Unpacking the forthcoming RFRA challenges to the government's accommodation (with emphasis on self-insured plans)

With its order in the Wheaton College case, the Supreme Court invited the federal government to develop a regulatory fix that might both satisfy the nonprofit challengers to the contraceptive coverage rule and at the same time guarantee that the women who work for those employers will continue to receive cost-free contraceptive coverage. 

In an earlier post, I suggested that the Court’s proposal (or hope) for such a cost-free regulatory solution is far easier said than done, at least in cases involving “self-insured” employers.  For example, the government may well conclude—as the Court appeared to anticipate it would—that an employer can simply notify the government of its religious objection, and the government will then have the legal authority to turn around and instruct the insurance plan’s third-party administrator to offer contraceptive coverage, subject to reimbursement from the government in the form of an adjustment to ACA exchange user fees.  If the government promulgates such a modification to its regulation, it might mollify some of the nonprofit plaintiff organizations; but I think it is likely that most of those organizations will not be satisfied:  They will argue that such a “fix,” too, violates their rights under RFRA, because their act of opting out will continue to establish the legal authority for the government to require another party to provide coverage.

If I’m right about that, and if the government cannot come up with an alternative regulatory solution that is satisfactory to all parties, then the courts will have little choice but to continue adjudicating the applicability of RFRA to the government’s “accommodation.”  The first set of such cases—many already pending—will involve nonprofit organizations currently eligible for the accommodation.  But the government is also likely to extend the accommodation to at least some for-profit employers with religious objections, as the Court suggested it could and should do in the Hobby Lobby decision.  Many of those for-profit employers may accept the accommodation.  Almost certainly, however, some will not—which will mean that the nonprofit cases challenging the accommodation will soon be joined by similar challenges from for-profit companies.

In this post, I’ll try to canvass the primary RFRA issues in these cases challenging the accommodation, and how should the courts should—or are likely to--address them.

1.  Furthering Compelling Interests in the Least Restrictive Manner.

Let’s start at the back-end of the RFRA analysis, since the questions there are relatively discrete and straightforward.  Assume for the sake of argument that an employer satisfies its burden of demonstrating that even the accommodation imposes a substantial burden on its religious exercise.  (As I discuss in detail below, this should actually be a much more difficult showing than many anticipate; but for now let’s assume that the plaintiff has met its burden.)  The government would then bear the burden of showing that denial of an exemption “(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.”  42 U.S.C. § 2000bb-1.

There appear to be five Justices who have concluded that the government would further compelling interests by denying religious exemptions.  If so, then the only remaining question would be whether such a denial of exemptions is the “least restrictive manner” of furthering those compelling interests.

For purpose of my hypo, remember, we’re assuming that the government has tried and failed to develop any purely regulatory solution that both satisfies the employer’s religious objection and at the same time furthers the government’s compelling interests.  In such a case, then, the only candidate for an arguably “less restrictive” alternative would be a brand new legislative enactment, involving a substantial new appropriation—something that will never happen as long as the Republican Party controls either house of Congress or the White House. 

Would the Supreme Court construe RFRA to require Congress to enact such a new law, with taxpayers footing the bill, in order to further its compelling interests—which would in effect be a recipe for failure, in light of our current political stalemate?

If the Court were (as it should) understand RFRA merely to incorporate the Court’s pre-Smith free exercise jurisprudence, then the answer would be easy:  Of course not.  If such a new appropriations law were to be deemed a “less restrictive” alternative, then the government would virtually always have to afford exemptions that harm third parties, since in theory Congress could compensate the third parties for their losses by the simple expedient of more taxing and spending.  Take the religious objection to the federal minimum wage at issue in Tony and Susan Alamo Foundation v. Secretary of Labor (1985), for example:  Congress in theory could have passed a law providing supplemental payments to the employees who did not receive the minimum wage from their religiously objecting employers.  But of course the Court would never have insisted upon a religious exemption just because Congress has such an appropriations power.  That is simply not how the Court resolved free exercise claims in the generation preceding Smith.  (And, in any event, as the government explained at pages 55-57 of its Conestoga Wood brief, an entirely separate program for contraceptive insurance would likely not be as effective as one tied to employees’ existing insurance plans.)

On the other hand, the Hobby Lobby Court gave some indication that it does not read RFRA to incorporate all of those pre-Smith free exercise precedents, and we know from Justice Alito’s opinion that there are some Justices who view a new appropriations law as an alternative that the government must use in lieu of denying RFRA exemptions.

Justice Kennedy went out of his way, however, to caution that that would be a much more troubling case than Hobby Lobby.  Tom Goldstein and other Court observers think it is very unlikely he would upend the solution he apparently negotiated in Hobby Lobby.  And I tend to share that assessment.  But Justice Kennedy was also careful not to express a firm view on the question, and therefore it’s difficult to confidently predict the outcome on the “appropriations as a less restrictive alternative” question (even assuming the composition of the Court is the same once the case gets there).

2.  What’s the Substantial Burden?

So now let’s fall back to the antecedent question:  Can the objecting employers satisfy their burden of demonstrating that the government’s accommodation itself substantially burdens their religious exercise? 

In virtually every one of the contraception coverage cases, the employers claim—as did Hobby Lobby—that the burden on their religious exercise is per se substantial, because the government is requiring them to do something their religion forbids.  As I have explained previously, a harm of this sort has long been viewed as a paradigmatic example of a substantial burden—when the state puts someone to the horrible dilemma of choosing between civic and religious obligations.

How does that sort of claim arise here, you may wonder, with respect to an employer that is entitled to the government’s accommodation?  After all, the law does not require the employers in question to use contraception, to purchase or subsidize the purchase of contraception, or even, to use the phrase the Court repeatedly invoked in Hobby Lobby, to “provide coverage” for the purchase of such contraceptives.  Indeed, the whole point of the accommodation is to ensure that the objecting employer does not administer, pay for, or provide the contraception coverage—which is why the Court saw it as an a solution that would satisfy the plaintiffs in Hobby Lobby.

The plaintiffs argue that, even accounting for the accommodation, the law requires them to in some manner facilitate their employees’ use of contraception in a way that is itself religiously proscribed—to engage in prohibited “cooperation with evil.”  Unfortunately, the plaintiffs’ complaints and briefs have not settled on exactly what it is that the law requires or compels them to do that would constitute impermissible complicity—instead, they invoke a wide-ranging hodgepodge of causal theories, most of which do not withstand even minimal scrutiny, as I’ll explain below.

First, however, it’s important to understand how the government’s accommodation works in the context of two different sorts of employee insurance plans—insured plans and “self-insured” plans.  Some of the nonprofit cases involve one type; some involve the other; and some involve both—at Notre Dame, for instance, students may participate in an insured plan, whereas employees are participants in a self-insured plan. 

As I’ll explain, the assertion of a RFRA “substantial burden” by an employer that sponsors an insured plan is almost certainly untenable.  Application of the accommodation in the case of “self-insured” plans, however, may raise slightly more complicated questions.

Insured plans

Most employers purchase their employees’ insurance coverage from an insurance company, or issuer, such as Aetna or Blue Cross/Blue Shield.  In such cases, typically both employers and employees pay premiums to the issuer, and the issuer itself then bears the costs of reimbursing employees for their health care claims.  

Under the government’s accommodation for nonprofit religious organizations that sponsor such insured plans, the organization only needs to “self-certify” that it is a religious organization that opposes providing coverage for particular contraceptive services, and provide a copy of that self-certification to its insurance issuer.  Once that occurs, the organization itself is “not required to contract, arrange, pay, or refer for contraceptive coverage” to which it has religious objections.  Instead, the issuer bears the burden:  The issuer must reimburse employees (or students) for contraceptive services without imposing any premium, fee, cost-sharing requirements or other fees on the employer (or school), the insurance plan, or the employee (or student) beneficiaries.  (As the Court in Hobby Lobby explained, the government agencies have concluded that this burden will not impose any net cost on an issuer because of the cost savings the issuer realizes by virtue of the pregnancies that are prevented as a result of the coverage of contraceptive services.)  What’s more, the issuer must “[e]xpressly exclude contraceptive coverage from the group health insurance coverage provided in connection with the * * * plan,” 45 C.F.R. 147.131(c)(2)(i)(A), and “segregate premium revenue collected from the eligible organization from the monies used to provide payments for contraceptive services,” 45 C.F.R. 147.131(c)(2)(ii).  And it is the insurance issuer—rather than the employer—that must notify plan participants and beneficiaries of the availability of separate payments for contraceptive services; moreover, its notice “must specify that the [employer] does not administer or fund contraceptive benefits, but that the issuer provides separate payments for contraceptive services[.]”  45 C.F.R. § 147.131(d).

As I explained in more detail in an earlier post, it is very difficult to see how an employer with such an insured plan can demonstrate that this accommodation would substantially burden its religious exercise, no matter what its religious views about contraception and complicity might be.  

The principal “substantial burden” argument offered by employers with insured plans is that the very act of opting out would itself “trigger” the legal obligation of someone else—the insurer—to pay for the employees’ costs of purchasing contraception, and that the employer would therefore itself be complicit in the employees’ eventual use of contraception because its invocation of the accommodation is a “but for” cause of the issuer’s provision of coverage.  Judge Moore’s opinion for the U.S. Court of Appeals for the Sixth Circuit in the recent Michigan Catholic Conference v. Burwell case explains why this argument is simply mistaken as a matter of law.  Quoting Judge Tatel’s dissent from an injunction pending appeal on New Year’s Eve in the D.C. Archdiocese case, Judge Moore writes:

“Because Congress has imposed an independent obligation on insurers to provide contraceptive coverage to Appellants’ employees, those employees will receive contraceptive coverage from their insurers even if Appellants self-certify—but not because Appellants self-certify.”  The obligation to cover contraception will not be triggered by the act of self-certification—it already was triggered by the enactment of the ACA.

This is the key point:  Under the ACA, the insurer “must provide contraceptive coverage without cost-sharing, whether or not the appellants decide to self-certify.”  That is to say, the employer’s act of opting out would have no effect whatsoever on whether particular employees will receive cost-free reimbursement for their purchase of contraceptives—they will be entitled to that statutory benefit regardless.  And they’ll receive that reimbursement from the same entity, the issuer, whether or not the employer invokes the accommodation.  

Of course, the employer’s opt-out would have some legal and practical effect—that’s why HHS offers the choice to religious nonprofits in the first place.  For one thing, once the employer opts out, the issuer would no longer make payments from the plan sponsored by the employer.  As the preamble to the regulations explains, the issuer “would be required to assume sole responsibility, independent of the eligible organization and its plan, for providing contraceptive coverage to plan participants and beneficiaries.”  Indeed, upon receipt of the employer’s opt-out certification, the insurer must expressly exclude contraceptive coverage from the employer’s group health insurance plan coverage.  45 CFR § 147.131(c)(2)(i)(A).  After an employer opts out, the insurance issuer itself must simply make payments to the employees, independent of the employer’s plan.  (Indeed, it can do so without issuing a separate insurance policy for contraceptive services:  the regulations prescribe what the agency describes as “a simpler method of [the insurer] providing direct payments for contraceptive services.”)  And, perhaps more importantly, once the employer opts out, the issuer may not use the employer’s funds to make such payments, as explained above.

The only effects of the employer’s opt-out, then, are not to change the fact or source of the employees’ reimbursement for contraception, but instead to further distance the employer (and its money and its plan) from the employees’ use of contraception. 

All of which is to say that in no way can the act of invoking the accommodation be a trigger for, or a but-for cause of, the insurer’s reimbursement of the costs of contraception to the employees.  Once that much is clear, any possible argument that the employer’s invocation of the HHS accommodation “causes” the reimbursement to be paid to its employees is untenable.*  In the case of an insured plan, then, the government’s accommodation cannot be the source of any conceivable complicity by the exempted organization in its employees’ (or students’) use of contraception.

Self-insured plans

The question is slightly more complicated with respect to self-insured plans, because of a particular technical facet of the Employee Retirement Income Security Act (ERISA).  

Some employer health-insurance plans (such as Wheaton College’s and Notre Dame’s employee plans) are “self-insured,” which means that the employer itself—not the issuer—bears the financial risk of paying claims.  Most if not all self-insured plans use insurance companies or other third parties to administer their plans.  These third party administrators, or TPAs, perform functions such as developing networks of providers, negotiating payment rates, and processing claims.  But they do not use their own funds to reimburse plan participants, and they are not technically “plan administrators” for purposes of ERISA.

The Administration’s accommodation with respect to self-insured plans is in most respects identical to the accommodation in the case of an insured plan.  If the eligible employer opts out by certifying that it has a religious objection, the TPA—rather than an issuer—must provide or arrange payments for contraceptive services for the organization’s employees without imposing any cost-sharing requirements on the eligible organization, its insurance plan, or its employee beneficiaries.  And the TPA, like the issuer of an insured plan, must provide notice of this separate treatment to the plan beneficiaries, and do so separate from materials distributed in connection with the eligible organization’s group health coverage.  The notice to employees must make clear that the objecting organization is neither administering nor funding the contraceptive benefits.

But here’s where the accommodation in the setting of a self-insured plan deviates a bit from its operation in the context of an insured plan:  For one thing, the TPA, unlike the issuer of an insured plan, will be doing something it would not have done but for the employer’s opt-out—namely, make reimbursements for claims with its own funds, something that would not have occurred if the employer did not opt out.  (Recall that with a self-insured plan, the employer itself ordinarily pays out the claims.)  And because of this new financial obligation that he TPA would not otherwise incur, the federal government reimburses the TPA for its payments in the form of an adjustment to the TPA’s assessed user fees for the ACA exchanges (something it does not do for the issuer of an insured plan).  In other words, the cost of the contraceptive coverage in the self-insured setting is ultimately borne by the government itself, rather than by an issuer or a TPA.

Finally, and perhaps most importantly for present purposes, TPAs, unlike issuers of insured plans, are not “plan administrators” under ERISA; therefore, without more, ERISA would not confer statutory authority upon the federal government to compel a TPA to reimburse employees for contraception costs, nor to compensate a TPA by adjusting its exchange user fees.  (This problem does not arise in the context of an insured plan, because the government has construed the Public Health Service Act itself to confer authority on the government to require the issuer to continue to make payments after the employer opt-out.)

The government therefore had to come up with a way to make the TPA the “plan administrator,” for ERISA purposes, with respect to contraceptive coverage, or the accommodation apparently could not work for self-insured plans.  As part of the preventive services regulations, the Department of Labor prescribed the following rule for self-insured plans to deal with this issue:

In the case of a self-insured group health plan established or maintained by an eligible organization [i.e., an organization eligible for the religious accommodation], . . . the copy of the self-certification provided by the eligible organization to a third party administrator (including notice of the eligible organization's refusal to administer or fund contraceptive benefits) . . . shall be an instrument under which the plan is operated, shall be treated as a designation of the third party administrator as the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered . . . to which the eligible organization objects on religious grounds, and shall supersede any earlier designation.  [29 C.F.R. § 2510.3–16(b).]

In other words, the federal government treats the employer’s opt-out certification (whether it be Form 700 or some other document) as a designation of the TPA as an ERISA “plan administrator” for purposes of contraception coverage—a designation that, in turn, affords the federal government the authority under ERISA to impose the contraceptive coverage obligation upon the TPA, and to subsequently reimburse the TPA for its expenses.

* * * *

With that background established, we can now examine whether a qualifying religious organization with a self-insured plan can demonstrate that the law substantially burdens its religious exercise.

It is important to emphasize at the outset that such an organization has four options under the current law:

1.  It can provide for the employee plan to cover contraception services, just as countless other employers in the nation do.

2.  It can discontinue its employee health plan altogether—which many employers across the United States are likely to do—in which case its employees will obtain cost-free contraception coverage in a plan on an exchange, with government subsidies, if necessary.

3.  It can switch over to an insured plan, in which case (as I explained above) there will be no substantial burden on the employer’s religious exercise.

4.  It can invoke the regulatory accommodation by opting out, in which case contraceptive coverage will be provided in the first instance by the plan’s third-party administrator, with the costs ultimately covered by the federal government.

In order to meet its initial burden under RFRA, an organization would have to demonstrate that each of these four options substantially burdens its religious exercise, either by requiring it to violate a religious obligation or by substantially pressuring it to do so.

An objecting organization would, like Hobby Lobby, presumably be able to satisfy this burden as to the first option.

However, as I’ve explained at length previously, it will be very difficult for an organization to satisfy its burden as to the second lawful option, i.e., to demonstrate that federal law substantially pressures it not to discontinue its employee insurance plan, even if that means providing contraceptive coverage.  (My previous posts on this topic culminated here.  And in this post I explained that the question remains an open one in the cases after Hobby Lobby; indeed, the Court referred to it as an “intensely empirical” question, one that presumably must be adjudicated on the specific facts unique to each employer’s situation.)

Even if the organization demonstrates substantial pressure to retain a health plan, however, that organization will also be required to demonstrate that federal law imposes substantial pressure on it not to switch over to an insured plan—the third option.  As far as I am aware, none of the self-insured plaintiffs has yet plausibly explained why this third option would not take care of any perceived burden on religion.

Finally, even if the organization makes the requisite showing of substantial burden as to the first three options, it will still have to demonstrate that invoking the government’s accommodation—the fourth option—will cause it to violate a religious obligation or otherwise substantially burden its exercise of religion. 

I devote the remainder of this post to a discussion of this fourth showing that accommodated plaintiffs with self-insured plans would have to make.  The nonprofit plaintiffs have raised a wide-ranging series of theories under which invoking the accommodation allegedly would make them complicit in their employees’ use of contraception.  In what follows, I discuss ten of the theories that appear most often in the plaintiffs’ briefs and pleadings, and in some lower court opinions.  (I have extracted these arguments from the briefs and lower court opinions in several of the cases, including Notre Dame, Wheaton College, Priests for Life (currently pending before the U.S. Court of appeals for the D.C. Circuit), and Michigan Catholic Conference.)

Virtually all of these theories either is based on a mistake of law, or proves too much, in that it is indistinguishable from important hypothetical cases in which the plaintiffs concede that there would be no RFRA problem. 

Theory One—The accommodation regulation requires the objecting organization to direct (or require, or instruct) the TPA to provide contraception coverage.

No, it doesn’t.  The organization must (at most) merely inform the TPA that it is opting out.  The regulation does not require the organization to direct, require or instruct the TPA to do anything.  The federal government does that.

Theory Two—The accommodation requires the objecting organization to inform the TPA that it is opting out of providing coverage.

In its current form, the regulation does, indeed, require the organization to tell the TPA that it is choosing not to provide contraceptive coverage.  But, of course, standing alone that cannot constitute any complicity with the ultimate use of contraception, since it’s something that the organization already does:  Both before and after the ACA, the employer with a religious objection tells the TPA not to administer reimbursements to employees for the purchase of such services.  (In any event, if the government takes up the Court’s invitation in Wheaton College to develop an alternative means of certification, the organization will only need to notify the government of its objection, and it’ll be the government that informs the TPA in the first instance.)

Theory Three—The accommodation requires the objecting organization to inform or “notify” the TPA of the TPA’s obligation to provide contraception coverage.

It’s hard to imagine any religious doctrine in which being required to inform a second party of its own legal obligation would render a first party morally complicit in something that a third party does when the second party complies with that legal requirement.  In any event, the government’s accommodation does not impose any such mandate that the organization must inform or notify the TPA of its legal obligations:  The current certification form that an organization must provide to its TPA, Form 700, does not inform the TPA of its legal obligations.  Instead, it tells the TPA that it can learn of its legal obligations from the federal government:  “The obligations of the third party administrator are set forth in 26 CFR 54.9815-2713A, 29 CFR 2510.3-16, and 29 CFR 2590.715-2713A,” reads the form.  (And if the government changes the regulation to require the organization only to issue a certification to the government itself, as the Wheaton College order suggests, then the organization will not be informing the TPA of anything.)

Theory Four—The accommodation turns the TPA into an “agent” of the objecting organization for purposes of contraception coverage.

To the contrary, the TPA is not an agent of the objecting organization for purposes of contraception coverage:  As explained above, it must take steps to distance itself from the organization; and it must make all of this crystal clear to the beneficiaries of the coverage.

Theory Five—The objecting organization’s invocation of the accommodation is a “but for” cause of someone else—the TPA—providing contraceptive coverage.

Well, yes, this is necessarily true, just as it is in countless other situations where the state affords religious or other exemptions.  Indeed, the whole point of such an accommodation is to shift a burden or function from one (objecting) party to another (nonobjecting) party.  If that were enough to establish a substantial burden on the religious exercise of the accommodated party, then it would effectively mean that governmental religious accommodations taking the form of "opt outs" for dissenters would themselves often create the very conflict with religion that they are designed to alleviate--and would thus threaten to prevent the state from both accommodating religion and satisfying its state interests through an alternative means, such as the use of a non-objecting party.  In an earlier post about the Notre Dame case, I offered these examples, the last of which has been discussed by several courts:

-- Consider a law that permits individual religious pharmacists to refuse to dispense certain drugs, and that provides that in such a case a nonobjecting pharmacist is obligated to dispense the drugs.  Under Notre Dame's theory, the first pharmacist could object to the accommodation--and thereby insist that customers not receive the drug at all--because its refusal to dispense would "trigger," or "authorize," the second pharmacist to commit a morally objectionable act.

-- Or consider the federal law permitting a district court judge to recuse himself from a case in which his impartiality might reasonably be questioned or where he has a bias or prejudice.  In a 1998 article, then-Notre Dame professor John Garvey (now President of Catholic University) argued that a judge who adheres to Catholic doctrine on the death penalty would have to invoke this law to recuse himself from the sentencing hearing in a capital case.  Federal law provides that in the case of a recusal "any other judge" can step in and conduct the hearing.   Let’s say that in such a case, the rule of the district court is that the case is reassigned to the judge with lightest pending docket, or to the judge whose name comes up in the “wheel.”  In other words, the second judge has no authority or obligation to supervise the hearing unless the first judge recuses.  Under Notre Dame's theory of complicity, the Catholic judge would be able to object to the sentencing hearing altogether--not only to his own participation in it--on the theory that his recusal would "trigger" or "authorize" the replacement judge to act immorally.

-- Or consider a religious conscientious objector to war:  Because his refusal to fight means that some other young person will take his place to kill and be killed, does that mean that he has a valid religious objection to the continuation of the war itself (or at least to the drafting and deployment of any further troops)?

For obvious reasons, it would be deeply counterintuitive to construe RFRA--or the pre-1990 Supreme Court case law that RFRA incorporates--to recognize a "substantial burden" on religious exercise in such cases.  And, as far as I’m aware, the plaintiff organizations have thus far not disputed that there would be no impermissible complicity in such cases (especially the conscientious objector hypo, which has been raised by several judges).  Yet the contraception accommodation cases are not materially different in terms of the argument that opting out is a “but for” cause of someone else picking up the slack.

More to the point in terms of any “complicity with sin” argument, an organization’s opt-out pursuant to the accommodation would not be a “but for” cause of the thing the organization ultimately considers sinful, namely, its employees’ use of contraception—or even of the employees’ cost-free purchase of contraceptives.  The whole point of the ACA regulation is to guarantee that all women have ready access to cost-free contraception from their insurance plan.  As I explained in a previous post, Congress and HHS have determined that virtually all women in the United States are now entitled to obtain certain preventive health services without cost--it is virtually a universal benefit.  Some women will obtain it through Medicare or Medicaid; others (including those whose employers do not offer access to an insurance plan) on a federally subsidized exchange; still others through their employer-provided plan.  That is to say, a woman receives such coverage not because she works for (or studies at) a particular organization, let alone because that organization invokes the accommodation, but instead because she lives in America.  

The HHS rule and the religious accommodation do not concern who will be eligible for the benefit, but merely how, and by whom, it will be conveyed.  As Judge Tatel explained, employees will, indeed, receive contraceptive coverage if their employer self-certifies its objection—"but not because [it] self-certif[ies]."  Opting out does not affect the likelihood that any employees will use contraceptives, one way or the other.

Theory Six—The objecting organization must take steps to help administer the TPA’s provision of contraceptive coverage.

This argument actually takes several forms, such as Notre Dame’s allegations that it will have to offer paperwork for employees to obtain contraceptive coverage, or that it will have to send such paperwork to the TPA, or that it has to identify to the TPA which employees are eligible for coverage.  None of this is true.  The regulations do not require the objecting organization to take any additional steps—no new or different paperwork, for instance—by virtue of its TPA’s provision of coverage once the organization opts out.  And it is the TPA, not the organization, that must give notice to the beneficiaries—notice that makes clear that the employer is neither administering nor funding the contraceptive benefits.

Theory Seven—The objecting organization must enter into, or sustain, a contract with a TPA that provides its employees with contraceptive coverage, or “identify” a TPA to contract with if it has no such contract already.

Of course, the accommodation for a self-insured plan only works if and when the organization has already, independently, chosen to contract with a third-party administrator.  But the regulations do not require the organization to enter into any new or different contracts.  Nor does it have to create or maintain a contract with a TPA—the organization can go without a third-party administrator if it wishes.    

Moreover, in the unlikely event an organization does choose to offer employees a self-insured plan and does not contract with a TPA, the regulatory accommodation would expressly exempt that organization from any obligation respecting contraceptive coverage: 

Although some commenters addressed the solicitation for comments on whether and how to provide an accommodation for self-insured group health plans established or maintained by eligible organizations that do not use the services of a third party administrator, no comments indicated that such plans actually exist. Accordingly, the Departments continue to believe that there are no self-insured group health plans in this circumstance.  However, to allow for the possibility that such a self-insured group health plan does exist, the Departments will provide any such plan with a safe harbor from enforcement of the contraceptive coverage requirement, contingent on: (1) the plan submitting to HHS information (as described later in this section) showing that it does not use the services of a third party administrator; and (2) if HHS agrees that the plan does not use the services of a third party administrator, the plan providing notice to plan participants and beneficiaries in any application materials distributed in connection with enrollment (or re-enrollment) in coverage that is effective beginning on the first day of each applicable plan year, indicating that it does not provide benefits for contraceptive services.

* * * *

If any such submission demonstrates that a self-insured group health plan established or maintained by an eligible organization does not use the services of a third party administrator, the Departments will provide a safe harbor from enforcement of the contraceptive coverage requirement while an additional accommodation is considered.

Theory Eight—The objecting organization must refrain from objecting to the TPA’s provision of contraceptive coverage to its employees, even if its religion would compel it to object.

Not so.  Nothing in the regulation prohibits the organization from publicly inveighing against the ACA, the contraception coverage, the accommodation itself, etc.  It can even try to persuade its employees not to use or purchase contraceptives.  The preamble to the regulation goes so far as to state expressly that “[n]othing in these final regulations prohibits an eligible organization from expressing its opposition to the use of contraceptives.”  78 Fed. Reg. at 39,880 n.41.

Theory Nine—The accommodation forces the objecting organization to violate the doctrine of “scandal,” or to act hypocritically by not practicing what it preaches.

Notre Dame has averted to this argument in passing—a claim that the accommodation compels the university to violate the doctrine of "scandal," which Notre Dame defines as "leading by words or example other persons to engage in wrongdoing."  See also Catechism of the Catholic Church paragraph 2284 (“Scandal is an attitude or behavior which leads another to do evil.”).  According to Notre Dame’s complaint, even if it seeks the accommodation, Notre Dame would have to "pay for, facilitate access to, and/or become entangled in the provision of" contraceptives "in ways that will lead many to think Notre Dame condones these services."  Elsewhere, plaintiffs have suggested that they will be forced to act “hypocritically”—not to practice what they preach.  But as I’ve previously explained:   

There are at least two problematic things about this “scandal” argument.  First, as discussed above, the whole point of the accommodation is to ensure that Notre Dame does not have to "pay for, facilitate access to, and/or become entangled in the provision of" contraceptives.  In any event, it is deeply implausible that anyone—let alone “many”—would think Notre Dame “condones” contraceptive services.  Indeed, the self-certification process itself provides Notre Dame an occasion to make a formal, very conspicuous statement that it opposes such services, something no reasonable observer could misunderstand; the regulation actually requires the insurer or TPA to notify plan participants and beneficiaries that their employer/university "will not contract, arrange, pay, or refer for contraceptive coverage," 45 C.F.R. § 147.131(d); and promulgation of the contraception rule more broadly has afforded Notre Dame the opportunity to make its views on contraception and complicity much more widely known and understood than was previously the case.  Moreover, nothing in the law limits Notre Dame’s ability to speak out further against contraception, the HHS Rule, and/or the ACA, or to otherwise “educate others on a matter of religious and moral significance” (Complaint paragraph 65).

To similar effect, some plaintiffs with self-insured plans argue that under the accommodation “their” health plans would serve as a “conduit” or “vehicle” or “pipeline” through which contraceptive benefits would flow to employees or students.  Use of such colorful metaphors does not account for the basic facts, however.  This is not a case, for instance, in which a person’s labor or real property is being used for sinful ends.  And to the extent the argument here is that observers (such as employees) will understand the organization to have ratified or blessed the contraceptive care services because they are, for ERISA purposes, being offered in connection with the organization’s employee benefit plan, the accommodation is carefully designed to dispel any such inaccurately assumed association or approval:  Like the payments for contraceptive services under the accommodation for insured plans, the payments the TPA makes to the organization’s employees are not health insurance policies.  Moreover, the TPA must provide to plan participants and beneficiaries written notice of the availability of such separate payments for contraceptive services separate from any application materials distributed in connection with enrollment in the group health coverage and, most importantly, such notice must specify that the employer organization does not administer or fund contraceptive benefits, such as with the following model language offered in the regulation:  

“Your employer has certified that your group health plan qualifies for an accommodation with respect to the federal requirement to cover all Food and Drug Administration-approved contraceptive services for women, as prescribed by a health care provider, without cost sharing.  This means that your employer will not contract, arrange, pay, or refer for contraceptive coverage.  Instead, [name of third party administrator] will provide or arrange separate payments for contraceptive services that you use, without cost sharing and at no other cost, for so long as you are enrolled in your group health plan. Your employer will not administer or fund these payments.”

This notice ought to be sufficient to allay any concern that employees will misunderstand whether the employer approves of, or is involved in or responsible for, the contraceptive coverage.  Moreover, as noted above, nothing prevents the employer from taking additional steps to further emphasize to its employees, or to any other audience, that it has a religious objection to the use of contraception, and/or to the contraceptive services that federal law guarantees.

Theory Ten—The objecting organization must take steps that will result in designation of the TPA as a “plan administrator” for purposes of ERISA, thereby establishing the federal government’s statutory authority to compel the TPA to provide contraceptive coverage.

This is the version of the plaintiffs’ argument that I think is likely to attract most of the courts’ attention in the accommodation cases.

As noted above with respect to Theory One, the plaintiffs are wrong to argue that the organization’s act of opting out thereby directs or obligates the TPA to offer contraception coverage.  As Justice Sotomayor wrote in her dissenting opinion in Wheaton College:

Any provision of contraceptive coverage by Wheaton’s third-party administrator . . . would result from the relevant law and regulations. . . .  The law and regulations require, in essence, that some entity provide contraceptive coverage.  A religious nonprofit’s choice not to be that entity may leave someone else obligated to provide coverage instead—but the obligation is created by the contraceptive coverage mandate imposed by law, not by the religious nonprofit’s choice to opt out of it. . . . .  If a religious nonprofit chooses not to pay for contraceptive services, it is true that someone else may have a legal obligation to pay for them, just as someone may have to go to war in place of the conscientious objector.  But the obligation to provide contraceptive services, like the obligation to serve in the Armed Forces, arises not from the filing of the form but from the underlying law and regulations.

Even so, the matter might not be quite as simple as that.  Although the religious organization’s self-certification—its opt-out—is not the source of the TPA’s coverage obligation, it is a necessary prerequisite to the government being able to exercise its authority under ERISA to impose the coverage obligation upon the TPA.  That is so because in the case of a self-insured plan the defendant agencies apparently do not have any affirmative authority under ERISA to require TPAs to use their own funds to provide the contraception coverage unless the TPAs are “plan administrators” for purposes of ERISA.  ERISA defines such a plan administrator as:

(i) the person specifically so designated by the terms of the instrument under which the plan is operated;

(ii) if an administrator is not so designated, the plan sponsor; or

(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary may by regulation prescribe.  [29 U.S.C. 1002(16)(A)]

In most or all self-insured plans, the TPA is not designated as a “plan administrator” by the instrument under which the plan is operated—the employer itself (the plan sponsor) therefore is the plan administrator for purposes of ERISA.  Therefore, without more, the government would appear not to have the authority under ERISA to direct TPAs to provide any coverage.

In order to deal with this problem, the Department of Labor prescribed the following rule for self-insured plans:

In the case of a self-insured group health plan established or maintained by an eligible organization [i.e., an organization eligible for the religious accommodation], . . . the copy of the self-certification [i.e., Form 700] provided by the eligible organization to a third party administrator (including notice of the eligible organization's refusal to administer or fund contraceptive benefits) . . . shall be an instrument under which the plan is operated, shall be treated as a designation of the third party administrator as the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered . . . to which the eligible organization objects on religious grounds, and shall supersede any earlier designation.  [29 C.F.R. § 2510.3–16(b).]**

The self-certification form the government has promulgated for this purpose is Form 700.  On its face, Form 700 does not designate the TPA as the plan administrator.  Indeed, the certification that the organization must sign on the front of Form 700 doesn’t say a word about who is to be the plan administrator, nor does it even mention the TPA.  The back of Form 700, however, states that the Form “constitutes notice to the third party administrator that the eligible organization . . . [w]ill not act as the plan administrator or claims administrator with respect to claims for contraceptive services, or contribute to the funding of contraceptive services.”

OK, so far, so good:  Form 700 notifies the TPA, not surprisingly, that the objecting employer will not act as the plan administrator or claims administrator with respect to claims for contraceptive services, or contribute to the funding of contraceptive services.  This makes perfect sense, since the whole point of the accommodation is to exempt the employer from playing any such roles.

The underlying regulation, however, goes further than Form 700 itself:  It prescribes that the government will treat the organization’s self-certification “as a designation of the third party administrator as the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered employer.”  And once the TPA is an ERISA “plan administrator” for those services, the federal government has the authority under ERISA to require it to reimburse beneficiaries for the costs of those services, and to reimburse the TPA for such payments and associated expenses.

The plaintiffs in the nonprofit cases therefore complain that the accommodation in effect requires the objecting organization to confer a legal status upon the TPA—i.e., ERISA “plan administrator”—which is a necessary prerequisite to the legal authority of the government to compel the TPA to play its part.  In this way, the organization itself is being required to take at least one affirmative role in making the accommodation workable—and that, say some of the plaintiffs, makes the organization impermissibly complicit in its employees’ eventual use of contraceptives.  (As I explained in a recent post, presumably some plaintiffs will raise this concern no matter what the form of the self-certification might be—whether it is Form 700 or (as the Wheaton College Court suggested) a letter to HHS.  If the government treats the certification as a designation of the TPA as an ERISA plan administrator, at least some organizations presumably will insist that they are being coerced to be complicit in their employees’ or students’ use of contraceptives.)

I am loath to suggest insincerity, but I can’t help but think that this sort of “complicity with evil” claim is implausible.  Can it truly be the case, under any serious religious understanding of moral responsibility, that the line between permissibly invoking a legal exemption and impermissible complicity turns on whether the opting out results in a technical change of legal status of another entity under the Employee Retirement Income Security Act?  Take, for example, my hypothetical above about the Catholic judge who recuses from the capital sentencing proceeding.  Presumably that opt-out does not make the judge complicit in the execution of the death penalty if a replacement judge volunteers to step in.  Can it really be the case, then, that the recusing judge would become complicit if his recusal results in a formal legal designation of the neighboring judge as “presiding” judge?  That’s frankly hard to imagine.  (And, once again, it is worth repeating that even if an employer is willing to argue that its line of complicity is to be drawn here, it remains free to offer its employees an insured plan, or to discontinue employee health insurance coverage altogether.)

______________________________

* It is of course true that the employer’s antecedent decision to contract with a particular insurer—such as Blue Cross Blue Shield instead of, say, Aetna—is what causes that insurer, rather than all the other insurers throughout the land, to make payments to a particular group of employees.  But it’s very hard to see how this could possibly be relevant to any question of employer complicity.  Regardless of which plan insurance issuer the employer originally contracted with, that issuer would make payments for contraception to those employees, whether or not the employer opted out.  The fact that it is, say, Blue Cross rather than Aetna, can’t be germane to the employer’s ultimate responsibility for its employees’ use of contraception:  One way or the other, the issuer had to be someone.  And it is hard to believe that the complicity question turns on whether the employer earlier chose issuer X rather than issuer Y.

** In response to comments questioning the Department’s authority to treat Form 700 as such a designation and plan instrument, the Department of Labor explained that it “has broad rulemaking authority under Title I of ERISA, which includes the ability to interpret the definition of plan administrator under ERISA section 3(16)(A)(i).  The Department of Labor's interpretation of the self-certification described herein as one of the ‘instruments under which the plan is operated’ is consistent with the plain meaning of the term because it identifies the limited set of plan benefits (that is, contraceptive coverage) that the employer refuses to provide and that the third party administrator must therefore provide or arrange for.”  78 Fed. Reg. 39,879 (July 2, 2013).


Compendium of posts on Hobby Lobby and related cases