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Health reform law opponents still battling against full implementation

Posted On: Feb. 10, 2013 12:00 AM CST

Health reform law opponents still battling against full implementation

Despite the U.S. Supreme Court's ruling last year upholding the federal health care reform law's individual mandate, several legal challenges affecting employers' obligations under the law remain unsettled.

Several dozen privately owned companies and nonprofit organizations filed suit in 2012 seeking exemption from a 2011 Department of Health and Human Services rule requiring employers and/or their insurers to provide cost-free contraceptive prescriptions and other preventive care benefits.

In nearly all cases, plaintiffs allege the rule violates their rights to religious expression under the Religious Freedom Restoration Act and the First Amendment.

The rule, which went into effect on Aug. 1, 2012, for nongrandfathered benefit plans, imposes a penalty on companies that do not offer the coverage if an employee uses a federal subsidy to purchase health insurance through a public health insurance exchange.

Certain types of religious employers are exempt from the contraceptive coverage requirements. Initially, the exemptions were limited to houses of worship and affiliated organizations. On Feb. 1, HHS proposed a rule extending exemptions to religious nonprofit organizations, such as health care providers, universities and other charities.

Under the proposals, an exempted organization's group health plan members would be offered no-cost contraceptive coverage through separate, individual health care plans directly administered by insurers or, if an employer self-insures their group health benefits, by a third-party administrator.

The exemptions do not include for-profit employers, regardless of their religious convictions. Nonetheless, experts said it may be difficult for those employers to prove that the coverage requirement substantially infringes on their right to religious expression.

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“It's a bit of a more compelling issue for the self-insured market because they're paying for the benefits directly as opposed to paying through premiums, but I still don't know if that means they'll succeed at trial,” said Steve Wojcik, vice president of public policy at the Washington-based National Business Group on Health.

While no suit has yet received a final verdict, several district and appeals courts have issued varying rulings on employers' requests for temporary exemptions from the rule pending the outcome of their suits. Experts say the disparate court rulings indicate the issue is destined to go before the U.S. Supreme Court.

“Because the central issue of these cases seems to be of great importance as part of the health care reform act, and given that there could be a significant split among the appeals courts, it's certainly possible that this could find its way to the Supreme Court,” said Nicole Bogard, an Atlanta-based partner at Seyfarth Shaw L.L.P.

The other significant challenge to the health care reform law's implementation concerns the availability of federal premium subsidies for health insurance purchased through public exchanges.

In September, Oklahoma Attorney General Scott Pruitt asked a federal judge to overturn an Internal Revenue Service rule penalizing employers whose employees use subsidies to buy coverage through any public insurance exchange. The suit argues that the health care reform law's original language allows the government to offer subsidies for insurance purchased only through state-run exchanges, and not through exchanges operated by the federal government.

Experts said a ruling in favor of Mr. Pruitt's claim could threaten the very framework of the health care reform law since it would limit the government's ability to enforce minimum coverage requirements for employers in states that refuse to establish insurance exchanges, as well as provide access to subsidized coverage for millions of lower-income uninsured adults.

However, experts said, it remains unclear if the court will reach a consideration of the merits of Mr. Pruitt's case, as the state first must prove that it has a legal standing to challenge the IRS rule.

“That's going to be a difficult challenge for the state,” Ms. Bogard said, noting that the Oklahoma suit does not establish that the state — as an employer — would be subject to the tax penalties.