This blog remains agnostic with regard to the religious
liberty issues, but there are evolving self-insurance angles related to this
story that deserve attention.
We recently reported that federal regulators contend the
final contraceptive coverage mandate rules incudes a practical accommodation
for most self-insured religious organizations (non-profit entities), but it’s really just a bureaucratic illusion. The rules allow such organizations a
functional exemption from the requirements by transferring all financial and
administration responsibilities to their third party administrator (TPA)
partners.
While this firewall approach may have satisfied the
Administration’s political considerations, it is so far proving unworkable in
the real world as multiple TPAs servicing this market segment report that they cannot
perform the required responsibilities, citing specific substantive
reasons. The end result is that these
self-insured religious non-profit organizations may simply have to dissolve
their self-insured group health plans to the extent that they wish to stick to
their religious convictions.
The Hobby Lobby case potentially adds a new twist specific
to for-profit self-insured companies. In
other words, companies that do not have a primary religious mission but whose
owners may have strong religious beliefs.
There are actually about 60 similar cases pending in
various federal courts and we expect that some companies are self-insured and
others are not. (This blog has not
independently verified the funding structure of Hobby Lobby’s group health
plans, but it is likely self-insured given the company’s size.) Hobby Lobby is the highest profile case both
because of its size and because its position was affirmed by the 10th
Circuit Court of Appeals in June of this year.
In addition to the central constitutional issue, Court may also need
decide whether the ACA is in conflict with the 1993 Religious Freed
Restoration Act (RFRA), which says the government “shall not substantially
burden a person’s exercise of religion” unless that burden is the least restrictive
means to further a compelling government interest.
A broad ruling by Court declaring the ACA contraceptive
coverage mandate provisions unconstitutional outright would take this issue off
the table. An equally broad ruling in
the other direction would certainly not be welcome by Hobby Lobby and other
similar plaintiffs, but it would at least bring some clarity to their legal
obligations.
The more interesting scenario is if the Court charts a
middle course in its ruling and determines that the exemption arrangement
designed for self-insured religious organization could satisfy the RFRA’s
“least restrictive means test” and therefore opens this option up for companies
like Hobby Lobby.
In other words, allow these for profit companies to
self-certify as exempt organizations for purpose side-stepping compliance with
the contraceptive coverage mandate.
But for self-insured companies it would not be that
simple because their TPA partners will be put in the same tenuous position as
the current non-profit exempt organizations have already done, which could
force these companies into more expensive fully-insured health insurance
arrangements or drop coverage altogether.
Yes, companies may be able to rely on legally permissible
firewalls should the Court rule accordingly, but both their TPAs and sponsored
self-insured group health plans may end up getting burned in the process. Perhaps this may be an unanticipated example
of being careful of what you ask for…or on this case, what you pray for.
