to Tim Stanton for advice and representation on their health and welfare and other employee benefit challenges. He counsels insurers, banks and other financial services companies, wholesalers and retailers, utilities, food companies and manufacturers, and other clients. Tim helps steer clients through the shoals of Affordable Care Act compliance and HIPAA privacy and security (including data breaches), and helps them establish and maintain...

Malaika K. Caldwell  (Chicago)

Malaika K. Caldwell
Ms. Caldwell is an associate in the firm’s Employee Benefits Group and assists clients on a variety of compliance, administration, and plan design issues including qualified plans, governmental plans, multi-employer plans, and health and welfare plans. Her practice covers all aspects of employee benefits. Ms. Caldwell has assisted clients with federal tax questions, compliance with federal law, fiduciary issues, and has drafted plan documents and summary plan descriptions. She has...

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