One year ago, the U.S. Supreme Court ruled in the case of Burwell v. Hobby Lobby Stores, Inc. et al, that for-profit closely held corporations must be permitted to opt out of the Affordable Care Act’s contraception mandate on religious grounds. As discussed in our July 7, 2014 blog post, the Hobby Lobby ruling left many key questions unanswered. In final regulations published on July 14, 2015, the regulating agencies addressed many of those questions.
Which “closely held corporations” may opt out of the ACA’s contraception mandate? A closely held corporation which properly adopts a resolution under applicable state corporation laws establishing that it objects to covering some or all forms of contraception on account of the owner’s sincerely held religious beliefs may opt out of the contraception mandate. The new final regulations define “closely held corporation” to mean an entity that:
- Is not a nonprofit entity;
- Has no publicly traded ownership interests; and
- Has more than 50% of the value of its ownership interest owned directly or indirectly by 5 or fewer individuals.
Such corporations must also either “self-certify” their status in a form developed by the Department of Labor or via a notice to the Department of Health and Human Services.
Do any ownership attribution rules apply? Yes. Ownership interests owned by a corporation, partnership, estate or trust are considered owned proportionately by the entity’s shareholders, partners or beneficiaries. An individual is considered to own the ownership interests owned, directly or indirectly, by or for his or her family. Family includes only brothers and sisters (including half-brothers and half-sisters), a spouse, ancestors and lineal descendants. If a person holds an option to purchase ownership interests, he or she is considered to be the owner of those interests.
What if a corporation is not certain whether it qualifies? In these instances, a corporation may send a letter describing its corporate structure to the Department of Health and Human Services (“HHS”) seeking a determination of eligibility. Interestingly, the regulations state that if the corporation does not receive a response from HHS within 60 calendar days, it will be considered to be eligible for the opt-out for as long as the corporate structure is maintained.
How do closely held corporations opt out of the mandate? A corporation offering self-insured health coverage may provide either a copy of its self-certification to its plan’s third party administrators or a notice to HHS advising that it is an eligible closely held corporation and of its religious objection to coverage of some or all of the mandated contraceptive services. Corporations offering insured health benefits may provide their self-certification to their insurers or to HHS.
Does opting out prevent covered employees from obtaining contraception benefits? No. The regulations place the burden on insurance companies and third-party administrators to ensure that all covered employees have access to free contraceptive coverage, albeit not through the objecting corporation’s health plan. Third-party administrators (“TPAs”) that administer self-insured health plans for closely held corporations that opt out are expected to provide contraception benefits to plan participants without imposing any charge to the objecting corporation. TPAs may do this by reimbursing participants for contraceptive services directly or through an arrangement with another party. Similarly, insurers that provide group health insurance to closely held corporations that opt out bear the sole responsibility of providing contraception benefits to plan participants independent of the objecting corporation’s health plan. The regulations indicate that costs associated with providing this coverage may be reimbursed through an adjustment to the federally-facilitated Exchange user fee.
If you have any questions regarding the new regulations or any aspect of the ACA, please contact any member of our Labor and Employment Law Practice Group.