Guest Article

(From the March 26, 2007 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Federal Civil Rights Law Does Not Require Employers to Cover Contraceptives, Eighth Circuit Rules

A group health plan that excludes coverage for all male and female contraceptives -- except when medically necessary for a non-contraceptive purpose -- does not violate the Pregnancy Discrimination Act (PDA), according to a recent decision by the Eighth Circuit Court of Appeals. The Eighth Circuit's ruling appears to be at odds with the position previously taken by the Equal Employment Opportunity Commission (EEOC) and by several federal district courts.

Legal Background

Title VII of the Civil Rights Act of 1964 states: "It shall be an unlawful employment practice for an employer -- (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate 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 ...." 42 U.S.C. § 2000e-2(a). After the Supreme Court in 1997 ruled the exclusion of pregnancy benefits does not violate Title VII, Congress enacted the PDA in 1998. The PDA overrules the Supreme Court's decision by specifying that,

42 U.S.C. § 2000e(k).

The EEOC has taken the position the PDA requires group health plans to cover prescription contraceptives if they otherwise cover prescription drugs and preventive care. Several federal district courts have adopted the EEOC's position, but others have ruled group health plans can exclude coverage for contraceptives without violating the PDA. The Eighth Circuit Court of Appeals is the highest court to rule on the issue thus far.

Case Background

In the case before the Eighth Circuit Court of Appeals, the plan excludes coverage for "both male and female contraceptive methods, prescription and non-prescription, when used for the sole purpose of contraception." However, the plan does provide benefits for contraception "when medically necessary for a non-contraceptive purpose such as regulating menstrual cycles, treating skin problems or avoiding serious health risks associated with pregnancy."

A group of female employees sued, claiming the plan sponsor is violating Title VII, as amended by the PDA, by not providing coverage for prescription contraception. A federal district court agreed, concluding the plan sponsor violates Title VII because "it treats medical care women need to prevent pregnancy less favorably that it treats medical care needed to prevent other medical conditions that are no greater threat to employees' health than is pregnancy."

Eighth Circuit's Ruling

The Eighth Circuit Court of Appeals reversed the district court's decision. According to the court of appeals, the district court "incorrectly characterized" the plan sponsor's policy as denying "prescription contraception coverage for women." Instead, the court of appeals noted the plan sponsor "excludes all types of contraception, whether prescription, non-prescription or surgical and whether for men or women, unless an employee has a non-contraception medical necessity for the contraception." (As the court acknowledged, prescription contraception methods currently are available only for women.) Thus, the court of appeals framed the issue as being whether the plan sponsor's "policy of denying coverage for all contraception violates Title VII, as amended by the PDA."

The court of appeals determined the PDA does not require plan sponsors to cover contraception. After reviewing previous Supreme Court and Eighth Circuit decisions relating to the scope of the PDA, the court of appeals ruled "contraception is not 'related to' pregnancy for PDA purposes because, like infertility treatments, contraception is a treatment that is only indicated prior to pregnancy." The court of appeals also ruled that contraception is not a gender-specific term, but instead applies to both men and women.

In reaching this decision, the court of appeals brushed aside the EEOC's 2000 opinion letter on this topic. As noted, the EEOC concluded plan sponsors must cover preventive contraception for women if they cover "other prescription drugs and devices, or other types of services, that are used to prevent the occurrences of other medical conditions." (The EEOC's opinion letter is available online.) However, the court of appeals found the EEOC's opinion "unpersuasive" because:

The court of appeals also rejected the assertion that the plan sponsor's failure to cover contraceptives violates the basic Title VII prohibition of gender-based employment decisions. According to the court of appeals, this type of Title VII violation exists only if the plan sponsor's action is based on a "sex classification," and only if "other employees outside of the protected group were ... treated more favorably and were similarly situated in all relevant respects." Title VII does not require plan sponsors to treat employees in a protected class more favorably than other employees, the court of appeals noted.

In order to determine if the plan sponsor treated "similarly situated male employees more favorably than the protected female employees," the court of appeals said it must "compare the plan sponsor's health benefits for men and women." After comparing the "medicines or medical services [that] prevent employees from developing diseases or conditions that pose an equal or lesser threat to employees' health than does pregnancy," the district court concluded the "health plans treated men more favorably because the plans covered preventive medicines and services such as medication for male-pattern baldness, routine physical exams, tetanus shots, and drug and alcohol treatments." But the court of appeals concluded the focus should be on the plan's coverage for contraception. Because the plans "do not cover any contraception used by women, such as birth control, sponges, diaphragms, intrauterine devices or tubal ligations or any contraception used by men such as condoms and vasectomies," the court of appeals ruled "the coverage provided to women is not less favorable than that provided to men."

What Does It All Mean for Employers?

According to a 2004 study by the Guttmacher Institute, 86 percent of employer-sponsored group health plans provided comprehensive coverage for contraceptives in 2002, up from 28 percent in 1993. So whether the law requires group health plans to include coverage for prescription contraceptives is largely a moot point for the vast majority of employers.

For those employers who still do not cover prescription contraceptives, the Eighth Circuit's decision may provide some comfort. But whether Title VII and the PDA require coverage for prescription contraceptives in certain circumstances is still an open question in the other ten Federal districts. Furthermore, the EEOC still can initiate enforcement actions based on its interpretation of Title VII and the PDA even though the Eighth Circuit Court of Appeals refused to defer to the EEOC's position.

Another consideration for some employers may be state law. Twenty-six states require insurers that provide coverage for prescription drugs in general to also cover the full range of FDA-approved contraceptive drugs and devices. These state mandates do not apply to self-insured plans, but indirectly regulate insured plans.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608, Erinn Madden 202.572.7677, Bart Massey 202.220.2104, Laura Morrison 202.879-5653, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Tom Veal 312.946.2595, Deborah Walker 202.879.4955. Copyright 2007, Deloitte.