Getting contraceptives under Obamacare is getting complicated

June 28, 2013

Hobby Lobby, which calls itself a "biblically-founded business," is among the 60 companies challenging the health law's contraceptive coverage mandate. (Ed Andrieski/Associated Press)

The Obama administration wants to require all employer-sponsored health insurance plans to cover contraceptives without co-payments. Some employers, largely on religious grounds, do not want to cover contraceptives in any form.

Finding a middle ground between the two position is no easy task. It has become a vexing one for the U.S. Department of Health and Human Services, fraught with political and legal landmines. Final regulations published Friday demonstrate just how complex the process will be to deliver contraceptive coverage to the employees of religious nonprofits that oppose such medications.

These regulations apply to only a small subset of employers: faith-based nonprofits, such as hospitals and universities, that oppose contraceptive use. All private employers are required to include contraceptive coverage in their benefits packages or face steep penalties.

Health and Human Services has developed a six-step process for the faith-based nonprofits that self-insure, meaning they cover all their medical costs rather than pay premiums to an employer:

1. The faith-based nonprofit will not have to "contract, arrange, pay or refer" employees for contraceptive coverage. It will, however, need to notify its health insurance plan that it will not cover such benefits in its insurance plan.

2. The health insurance plan must then send a notice to these employees that it will be the one covering contraceptive benefits. And they have to be careful in how they do this. It needs to be "contemporaneous with...but separate from any application materials distributed in connection with enrollment in group health coverage."

3. When employees use contraceptives, their coverage claims go to the health insurance plan, which pays for them. The health insurer is barred from using any of the premium dollars from the objecting employer to do this.

4. At the end of a year, the insurer calculates the money it has spent paying for contraceptives and sends that tally to the federal government.

5. The federal government looks at that number and adds some additional funds meant to cover the cost of administering the program.

6. The federal government gives the health insurer a discount on the fees required to sell on the federal health insurance exchanges commiserate with this determined amount. Federal officials say it should be at least a 10 percent cut.

Under this policy, insurers have the "opportunity to get full reimbursement for all costs of these benefits," Michael Hash, director of the Office for Health Reform at HHS, says. "There will be full coverage for administrative costs, and a margin, so it's a sound business opportunity."

Women's health groups are happy with this approach. While complex, it does deliver on their key goal: maximizing access to contraceptives without a co-payment.

Religious opponents of contraceptive coverage are unsatisfied, noting that these regulations look a lot like the previous rules the administration issued. Employers "will still have to provide abortion-inducing drugs or pay millions in fines," Becket Fund deputy general counsel Eric Rassbach says.

Now that the rule is final, it likely clears a path for legal action. Courts have held off on some decisions on these lawsuits, reasoning that changes could be made between preliminary and final regulations. Now that the regulation is out, these challenges have a big green light to move forward.

Correction: This article initially misidentified which health plans must go through this process. These steps apply to objecting non-profits with a third party administrator. 

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Ezra Klein · June 28, 2013