Health Care Reform Update

Federal Court Temporarily Blocks Contraceptive Mandate

On July 27, 2012, the U.S. District Court for Colorado temporarily blocked the enforcement of a health care reform rule requiring certain health plans to cover contraceptives without copays or other cost-sharing. This ruling applies only to the specific business involved in the lawsuit and does not stop the rule from going into effect. However, it is only one of many lawsuits challenging the mandate and could signal the beginning of an extended period of litigation.

Employers should be aware of potential changes to the contraceptive rule that could result from these lawsuits. Kapnick Insurance Group will monitor any legal actions and rulings related to this issue.

background

The health care reform law requires non-grandfathered health plans to cover preventive health services without imposing cost-sharing requirements. This mandate generally became effective for plan years beginning on or after Sept. 23, 2010. The preventive care services that must be covered are described in a series of guidelines.

On Aug. 1, 2012, additional preventive care guidelines for women will go into effect for the first time. These additional guidelines, which are generally effective for plan years beginning on or after Aug. 1, 2012, require non-grandfathered health plans to cover women’s preventive health services, including contraceptives, without charging a copayment, a deductible or coinsurance.

Under the guidelines, plans must cover all Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity. According to the Department of Health and Human Services (HHS), the recommendations do not include abortifacient drugs.

Contraceptive Services and Religious Employers

Group health plans sponsored by certain religious employers such as churches, and group health insurance coverage in connection with these plans, are exempt from the requirement to cover contraceptive services. A religious employer is one that: (1) has the inculcation of religious values as its purpose; (2) primarily employs persons who share its religious tenets; (3) primarily serves persons who share its religious tenets; and (4) is a nonprofit organization under Internal Revenue Code section 6033(a)(1) and section 6033(a)(3)(A)(i) or (iii).

This exemption does not extend to nonprofit employers (such as universities, hospitals and charities) that do not qualify as religious employers under this definition. It also does not apply to private employers that simply object to providing contraceptive coverage on a religious basis (or for any other reason). HHS has announced a one-year delay in the application of the rule for these nonprofit employers while a compromise is explored. However, no such delay is available for private employers.

The Court’s Ruling

There are 24 reported lawsuits that have been filed attempting to strike down the contraceptive mandate. Many of these suits involve nonprofit employers that are affiliated with a religious organization. This particular case—Hercules Industries, Inc. v. Sebelius—involves a private business, a Colorado HVAC company owned by a Catholic family.

The owners of Hercules Industries stated that their religious beliefs prohibit the use of contraceptives and that they seek to run their business in a manner that reflects those beliefs. They argued that the birth control mandate violates their First Amendment rights by interfering with their ability to freely practice their religion.

The judge did not rule on the merits of the case. He has not yet determined whether the contraceptive requirement is in fact a violation of the First Amendment. However, the judge found that the rule should not apply to Hercules Industries while the case is being decided and granted a temporary injunction to keep the rule from being enforced. The judge concluded that the possible harm to Hercules Industries in having to implement the rule far outweighed the potential harm of temporarily blocking the requirement.

The judge also made clear that his ruling applies only to Hercules Industries and not to any other case or employer. He stated that the injunction does not relate to any other party’s free exercise of religion and does not affect enforcement of the preventive care mandate against any other party.

MORE INFORMATION

Please contact Kapnick Insurance Group for more information on coverage of preventive care services required by health care reform or see one of the following resources: