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Final Contraceptive Rules Include TPA Role for Providing Certain Contraceptive Coverage
Practical Law Legal Update 1-533-0306 (Approx. 7 pages)
Final Contraceptive Rules Include TPA Role for Providing Certain Contraceptive Coverage
by PLC Employee Benefits & Executive Compensation
| Published on 02 Jul 2013 • USA (National/Federal) |
The Departments of Labor (DOL), Health and Human Services (HHS) and Treasury have finalized regulations regarding the contraceptive coverage requirement, which is part of the Affordable Care Act's (ACA's) preventive services rules. The final regulations simplify and clarify the religious employer exemption under the proposed regulations, among other things.
On June 28, 2013, the DOL, HHS and Treasury (Departments) issued final regulations addressing the contraceptive coverage requirement under the Affordable Care Act (ACA). The requirement is part of an Affordable Care Act (ACA) provision requiring that non-grandfathered group health plans and insurance coverage be provided without cost-sharing for certain preventive health services. Prior guidance, which includes proposed regulations issued in February 2013 (see Legal Update, Proposed Contraceptives Coverage Rules Would Involve Insurers and TPAs), provided:
- An exemption for certain religious employers.
- A temporary enforcement safe harbor for certain nonprofit entities having religious objections to covering contraceptives (referred to as "eligible organizations").
The final regulations:
- Simplify and clarify the religious employer exemption so that otherwise exempt employers are not disqualified because:
- the employer's purposes extend beyond inculcating religious values; or
- they hire or serve people of different religious faiths.
- Provide for accommodations regarding contraceptive coverage for plans established by eligible organizations.
Except for certain changes involving the religious employer exemption (which apply to group health plans and insurers beginning on or after August 1, 2013), the final regulations apply for group health plans and insurers for plan years beginning on or after January 1, 2014.
In addition to the final regulations, the Departments issued:
Religious Employer Exemption
The final regulations carry out a proposal to simplify the definition of religious employer by eliminating aspects of the definition involving inculcating religious values, primarily employing individuals with religious tenets and primarily serving individuals who share the employer's religious tenets. Under the final regulations, an employer fits under the religious employer exemption if it is:
- Organized and operates as a nonprofit entity.
- Referred to in Sections 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code (Code), which generally refer to churches and certain related entities (26 U.S.C. § 6033(a)).
The intent of these changes is, in part, to eliminate ambiguity about whether group health plans of houses of worship that provide educational, charitable or social services qualify for the exemption. However, the amendments do not expand the group of employers that qualify for the exemption.
Coverage Maintained by Eligible Organizations
Like the proposed regulations, the final rules include accommodations for certain nonprofit organizations that do not satisfy the religious employer exemption (for example, educational institutions and charities). Nonprofit religious organizations that meet the regulations' definition of eligible organization, which was unchanged from the proposed version, need not contract, arrange, pay or refer for contraceptive coverage. However, the entity must self-certify, prior to the start of the first plan year for which the accommodation applies, that it meets the definition. The self-certification must be:
- Made available on request.
- Maintained in the entity's records, consistent with the record retention rules of ERISA Section 107.
- Provided to new insurers or third-party administrators (TPAs), as applicable, which cannot require additional documentation regarding the entity's eligible organization status.
Separate Payments (Insured Plans)
An insurer that receives an eligible organization's self-certification must exclude contraceptive coverage from the organization's health coverage. The final regulations eliminate a rule that would have required issuance of a separate individual health policy covering contraceptive services, which may have raised issues under state insurance law. Instead, the insurer must provide payments for contraceptive services, without cost sharing, for participants and beneficiaries that is separate from the group health plan. However, the insurers' provision of contraceptive services must satisfy other ACA requirements, including:
- Nondiscrimination rules (see Practice Note, Nondiscrimination Requirements for Insured Group Health Plans Under the ACA).
- Restrictions on lifetime and annual limits (see Practice Note, Lifetime Limits, Annual Limits, and Essential Health Benefits Under the ACA).
- Appeals procedures (see Practice Notes, Internal Claims and Appeals Under the ACA and External Review Under the ACA).
- Patient protections (see Practice Note, Patient Protections Under the ACA).
The insurer must also notify participants and beneficiaries that it provides separate payments for contraceptive coverage for enrolled individuals.
Separate Payments (Self-insured Plans and TPAs)
The proposed regulations included a set of approaches for providing contraceptive coverage under self-insured plans. The regulations finalize an approach under which TPAs become the ERISA plan administrator, and claims administrator, for providing contraceptive coverage payments to an eligible organization's self-insured plan. Under this approach:
- An eligible organization provides the TPA a self-certification saying it will not act as the plan administrator or claims administrator for providing or funding contraceptive services.
- The TPA may choose whether to establish (or continue) a contract with the eligible organization to provide plan administrative services.
According to the Departments, the self-certification:
- Is an instrument under which the plan is operated under ERISA.
- Provides the TPA notice of its obligations under the final regulations.
- Is treated as a designation of the TPA as ERISA plan administrator, and claims administrator, for contraceptive benefits.
If it agrees to provide payments for contraceptive services, the TPA will either do so on its own or arrange for an insurer to do so, and must provide individuals notice of the availability of separate payments for contraceptive services. In carrying out these obligations, the TPA must satisfy ERISA's requirements regarding claims procedures, providing required ERISA disclosures and ERISA's requirements for group health plans.
The final regulations also include a safe harbor procedure for self-insured plans that can demonstrate they do not use a TPA's services.
Notice of Availability of Separate Payments for Contraceptive Services
Insurers or TPAs, as applicable, that provide payments under an accommodation must provide written notice addressing this option to participants and beneficiaries in an eligible organization's plan. The final regulations include model language for use in satisfying this requirement, which must include the insurer's or TPA's contact information.
Funding of Contraceptive Services
The final regulations also address how providing contraceptive services under the regulations is funded, which involves an adjustment to the federally-facilitated exchange (FFE) user fees payable to insurers that participate in the ACA's insurance exchanges. The amount of the adjustment represents the estimated cost of contraceptive coverage. This method also applies if the insurer:
- Makes payments for contraceptive services on a TPA's behalf.
- Seeks the adjustment regarding payments made or arranged for by a TPA.
The final regulations include a deadline by which a TPA must inform HHS that it intends for an insurer to seek an adjustment on its behalf.
Practical Impact
According to the preamble to the final regulations, commenters on the proposed regulations raised significant concerns regarding the role of TPAs relating to providing contraceptive services for eligible organizations. The final regulations do little to alleviate those concerns, and impose numerous ERISA compliance obligations on TPAs that assume this role. As a result, TPAs that agree to provide administrative services to eligible organizations (there is no requirement that they do so) should be prepared to assume both the duties that fall on ERISA plan administrators and the other requirements set out in the final regulations.