July 21, 2014

More Guidance Issued Post Hobby

Lobby

The Departments of Labor, Health and Human Services, and the Treasury (collectively,
the Departments) have issued the twentieth set of FAQs addressing implementation of
the Affordable Care Act (ACA). These FAQs are intended to answer questions from
stakeholders to help people understand the law and benefit from it. In related
developments, the Equal Employment Opportunity Commission (EEOC) released
updated enforcement guidance under the Pregnancy Discrimination Act of 1978 (PDA).
Both pieces of guidance address the provision of contraceptives under a group health
plan.

Briefly:

The FAQ imposes a notification requirement on any closely held for-profit
corporation that excludes all, or a subset of, contraceptive services.
The EEOC takes the position that a failure to offer contraceptive services in a
group health plan when other preventive care services are offered may violate
Title VII of the Civil Rights Act.

THE DEPARTMENTS FAQ 20

This most recent FAQ comes in response to the recent Supreme Court decision in the
Hobby Lobby case, where the Court held that the ACAs contraceptive mandate violated
rights of certain closely held for-profit corporations under the Religious Freedom
Restoration Act of 1993 (RFRA).
1


Briefly, the Departments make clear that if an ERISA health plan of a closely held for-
profit corporation
2
excludes all or a subset of contraceptive services from coverage under
its group health plan, the plan's SPD must describe the extent of the limitation or
exclusion of coverage.

Further, for plans that reduce or eliminate coverage of contraceptive services after
having provided such coverage, expedited disclosure requirements for material
reductions in covered services or benefits apply. These rules generally require
disclosure not later than 60 days after the date of adoption of a modification or change to
the plan that is a material reduction in covered services or benefits. Other disclosure
requirements may apply, for example, under state insurance law applicable to health




insurance issuers.

While not addressed in this FAQ, under ERISA fiduciary rules, advance notice of this
type of change is recommended.

WHAT ABOUT THE SBC?

While also not addressed in this FAQ, it is possible that a mid-year change to remove
some or all contraceptives from the group health plan could require a change to the
Summary of Benefits and Coverage (SBC) and issuance of a revised SBC. Such a
change may be reflected as a limitation & exception under prescription drugs and/or as
an excluded service.

Per the SBC instructions relating to limitations and exceptions:

List the significant limitations and exceptions for each row. Significance of limitations and
exceptions is determined by the plan or issuer based on two factors: probability of use
and financial impact on an individual. Examples include, but are not limited to, limits on
the number of visits, limits on specific dollar amount paid by the plan, prior authorization
requirements, unusual exceptions to cost sharing, lack of applicability of a deductible, or
a separate deductible. See the Instruction Guide for the SBC,
http://www.dol.gov/ebsa/pdf/SBCInstructionsGroup.pdf.

Any mid-year change to the SBC requires 60 days advance notice and would satisfy the
notice of a material reduction in group health plan benefits described above. Further
clarification from the regulators with respect to issuing a revised SBC when some or all
contraceptives are excluded by a closely held for-profit corporation mid-year would be
helpful.

EEOC ADDS A NEW WRINKLE

The PDA makes clear that discrimination based on pregnancy, childbirth or related
conditions is a form of sex discrimination prohibited under Title VII of the Civil Rights Act
of 1964. This law generally applies to employers with 15 or more employees. The recent
EEOC guidance states:

Employers can violate Title VII by providing health insurance that excludes coverage
of prescription contraceptives, whether the contraceptives are prescribed for birth
control or for medical purposes. Because prescription contraceptives are available
only for women, a health insurance plan facially discriminates against women on the
basis of gender if it excludes prescription contraception but otherwise provides
comprehensive coverage. To comply with Title VII, an employer's health insurance
plan must cover prescription contraceptives on the same basis as prescription drugs,
devices, and services that are used to prevent the occurrence of medical conditions




other than pregnancy.
3


The guidance states that in order to comply with Title VII, an employer providing
prescription drugs, devices or services for the prevention of medical conditions other
than pregnancy must cover prescription contraceptives on the same basis.

Practically, since all non-grandfathered group health plans subject to the ACAs market
reform provisions must cover preventive care services, such plans would appear to be in
violation of the Title VII if they did not cover prescription contraceptives.
4


While the EEOC acknowledges the Hobby Lobby decision in its guidance, the agency
does not address whether certain employers may be exempt from Title VIIs
requirements under RFRA or the First Amendment. It should be noted that EEOC
enforcement guidance, while persuasive, does not have the full force of law. Thus, the
EEOCs position opens the door to additional challenges under Title VII and it will likely
be up to the Courts to determine to what extent employers may limit contraceptive
coverage.

WHAT SHOULD AFFECTED EMPLOYERS DO?

It is expected that the Departments will soon release regulations and guidance
applicable in a post-Hobby Lobby environment. Until then, it is unclear how
contraceptives may be accessed by participants and beneficiaries if they are removed
from the plan of a closely held corporation due to religious beliefs.

In addition, the conflicting guidance from the EEOC adds yet another layer of complexity.
Closely held for-profit employers considering removing some or all contraceptives due to
religious belief should, absent guidance, consult with their counsel.

For the DOL FAQ 20, visit http://www.dol.gov/ebsa/faqs/faq-aca20.html

For the EEOCs Enforcement Guidance: Pregnancy Discrimination and Related Issues,
visit http://www.eeoc.gov/laws/guidance/pregnancy_guidance.cfm#fn39

For the EEOCs FAQs, visit http://www.eeoc.gov/laws/guidance/pregnancy_qa.cfm

For more information please contact AWANE at http://www.awane.com/contact-us/.
Phone: (800) 258-5318
PO Box 838
2-4 Main Street
Peterborough, NH 03458


Disclaimer: This document is designed to highlight various employee benefit matters of




general interest to our readers. It is not intended to interpret laws, regulations or to
address specific client situations. It should not be construed as legal advice or opinion.

1
The Religious Freedom Restoration Act (RFRA) provides for religious exemption from
a federal law, even if the law is of general applicability and neutral toward religion, if it
substantially burdens a religious practice and the government is unable to show that its
application would further a compelling government interest and is the least restrictive
means of furthering the interest. 42 U.S.C. 2000bb-1.

2
There is no prescribed definition for a closely held corporation. Based on the Supreme
Courts ruling in Hobby Lobby, it appears closely held corporations are organizations
owned and controlled by members of a single family with religious beliefs that oppose
some or all contraceptives where there is no dispute as to the sincerity of their religious
beliefs.

3
For example, if an employer's health insurance plan covers preventive care for medical
conditions other than pregnancy, such as vaccinations, physical examinations,
prescription drugs that prevent high blood pressure or to lower cholesterol levels, and/or
preventive dental care, then prescription contraceptives also must be covered.

4
This may also be an issue for a grandfathered plan that excludes prescription
contraceptive.