United States: The Assault On The ACA Continues In The Federal Appeals Courts

Combative oral arguments were seen in two high profile federal court challenges to the Patient Protection and Affordable Care Act of 2010 (ACA).  The Supreme Court of the United States heard a vigorous oral argument concerning whether corporations must abide by the contraception mandate despite religious objections.  Simultaneously, the U.S. Court of Appeals for the District of Columbia Circuit saw a lively argument regarding whether premium tax credits should be available to exchange consumers nationwide.

The Supreme Court of the United States recently heard oral argument considering whether for-profit corporations must provide contraception coverage in their employee health insurance plans despite religious objections.  Simultaneously, the U.S. Court of Appeals for the District of Columbia Circuit considered whether consumers purchasing health insurance coverage through the exchanges may qualify for premium tax credits, regardless the state in which the consumer resides.

The Contraception Coverage Mandate Case Before the Supreme Court

The case pending before the nation's highest court challenges Section 1001(5) of the Patient Protection and Affordable Care Act of 2010 (ACA) that created Public Health Service Act § 2713(4) (42 U.S.C. § 300gg-13(a)(4), which requires all health insurance plans to cover, without any cost-sharing, preventive services for women that are recommended by the Health Resources and Services Administration (HRSA).  Through rulemaking in 2012, the HRSA issued guidelines that included the full range of U.S. Food and Drug Administration (FDA)-approved contraception methods.  Churches and houses of worship are exempt from the contraception coverage mandate.  The government offers an accommodation to other nonprofit, religiously affiliated groups, such as church-run hospitals, parochial schools and charities, by allowing a third-party insurer to provide separate benefits without the employer's direct involvement. 

Hobby Lobby is an Oklahoma-based, closely held, family-owned corporation that sells arts and crafts, closes on Sundays, does not sell liquor, advertises its Christian orientation and plays religious music in its 600 stores, which employ about 13,000 workers nationwide.  Hobby Lobby objects to four of the 20 FDA-approved contraception methods that it considers to be tantamount to abortion: two types of IUDs, Plan B (commonly referred to as the "morning-after pill") and Ella (commonly referred to as the "week-after pill," which may work for five days). 

If Hobby Lobby were to exclude contraception coverage from its health insurance benefit plans, it would face a penalty of $100 per day/per employee, amounting to an estimated $475 million each year.  On the other hand, if Hobby Lobby declined to provide any health insurance coverage for its employees at all, the corporation would face an annual tax of $2,000 per employee, amounting to $26 million each year.  Hobby Lobby maintains that either choice is punitive, because failing to offer health insurance coverage would force the retailer to raise wages in order to attract and retain employees.  Consequently, Hobby Lobby sued in federal court in Oklahoma, arguing that the contraception mandate impermissibly burdened the free exercise of religion under the First Amendment and the Religious Freedom Restoration Act (RFRA), which prohibits the government from substantially burdening on a person's exercise of religion, even if that burden results from a rule of general applicability.  RFRA permits the government to impose such a substantial burden on a person's exercise of religion only upon showing that the law is the least restrictive means of furthering a compelling governmental interest. 

The U.S. Court of Appeals for the Tenth Circuit held that Hobby Lobby and its owners were entitled to bring a claim challenging the law under RFRA.  By contrast, the Third Circuit ruled that a closely held, Mennonite Christian family-owned Pennsylvania wood cabinet and furniture manufacturer, Conestoga Wood Specialties, was not entitled to challenge the mandate.  The two cases were consolidated before the Supreme Court for oral arguments on March 25, 2014, giving the parties 90 minutes, rather than the typical 60 minutes, for oral argument.

Hobby Lobby argues that the word "person," left undefined in RFRA, must be defined according to the federal Dictionary Act to include for-profit corporations.  Hobby Lobby contends that the ACA's contraception mandate does not pass muster under RFRA because there are less restrictive means of providing contraception coverage to its employees, such as the government paying directly for contraception, as it does to accommodate the objections of religious nonprofit organizations.  Hobby Lobby framed the case as being a matter of statutory interpretation of RFRA, arguing that the statute protects the free exercise rights of for-profit corporations. 

In response to questions from Justices Samuel Alito and Antonin Scalia concerning why the government contends that RFRA does not cover for-profit corporations, the government countered that the operative phrase for the court to interpret is "exercise of religion."  The government explained that RFRA did not define this phrase because it was intended to restore the court's application of that free exercise law in the pre-Smith line of cases.  The government argued that, in light of that history, the court has never granted an exemption to a for-profit corporation based on the free exercise clause.

Given the court's recognition of the free speech rights of corporations, see Citizens United v. Federal Election Comm'n, 130 S.Ct. 876 (2010), commenters have predicted that the case will hinge on whether the court will find that the First Amendment protects the free exercise rights of for-profit corporations.  In the federal trial and appellate court cases, where the lower court has found that for-profit corporations may raise a free exercise challenge (the Tenth, Seventh and D.C. Circuits), the lower court has found that the contraception mandate violates that religious freedom based upon the test set forth under RFRA.  By contrast, the government has succeeded in other circuits (the Third and the Sixth Circuits) when the lower court has determined that for-profit corporations lack free exercise rights and thus cannot sue under RFRA. 

If the Supreme Court sides with the plaintiffs in the contraception cases, employers would have the opportunity to refuse to provide contraception coverage based upon the assertion of a religious objection.  It is difficult to try to predict how many employers might assert such an objection, as there are a number of calculations for the employers themselves to consider regarding the effect on their attractiveness to their employees and prospective employees, public relations and customer base.  Some amici briefs contend that a win for the plaintiffs might allow employers to assert religious-based objections to laws beyond the contraception mandate (e.g., nondiscrimination against homosexuals in the workplace, or coverage of vaccinations and blood transfusions).  A potential avenue for the court to narrow its ruling would be to sidestep the question of whether for-profit corporation can exercise religion.  Instead, the court could consider, as suggested by the Cato Institute's amicus curiae brief, whether the contraception mandate impermissibly burdens the free exercise rights of the individual owners of these closely held corporations.

Court watchers predict that Justice Anthony Kennedy will be the swing vote in the decision.  During the argument, Justice Kennedy focused on the effect on third parties of extending an accommodation to the corporations. 

The Premium Tax Credits Case Before the D.C. Circuit

On the same day, premium tax credits, another provision of the ACA that is considered key to attaining near-universal coverage, came under a revived attack.  After winning at the district court level in federal trial courts in the District of Columbia and Virginia, the government appeared to be an underdog in the oral arguments in Halbig v. Sebelius held before the U.S. Court of Appeals for the District of Columbia Circuit.

Halbig challenges a May 2012 Internal Revenue Service (IRS) rule providing that health insurance premium tax credits will be available to all taxpayers nationwide, regardless of whether they obtain coverage through a state-based exchange or a federally facilitated exchange (FFE).  The plaintiffs argue that the plain language of the ACA limits the availability of premium tax credits to only those taxpayers that reside in the 14 states (plus the District of Columbia) that set up their own exchanges.  The plaintiffs seek to invalidate the IRS rule's application to the FFE states.  The government defends the IRS rule by asserting that the plaintiffs' isolation of a phrase in the statute is inconsistent with the legislative history, structure and purpose of the ACA.

Judge Harry T. Edwards aggressively questioned the plaintiffs' counsel regarding the purpose of the ACA and congressional intent as evidenced by the legislative history.  Notably, Judge Edwards challenged plaintiffs' counsel's argument that Congress intentionally limited federal subsidies to residents of states that ran their own exchanges, offering a "carrot" to states that set up exchanges while using a "stick" on states that refused to do so.  Whereas Judge Edwards declared that a ruling invalidating premium tax credits in FFE states would "kill the individual mandate and gut the statute," Judge A. Raymond Randolph countered that it was not the court's job to save "stupid" and "poorly written" legislation.  The third panel member, Judge Thomas B. Griffith, appeared skeptical that legislative history would aid either side and wondered whether it was the court's job to fix an unclear statute, which could be a signal that the plaintiffs' plain language argument may carry the day before this panel.  The panel's decision is expected in June 2014.  It is predicted that if the government loses, it will likely appeal to the D.C. Circuit for en banc review, which might delay the Supreme Court from deciding this issue. 

In an unusual move before oral argument, the U.S. Department of Justice filed a letter with the court asserting that any adverse ruling should apply only to the named plaintiffs (and thus could not overturn the IRS rule nationwide) because the suit was not a class action.  At the end of the oral argument, Judges Randolph and Griffith admonished the government lawyer for what they deemed to be an "improper" filing.

The sister case, King v. Sebelius, brought by the same attorneys as Halbig, will be argued before the Fourth Circuit on May 14, 2014, in Richmond.  At the district court level, the Commonwealth of Virginia filed an amicus brief in support of the plaintiffs' position.  However, the Commonwealth switched sides in the appeal; after being sworn into office in January 2014, Attorney General Mark Herring (D) filed an amicus brief in support of the government that expressly repudiated the Commonwealth's prior position. 

Two other cases challenging the premium tax credit remain pending in federal trial courts.  In Indiana v. IRS, pending in federal court in Indianapolis, the state and 39 of its public school districts argue that the IRS rule directly injures the state and school districts in their capacities as employers by subjecting them to increased compliance costs and administrative burdens.  Similarly, in Pruitt v. Sebelius, pending in federal court in Muskogee, Oklahoma, the state complains that the availability of the premium tax credit in FFE states forces the state to choose between the costs of providing coverage to its employees or paying the IRS a significant financial penalty.  The parties' written motions briefings will wrap up in May 2014 in both cases. 

The availability of premium subsidies affects that vast majority of consumers enrolling through the exchanges because people who are not eligible for premium subsidies can buy comparable coverage with similar consumer protections outside of the exchanges.  According to an evaluation released by the U.S. Department of Health and Human Services, as of March 1, 2014, more than 4.2 million people had enrolled in health insurance coverage through an exchange.  Most of those enrolled—2.6 million—lived in FFE states.  Among these FFE enrollees, more than 2.2 million (85 percent) received federal assistance. 

Kaiser Family Foundation reports that 83 percent of enrollees nationwide qualify for premium subsidies but that only about 21 percent of those eligible for premium subsidies have applied for assistance.  Generally, states that run their own exchanges and face minimal technical problems have the highest percentages of subsidy-eligible consumers actually enroll; for instance, 40 percent of subsidy-eligible Californians have applied for subsidies through their state-based exchange.  On the other hand, although 92 percent of Wyoming residents qualify for premium subsidies, only 13 percent have applied for subsidies when enrolling through the FFE.  Kaiser Family Foundation estimates that 3.5 million people have qualified for a total of about $10 billion in annual premium subsidies, averaging to about $2,890 per person.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions