The ACA requires non-grandfathered health plans to cover preventive services at no cost to the plan participant and included among these preventive services are certain women’s health services some of which relate to contraception. On June 30, 2014, the Supreme Court in a 5-4 decision ruled that closely held corporations are not obligated to cover the contraceptive benefit mandated by the Affordable Care Act (ACA), if they object to doing so on religious grounds. In a nutshell, the Court ruled in Burwell v. Hobby Lobby et al. [No. 13-354 (U.S. June 30, 2014)] that a closely held corporation is protected by the Religious Freedom and Restoration Act (RFRA). HRB 97 provides details on how entities are categorized for purposes of determining how the contraceptive mandate will apply.

1. Subject: Preventive Services – Contraceptive Mandate
Date: July 2, 2014
On June 30, 2014, the Supreme Court in a 5-4 decision ruled that closely held corporations are
not obligated to cover the contraceptive benefit mandated by the Affordable Care Act (ACA), if
they object to doing so on religious grounds. In a nutshell, the Court ruled in Burwell v. Hobby
Lobby et al. [No. 13-354 (U.S. June 30, 2014)] that a closely held corporation is protected by
the Religious Freedom and Restoration Act (RFRA).
The RFRA, enacted in 1993, is a federal law intended to prevent laws that would substantially
burden a person’s free exercise of their religion. According to the Opinion:
“RFRA prohibits the “Government [from] substantially burden[ing] a person’s exercise of
religion even if the burden results from a rule of general applicability” unless the
Government “demonstrates that application of the burden to the person—(1) is in
furtherance of a compelling governmental interest; and (2) is the least restrictive means
of furthering that compelling governmental interest.” 42 U. S. C. §§2000bb–1(a), (b)
(emphasis added).”
The ACA requires non-grandfathered plans to cover preventive services at no cost to the plan
participant and included among these preventive services are certain women’s health services
some of which relate to contraception. For purposes of determining applicability of the
mandate, entities can be divided into three and possibly now, four classifications:
1. Churches. Religious organizations, specifically churches and religious orders, are
expressly exempt, i.e., plans sponsored by these entities are not obligated to cover
contraceptive services.
2. Eligible Organizations. Non-profit entities with a religious affiliation, known as “eligible
organizations” are not entitled to the full exemption, but are entitled to certify their
religious objection and thus be exempt from providing the coverage. In this instance,
individuals obtain the services directly from an insurer or third party administrator.
Several of these eligible organizations are objecting to having this degree of association
with the contraceptive mandate, and it is expected that the Supreme Court will take this
up next term.
3. For-Profit Entities. The ACA does not provide an exemption from the contraceptive
mandate for private sector entities, including for-profit entities. Upon review of this
issue, the Supreme Court determined that “the contraceptive mandate, as applied to
closely held corporations, violates RFRA.” This means that a closely held for-profit
corporation is not obligated to cover the contraceptive products or services to which the
entity objects.
July 2, 2014 – HRB 97 Page 1

2. CBIZ Health Reform Bulletin
A closely held corporation is defined in several ways. The term generally refers to a
small privately held for-profit corporation consisting of few shareholders, typically family
members or other close associates. For federal tax law purposes, the IRS refers to a
closely held corporation as one in which over 50% of the value of its outstanding stock
is owned (directly or indirectly) by 5 or fewer individuals at any time during the last half
of the tax year; and is not a personal service corporation. For corporation formation
purposes, a state may have a similar definition.
This Opinion does not address corporations that are publicly traded, arguably making this
group a fourth category which today, is obligated to comply fully with the mandate.
NEXT STEPS
First and most important, the provisions of the ACA remain in full force and effect and all steps
toward compliance should continue to be followed. This ruling relates only to the contraceptive
mandate and it applies only to closely held corporations with a religious objection to some or all
of the required services.
It is likely that matters will continue to evolve as it relates to the contraception requirement.
Lawsuits challenging this same issue brought by eligible organizations will continue to wind
their way through the courts.
It is likely that the Health and Human Services will issue additional regulations establishing a
process by which a closely held corporation with a religious objection to forego some or all of
the contraception requirements. The regulations are likely to provide a methodology whereby
employees of objecting corporations can obtain these services. This process will likely mirror
that which is available to eligible organizations described above.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ
Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with
particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese
is based in the CBIZ Leawood, Kansas office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments
directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in
law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional
advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no
warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to
inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S.
Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or
written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal
Revenue Service.
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