I think most of my readers would agree that Congress caused quite a ruckus when it passed the Affordable Care Act in 2010. From changes to existing health plan designs to brand new rules and entities, implementation of the ACA has certainly led to upheaval in many areas.

However, I doubt that any of the new rules has caused such an emotional reaction as the requirement that non-grandfathered health plans cover contraceptives with no cost sharing. Many strong opinions were aired on whether health plans should have to cover birth control and specifically, whether employers should have to pay for it as part of the health benefits offered to employees.

The requirement included an exemption for religious employers and evolved to include special rules for nonprofit organizations, but did not provide an exception for private businesses, regardless of the religious beliefs of the owners. Owners of a number of these businesses sued the federal government because they objected to offering this coverage on religious grounds. And last week, the U.S. Supreme Court resolved this issue in favor of these employers in Burwell v. Hobby Lobby Stores, Inc.

The ACA’s Contraceptive Mandate

The contraceptive mandate is a small part of the ACA requirement that non-grandfathered health plans cover preventive care services at no cost to the participant. The covered services are determined by reference to various guidelines. Specific guidelines for women were issued in August 2011 and include a number of different services in addition to all FDA-approved contraceptive methods. These guidelines took effect for plan years beginning on or after Aug. 1, 2012.

The Supreme Court’s Decision

On June 30, 2014, the U.S. Supreme Court issued its ruling in two related cases challenging the ACA’s contraceptive coverage mandate. In these cases, three closely held for-profit corporations—Hobby Lobby Stores, Mardel and Conestoga Wood Specialties—argued that they should not be required to comply with the contraceptive mandate because covering certain types of contraceptives under their health plans violates their sincere religious beliefs. Not complying with the mandate would have led to significant penalties—$100 per individual per day.

In a 5-4 ruling, the Court held that a for-profit business organized as a corporation has the right to exercise religious beliefs under the Religious Freedom Restoration Act (RFRA). The Court also held that the contraceptive mandate violates the RFRA because there are less restrictive ways for the federal government to ensure that all women have cost-free access to FDA-approved contraceptives.

The Supreme Court’s ruling creates a narrow exception to the ACA’s contraceptive mandate for closely held businesses that object to providing coverage for certain types of contraceptives based on their sincere religious beliefs. For all other for-profit employers, the contraceptive coverage mandate will continue to apply. HHS will likely issue guidance in the future to address how the Court’s ruling should be implemented.

Impact on Employers

The impact on employers will depend on a number of factors, including the type of employer and their position on offering contraceptive coverage. Many employers won’t be affected at all–recent surveys have indicated that 85 percent of large employers already offer contraceptive coverage. For employers that already offer coverage and plan to continue doing so, the Court’s decision won’t matter much.

However, employers that do not plan to offer coverage due to religious reasons will need to parse the Court’s decision or the existing rules to make sure they qualify and are meeting all applicable requirements. Employers may have questions about where they fit in regarding compliance, giving brokers the perfect opportunity to provide information regarding their options.

As a brief summary, the following types of employers have different options if they have religious objections to providing contraceptive coverage:

• Religious Employers. There is an exemption to the contraceptive coverage requirement for group health plans of certain nonprofit religious employers, including churches, other houses of worship and their affiliated organizations.
• Nonprofit Religious Organizations. The contraceptive mandate was delayed until the 2014 plan year for group health plans sponsored by nonprofit organizations that object to providing  contraceptive coverage because of the organization’s religious beliefs (consistent with state law). This safe harbor applies to religious organizations like schools, charities, hospitals and universities. For plan years beginning on or after Jan. 1, 2014, there is an accommodations approach for these organizations, which must meet specific eligibility requirements to qualify. Separate payments for contraceptive services are provided to female employees by an independent third party, such as an insurance company or third-party administrator (TPA), directly and free of charge.
• Closely Held For-profit Companies. Closely held for-profit corporations that object to providing coverage for certain types of contraceptives based on their sincere religious beliefs can take advantage of the narrow exception to the ACA’s contraceptive mandate granted by the Supreme Court.  Although the Court did not define what constitutes a closely held for-profit corporation, the decision appears intended to apply to a narrow group of employers. Specifically, the Court did not envision the exception applying to publicly traded companies.

A Word of Caution

Employers should keep in mind that the Court’s decision does not provide companies with unfettered discretion in complying with other legal requirements. For example, the decision does not impact state laws, such as state insurance mandates regarding contraceptive coverage, or other benefit mandates like coverage for immunizations.

Also, the decision does not provide a way for employers to illegally discriminate against individuals (for example, discriminate in hiring on the basis of race) and claim that it is a protected religious practice. According to the Court, the federal government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.

Because this is such a complex and potentially contentious topic, brokers are well-positioned to support clients as they choose the best plan to fit their business needs.