In early February, the Obama administration announced a compromise on the requirement that non-grandfathered health insurance plans offered by religiously-affiliated employers offer free birth control to female participants. Insurance companies that underwrite the plans will have to offer these workers and their families the opportunity to obtain contraceptive coverage directly from the insurer at no additional charge.
The compromise, however, applied only to insured plans. How about plans that are self-funded, many asked. At least 800,000 students are in plans which their school purchases from insurance companies, while self-funded plans are used by about 200,000 college students, many at religiously-affiliated schools.
On March 15, 2012, the three federal departments in charge of health reform (the DOL, IRS and HHS), released an advance notice of proposed rulemaking establishing alternative ways to provide contraceptive coverage to participants in self-funded plans sponsored by religiously-affiliated employers that object to providing contraceptive services. The proposed requirements would apply to the many Roman Catholic and other religiously-affiliated hospitals, universities and social service agencies that self-insure their employees and students. The Departments’ goal was to shield religiously-affiliated organizations from “contracting, arranging, paying or referring for contraceptive coverage.”
Employers with self-funded plans typically hire a third party administrator (TPA) to administer their plan. Officials said they are likely to require the TPA to cover participants’ birth control in cases where the employer refuses to do so. Before entering into a TPA contract, the employer would provide the TPA with written notice that the employer: (1) is a religiously-affiliated organization; (2) will not fund claims for contraceptive services, and (3) will not participate in claims processing of claims for contraceptive services.
It is unclear how the TPAs would pay for the coverage, however. The administration floated three options for public comment. One idea is to require TPAs to use revenue such as drug rebates, services fees or fees for disease management programs. Additionally, a TPA could receive funds from a private, non-profit organization to pay for contraceptive services for participants covered under the plan of a religiously-affiliated employer.
A second option under consideration is to have the TPA receive a credit or rebate on the amount it pays under the health reform law’s reinsurance program. Payments from insurance companies and TPAs on behalf of group health plans will be made to a reinsurance entity to offset the cost of reinsurance for health insurance companies insuring high-risk individuals. A TPA that funds contraceptive coverage could offset the cost of providing the coverage with a credit or rebate against its assessments under the reinsurance program.
A third option involves having the TPA separately arrange for contraceptive coverage from a private insurer offering a multi-state plan. The federal Office of Personnel Management would incentivize or require one or more of the insurers to provide, at no additional cost, contraceptive coverage to participants covered under a religiously-affiliated employer’s self-insured plan.
The Departments invited comments on these three options as well as other ideas for the source of funds for contraceptive coverage in the self-funded plans of religiously-affiliated employers. They also asked for comments on how accomodation would work in a sitatution where there is a religiously-affiliated, self-insured health plans without a TPA. The 90-day comment period will end on Wednesday, June 13th.
We can’t help but think that TPAs will not fund contraceptive services for religiously-affiliated employer’s plans. If the employers are required to provide written notice to the TPA before entering into a TPA contract, some TPAs might simply turn down their business, but most will look for ways to push the cost back onto the plan sponsor. After all, TPAs are not like insurance companies; they won’t ultimately save on pregnancy and child birth-related claims because they are providing contraceptive coverage. And, to the extent that they are required to use drug rebates or other disease-management fees to fund birth control, they’ll merely hike up their fees. We have a sneaking suspicion that the federal government is going to have to incentivize TPAs to subsidize the cost of contraceptives, as in the second or third options.