Hobby Lobby Fallout – Act 1

Late yesterday, the DOL released an FAQ in response to the Hobby Lobby decision.

Basically, the FAQ said that an elimination of any contraceptives from coverage under a plan is a considered a “material reduction” in covered benefits triggering the shorter 60-day notice period for a summary of material modifications. The usual deadline is 210 days after the end of the plan year in which the change is effective (although most tend to communicate sooner).

The bottom line is this: if a plan of a closely held business eliminates coverage for any contraceptive item or service, it has to distribute an SMM or revised SPD within 60 days after the change.

There has always been some ambiguity around what constituted “material” in this context. The regulations speak in terms of what “the average plan participant [would consider] to be an important reduction in covered services or benefits” making it a judgment call. By contrast, this FAQ sets a standard (at least for contraceptives) that the elimination of even one item or service is material.

Even sponsors who do not qualify, or are not considering, eliminating contraceptive products or services should take note. The DOL could potentially use this FAQ to argue that other reductions are material as well.