DOL has announced that group health plans sponsored by
closely held companies that stop offering coverage for some or all
contraceptives must provide participants with notices disclosing the
change. This guidance comes in the form of Frequently Asked Questions
("FAQs") issued by DOL in the wake of the Supreme Court's
decision in Burwell
v. Hobby Lobby. (See the Alert of 7/10/14.) The FAQs clarify
that the reduction or elimination of contraceptive coverage triggers
an obligation to provide the notice no later than 60 days after the
plan's adoption of the modification.
Background. PPACA requires all non-grandfathered group health
plans to cover certain preventive services at no cost to
participants. HHS has identified 20 FDA-approved contraceptives as
being covered under PPACA's preventive services mandate.
Lobby, the Supreme Court decided that PPACA's
contraceptive mandate imposed a substantial burden on the religious
beliefs of the plaintiffs (i.e., owners of a closely held
corporation) by requiring them to engage in conduct that violates
their religious beliefs. Accordingly, the Court ruled that the
plaintiffs did not have to comply with the contraceptive mandate.
However, the Court indicated that the scope of its opinion was very
limited and that publicly-traded corporations would probably be
unable to claim the exemption.
ERISA generally requires group health plans to disclose
information relevant to coverage of preventive services, including
contraceptive coverage. In particular, DOL regulations provide that
the group health plan's summary plan description ("SPD")
must include a description of the extent to which preventive
services, including contraceptive services, are covered. Thus, if a
plan excludes certain contraceptives from coverage, the SPD must
describe this limitation.
Disclosure Requirements. The FAQs clarify that an amendment to a group health
plan that reduces or eliminates contraceptive coverage is a material
reduction in covered services that requires expedited disclosure. Specifically,
these rules require group health plan administrators to disclose, by
means of a new SPD or a Summary of Material Modifications, the
reduction in services no later than 60 days after the plan adopts the
amendment implementing the change. In the context of the Hobby Lobby
decision, a group health plan that is amended to reduce or eliminate
contraceptive services must provide notice of this modification to
participants and beneficiaries within 60 days after the amendment's
Generally, a 60-day advance notice of the change
would not be required because the change would not affect the
information in the Summary of Coverage and Benefits.
Action Steps for Plan Sponsors. Although the FAQs do not impact most employers subject
to PPACA, closely-held employers with religious objections towards
providing contraceptive coverage are advised to seek counsel from
qualified employee benefits practitioners before eliminating or
reducing contraceptive coverage. Employers that do redesign or amend
their group health plan to eliminate contraceptive coverage must be
sure to timely and adequately disclose the change to plan
participants and beneficiaries.
The FAQs can be accessed at: http://www.dol.gov/ebsa/pdf/faq-aca20.pdf