Questions and Answers About What the Latest HHS Mandate Rule Means for Catholic High Schools

This Issue Brief takes a look at the new1 “Notice of Proposed Rulemaking” issued on February 1, 2013, by the Department of Health and Human Services concerning the federal mandate that health insurance plans, including those provided or arranged by non-exempt Catholic high schools, must include coverage of early abortion pills, contraception, sterilization, and related education and counseling for women with a reproductive capacity.

What was the government’s intent with the February 1st  “Notice of Proposed Rulemaking”?

The Notice of Proposed Rulemaking (“NPRM”)2 sets forth a proposed (not final) structure for public comment on whether or how the government will respect religious objections to its coverage mandate of early abortion pills, contraception, and sterilization.  It concerns three categories of entities with objections to the mandate.  Generally, these categories are: (1) houses of worship; (2) all other religious non-profits; and (3) all other objectors.

Is this the final rule?

No, it will be finalized by August 1, 2013.  The public may submit comments by April 8, 2013.

Who would be exempt from the mandate under the NPRM?

The NPRM proposes that basically only houses of worship would be exempt from the mandate.  Exempt entities are called “religious employers,” and these must be either “churches, their integrated auxiliaries, and conventions or associations of churches,” or “the exclusively

religious activities of any religious order.” These categories are narrow and well-established in Internal Revenue Code section 6033(a)(3)(A)(i) and (iii). Many Catholic high schools might not fall into these categories.  They should consult with an attorney or tax advisor to review whether or not they qualify.

Is this a change from the existing exemption?

In one respect, the NPRM proposes a change from the existing mandate exemption. Under the existing exemption, houses of worship are still the only entities eligible for an exemption, but in addition those houses of worship must function to inculcate beliefs, and must primarily hire and serve only those of their own faith. The NPRM proposes to remove the latter three requirements from the definition of exempt “religious employers,” but retain the fourth criteria by which the entity must be a house of worship, church, religious order, or the like as listed above.  The NPRM insists that this change is a clarification, not a broadening of the exemption. Since houses of worship are still the only entities that qualify for an exemption, the NPRM’s changes “would not expand the universe of employer plans that would qualify for the exemption beyond that which was intended” in the existing rule.

In another respect, the new proposal appears to be worse for entities such as Catholic high schools. Under last year’s regulations, it was suggested that if a school’s employees received insurance from a diocese’s health plan, the school’s coverage would fall under the diocese’s exempt status as a church. See 77 Fed. Reg. 16,502. But the new proposed exemption intentionally removes this possibility and says employers will be treated separately: only if a school is itself a church or integrated auxiliary thereof will it be exempt, even if its employees use the diocesan health plan. 78 Fed. Reg. at 8,467. Thus, many schools that are affiliated with churches, but not integrated auxiliaries thereof, may lose their access to exempt insurance.

Is this a very narrow definition of “religious employer,” or one that is used commonly by the federal government?

This definition is extremely narrow compared to other federal laws providing for conscience exemptions.  The 40-year-old bipartisan standard established throughout federal law, including in health and insurance coverage of items such as contraception, is to exempt any person or group with moral or religious objections.  The Religious Freedom Restoration Act in particular requires the federal government to exempt any religious objector from rules such as this Mandate. The administration has instead constrained religious freedom by using a category in tax law that has no relationship to conscience, but instead relates to whether a group files its own 990 tax form. Even within that code section, the administration gerrymandered this rule by selecting subparts (i) and (iii) but not (ii) which includes other nonprofits.  The administration apparently selected a category with the smallest possible scope it could find.  This is consistent with its view that religious freedom really only inheres in worship and not in the exercise of religion outside a house of worship.

How would the NPRM deal with objections from colleges and other non-profits?

The NPRM proposes to apply the coverage mandate to all non-exempt entities, including religious groups. But for some religious non-profit groups, the NPRM proposes to accomplish this through what it calls an “accommodation.” The accommodation is a complex arrangement designed to create the impression that the religious organization is not involved in giving its employees access to objectionable items such as early abortion pills, while at the same time insisting that the employees will receive those items seamlessly with their employer’s own provision of coverage.

Their employees would still receive objectionable coverage from those groups’ own insurers or plan administrators, and would receive it “automatically,” so that the employees could not opt out of the coverage for themselves or their female family members.

What qualifies an organization for this “accommodation”?

The NPRM applies its accommodation to non-exempt “eligible organizations.”  These should not be confused with exempt “religious employers” discussed above.  (Exempt religious employers—houses of worship—are not subject to the accommodation scheme.)  A non-exempt “eligible organization” is one that meets the following criteria:

The organization opposes providing coverage for some or all of the contraceptive services required to be covered under section 2713 of the PHS Act on account of religious objections.

The organization is organized and operates as a nonprofit entity.

The organization holds itself out as a religious organization.

Again, these “religious organizations” are those that do not fall within the exempt category of houses of worship discussed above.

How does the “accommodation” work for non-exempt “eligible organizations”?

The organization must sign a certification asserting that it meets the above-described criteria, keep the certification in its records “for examination upon request so that regulators, issuers, third party administrators, and plan participants and beneficiaries,” and provide the certification to the insurance issuer(s) and/or its self-insurance plan administrator(s) that the group pays for their ordinary duties.

Under the accommodation, once the religious group’s insurer or administrator receives that certification, the insurer or administrator is required to “automatically” provide the religious group’s employees and plan beneficiaries with insurance covering the objectionable items.

If the religious group uses an insurer, that insurer also becomes the insurer for the objectionable items.  The NPRM claims that this insurance plan will be “separate” and will not be charged to the religious group.  But it admits that there are up-front costs to the items, and it claims that these costs will be offset by the benefits of the primary insurance that the religious group is paying for (since, it theorizes, fewer childbirths will lead to lower costs).

What about self-insured non-profit religious groups?

If the religious group is self-insured, the NPRM proposes that it be required to use a plan administrator (even if it does not presently have one).  When that plan administrator receives the certification it will take on the additional duties of finding an external insurance company to “automatically” issue insurance coverage of objectionable items to the religious group’s employees.  The NPRM does not address the privacy implications of releasing employee health information to an insurance company with which the religious group never contracted, for a purpose to which the religious group objects.

The NPRM proposes that the costs of the objectionable items will be offset by rebates that the federal government will offer those insurers in the health “exchanges” otherwise implicated by the Affordable Care Act.

Is the NPRM correct that the “accommodation” does not implicate an objecting entity?

The NPRM imposes what is essentially a moral judgment that the “accommodation” frees objecting entities from culpability for coverage of objectionable items.  Entities are not allowed to disagree with this moral judgment set forth by the government. Several factors might lead objecting entities to differ from the government’s moral viewpoint. Under the accommodation, the Affordable Care Act will still be requiring objecting entities with 50 or more full-time employees to provide health insurance coverage, and that coverage will be the trigger for the objectionable items to flow to its employees.  The objectionable coverage will come from the same insurers or plan administrators that the religious group is paying. The provision of objectionable coverage will be triggered specifically by the religious group’s mandated delivery of its religious certification to its insurer or plan administrator.  For insured entities, the costs of the objectionable items will allegedly be offset by the main plan the objecting entity is buying. For self-insured entities, the NPRM does not fully explain how costs will be offset.  Unprecedented burdens and fiduciary duties will fall on insurers and plan administrators with whom religious groups contract, because of that contract.  The NPRM does not fully explain how these additional burdens will not eventually be reflected in the ability of religious groups to contract with insurers or administrators in the first place.

What religious freedom allowances does the NPRM provide to other objectors?

None.

Neither an exemption nor a feigned accommodation is provided under the NPRM for: employees of religious non-profit groups who do not want free abortion-pill, contraception, sterilization and counseling coverage for themselves, their spouses       or their daughters; non-profit groups that object to abortion-pills or contraception for non-religious reasons; insurance companies or plan administrators that object; religious families that earn a living running a business; or individuals that arrange for their own insurance coverage not through an employer.

Notably, the Affordable Care Act uses secular reasons to refrain from applying this mandate to tens of millions of other Americans, such as because a plan is “grandfathered” from many ACA regulations.  Yet the government refuses to exempt most religious objectors.

Is the NPRM still subject to comment?

Yes.  The NPRM is not final and the government will accept public comments until April 8, 2013, about any aspect of the proposal. The Alliance Defending Freedom work with The Cardinal Newman Society to prepare a formal comment and other institutions are welcome to join that comment. Individual organizations may also submit their own electronic comments to www.regulations.gov. All comments should reference file code CMS–9968–P.

If I have more questions, whom do I contact?

General questions can be address to Bob Laird at the Cardinal Newman Society’s Catholic High School Honor Roll, (703) 367-0333 x 106 or blaird@CardinalNewmanSociety.org.  Specific questions about legal actions should be directed to Matt Bowman at Alliance Defending Freedom, 1-800-835-5233.

 

 

Questions and Answers About What the Latest HHS Mandate Rule Means for Catholic Colleges

This Issue Brief takes a look at the new1 “Notice of Proposed Rulemaking” issued on February 1, 2013, by the Department of Health and Human Services concerning the federal mandate that health insurance plans, including those provided or arranged by Catholic colleges, must include coverage of early abortion pills, contraception, sterilization, and related education and counseling for women with a reproductive capacity.

What was the government’s intent with the February 1st  “Notice of Proposed Rulemaking”?

The Notice of Proposed Rulemaking (“NPRM”)2 sets forth a proposed (not final) structure for public comment on whether or how the government will respect religious objections to its coverage mandate of early abortion pills, contraception, and sterilization.  It concerns three categories of entities with objections to the mandate.  Generally, these categories are: (1) houses of worship; (2) all other religious non-profits; and (3) all other objectors.

Is this the final rule?

No, it will be finalized by August 1, 2013.  The public may submit comments by April 8, 2013.

Who would be exempt from the mandate under the NPRM?

The NPRM proposes that basically only houses of worship would be exempt from the mandate.  Exempt entities are called “religious employers,” and these must be either “churches, their integrated auxiliaries, and conventions or associations of churches,” or “the exclusively

religious activities of any religious order.” These categories are narrow and well-established in Internal Revenue Code section 6033(a)(3)(A)(i) and (iii). Most Catholic colleges know that they do not fall into these categories.  They should consult with an attorney or tax advisor to review whether or not they qualify.

Is this a change from the existing exemption?

In one respect, the NPRM proposes a change from the existing mandate exemption. Under the existing exemption, houses of worship are still the only entities eligible for an exemption, but in addition those houses of worship must function to inculcate beliefs, and must primarily hire and serve only those of their own faith. The NPRM proposes to remove the latter three requirements from the definition of exempt “religious employers,” but retain the fourth criteria by which the entity must be a house of worship, church, religious order, or the like as listed above.  The NPRM insists that this change is a clarification, not a broadening of the exemption. Since houses of worship are still the only entities that qualify for an exemption, the NPRM’s changes “would not expand the universe of employer plans that would qualify for the exemption beyond that which was intended” in the existing rule.

Is this a very narrow definition of “religious employer,” or one that is used commonly by the federal government?

This definition is extremely narrow compared to other federal laws providing for conscience exemptions.  The 40-year-old bipartisan standard established throughout federal law, including in health and insurance coverage of items such as contraception, is to exempt any person or group with moral or religious objections.  The Religious Freedom Restoration Act in particular requires the federal government to exempt any religious objector from rules such as this Mandate. The administration has instead constrained religious freedom by using a category in tax law that has no relationship to conscience, but instead relates to whether a group files its own 990 tax form. Even within that code section, the administration gerrymandered this rule by selecting subparts (i) and (iii) but not (ii) which includes other nonprofits.  The administration apparently selected a category with the smallest possible scope it could find.  This is consistent with its view that religious freedom really only inheres in worship and not in the exercise of religion outside a house of worship.

How would the NPRM deal with objections from colleges and other non-profits?

The NPRM proposes to apply the coverage mandate to all non-exempt entities, including religious groups. But for some religious non-profit groups, the NPRM proposes to accomplish this through what it calls an “accommodation.” The accommodation is a complex arrangement designed to create the impression that the religious organization is not involved in giving its employees access to objectionable items such as early abortion pills, while at the same time insisting that the employees will receive those items seamlessly with their employer’s own provision of coverage.

Their employees would still receive objectionable coverage from those groups’ own insurers or plan administrators, and would receive it “automatically,” so that the employees could not opt out of the coverage for themselves or their female family members.

What qualifies an organization for this “accommodation”?

The NPRM applies its accommodation to non-exempt “eligible organizations.”  These should not be confused with exempt “religious employers” discussed above.  (Exempt religious employers—houses of worship—are not subject to the accommodation scheme.)  A non-exempt “eligible organization” is one that meets the following criteria:

The organization opposes providing coverage for some or all of the contraceptive services required to be covered under section 2713 of the PHS Act on account of religious objections.

The organization is organized and operates as a nonprofit entity.

The organization holds itself out as a religious organization.

Again, these “religious organizations” are those that do not fall within the exempt category of houses of worship discussed above.

How does the “accommodation” work for non-exempt “eligible organizations”?

The organization must sign a certification asserting that it meets the above-described criteria, keep the certification in its records “for examination upon request so that regulators, issuers, third party administrators, and plan participants and beneficiaries,” and provide the certification to the insurance issuer(s) and/or its self-insurance plan administrator(s) that the group pays for their ordinary duties.

Under the accommodation, once the religious group’s insurer or administrator receives that certification, the insurer or administrator is required to “automatically” provide the religious group’s employees and plan beneficiaries with insurance covering the objectionable items.

If the religious group uses an insurer, that insurer also becomes the insurer for the objectionable items.  The NPRM claims that this insurance plan will be “separate” and will not be charged to the religious group.  But it admits that there are up-front costs to the items, and it claims that these costs will be offset by the benefits of the primary insurance that the religious group is paying for (since, it theorizes, fewer childbirths will lead to lower costs).

What about self-insured non-profit religious groups?

If the religious group is self-insured, the NPRM proposes that it be required to use a plan administrator (even if it does not presently have one).  When that plan administrator receives the certification it will take on the additional duties of finding an external insurance company to “automatically” issue insurance coverage of objectionable items to the religious group’s employees.  The NPRM does not address the privacy implications of releasing employee health information to an insurance company with which the religious group never contracted, for a purpose to which the religious group objects.

The NPRM proposes that the costs of the objectionable items will be offset by rebates that the federal government will offer those insurers in the health “exchanges” otherwise implicated by the Affordable Care Act.

Is the NPRM correct that the “accommodation” does not implicate an objecting entity?

The NPRM imposes what is essentially a moral judgment that the “accommodation” frees objecting entities from culpability for coverage of objectionable items.  Entities are not allowed to disagree with this moral judgment set forth by the government. Several factors might lead objecting entities to differ from the government’s moral viewpoint. Under the accommodation, the Affordable Care Act will still be requiring objecting entities with 50 or more full-time employees to provide health insurance coverage, and that coverage will be the trigger for the objectionable items to flow to its employees.  The objectionable coverage will come from the same insurers or plan administrators that the religious group is paying. The provision of objectionable coverage will be triggered specifically by the religious group’s mandated delivery of its religious certification to its insurer or plan administrator.  For insured entities, the costs of the objectionable items will allegedly be offset by the main plan the objecting entity is buying. For self-insured entities, the NPRM does not fully explain how costs will be offset.  Unprecedented burdens and fiduciary duties will fall on insurers and plan administrators with whom religious groups contract, because of that contract.  The NPRM does not fully explain how these additional burdens will not eventually be reflected in the ability of religious groups to contract with insurers or administrators in the first place.

What religious freedom allowances does the NPRM provide to other objectors?

None.

Neither an exemption nor a feigned accommodation is provided under the NPRM for: employees of religious non-profit groups who do not want free abortion-pill, contraception, sterilization and counseling coverage for themselves, their spouses       or their daughters; non-profit groups that object to abortion-pills or contraception for non-religious reasons; insurance companies or plan administrators that object; religious families that earn a living running a business; or individuals that arrange for their own insurance coverage not through an            employer.

Notably, the Affordable Care Act uses secular reasons to refrain from applying this mandate to tens of millions of other Americans, such as because a plan is “grandfathered” from many ACA regulations.  Yet the government refuses to exempt most religious objectors.

How does the NPRM treat student health plans? 

Student health plans that are arranged by “eligible organizations” are subject to the same “accommodation” that applies to employee health plans established by such organizations.

Is the NPRM still subject to comment?

Yes.  The NPRM is not final and the government will accept public comments until April 8, 2013, about any aspect of the proposal. The Alliance Defending Freedom work with The Cardinal Newman Society to prepare a formal comment and other institutions are welcome to join that comment. Individual organizations may also submit their own electronic comments to www.regulations.gov. All comments should reference file code CMS–9968–P.

If I have more questions, whom do I contact?

General questions can be address to Bob Laird at the Cardinal Newman Society’s Center for the Advancement of Catholic Higher Education, (703) 367-0333 x 106 or blaird@CardinalNewmanSociety.org.  Specific questions about legal actions should be directed to Matt Bowman at Alliance Defending Freedom, 1-800-835-5233.

 

 

 

Crafting Employee Health Plans for Catholic Institutions

In the last few years, the Catholic Church and its Catholic institutions have faced attacks through legislation and judicial activism, which are increasingly coming in the form of mandates for health insurance “benefits” that support immoral behavior but not medical necessities. The most recent instances in the news include the federal Equal Opportunity Employment Commission’s (EEOC) ruling against Belmont Abbey College and Wisconsin’s mandate forcing even Catholic employers to provide contraception coverage. Both are extremely troubling though not unexpected in to- day’s increasingly secular environment.

This paper is written from my experience building employee health plans for more than 50 Catholic employers, including several dioceses and religious orders. I do not write from a legal perspective. My concern is finding insurance solutions that avoid the problems of religious discrimination and violations of conscience—“real world” solutions that can be implemented today. Legal advice is also important, but it often only answers one question without examining the non-legal consequences of recommended actions. Health insurance experts like me who work every day with the Church must be concerned with reality and practicality, and not only what is permissible under the law.

The State of Affairs

Let us first consider the moral issues on which Catholic institutions are being at- tacked and which have a current or potential impact on medical insurance. These are many and growing: contraception, abortion, domestic partners, same-sex marriages, “gender reassignments,” sex-change operations, sterilization, stem cell research, in vitro fertilization and several other issues.

The attacks come primarily from two fronts, legislation and judicial activism. The activism is often coordinated and well-funded by Planned Parenthood, the American Civil Liberties Union and others who view the Church and its moral principles as dangerous obstacles that must be eliminated from public policy decisions.

In response to these attacks, the Church’s lawyers typically argue that the constitutional right of religious freedom should protect “religious” institutions from new laws and lawsuits. However, the reality is that it is very expensive to defend an institution in court, and there is significant risk of losing a court battle. The Supreme Courts of California and New York have issued rulings that are very troubling for Catholic institutions, and thus far the U.S. Supreme Court has not enforced First Amendment rights in these situations.

How “Catholic” must a college, hospital or other entity be to qualify for religious exemptions from health insurance mandates? Unfortunately several laws and rulings have denied a religious exclusion because of things like:

  1.  Too many employees are not Catholic.
  2.  Too many people served are not Catholic.
  3.  The institution takes federal funds.

This may be oversimplified, but it makes the point. Catholic charities, hospitals and colleges are going to be in great difficulty with these rulings, even in states that have religious exemptions written into the laws. The courts are defining religious institutions so narrowly, it sometimes seems only a cloistered convent might qualify.

A particularly dangerous line of attack is employee complaints and “discrimination” lawsuits, alleging that by not providing morally offensive “benefits,” employers are discriminatory to women. This is the heart of the Belmont Abbey case. The argument is that by not covering contraception, an employer discriminates against women since they bear a higher burden and cost for birth control. There have been several rulings by the EEOC along these lines, and it is likely that in the current political climate there will be more of this, not less.

Additionally, Catholic institutions can anticipate great difficulties with regard to insuring legally married same-sex couples. While many have argued that the Defense of Marriage Act provides some protection, this law is being challenged on many levels, and Catholic employers should plan for the worst and expect lawsuits in this area.

Designing Catholic Health Plans

The Catholic Church and its institutions will inevitably and increasingly face legal battles, but must act now to make changes that help protect health plans. At the risk of oversimplifying a complex task that requires professional advice, what follows are a few recommendations for Catholic employers.

Plan ahead and stop being reactionary with regard to health insurance. Assume that your institution’s Catholic principles will be challenged eventually; it is not a matter of “if ” but “when” in today’s increasingly secular society. To be safe your institution must have a specifically Catholic health plan in place, not an off-the-shelf product.

Commit today to take a few hours up front dealing correctly with health insurance, first by reading and understanding what your existing policy actually covers. Many Catholic institutions will be surprised by what they find. It helps to have professional assistance, because often the offensive benefits are hidden in vague language and technical insurance terms.

Consider the Belmont Abbey situation. Their health insurer reportedly added contraception coverage without their knowledge, which was readily apparent when officials read the plan documents. However, to be honest, officials and even human resources staff often fail to read such documents in their entirety. The documents are dry and boring and have paragraph after paragraph of highly technical insurance contract language. Unfortunately the consequence of a mistake could be spending hundreds of hours playing defense in a legal system that is not always friendly to Catholic concerns.

When designing or revising your employee health plan, ensure that it is regulated by federal law and not state law, by “self-funding” if at all possible. Almost all state- regulated, fully insured plans are deficient in protecting Catholic institutions. Currently 23 states have mandated contraception coverage. When provisions for abortion, sterilization, in vitro fertilization and same-sex couples are considered, more than half of the states have morally objectionable mandates. The remaining states are constantly moving in the same secular direction. Even in states that do not have these morally objectionable mandates, Catholic institutions are not likely to be safe for the long term in state-regulated insurance plans.

Federal regulation of medical insurance began in 1974 with the Employment Retirement Income Security Act (ERISA), which covers “self-funded” insurance. A section of ERISA specifically provides for “church plans” that generally do not have to pay for morally objectionable “benefits.”

To avoid state regulation, the real-world answer is to “self fund.” That means that instead of paying a fixed premium every month to an insurance company that accepts all the risk of claims, the employer agrees to share the risk. The employer financially “participates” in the cost of the employees’ medical claims. Does this mean that a self- funded plan is riskier than the alternative? Not necessarily. Any insurance plan can have zero risk or a large amount of risk—the latter can include a fully insured plan with a high deductible that the employer reimburses. But many Catholic institutions do not have the resources to gamble on high-risk plans.

In layman’s terms, here is how self-funding works. A plan document is written specifying what the plan pays for. The employee has a plastic card that looks and works just like a fully insured plan. A hired third-party administrator receives and pays claims from the doctors and other health care providers. In a “pure” self funded plan, the administrator would simply bill the employer for the cost of claims plus administrative costs, but few have a plan like that.

More commonly, an employer will purchase an insurance contract to limit the risk per insured on the plan. The employer is now responsible for only the first “X” dollars in claims per person, called the “stop loss” deductible. A large conglomerate might have a $100,000 stop loss deductible; but a smaller organization may have a risk as low as $25,000 a person. Even then, an institution of 100 employees cannot afford $2.5 million in risk, so they buy another type of stop loss insurance called “aggregate stop loss” to limit the maximum claims of the entire group. Aggregate allows the institution to budget, since it now has a firm cap and maximum risk if claims go out of control. If claims are less than the maximum, the employer keeps the funds instead of the insurer.

The bottom line is that self funded does not have to mean unlimited risk. With careful planning many if not most Catholic organizations should be able to find a way to do this.

Getting It Right

Even though I recommend getting out from under state regulation if possible, Catholic employers should not run out and self-fund unless they do it correctly. Many dioceses have had very bad experiences with self-funding, because their advisors were not sufficiently knowledgeable about “church plans,” how to use appropriate language and structure, and other practical details. Self-funding is not bad by itself, but every detail must be considered to avoid serious difficulties.

For instance, consider cash flow: many Catholic institutions are not wealthy, but most stop loss insurance requires them to pay the costs up front and get reimbursed at a later date. For institutions in this position, a third type of insurance, “cash flow protection,” is available to limit employer up-front costs to an annual cap divided by 12 months. It is added protection that many insurance advisors are not always aware of, because their experience with self-funded plans may have been primarily with larger corporations where cash flow is not a primary consideration.

In addition, a “church plan” under federal law must have some very specific language to avoid future challenges. The insurer most likely will not be an expert on Catholic-sensitive language and will offer a boilerplate contract. Do not assume that the Church’s definition of something is the same as the insurer ’s. For instance, the contract must define “family” and other things that may have very different meanings for a Catholic institution and a secular insurer. Every word of the contract must be read and understood, and every exclusion must be examined. You cannot trust that a contract is operating the way your agent, lawyer or other professional claims, unless you read and understand it yourself and consult with a true expert on the very unique needs of Catholic institutions.

The contract needs language controlling when an insurer can add benefits. Several dioceses were recently surprised when they learned the hard way that their insurer had the contractual right to add benefits without their approval. Although the dioceses’ lawyers believed they had a contract that could only be changed on renewal, the insurer had the unilateral right to impose changes—in this case covering contraception in response to a new state law. Thus in the middle of the year the dioceses have a major problem.

Eligibility is also an area where Catholic institutions may run into problems. In the U.S., health insurance is governed by an employer-employee relationship, and insurers expect to see a wage and tax statement showing earnings for each employee. Insurers do not want to cover volunteers who might only be volunteering to gain health insurance because they are ill. But how do we deal with Religious with a vow of poverty? Even if full-time employees, they are not paid; instead their order is often paid for their services. Thus, many Religious and even entire orders have been denied or removed from coverage because they receive no wages. Worse, insurers often do not ask for proof of wages until after the insured has an expensive claim—a terrible time to lose coverage. Again, this is a contractual issue that should be addressed up front.

There are also Catholic Church-specific laws, such as the Downey Amendment, that deal with Medicare for Catholic Religious. It is a very complex law, and most insurers are not even aware of its existence, let alone the application. There has been much confusion that required a ruling by the Center for Medicare Services three years ago, as many dioceses were interpreting the law incorrectly.

There are many more considerations involved in constructing a health plan for Catholic employers. This generally must be done with a custom product, not an off-the-shelf “normal” design. A custom plan often requires the cooperation of the insurer, filing with regulatory agencies and complex legal issues.

Split Off Drugs?

It is sometimes recommended that Catholic institutions should split off drugs—that is, have a fully insured health plan and self fund prescription drug claims—in order to avoid government mandates for contraceptives. It is suggested that such a scheme also produces cost savings, sometimes leading to rebates from the insurance companies that offer such standalone drug programs. My experience has shown this not to be the case, and I would advise against it.

Let us look how drugs are purchased by insurance plans. An insurance company will often subcontract portions of an employer ’s health plan including drugs, trans- plants and networks of doctors and hospitals. All these are normal subcontracted functions under the health plan. With regard to prescription drugs, most health plans use the same four pharmacy benefit managers.

Separating out drugs does not generate any cost savings by itself. There are actually several possible negative economic consequences. Many times drugs are not covered under the stop loss agreements if an employer self funds, but this is especially likely if drugs are covered through a separate plan. If the institution has a fully insured medical plan and then self funds the drugs, it could have unlimited drug cost liability. How would the institution budget? What if it has a terrible year? Will it have adequate reserves?

As for avoiding state mandates, self-funding a drug plan alone may not help. Regulators could simply decide that drugs are part of the major medical plan, regardless of the setup. For instance, when a patient is in the hospital, some drugs are covered under the medical plan; when he leaves the hospital and takes the same drugs, they may be covered by the self-funded pharmacy plan. How does the institution explain that inconsistency? The opportunity for misinterpretation by state regulators is great, and a legal fight to argue otherwise could be costly.

My best advice: do not do it. Leave the pharmacy plan to the insurer and take the huge discounts.

Pool Together?

It is also often recommended that Catholic institutions “pool” together for health insurance benefits, but there are many reasons why a pooled plan could be a disaster waiting to happen.

If the goal is to avoid mandates as a religious employer, the courts have indicated that the pooled entity itself must be “Catholic.” Would that new entity qualify for inclusion in the Official Catholic Directory?

And what about linking an institution’s finances with another entity? My firm has several clients that have struggled through the huge time, effort and cost of fighting sexual abuse lawsuits. One has filed for bankruptcy, and the lawyers aggressively sought to “find” money. Does another institution want to intertwine finances with such a troubled entity at this time? What kind of risk does that add? I know that this is a terrible question, but it is an honest, real-world question. Pools have set up separate corporations to try to limit the risk to individual employers, but the more that the pool or self-funded plan is walled off, the less likely that it will be considered “Catholic” by regulators or the courts. The two goals are somewhat at odds with each other.

Another argument for a pool is the opportunity for a volume discount, which in itself is a good idea. However, a good firm can help employers create groups that are financially separate, with different premium levels, yet receive a volume discount. Think about going to the car dealership and pooling with 10 entities for a fleet dis- count, but writing separate checks. It is the same concept, provides the same net result and risks much less liability, since you do not in fact pool assets together.

You may have heard that XYZ Diocese pools together and it works great. Pools do often work great, right up to the day they do not! Consider a real example:

A large Catholic pool run by a secular broker struggled with passing on necessary rate increases, and the trustees did not fund the plan to the level it needed. The plan nearly ran out of money. The dioceses participating in the plan were surprised by a mid-year assessment. Now how do you budget for that?

Ultimately, when an institution is in a pool, it owns all the risk of the whole pool. It is like owning a condo and having the pool leak. Every unit gets assessed money. It does not matter if a participating institution was excellent and had low claims. Pools generally must have the ability to assess or they run the risk of not having funds to pay unexpected or higher-than-expected costs.

Now here is the real mess: How should the pool assess, or make any similar decision? Should it divide the total amount of the assessment by the number of entities in the pool? The larger entities would favor that, but a smaller entity would want the assessment to be apportioned by the number of insureds for each participant.

So assume that everything is pro-rated according to each entity’s number of insureds—then turn the tables. What happens when the pool needs to pick a network of doctors? Back to my real example: The pool decided on a network that was not great for small rural dioceses but excellent for large dioceses. What could the little guys do? They only had 100 votes, while the big member had 50,000.

At some point the pool will not work for a member institution. Typically it is when the institution is very healthy and the pool is sick. The institution’s rates go up, and its trustees want to leave. It cannot afford the huge premiums, and it can go locally for much less. The institution leaves the pool, thus the remaining participants have fewer people to spread the risk of claims. Rates go up, and more participants leave. This drives the rates way up, and eventually the plan collapses. This is classic “adverse selection” as we call it in the insurance industry.

Now there are rare occasions when adverse selection is tempered. There is a state-specific Catholic pool where one health insurer virtually owns the state, due to restrictive laws; this seems to function well.

But that is the exception. The insurance industry tried for years to form pools through “associations.” They almost all lost money and blew up the pools with huge claims. Remember chamber of commerce pools?

Yet another problem with pools is how to get out. They tend to be thrown together for the sake of what often turns out to be short-term cost savings. Rarely do the pool members ask going in, “What are the rules to leave?” The example I have been using had two small entities leave. One had a surplus and its employees were very healthy; it was not allowed to take their surplus with them when they left. Another entity that left had a deficit of several hundred thousand dollars; it was forced to pay the debt to the pool. This institution had not budgeted for that, believing that the premiums they paid were the maximum required.

Let us say that one entity in a pool is knowingly incurring non-eligible expenses or is poor at controlling eligibility. How do other institutions control a pool participant? One bishop or entity cannot tell another what to do. What is the enforcement action? What if the problem participant is costing other institutions money that they really should not be paying? This is real and happens often. The other institutions cannot do much except maybe leave the pool, but under what terms?

Another example: Many dioceses and even some larger independent Catholic institutions do not have centralized payroll. Their sub-units hire and fire, and the master entity has difficulty controlling and keeping track of who should be on the health plan. In such cases there are often people not on the plan who should be, and others who are on the health plan but should not be.

Consider this also: what if the pool fails or too many groups suddenly pull out? A sick group could have a world of problems. Do groups that leave take pending claims with them? Let us say their insured receive one million dollars of health care on December 31, and the group leaves on January 1. Does the group that left “own” the claim legally, or are the remaining groups “stuck” with it? It is typical for many pools to not fully educate, disclose or address these issues, and so many of their member entities do not fully understand their liabilities.

Conclusion

For many institutions, employee health insurance is the second largest expense after payroll. Yet most will spend less time on their health plan than mundane purchases such as computers or telephone plans. Given the increasing dangers to Catholic institutions because of federal and state regulation of employee benefits, it is critical for Catholic institutions to take a fresh look at their health insurance decisions.

This applies especially to the choice of broker. Most institutions consult only with local general practitioner agents. These may be friends, donors or other honest, hard- working people. The problem is they are not experts in this unique and specialized field, lacking the skill sets, abilities and relationships of Catholic-only agencies. They do not devote all or even a substantial part of their time to Catholic institutions and their particular requirements.

Ultimately, to properly construct a “Catholic” health plan, Catholic institutions need an expert. Think of it this way: if your child becomes ill and needs brain surgery, you would never ask a pediatrician to be the surgeon. In situation after situation, problems could have been avoided if a Catholic institution had hired a Catholic-specific firm to stay on top of changes to the law and to the health plan, avoiding future lawsuits.

The bottom line is that today’s legal and policy environment makes it difficult for Catholic institutions to buy “off the shelf ” health insurance that is morally sound. The good news is that there are ways to craft Catholic health plans. To help navigate the complex issues, there are at least three major firms that work only with the Catholic Church and others with particular expertise in designing plans for Catholic institutions.

Contraceptive Mandates and Immoral Cooperation

As the largest provider of nongovernmental, nonprofit health care in the United States, Catholic health care is susceptible to being viewed as just another secular institution engaged in the welfare of the larger society, and at its behest. Those who wish to deny the ministerial nature of Catholic health care have capitalized on this misperception for their own political agendas. Advocates for abolishing sexual mores, for providing abortion on demand and for redefining the human being as a bearer of rights have engaged political structures in their pursuit of reshaping Catholic health care in their own image. They have made some subtle and some blatantly obvious attempts at changing the public perception of the purposes of Catholic health care. These have escalated into legislative initiatives that attempt to force Catholic health care to violate the tenets of the Catholic Church in the delivery of health care.

First, there is a need to correct the misperception that the delivery of health care is a secular endeavor. The Christian woman Fabiola, who established a hospital in Rome around the year 390, was the earliest forerunner of today’s nurse. Her decision to dedicate her wealth and her life to the care of the sick poor was grounded in her Christian faith. St. Benedict founded the Benedictine nursing order, based on the Christian ethic, around the year 500. The very names of the oldest foundations of health care, which continue to exist today—including the Hotel-Dieu in Paris, founded in 660—reflect the religious tradition of health care delivery. A structure for the delivery of nursing care was created by the Christian religious order the Hostpitallers of Saint John of Jerusalem in 1113. This historically is considered to be the first organized structure for the delivery of health care. The first identified nurse in the territory that was to become the United States was Catholic friar Juan de Mena, from Santo Domingo of Mexico. He arrived on the shores of the southern Texas coast in 1554. The friar was known for his humility and his charity toward the sick.

The second oldest public hospital in continuous existence in the United States, Charity Hospital in New Orleans (1736), despite being a public hospital, was under the administration of the Daughters of Charity from 1834 to 1970. The oldest hospital west of the Mississippi was established in St. Louis, Missouri, in 1828 by St. Elizabeth Seton’s Sisters of Charity. Today, through the centuries of initiatives to apply the Gospel imperatives in the service of neighbor, Catholic health care is the largest provider of nongovernmental, nonprofit health care in the United States. With this stunning history of health care in the ministry in the Catholic tradition, it is disingenuous to identify Catholic health care as a secular function of society. Yet, state by state, there have been legislative initiatives to define Catholic health care ministries as secular endeavors, not protected by the free exercise clause of the First Amendment of the United States Constitution.

The Secular Redefinition of Catholic Health Care

The escalation of legislated health care mandates illustrates this trend to secularize Catholic health care. (See the regularly updated “Table of Legal Mandates State by State” at www.ncbcenter.org.) The majority of states mandate that contraceptive coverage, including prescription drugs and devices, be included in employee insurance plans that offer prescription coverage. Of these mandating states, few provide a true religious or conscience exemption. Increasingly states are mandating the administration of emergency contraception in emergency departments to victims of sexual assault, even when there is an indication that the medication would function as an abortifacient. Only in rare cases are states providing conscience exemptions for the health care agency. Pharmacists have been more successful in securing refusal provisions that protect them from having to violate their consciences in the dispensing of emergency contraception. Increasingly, however, they have had to seek court injunctions to protect their rights of conscience.

Of significant concern is the redefinition, in statutes or through the courts, of a religious employer. Arizona, Arkansas, California, Hawaii, New York, North Carolina and Oregon are examples of states which have narrowly defined a religious employer to include only nonprofit agencies (which would include Church ministries) that serve or employ primarily members of their own faith (which would not include the majority of Church ministries). Here rests the example of a revisionist’s view of the role of religion in society and the protections that should be provided to religious entities.

To define a religious employer as primarily hiring or serving its own members is the antithesis of the historical role of a religious ministry. The classic example of this can be seen in the parable of the Good Samaritan (Luke 10: 29-37). In defining who is one’s neighbor, who we are to love as we love ourselves, Jesus tells a young legal scholar the story of the compassionate Samaritan who, unlike a priest and Levite, stopped and ministered to a man who was beaten and robbed along the road to Jericho. The Samaritans were despised by the Jews. Jesus asks, “Which of these three, in your opinion, was neighbor to the robbers’ victim?” The scholar answers, “The one who treated him with mercy,” and Jesus tells him to “go and do likewise.” Church ministries answer this call. They are not created to be self-serving and self-employing, but to care mercifully for those in need, regardless of their religion, ethnicity, gender, social status, vocational or marital status, or ability to pay. History supports this purpose of Church ministry.

Furthermore, Church hiring practices are based on the ministry being provided. In a Catholic school, where beliefs are imparted to the next generation, teachers of certain disciplines may be required to be Catholic. For the majority of ministries, competence in and adherence to the mission of the ministry are the usual criteria for employment. Finally, there are no client eligibility conditions (such as conversion to the Catholic faith) applied to recipients of Church ministry. However, states such as New York and California require that to be considered a religious employer one must have as a purpose the inculcation of religious values. It would be very interesting to see the response of state legislatures if Church ministries attempted to apply the very criteria that these legislatures have stated define a religious ministry: that is, for a Catholic hospital to hire only Catholic workers and to treat only Catholic patients, or those willing to be evangelized in the faith.

Not only have state legislatures redefined Church ministries, but so have the courts. In 2006, the New York State Court of Appeals, by a unanimous vote, upheld two lower court decisions requiring the Church to include contraceptive drugs and devices (including abortifacients) in their employee prescription drug plans. Religious or faith-based ministries may be exempted only if they evangelize, and employ and provide services primarily to their own members. Thus, while employers of Catholic schools and chanceries may be exempted, most other ministries may not be. In the decision, it was evident that what was viewed as the need to remedy a bias against women took precedence over the rights of people of faith. In considering the constitutionality of the narrow legal definition of a “religious employer,” the justices acknowledged the reasoning of the New York legislature: “Those favoring a narrower exemption asserted that the broader one would deprive tens of thousands of women employed by church-affiliated organizations of contraceptive coverage. Their view prevailed.”1 In other words, the pro-contraception/pro-abortion agenda prevailed over religious freedom. This agenda was supported by the New York State Court of Appeals: “Finally, we must weigh against plaintiffs’ interest in adhering to the tenets of their faith the State’s substantial interest in fostering equality between the sexes, and in providing women with better health care.”2

A similar bias was demonstrated by the Supreme Court of California. This court concluded that the California legislature did not violate the “free exercise [of religion] clause” of the California Constitution when mandating that Catholic Charities of Sacramento include contraceptive drugs and devices in its employee prescription coverage plan. The justices found that it is within the legislature’s competence to identify subtle forms of gender discrimination, by which they referenced discrimination based on pregnancy, childbirth or related medical conditions: “Certainly the interest in eradicating gender discrimination is compelling. We long ago concluded that discrimination based on gender violates the equal protection clause of the California Constitution… and… triggers the highest level of scrutiny.”3 Again, the pro-contraception/pro-abortion agenda prevailed over religious freedom.

The First Amendment of the U.S. Constitution states that Congress will make no law respecting a religious establishment. However, it immediately follows with a prohibition against violations of the free exercise of religion. These provisions have been described as the separation of church and state. However, no other concept of constitutional protections has been more misunderstood or misused by those with their own political agendas. The constitutional scholar Stephen Carter addresses this misperception: “For the most significant aspect of the separation of church and state is not, as some seem to think, the shielding of the secular world from too strong a religious influence; the principle task of the separation of church and state is to secure religious freedom.”4

Clearly, there has been a redefinition by the courts of the meaning of the First Amendment since its adoption in 1791. The mandate for demonstrating a prevailing state interest before passing a law that infringes on a religious freedom has been marginalized. When rights conflict (as in this case), the balance has tragically shifted from religious freedom to “reproductive rights.” In the Oregon v. Smith decision in 1990, public employees who smoked peyote as part of a religious ritual were held to not be protected by the free exercise clause of the First Amendment.5 The impact of the decision is that the state has no obligation to demonstrate a prevailing state interest if a legal mandate or prohibition is applied to all persons. This negates the very purpose of the free exercise of religion clause. As Carter states, “If the state bears no special burden to justify its infringement on religious practice, as long as the challenged statute is a neutral one, then the only protection a religious group receives is against legislation directed at that group. But legislation directed at a particular religious group, even in the absence of the free exercise clause, presumably would be prohibited by the equal protection clause.”6

In response to the Oregon v. Smith decision, advocates of religious freedom succeeded in securing passage of the Federal Religious Freedom Act of 1993. This legislation prohibited the government from limiting religious freedom in the absence of a compelling government interest, and even then the limitation had to be the least restrictive. In 1997, however, in the decision Boerne v. Flores, the U.S. Supreme Court overturned the law on the basis that it interfered with states’ rights.7

In his analysis of the changing perception of the First Amendment, Carter cites the legal scholar Harold Berman, who asserts that contemporary thinking on the First Amendment is sharply discontinuous with that of the Founding Fathers. Berman further asserts that the establishment clause of the First Amendment should be understood to allow “government support of theistic and deistic belief systems more nearly comparable to the government support which is permitted to be given to agnostic and atheist belief systems.”8 While Berman’s analysis addressees government support for faith-based endeavors, he identifies a phenomenon which some would consider to be a bias against religions by the very state(s) charged with protecting religious rights. Clearly, recent actions of legislatures and the courts have demonstrated this phenomenon. To fail in vigorously opposing such actions can have long-term and catastrophic implications for people of faith. Carter forecasts, “The potential transformation of the Establishment Clause from a guardian of religious freedom into a guarantor of public secularism raises prospects at once dismal and dreadful.”9 All one has to do is analyze the burgeoning list of mandates against religious freedom to understand the proportions of this very real threat. (See “Table of Legal Mandates” at www.ncbcenter.org.)

It will not end there. Ever-increasing threats exist, such as mandated assisted suicide and the recognition of same-sex unions, to name two examples. The question is, can the Church acquiesce under the misnomer of “the greater good?” Analyses of this conundrum have centered on proportionality of evil to good. There is a risk in refusing to comply with the legislative mandates (refusing to be complicit with evil) of losing one’s right to engage in the social and health care ministries of the Church. There is also the real concern that if the Church responds to the only morally tenable option – given the rulings in New York and California, for example – it would have to discontinue all prescription benefit coverage for employees. However, providing coverage for contraceptives and abortifacients may, in canonical terms, cause representatives of the Church to commit gravely imputable acts by cooperating with evil.

Grave Imputability

The concept of grave imputability relates to external violations of Church law. Canon 1321 §1 provides an insight into the nature of grave imputability: “No one is punished unless the external violation of a law or precept, committed by the person, is gravely imputable by reason of malice or negligence.” Thus, one is accountable for violations of the law through both intentional commissions (malice) and omissions of which they are culpable (negligence).10 The question is, could representatives of the Church be committing gravely imputable acts by allowing their employee benefit plans to pay for contraceptive drugs and devices, including abortifacients? Specifically, could they be considered in violation of canon 1282, which states, “All clerics or lay persons who take part in the administration of ecclesiastical goods by a legitimate title are bound to fulfill their functions in the name of the Church according to the norm of law?”

There is no question that the use of contraceptives, even by married couples, is gravely and intrinsically evil. Pope Paul VI states, “It is a serious error to think that a whole married life of otherwise normal relations can justify sexual intercourse which is deliberately contraceptive and so intrinsically wrong.”11 The Catechism of the Catholic Church states that contraception, even to regulate births, is morally unacceptable: “The regulation of births represents one of the aspects of responsible fatherhood and motherhood. Legitimate intentions on the part of the spouses do not justify recourse to morally unacceptable means (for example, direct sterilization or contraception).”12

What accountability, then, is borne by those who facilitate such use of morally unacceptable means? Pope Paul VI states that to make it easy for another to commit this intrinsic evil also is “an evil thing”: “Not much experience is needed to be fully aware of human weakness and to understand that human beings—and especially the young, who are so exposed to temptation—need incentives to keep the moral law, and it is an evil thing to make it easy for them to break that law.”13 Causing another to break the law is, in and of itself, scandal, which is morally illicit.14 Furthermore, the scandal is grave when it is caused by a representative of the Church, “who by nature or office [is] obliged to teach and educate others.”15

This grave nature of the matter is compounded by the fact that almost all state contraceptive mandates include insurance coverage for “devices” such as intrauterine abortifacient devices. Abortion is one of the most serious violations of the law. “A person who procures a completed abortion incurs a latae sententiae excommunication” (can. 1398). A latae sententiae penalty is one that is incurred ipso facto when the specific external violation of the law is committed (can. 1314). Abortion includes the destruction of the embryo or fetus any time after conception (fertilization).16 The Ethical and Religious Directives for Catholic Health Care Services are consistent with this interpretation of the meaning of abortion. Directive 36 states, in part, “It is not permissible, however, to initiate or to recommend treatments that have as their purpose or direct effect the removal, destruction or interference with the implantation of a fertilized ovum.”17 Therefore, initiating or recommending the use of abortifacient drugs or devices is also prohibited.

Canon 1329 addresses the imputability as it pertains to accomplices without whose assistance the delict (external violation of the law) would not have been committed:

  • 1. If ferendae sententiae [imposed, not latae sententiae] penalties are established for the principal perpetrator, those who conspire together to commit a delict and are not expressly named in a law or precept are subject to the same penalties or to others of the same or lesser gravity.
  • 2. Accomplices who are not named in a law or precept incur a latae sententiae penalty attached to a delict if without their assistance the delict would not have been committed, and the penalty is of such a nature that it can affect them; otherwise, they can be punished by ferendae sententiae penalties.

Given these laws, are representatives of the Church accomplices when, under legal mandate, they allow their employees to receive contraceptive coverage, including coverage for abortifacient devices, through the Church’s employee benefit plans? A relevant factor that exempts one from a penalty for a delict is coercion. However, there are provisions to this exemption. One relevant exemption pertains to “a person who acted coerced by grave fear, even if only relatively grave, or due to necessity or grave inconvenience unless the act is intrinsically evil or tends to the harm of souls” (can. 1323, 4º). The presence of legal coercion is a fact in contraceptive mandate laws, but the act of facilitating contraception and the use of abortifacients is “intrinsically evil” and “tends to harms souls.” The bishops of the United States have issued a statement addressing the harm done to couples, in Married Love and the Gift of Life: “Suppressing fertility by using contraception denies part of the inherent meaning of married sexuality and does harm to the couple’s unity.”18 Thus, this exemption from imputability does not apply.

One also can look at the meaning of “malice” in canon 1321 §1: the Latin text uses the word dolo, meaning “deliberate intent to violate the law.”19 One can also examine factors in cooperation with evil: “The term ‘cooperation’ refers to any specific assistance knowingly and freely given, either as a means or an end, to a morally evil act principally performed by another individual or institution.”20 In formal cooperation in evil, the cooperators in the evil act have the same intent as the principal agents of the act. For the representatives of the Church to engage in explicit formal cooperation in providing contraceptives and abortifacient devices to their employees, they must have the same intent as the medical professionals who provide these prescriptions or services. The intent could also be implicit, in giving assistance for a specific portion of the immoral act or in providing prerequisite assistance to enable the immoral act to occur.

There is much evidence to support the fact that bishops and other representatives of the Church have opposed contraceptive mandates as a violation of the moral teachings of the Church. Thus, there is no malice or deliberate attempt to violate Church law by complying with contraceptive mandates.

Ethicists have examined the other levels of cooperation pursuant to adhering to contraceptive mandates. Peter Cataldo differentiates these levels as follows:

Cooperation is material if the act of the principal agent is not intended. The act of the cooperator in material cooperation is itself good or morally indifferent. Material cooperation can be either immediate or mediate. Immediate material cooperation contributes to the essential circumstances, and mediate material to the nonessential circumstances, of the principal agent’s act. Mediate material cooperation can be either proximate through a direct causal influence, or remote through an indirect causal influence, upon the act of the principal agent. Immediate material cooperation by an institution in an intrinsically evil act such as contraception is never morally permissible. Mediate material cooperation can be morally tolerated if there is a great good to be preserved or a grave evil to be avoided.21

The question is whether enabling payment for the prescription constitutes an essential circumstance, making the immoral act possible.

There are numerous permutations of employee benefit plans used by Church corporations. Employee benefit plans are funded in part by the employer and in part by all of the employees participating in the plan. There is nothing more essential to the completion of an act than the payment for the act, which would not be completed without such payment, thus making the material cooperation immediate. Even if one did not agree with this premise, and held that cooperation with contraceptive mandates constitutes mediate material cooperation, one would have to analyze the good being preserved and the grave evil to be avoided in determining whether the cooperation is licit. As stated earlier, there are goods to be preserved: the continuance of the health care and social ministries of the Church, and the continued employment of thousands of persons provided with prescription coverage. However, to preserve these goods requires cooperation in the intrinsically evil acts of contraception and abortion (through abortifacient devices). While canon 1324 §1,5o provides for a tempering of a penalty is a violation is perpetrated under coercion, and 1324 §3 precludes a latae sententiae penalty under such circumstance, canon 1323, 4o states that one is still subject to a penalty for violating a law, even if coerced, if the act is intrinsically evil or tends to harm souls.

The evil of cooperating in contraception and abortion is not the only evil to be averted. By cooperating with contraceptive laws, Church employers are forcing their employees to contribute to the insurance pools that pay for the immoral prescriptions and services. There is a third evil to be averted, and it is that which was predicted by Paul VI in Humane vitae. He predicted that government would impose its will in the area of contraception:

Who will prevent public authorities from favoring those contraceptive methods which they consider more effective? Should they regard this as necessary, they may even impose their use on everyone. It could well happen, therefore, that when people, either individually or in family or social life, experience the inherent difficulties of the divine law and are determined to avoid them, they may give into the hands of public authorities the power to intervene in the most personal and intimate responsibility of husband and wife.22

By collaborating, even under protest, with contraceptive and abortifacient mandates, the Church is paving the way for further government intrusions. This is a grave evil to be avoided. The Church has made every legal attempt to overturn the contraceptive mandate laws. To date, all efforts to secure judicial recourse have failed. To continue to comply with such mandates can only lead to a further erosion of religious freedom. Furthermore, to acquiesce to a redefinition of our ministries as secular entities not only is historically inaccurate but also has significant implications for the future of religion in the United States. To comply now would appear to be akin to negligence.

The second criterion of grave imputability for a violation of the law, culpable negligence, is also addressed in canon 1321 §1: “No one is punished unless the external violation of a law or precept, committed by the person, is gravely imputable by reason of malice or negligence [culpa].” To comply with contraceptive and abortifacient mandates could constitute ecclesiastical negligence pursuant to canon 1389 §2: “A person who through culpable negligence illegitimately places or omits an act of ecclesiastical power, ministry or function with harm to another is to be punished with a just penalty.” Canon 1321 §2 states that ordinary negligence due to the omission of necessary diligence is not punishable by law: “A penalty established by a law or precept binds the person who has deliberately violated the law or precept; however, a person who violated a law or precept by omitting necessary diligence is not punished unless the law or precept provides otherwise.” However, canon 1321 continues, “when an external violation has occurred, imputability is presumed unless it is otherwise apparent” (can. 1321 §3).

Need for Decisive Action

Concerning culpable negligence, no one could accuse the Church of not performing due diligence on the matter. Extensive legal resources have been expended in the pursuit of religious freedom. Now that legal remedies are being exhausted, the issue is how will the Church act in accord with its due diligence? Now is the time to act: to refuse to comply, so that no further harm can be done to the ministries of the Church, her employees and the future of religious freedom. The history of Catholic health care is being rewritten by legislatures and the courts, who are denying the ministerial nature that is its foundation. The essential meaning of religion is being redefined to deny its very essence. Furthermore, for the Church not to act will fulfill the prophesies of Paul VI, as well as those of Carter: “The potential transformation of the Establishment Clause from a guardian of religious freedom into a guarantor of public secularism raises prospects at once dismal and dreadful.”23

Since the U.S. Supreme Court declared the federal Religious Freedom Restoration Act of 1993 unconstitutional, efforts to remedy this in Congress have stalled. In 2000, Congress passed a limited version of an RFRA, the Religious Land Use and Institutional Persons Act. This legislation restricts government intrusion into the use of religious land, and protects religious freedom of institutionalized persons. The final recourse to redress the contraceptive mandate laws and rulings of New York and California is the U.S. Supreme Court. However, in October 2004 the U.S. Supreme Court refused to hear the challenge to the decision of the Supreme Court of California; and in October 2007 the U.S. Supreme Court refused to hear a challenge to the New York Court of Appeals decision. Now what should be done?

Eventually the Church will have to say, “Enough. We will not be complicit in the violation of moral law.” This will require significant employee relations and public relations campaigns to demonstrate the source of the problem: violation by the government of religious freedom that the drafters of the U.S. Constitution intended to protect. Sufficient notice of the intent to no longer comply, perhaps by no longer offering prescription coverage to employees, will be needed. Then the very secular society that depends on the services of the Church, which is the largest provider of nongovernmental, nonprofit health care, social services, human services and education in the United States, will be responsible for the outcome.

 

 

 

Implications of Mandatory Insurance Coverage of Contraceptives for Catholic Colleges and Universities

You have asked us to describe some of the current issues surrounding conscientious objections to the funding of contraceptives through employee and student health insurance benefit plans. In particular, you have asked us to describe the general considerations confronting Catholic institutions that seek to comply with their understanding of their obligations under Ex corde Ecclesiae and Roman Catholicism generally.

We emphasize at the outset that this is not legal advice, and no one should treat it as such. Nor are we presuming to give religious or theological advice.

We also note that it is not only those Catholic institutions that conform in all respects to the most obvious reading of Ex corde Ecclesiae, canon law, or any other source of church authority that enjoy religious liberty under the law. At least since Thomas v. Review Board, 450 U.S. 707 (1981), it has been clear that it is the specific religious beliefs of the person or institution before the Court that determine the extent of conscience protection afforded by civil courts. The legal analysis that follows is therefore belief-neutral.

Introduction

The issue of contraceptive mandates is a new one for most Catholic institutions. The trend toward state-mandated contraceptive coverage in employee health insurance plans began in the mid-1990s1 and was accelerated by the decision of Congress in 1998 to guarantee contraceptive coverage to employees of the federal government through the Federal Employees Health Benefits Program (FEHBP).2 After FEHBP—the largest employer-insurance benefits program in the country—set this precedent, the private sector followed suit, and state legislatures began to make such coverage mandatory.3

The trajectory of state law and the Equal Employment Opportunity Commission’s (EEOC) recent interpretations of Title VII and the Pregnancy Discrimination Act (PDA) pose serious threats to the conscience rights of Catholic employers who believe that they cannot fund employee prescription contraceptives without contradicting fundamental tenets of their faith. Should this trend continue, many Catholic institutions will not be able to comply with state law and the PDA while remaining true to their religious convictions. As a result, Catholic institutions might be compelled to suspend, or significantly restrict, the prescription health care benefits available to their employees.

Failure to exclude objecting Catholic entities from the requirement to provide contraception constitutes an abandonment of the government’s responsibility to protect against threats to the moral integrity of a large class of its citizens.4  What is at stake is therefore the right of an objecting Catholic college to remain “authentically Catholic” by its own lights.5

Overview of Governing Law

Catholic employers are no doubt familiar with Title VII, the primary federal law addressing employment discrimination. Title VII prohibits “discriminat[ion] against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin….”6  Title VII exempts religious organizations and institutions from its provision on religious discrimination, but does not exempt them from its provisions on gender discrimination.7

Title VII defines discrimination “on the basis of sex” to include discrimination “because of or on the basis of pregnancy, childbirth, or related medical conditions;” and specifies that “women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability or inability to work….”8

This part of Title VII, commonly known as the Pregnancy Discrimination Act (PDA)9, was added by Congress in 1978 in response to a Supreme Court decision holding that an employer ’s selective refusal to cover pregnancy-related disability was not sex discrimination within the meaning of Title VII.10  The PDA specifies that it “shall not require an employer to pay for health insurance benefits for abortion, except where the life of the mother would be endangered if the fetus were carried to term, or except where medical complications have arisen from an abortion.”11  The PDA does not define abortion, and makes no mention of contraception.12

In 2000, the EEOC issued an opinion stating that the refusal to cover contraceptives in an employee prescription health plan constituted gender discrimination in violation of the PDA.13  Although this opinion is not binding on federal courts, it is influential, since the EEOC is the government body charged with enforcing Title VII.14  This opinion led to many lawsuits against non-religious employers who refused to cover prescription contraceptives.15  The first federal court decision in one of these cases—Ericksov. Bartell Drug Co.—came less than a year after the EEOC opinion, and agreed that employers with prescription drug plans have “a legal obligation to make sure that the resulting plan does not discriminate based on sex-based characteristics and that it provides equally comprehensive coverage for both sexes.”16 The Supreme Court has not ruled on the issue of contraceptive coverage. But, since Erickson, new Title VII claims have been brought against Catholic institutions that did not provide contraceptive coverage.17

Current State Laws Concerning Insurance Coverage of Contraceptives

While virtually all insurance plans include coverage of prescription drugs, employers can opt to exclude coverage of the range of U.S. Food and Drug Administration (FDA)- approved prescription contraceptive drugs and devices.18  To counteract this policy, in the past two decades, 27 states have enacted laws to require insurers that cover any prescription drugs at all to cover all FDA-approved contraceptive drugs and devices.19 Furthermore, 16 of these states have mandated coverage of related outpatient services.20 Such state laws regulate college and university health plans for students as well as employees.

Catholic institutions are afforded limited protection in 15 of the 27 states.  These states have enacted conscience protections that allow institutional employers or insurers to exclude contraceptive coverage on religious or moral grounds.21  Under such provisions, a Catholic college or university may be able to exclude contraceptive coverage from its employee health plan. (However, the conscience protections do not extend to health plans offered by a college or university to its students.)22

The state exemptions ordinarily allow entities to opt out if covering contraception would interfere with the employer ’s “religious tenets” (e.g., Hawaii and North Carolina), “bona fide religious tenets” (e.g., Connecticut), or “bona fide religious beliefs and practices” (e.g., Maine and Maryland).23 Among the states that have enacted these mandates, Missouri is the most protective of conscience, allowing any employer to refuse coverage, regardless whether the motivation is based on religion or other ethical principle.24  The objections of Catholic institutions to covering contraception should meet any of these state standards, since Catholic institutions that object to contraception, sterilization, and abortion as “intrinsic evils” can invoke a number of doctrinal statements expressing the value and dignity of human life from conception and the sacredness of the marital act open to procreation.25

More complicated, however, is how the state laws define the religious employers to be exempted under their conscience provision. Some states do not define the term “religious employer ” at all, which could permit any institution that self-identifies as religious to claim the exemption.26  In North Carolina, for example, a religious employer is a non- profit organization whose purpose is to advance the “inculcation of religious values” and whose employees primarily “share the [employer ’s] religious tenets.”27  Thus, in North Carolina and states employing similar language, Catholic colleges would ordinarily be exempted. Hawaii’s statute is similar to North Carolina’s, although it also affords protection to nonprofit organizations that are owned or controlled by a religious employer, as long as the organization “primarily employs persons who share the religious tenets of the entity.”28 In New York and California, among others, the term “religious employer ” is interpreted so as to exempt Catholic churches themselves, but not the various organs of the Catholic Church such as Catholic Charities, or Catholic hospitals, colleges, universities or nursing homes.29

Catholic colleges are subject to the overlapping jurisdictions of the state and federal governments; a fact that complicates approaches to benefits decisions. For example, fully-insured health plans, such as those extended to employees and students of most colleges and universities, are governed by both federal and state law. Self-insured employee health plans, by contrast, are governed exclusively by federal law under ERISA.30  However, this federal preemption of state mandates under ERISA affects employee health plans only; student health plans remain subject to state regulations despite an institution’s decision to self insure.31

Since the PDA is federal law, a religious exemption to the PDA would be ineffectual in protecting religious employers in the 27 states that require contraceptive coverage. An exemption to the PDA would only affect those religious institutions that are able to provide self-insurance programs (that are subject to Federal ERISA) or in the minority of states that have not mandated contraceptive coverage.

Trends in the Law

The law governing contraceptive mandates has seen much change in recent years. One of the most far-reaching state contraceptive mandates was enacted earlier this year in Wisconsin. As of January 2010, Wisconsin will require all providers of health insurance to include contraceptive services, irrespective of religious affiliation, moral objection, or category of “religious employer.” The Roman Catholic bishops of Wisconsin issued a statement in response, decrying “this blatant insensitivity to our moral values and legal rights.”32  The new mandate will have direct impact on all objecting Catholic institutions and dioceses, except for the few that have the size and wherewithal to self-insure for their employees.33

The Wisconsin law is the latest iteration of a growing body of state law that rejects conscientious objections to contraceptive mandates. For instance, in 2004 the California Supreme Court held that Catholic Charities was required to cover contraceptives under their fully-insured employee health plan in order to comply with California’s Women’s Contraceptive Equity Act (WCEA). See generally Catholic Charities of Sacramento, Inc. v. Superior Court, 85 P.3d 67 (Cal. 2004).34

The reasoning in Catholic Charities of Sacramento was followed in New York, where the state’s highest court affirmed a decision that Catholic Charities was not a “religious employer ” for the purposes of a religious exemption to the state mandate on contraceptive coverage.35  Part of the intermediate appellate court’s explanation for overriding Catholic Charities’ Free Exercise claims was that “the paramount right of personal health…of many employees who do not share plaintiffs’ views on contraceptives would be subordinated to plaintiffs’ right to freely exercise their beliefs.”36  This reasoning manifests the courts’ and legislatures’ recent tendency to treat government as the guarantor of a limited set of state-defined benefits—even at the expense freedom of conscience—rather than as the protector of the liberty and integrity of persons.37

If other state courts follow the reasoning of the California and New York courts, then state contraceptive mandates will affect Catholic institutions in every state where state law does not provide conscience protections.

There is similar uncertainty with respect to the EEOC’s claim that the PDA provides for a contraceptive mandate for employers. Lower courts have split over whether Title VII, as amended by the PDA, compels insurance coverage for contraceptives. Compare Cummins v. Illinois, No. 2002-cv-4201-JPG, 2005 U.S. Dist. LeXIS 42634 (S. D. Ill. 2005) (employee health plan does not violate Title VII if both men and women are denied contraceptive coverage); Alexander v. American Airlines, Inc., 2002 WL 731815 (N.D.Tex. 2002) (“[b[y no stretch of the imagination does the prohibition against discrimination based on ‘pregnancy, childbirth, or related medical condition[s]’ require the provision of contra- ceptives.”) with Erickson, 141 F. Supp. 2d 1266 (failure to provide contraceptive coverage violated the PDA); Stocking v. AT&T Corp., 436 F.Supp.2d 1014 (W.D.Mo.2006) (same); Cooley v. DaimlerChrysler Corp., 281 F.Supp.2d 979, 984-85 (E.D. Mo. 2003) (same); Mauldin v. Wal-Mart Stores, Inc., 2002 WL 2022334 (N.D. Ga. 2002) (same).

Although the federal district courts have split over the issue of whether the PDA requires employers to provide contraception, the only federal court of appeals to reach the issue held that the PDA did not include a contraceptive mandate. In 2007, the Eighth Circuit Court of Appeals ruled that contraception was not sufficiently “related to” pregnancy to fit under the umbrella of the PDA. See In re Union Pacific Railroad, 479 F.3d 936 (8th Cir. 2007). Specifically, the court grounded its opinion on the fact that contraception itself is “gender-neutral” and the plain language of the PDA statute did not refer to contraception.38  An employee health insurance plan, therefore, did not violate the PDA by failing to include contraception coverage. Since the court ruled the employer ’s decision not to cover contraceptives did not involve a “sex classification,” it could not be categorized as a sex-based violation of Title VII.39

Given the relatively recent vintage of the EEOC’s interpretation (2000) and the mixed court rulings so far, it remains an open question whether federal law, like some state laws, will impose a contraceptive mandate on objecting Catholic colleges and institutions.

Legal Defenses for Catholic Colleges and Universities

Catholic institutions with objections to contraceptive mandates are not wholly without legal options, even in the face of federal or state law. There are two main kinds of legal defenses that Catholic colleges can raise in response to federal- or state-imposed contraceptive mandates.

First, there are various defenses arising from the federal Constitution or state constitutions that objecting Catholic institutions may be able to employ to defend against contraceptive mandates. Colleges may have recourse to state constitutional language and the First Amendment of the U.S. Constitution, which preserve free exercise of religion. Colleges may also raise defenses rooted in the constitutional doctrine of “church autonomy,” which protects internal church affairs on matters of theology and ecclesiastical governance from government interference.

Despite these constitutional guarantees, Catholic institutions will have to be prepared for arguments stemming from the Supreme Court’s decision in Employment Division v. Smith.40  In Smith, the Supreme Court announced that the First Amendment’s free exercise clause “does not relieve an individual of the obligation to comply with a ‘valid and neutral law of general applicability,’” simply because “the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes).”41  In other words, the fact that an act infringes on the religious beliefs or regulates the religiously motivated policies of a Catholic institution does not necessarily make the law unconstitutional.42 This is because, as the New York and California courts have asserted, their state contraceptive insurance mandates “apply neutrally and generally to all employers, regardless of religious affiliation, except to those few who satisfy the statute’s strict requirements for exemption on religious grounds.”43

In New York and California, “those few” may not include Catholic colleges. Nonetheless, objecting Catholic institutions can argue that the definition of a “religious employer ” for purposes of a statutory exemption should comprehend Catholic colleges with a strong Catholic identity, since there is a very strong argument that the mission of a Catholic college is “to inculcate religious values.”

That said, any constitutional defense will necessarily vary with both the location and the circumstances of the particular Catholic institution affected. Therefore experienced constitutional counsel should be consulted at the earliest opportunity.

Second, Catholic institutions can raise various statutory defenses to contraceptive man- dates. These include federal and state “Religious Freedom Restoration Acts,” as well as various anti-discrimination statutes.44  These laws typically protect against (a) religious discrimination and (b) “substantial burdens” on religious exercise, without regard to whether the government intended to discriminate. However, in the context of an EEOC action, the EEOC is likely to argue that statutory religious discrimination defenses do not trump gender discrimination claims made under the PDA.45 Moreover, since state religious freedom laws (including state constitutions) do not protect against action by the federal government, PDA claims brought by the EEOC would be relatively difficult to defend against on that basis.

Catholic institutions should be aware that all of these protections—constitutional and statutory—are subject to the requirement that the religious institutions’ claims be sincere, or “bona fide.” Although the courts will not delve into the reasonableness of a religious belief, they are competent to judge whether a belief is “sincerely held.”46  Insincere religious beliefs enjoy neither constitutional nor statutory protection.47 For example, a prison inmate who requests to be served a vegetarian diet for religious reasons but who nonetheless buys hot dogs from the commissary cannot invoke free exercise protections because his behavior appears to be insincere. In the context of Catholic colleges and universities, first acting inconsistently with the school’s religious identity and then later claiming a religious exemption (after a lawsuit has been filed) is unlikely to succeed.

As with the constitutional defenses, there is no one-size-fits-all legal strategy to law- suits attempting to impose contraceptive mandates on Catholic institutions. Therefore the key to raising a successful defense will be to involve competent counsel at an early juncture.

Areas of Consideration for Catholic Colleges and Universities

Depending on the state legislative developments and the outcome of future litigation over the scope of the PDA, objecting Catholic institutions may have to resort to creative arrangements to balance treating their employees and students justly and remaining faithful to their principles. Some possible courses of action and recommendations are outlined below:

Eliminating Prescription Drug Benefits Altogether. This option was proposed by the New York Court of Appeals in Catholic Charities of Albany, but has obvious drawbacks, including burdens on students, employees and their families who require prescription drugs.48  It would also likely present objecting Catholic institutions with the dilemma of reconciling Catholic teaching on living wages for workers with their beliefs about facilitating contraception, sterilization, and abortion.

Eliminating prescription drug benefits altogether may be a more appealing option for student health insurance plans (rather than employee plans).  Already, student plans tend to be less comprehensive than employee plans; students are typically offered a choice among different plans with varying levels of benefits.  Because basic student plans, or “catastrophic plans,” usually exclude prescription drugs or “out- patient treatment” altogether, these plans would not be obligated to provide “family planning services” under state mandates.  Moreover, unlike a university employee, a student pays an additional fee for health coverage offered by the university.  Thus, a student who desires prescription health benefits can simply opt for a private health plan instead of the university plan. Although the student might have to sacrifice convenience, a Catholic college might decide this is an acceptable compromise.

Attempting to “Out-source” Contraceptive Coverage. Another way that some Catholic institutions, principally health care systems, have dealt with mandated contraception coverage is by attempting to distance themselves from the actual provision of benefits.49 According to a 2000 report of “Catholics for a Free Choice,” more than half of managed care plans adopted by Catholic health systems have found “creative approaches” to contract at arm’s length to meet the state requirements and joint federal-state Medicaid mandate that entitles Medicaid recipients to family planning services and supplies.50  Some of these Catholic employers have attempted to distance them- selves from providing this coverage by separating out the amount of the premium that would be used to cover contraception and contracting with a third-party administrator to handle payment. Others contract with an independent insurance company to handle coverage of those services.

This approach would have the disadvantage of putting many religious institutions and individuals into a quandary of conscience.51 Such arrangements would also make it much more difficult for Catholic institutions to invoke religious freedom protections against facilitating access to morally objectionable services in other contexts, because plaintiffs would likely argue that the outsourcing arrangements contradict the institution’s claimed beliefs.

Form self-insurance pools. Another option may be for Catholic institutions to pool their benefits and liabilities in such a way as to self-insure. This strategy would allow Catholic employers to escape restrictive state laws styled after Wisconsin’s recent mandate, but would not protect against federal laws or EEOC action. However, converting from insured to self-insured has larger consequences than protecting against state law prescription contraceptive mandates. For instance, self-insuring would ex- pose the religious employer to financial risk whenever high-cost claims are filed.52

Be consistent in policy decisions and in media communications. A Catholic institution must be careful to ensure that all of its members’ actions are consistent with the values it espouses. Recent history amply demonstrates that religious institutions will be charged with hypocrisy, and incur civil liability, if they do not act consistent with their beliefs. Similarly, all media communications need to be consistent with the actual values of the institution. A civil court will be much less inclined to believe assertions of sincere conscientious objection if the institution has not been consistently acting and communicating in accordance with its claimed beliefs.

Make clear—externally and internally—what one’s institutional values are. It is crucially important that the administration of a Catholic institution state publicly and privately what moral precepts it intends to follow and why. Many religious institutions have seen religious freedom defenses fail because the institutions failed to assert their values openly, vigorously, and consistently. Catholic institutions also run the risk of liability if they fail to explain in detail why they believe what they do. Rooting benefits policies in specific Church doctrines makes clear where the institution stands, and that it is sincere. Sound theology can be a sound defense, even in civil court.

Dont carelessly discuss finances and costs of health insurance. Colleges and universities often take a business-like approach to certain decisions, even when there are underlying religious principles at stake. Make sure that the written record of any decision regarding benefits reflects the religious principles motivating the decision. Plaintiffs seeking to defeat a religious freedom defense often argue that denying certain benefits is “just about the money.” Don’t give a civil court reason to believe them.

Seek legal advice at the earliest opportunity. Every legal situation is different, and religious freedom issues can be particularly tricky in any state. Catholic institutions should get expert legal advice as soon they find out about a challenge to their benefits practices. Waiting to get legal advice until later often leads to mistakes that can be difficult to unwind.

Responding firmly. As the analysis above shows, objecting Catholic institutions have legal options. Immediately accommodating a potential plaintiff once he or she com- plains often results in only temporary appeasement and additional requests later. It is frequently better to respond firmly at the outset than to accommodate and merely delay the inevitable conflict until later.

Conclusion

The next few years may present difficult times for Catholic colleges and universities that have conscientious objections to contraceptive mandates. However, there are a number of ways Catholic institutions can continue to carry out their missions while minimizing the threat of government penalty. They should not be afraid to do so.