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New Contraceptive Regulations Part 2 – Interaction with California Law and Recent Challenges

In our October 2017 Benefits News¹, we described the new contraceptive regulations that provide employers exemptions from providing no-cost contraceptive coverage due to religious or moral convictions. Now that the regulations have been in effect for two months, we can explore legal challenges and how the regulations interact with state law. For California employers, state law may further limit which employers can take advantage of the exemptions.

Interaction with California Law

California passed the Contraceptive Coverage Equity Act in 2014, which requires health plans and policies regulated by state insurance regulators, including insured health plans and Medi-Cal managed care plans, to provide no-cost coverage for all FDA-approved contraceptives for women. These rules continue to be in effect, so many women covered by California insured plans will still receive no-cost contraceptive coverage, despite the new federal regulations. Self-insured plans are not subject to California’s mandate, so some women enrolled in self-insured plans sponsored by objecting employers may lose coverage as a result of the new regulations.

Certain religious employers may be exempt from California’s contraceptive mandate if:

(i) the employer’s purpose is the inculcation of religious values,

(ii) the employer primarily employs persons who share its religious tenets,

(iii) the employer serves primarily persons who share its religious tenets, and

(iv) the employer is a nonprofit organization that is a church, a church’s integrated auxiliary, a convention or association of churches, or a religious order.

These conditions are more stringent than the requirements for religious exemption under the new federal regulations. Religious employers invoking the state exemption must also provide notice to prospective enrollees listing the contraceptive health services the employer does not cover for religious reasons.

California does not have an exemption for moral conviction. Therefore, some plans will not be able to claim exemption from contraceptive coverage based on moral conviction without violating state law.

Implementation of New Regulations

At least one employer’s attempt to utilize the new regulations has come under public scrutiny. The University of Notre Dame announced that it would no longer provide no-cost birth control coverage to students and employees in early November. However, after lawsuits were filed by plaintiffs that included three of the university’s students, Notre Dame decided that it would continue to offer no-cost contraceptive coverage to employees and students via a plan that is funded and administered independently of the university.

It is not clear how many other employers will take advantage of the new regulations. Whether or not employers do use the new exemptions will not necessarily be public knowledge, since there is no longer a filing requirement associated with the exemptions.

Challenges to New Regulations

The California and Massachusetts Attorneys General, as well as the American Civil Liberties Union, the National Women’s Law Center, and the Americans United for Separation of Church and State have already filed lawsuits challenging these new regulations.

The lawsuits allege that the regulations violate both the Establishment Clause of the First Amendment and the Equal Protection Clause of the Fifth Amendment by authorizing and promoting discrimination against women seeking reproductive health care. California’s suit also alleges that because there is no longer a certification requirement or an automatic means for a woman to receive contraceptive coverage (e.g., from a third-party administrator or insurer) when her employer opts out, the state will face an additional administrative and fiscal burden on state-funded programs through which women may seek contraceptive coverage.

© Boutwell Fay LLP 2017, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of November 30, 2017.

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