Today, a divided U.S. Supreme Court held in a 5-4 decision that
closely-held for-profit corporations providing group healthcare to
their employees could, on religious grounds, be exempted from
providing contraception coverage to employees required under the
Patient Protection & Affordable Care Act.
Background
Hobby Lobby Stores, Inc. is an arts and crafts chain with over
500 stores and about 13,000 full-time employees. Hobby Lobby is a
closely-held family business organized as an S-Corp. Mardel, Inc.
is an affiliated chain of 35 Christian bookstores with
approximately 400 employees, also run on a for-profit basis. The
Green family owns and operates Hobby Lobby and Mardel.
The Green family is deeply religious and operate their companies
in accordance with their beliefs. For example, Hobby Lobby and
Mardel stores are not open on Sundays; the companies buy hundreds
of full-page newspaper ads promoting Christian messages; and Hobby
Lobby refuses to engage in business activities which they feel may
facilitate or promote alcohol use.
Both companies offer health coverage to their employees through a
self-insured group health plan.
Issues Under The Affordable Care Act
Beginning in 2015, the Patient Protection and Affordable Care
Act (ACA) generally requires large employers to offer their
full-time employees (and their dependents) the opportunity to
enroll in "minimum essential coverage" under an eligible
employer-sponsored health plan or face a tax penalty. This is
referred to as the Employer Mandate. The ACA also imposes a
number of standards and requirements on group health plans,
including those that are employer sponsored, such as requiring
non-grandfathered plans to cover certain preventive-health services
without requiring co-pays or deductible payments from plan
participants or beneficiaries.
Under regulations developed by the Department of Health &
Human Services (HHS), this requirement is interpreted to include
all FDA-approved contraceptive methods. Currently, there are 20
such methods approved by the FDA, ranging from oral contraceptives
to surgical sterilization. Four of those methods – two types
of intrauterine devices (IUDs) and emergency contraceptives
commonly known as Plan B and Ella – can function by
preventing the implantation of a fertilized egg in the womb.
HHS' contraception regulations allow exemptions for
"religious employers" and other related accommodations.
Such exemptions and accommodations did not extend to for-profit
businesses such as Mardel and Hobby Lobby.
Complying with the HHS contraception requirements (at least with
regard to the four contraception methods discussed above) was
unacceptable to the Green family because one aspect of their
religious beliefs is that human life begins when sperm fertilizes
an egg and that it would be immoral for them to facilitate any act
that causes the death of a human embryo.
Dropping health coverage for their employees or refusing to comply
with the HHS' contraception requirements would subject the
companies to large penalties under the ACA. The Greens asserted
that they could be subject to nearly $475 million in penalties each
year for failure to provide all FDA-approved contraception methods.
But if health coverage was dropped altogether, they calculated that
Hobby Lobby and Mardel could face Employer Mandate penalties up to
$26 million per year.
The Respondents filed suit claiming that the contraceptive mandate
violated both the Religious Freedom Restoration Act of 1993 (RFRA)
and their Free Exercise rights under the First Amendment to the
U.S. Constitution. The RFRA bars the government from substantially
burdening a "person's" exercise of religion unless
that burden is the least restrictive means to further a compelling
governmental interest.
Specifically, the Greens contended that the RFRA entitles their
Plan to an exemption from HHS' contraception requirement
because the Greens objected on religious grounds. A similar
group of plaintiffs (the Hahn family and Conestoga Wood Specialties
("Conestoga")) also challenged the law on the same
grounds in the U.S. Court of Appeals for the 3rd Circuit and did
not prevail. The cases were consolidated into HHS v.
Hobby Lobby, et al. for oral arguments and the Court's
decision today.
Decision Of The Court
The Supreme Court held that closely-held corporations should be
provided the same accommodations under the RFRA as those provided
to nonprofit organizations. In other words, the RFRA's
protections could extend to for-profit corporations such as Hobby
Lobby, Mardel, and Conestoga.
Accordingly, in order for the contraceptive mandate to survive (at
least as applied to the Respondents), the burden was on the
government to show that the contraception regulations 1) served a
"compelling government interest" and 2) were the
"least restrictive means" of achieving its interest in
guaranteeing cost-free access to birth control. The Court
assumed the first prong had been met.
As to the second prong, however, the Court found that the
Government failed to carry its burden to show that the
contraception requirements were the "least restrictive
means" of achieving its interest in guaranteeing cost-free
access to birth control. For example, the Court noted that
HHS had already devised and implemented a system for providing all
FDA-approved contraceptives to employees of religious nonprofit
organizations that object to HHS' contraception made, and the
government did not provide a sufficient reason why this system
could not be extended to employees of closely-held for-profit
companies whose owners also have religious objections.
Implications For Employers
It is not clear how far-reaching today's decision will be.
Supporters of the government's position have argued that
the Court's decision could go far beyond contraception, and
allow corporations to lodge objections on religious grounds to a
host of health, employment, safety, and civil rights laws (the
dissenting justices also voiced similar concerns).
But the Court's opinion today seemed to limit itself to the
contraceptive mandate only, likely quelling the concerns of many
who argued a broader decision may put in jeopardy other items
typically covered under group plans, such as vaccinations and blood
transfusions. In addition, the Court warned that its decision
should not be interpreted to provide a shield to employers to cloak
illegal discrimination under the guise of claimed religious beliefs
(for example, companies claiming to object, on religious grounds,
to same-sex marriage).
In addition, even as to the ACA's contraception requirements,
this decision likely will not seem to extend to larger corporations
with diverse ownership interests. The Court noted the
difficulty of determining the religious beliefs of, for example, a
large publicly-traded corporation, and pointed out that the
corporations in this case were all closely-held corporations, each
owned and controlled by a single family, with undisputed sincere
religious beliefs.
Accordingly, there may be relatively few employers that fit the exemption created by the Court's decision today (and the contraceptive requirements otherwise still stand). HHS will likely draft new regulations to comply with today's decision, and it remains to be seen whether new plaintiffs will challenge the contraception requirements or other requirements under the ACA on similar grounds.
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