Religious Liberties and Who Pays for Contraception

The discussion last week about the HHS decision to require religious organizations (excluding churches) to pay for contraception through their insurance plan was, in short, excellent.   My hope in what follows it to hastily outline a few thoughts in response to it.

But first, two news stories to keep an eye on.  First, even Chris Matthews has come out against the HHS on religious liberty grounds.  Which means it’s not just conservatives who are concerned here.

Second, the White House is floating language about a compromise because of the backlash.  That’s good news.

For the backstory, read Michael Brendan Dougherty, who has brought the A-game to this issue.  This question seems exactly right:

Isn’t this a case of conflicting rights? 

Yes, basically. Proponents of the regulation say that women of all faiths have a right to health-care and the way we provide health-care in this country is through employer-based health insurance. If contraception and sterilization and all these other things are health-care, then employers have to provide it. To them this is a simple uncontroversial idea, hindered only by the dogmas of a medieval Church.

The discussion last week centered on the question of whether it is an infringement of religious liberty to require religious institutions to pay for things they are morally opposed to.  One of my favorite commenters, “Christian Lawyer,” suggested that it was not on grounds that such institutions won’t actually be paying for contraception:

When paying salary, the funds flow from the university to the employee, who then chooses how to spend the money. Thus, no one argues that a Catholic university is being required to “fund” or “pay for” contraception when one of its employees uses their salary from the University to make such a purchase. The university’s religious liberty does not extend to dictating how funds are used once they are provided to a non-ministerial employee as salary because the funds go out of the control of the employer and into the control of the employee.

Health insurance is another form of compensation provided to an employee. Employer-sponsored or -provided insurance policies are a form of non-monetary compensation in which the employer contracts with an insurance company and pays a portion of the premiums to the insurer, which holds the money to be paid out only as directed by the employee. We know that this non-monetary form of compensation is substantively and legally no different from monetary compensation (salary) because, without the specific exemption in the IRS Code, the employer-paid cost of the health insurance policy would be taxed as ordinary income to the employee even though the employee receives it in the form of non-monetary insurance benefits.

Even if the government requires the employer to make arrangements for an insurance plan that covers contraception, there is no funding that ever flows from the employer to the actual provider of the contraceptives or abortion. The insurance company is not “providing” contraception. It merely holds the funds (or benefits) controlled by the employee. Thus, funds only go from the insurer to the actual provider of contraception if the employee so directs.

This is about as good an argument as you’re going to see on this, quite frankly.  Solid work, of the sort that makes me love Mere-O that much more.

But–and you certainly knew this was coming, didn’t you?–I don’t think it’s successful.   It’s absolutely true that Catholic employees can take their salary and do whatever they want with it (within the bounds of the law) without their employers saying, well, anything.

But the question of insurance funding is different:  while the decision to activate that particular part of the insurance plan might lie with the employee, the funds come directly from the employer.  The insurance company is simply a mediator, and as such has no moral significance (it seems to me).  It is the employer who presents the plan to the employee and outlines the benefits, the employer who has (or had, anyway) final say over what benefits get covered, and the employer whose money goes into the account to pay for it.  The actual insurance company serves at the will of the employer, which is why employers are frequently shopping companies trying to get better rates and packages for their employees.

Consider the parallel case of 401ks.  Employers are the “plan trustees,” but they are almost universally run and sourced by third parties.  But as the trustees, the employer funds them, approves the fund choices, etc. and so is materially responsible for their operation.   If, for instance, employers do not provide sufficient education for employees around investment options, the employer can be subject to lawsuit.

Insurance benefits function very similarly.  As such, it is absolutely the case that the regulation is forcing Catholic employers to pay for contraceptives–even if such contraceptives have to be requested by employees.

Let’s go at it this way, in case the argument hasn’t taken hold yet:  when an employees insurance covers something, who pays for it?  The insurance company or the employer?   The fact that insurance counts as non-monetary compensation within the tax code doesn’t much matter, as when such compensation is delivered in the form of contraceptives (or insurance checks paying for contraceptives) it’s still the employer writing the check.  To put it differently, the non-monetary compensation is compensation from the employer, not the insurance company who is managing the plan.

The money might end up in contraception one way or the other, if employees go spend their monetary compensation on it in the open market.  But when it comes to how it’s being paid for and who is footing the bill, the  difference in agency makes all the difference in the world.

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  • http://Bensonian.org Christopher Benson

    This morning I David Brooks’ op-ed column, “Flood the Zone” (New York Times, February 6, 2012). His column raises an interesting question about motive. What motivated the Obama administration to require religious institutions to pay for contraception, sterilization and the morning-after pill? Is it a secular war on religion (as Newt Gingrich claims) or technocracy (as Brooks claims)? I’m not sure. If we accept Obama’s words about his own Christian faith, then it seems unlikely that secular ideology is at work so much as liberal Christianity, which cannot fathom why a 21st century American would get so exercised over contraception. They figure that if a majority of Catholics use contraception in violation of the Church’s teaching, then what’s the big deal? There will be no change in practice – only in principle. Brooks adds to the analysis by reminding us that technocratic government is also responsible for the administration’s action and technocracy is an enemy of pluralism and localism. Here’s an excerpt from the column:

    “Members of the Obama administration aren’t forcing religious organizations to violate their creeds because they are secular fundamentalists who place no value on religious liberty. They are doing it because they operate in a technocracy.

    Technocrats are in the business of promulgating rules. They seek abstract principles that they can apply in all cases. From their perspective, a rule is fair when it can be imposed uniformly across the nation.

    Technocratic organizations take diverse institutions and make them more alike by imposing the same rules. Technocracies do not defer to local knowledge. They dislike individual discretion. They like consistency, codification and uniformity.

    Technocratic institutions have an unstated theory of how change happens. It’s the theory President Obama sketched out at the beginning and end of his State of the Union address: Society works best when it is like a military unit — when everybody works together in pursuit of a mission, pulling together as one.”

    • Matthew Lee Anderson

      Yup. Brooks and Douthat have been hitting it out of the park lately.

      • Christopher Benson

        What do you think about Gingrich’s rhetoric – ”Obama’s war on religion”?

        • Matthew Lee Anderson

          Lots of folks are trotting that line out. I don’t know what to make of it, honestly. I’d like to suspend judgment on whether it’s actually a “war”–but then, Kathleen Sebelius gave a speech in December when she said, “We are in a war” (from the Becket Fund legal challenge on this). So the warfare language seems to be on both sides right now.

    • http://bookwi.se adam shields

      This is the type of analysis that I think should be discussed. I happen to think it is right. Obama’s people view this as similar to the 1996 rules on Mental Health parity. I think there should be some sort of compromise but I think religious persecution and war language on the whole is a negative for the long term.

      • Matthew Lee Anderson

        Adam,

        I can’t for the life of me think of what a “compromise” would be, honestly. Douthat’s column today hit on that problem. As long as access to contraception is a basic right, then this conflict is going to exist.

        Matt

  • http://frcblog.com Chris Marlink

    Your analysis is right on, Matt. One thing I believe this whole conversation surfaces again, is the real need for health insurance reform–just not the variety that the Obama administration delivered. The third party payer system has to go, or at least become just ONE of a number of options with equitable tax treatment.

    The Obama administration’s unstated goal is to run private insurers out of the marketplace. Coverage mandates are one way to do this. Combine this with their “abortion as moral good” guiding principle, and I think this showdown was entirely predictable.

    What we see time and again from the Obama administration is an absolute commitment to the abortion rights lobby. Look back at the government shut-down standoff in 2011, cuts to abortion providers were non-negotiable. On this issue the President will not be moved.

    The question is, will he sacrifice a second term for it? His intransigence is certainly galvanizing Protestants and Catholics.

    • Matthew Lee Anderson

      chris,

      Thanks for that. You’re *exactly* right about the need to decouple insurance from employment, and I think your comment about the intransigence of the administration on this issue. And I’m sure you saw earlier today the NY Times piece where they doubled down saying that the ruling would not be modified.

      I actually think this could cost him a second term, as I think a lot of social conservatives would not be very passionate about getting out the vote if it’s Romney. But if this is genuinely at stake, then they will do everything they can so Romney will win. And that sort of voter intensity is what, ultimately, wins elections.

      Matt

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  • Christian Lawyer

    Matt — Thanks for your kind words and your thoughtful engagement with the substance of my comment to your earlier post. I still have to disagree, though.

    Of course the non-monetary compensation is paid by the employer, and the funds to pay that non-monetary compensation come directly from the employer, but that is true for monetary compensation (salary) as well. You dismiss the insurance COMPANY as merely a “mediator” without any “moral significance,” but I believe you overlook the significance of the insurance POLICY itself.

    Your formulation has the insurance company functioning merely as a mechanism for money to pass from the employer to the pharmacy or doctor to pay for the contraceptives. That’s how “self-insurance” works if a company choses to be self-insured and merely retains a third-party administrator to administer the benefits. Then the TPA would merely be a pass-through. That’s not how insurance POLICIES work, though.

    Your formulation misses the legal significance of the insurance policy, which, though intangible, is a PRODUCT purchased by the employer and given to the employee as non-monetary compensation. (It’s sort of like owning a bond or promissory note or another type of debt instrument). It’s the policy that’s the non-monetary compensation, not the contraceptives themselves.

    Once the employer purchases that product for the employee, the employer is done and out of the picture. The product that the employer purchased (the policy) is now owned and controlled by the employee and the policy benefits (the “debt”) is owed by the insurance company to be paid as the employee directs. That, to me, makes all the moral difference in the world.

    An insurance company may have been chosen “at the will of the employer,” but, pursuant to the terms of the policy, the insurance company acts at the direction of the employEE. The “money” is no longer the employer’s. Moreover, it’s not even really the insurance company’s any more. It’s a debt owed by the insurance company to be paid as directed by the employee, which is owned by the employee. Thus, “when an employee’s insurance [policy] covers something,” it is really the employEE who is paying for it using the benefits the employee owns in the policy. And therefore, there is no moral difference between the employee owning and controlling the insurance company’s obligations under the policy and the employee owning and controlling the salary that was direct-deposited into their checking account. In fact, I might argue that the purchase of the policy provides an added degree of separation between the employer and the contraceptives than in the case of salary going directly to the employee and from the employee directly to the pharmacy.

    I’m sorry, but I’m not sure I understand your argument about the 401K plan. I think I would agree with you if the health insurance plans we were discussing were self-insured plans, which function more like a 401K plan. But, as I said above, the health insurance POLICIES at issue are quite different.

    Thanks again for hearing me out. –CL

    • Matthew Lee Anderson

      CL,

      BTW, meant to tell you how happy I am that this one brought you out of the woodwork. Seriously, love having you comment and am always instructed and edified by it.

      That said, I don’t have much time, but I think the 401K analogy is really instructive, so let me just cash that out. There are two levels of obligations on companies around 401ks. There is the funding requirement, of course. In which case, you’re right–the parallel would be to a self-funded insurance plan. But there’s also a fiduciary obligation around the *components* of the 401K that the company has to employees, such that if they do not meet those obligations they can be subject to lawsuit. This includes things like providing enough investment options, keeping costs reasonable, providing sufficient education, etc.

      Which is to say, the 401K plan is actually a *product* that companies purchase from TPAs in the same way that insurance policies are. I know this only because during my 18 months in the financial advising wilderness I sold them as a TPA to companies. Our obligation as a TPA was to ensure that the company knew ITS responsibilities around the plan, and to recognize that we were simply an *administrator* and not the fiduciary and trustee of the plan. That was always the company itself.

      In that sense, the company is still liable for the contents of the product–regardless of which particular investments the employees ultimately end up choosing. Not investment performance, mind you, but if they put out a 401K with a single investment option, that would be a problem.

      This is, of course, the exact argument that is being made against religious institutions. They have responsibilities to include a particular service as part of their insurance product. Yet they happen to have a moral objection to that service. The parallel might be a requirement that all religious institutions provide Playboy stock as one of their 401k options. The funding scheme would work differently, of course, but you’re still requiring Catholics to present as part of their institutional compensation to employees a product that they are morally opposed to–even if none of their employees ultimately choose it.

      Does that clarify the parallel?

      Best,

      Matt

      • http://bookwi.se Adam Shields

        I understand your point with the 401k, but isn’t is more like telling the employer that they can’t obtain a 401k program that prevents an employee from buying Playboy stock? Because the action I still maintain is in the hand of the employee.

        This is a line in the sand and neither side seems willing to budge, like many lines in the sand, the issue is not the particular fight but the war.

        So it is unlikely that we will discuss to resolution because it is about the perceived war, not the actual small battle.

        My guess is that there a dozens if not hundreds of things that the insurance covers that the Catholic church would object to. But because the insurance they have already covers them they are not going to fight over them. This is just one more thing.

        • Matthew Lee Anderson

          I’d be surprised if there are that many (or any, really!) things that Catholics have moral objections to that are covered by health insurance, as many of the other aspects of reproductive care (IVF, etc.) are generally not covered either.

          The way most 401Ks are set up, they do “prevent” people from buying any particular stocks because they have only a limited number of mutual fund options inside of them–20-25 or so. That’s changed over the past decade, as more 401K providers have figured out how to have a “self-investment” option that opens up the range of investments beyond the default 20-25, but even there many investments are excluded (particularly high risk investments) that you would otherwise be able to buy on the open market.

          matt

  • http://bookwi.se Adam Shields

    So what do you think of the proposed compromise from the White House? My understanding is that it treats contraception as an optional add on paid by the employee. If I understand it correctly, I honestly can’t think of a reason that it can be objected to.

  • JimTh

    Matthew,

    I don’t know if you will see this. I happened to find this blog which is several months old, and wanted to clarify (as I see it) the 401k analogy.

    Funds allocated to benefits belong to and are managed for the benefit of employees. The employer and others involved in the management of these funds are fiduciaries. As such, they are subject to stringent rules under both state and federal law. A plan fiduciary must always act for the exclusive benefit of plan participants.

    The employer decides whether to provide employees with health insurance, and the employer exercises some control over the choice of products. However, the employer does not have total discretion in choosing products. The duty to act exclusively for the benefit of employees means there are standards of conduct that employers must meet. This is true even when the employer expresses moral or ethical concerns. This issue was addressed in a May 28,1998 Advisory Opinion issued by the Department of Labor.

    This Advisory Opinion was in response to questions regarding the ability of plan sponsors to include socially-responsible or so-called ethical funds in employee retirement plans. These products have portfolios that exclude investments that some find morally objectionable (similar to the way church-affiliated employers would exclude services they find morally objectionable from healthcare products). In addressing the question before it, the DOL applied principles that are applicable to many products, not just mutual funds.

    The Advisory Opinion reaffirmed the obligation of plan fiduciaries to act for the exclusive benefit of plan participants. The opinion made it clear that fiduciaries must ordinarily consider only factors relating to the interests of plan participants. However, the DOL did not rule that other factors could not be taken into account. Plan fiduciaries are allowed to take other factors into account when choosing products as long as the chosen products are equal or superior to alternative products.

    This poses a problem for those who want to exclude contraceptives from the health plans of religiously affiliated employers. The Institute of Medicine has concluded that contraceptive coverage enhances women’s health and the health of their families. In addition, multiple studies have shown that there is little or no difference in the plan cost for contraceptive coverage, since plans with such coverage have lower maternity-related claims. With an equivalent outlay while excluding coverage that enhances women’s health, health plans that exclude contraceptives are clearly inferior to the alternative. That may be why opponents of the HHS mandate are not arguing that banning contraceptive coverage is in the best interest of plan participants. Instead, they want to subordinate the interests of plan participants to their own interests as church-affiliated employers. The problem is that doing so is a clear breach of fiduciary duty.

    What’s an employer who is morally opposed to contraception supposed to do? Including that benefit in a plan may violate the employer’s conscience. Putting the employer’s interests ahead of the interests of plan participants would be a breach of fiduciary duty. For an employer motivated by moral and ethical concerns, this may seem like a no win situation.

    Fortunately, there is a well-established remedy. Whenever a conflict exists between the interests of plan fiduciaries and the interests of plan participants, fiduciaries have a duty to step down and let someone free of conflict take over. This means conflicted employers should be leaving the choice of products to an independent third party. That hasn’t happened, of course. The conscience of employers opposed to contraception is curiously silent when it comes to clear violations by these same employers of their legal and ethical obligations as fiduciaries.

    I would have no trouble supporting those protesting the HHS ruling if they were were able to demonstrate that contraceptive coverage was being excluded from their plans for the benefit of plan participants. They might argue that contraceptives are not beneficial (or better yet, argue that they are harmful). They might offer evidence that excluding contraceptives reduces the cost of coverage and that, on a cost/benefit basis, plans that exclude such coverage are at least the equal of those that don’t. If they could make such arguments, I’m sure they would. But they aren’t making any such arguments, and the reason is obvious. They can’t.

    But this isn’t about what is best for plan participants, is it?

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