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News Flash June 30 2014 Supreme Court Rejects Contraceptive Coverage Mandate for Certain Employers
1. News Flash: June 30, 2014 – Supreme Court Rejects Contraceptive Coverage
Mandate for Certain Employers
Earlier today, the US Supreme Court, in Burwell v. Hobby Lobby Stores, Inc., et. al., found that
the Department of Health & Human Services’ (HHS’) regulations implementing certain no cost
sharing women’s preventive health services included in the Patient Protection and Affordable Care
Act of 2010 (PPACA) violated the Religious Freedom Restoration Act of 1993 (RFRA) with
regard to closely-held, for profit corporations who assert that such mandates violate the owners’
sincere religious beliefs.
Background – Supreme Court Decision:
HHS regulations confirm that nonexempt employers who provide health coverage are generally
required to provide coverage for the 20 contraceptive methods approved by the Food and Drug
Administration, including the 4 that Hobby Lobby objected to (scripts/services that may have the
effect of preventing an already fertilized egg from developing any further). Religious employers
such as churches are exempt. HHS has also effectively exempted nonprofit organizations with
religious objections through an accommodation – where, upon certification by the employer, the
issuer of coverage must exclude contraceptive coverage from the employer’s plan and provide
participants and beneficiaries with separate contraceptive services without cost sharing – ensuring
neither the employer, the plan nor the participants/beneficiaries incur any cost. Hobby Lobby, as a
for-profit, closely held corporation, objected to these provisions and filed suit.
The majority opinion of the court noted that: “… The Religious Freedom Restoration Act of 1993
(RFRA) prohibits the “Government [from] substantially burden[ing] a person’s exercise of
religion” … 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.” The court cited a subsequent law, the Religious
Land Use and Institutionalized Persons Act of 2000, which amended RFRA to confirm that the
term “exercise of religion” need not be restricted to those actions that are “… compelled by, or
central to, a system of religious belief…”
The majority opinion of the court found that:
“… As applied to closely held corporations, the HHS regulations imposing the
contraceptive mandate violate RFRA. …”
The court noted that HHS’ concession that a nonprofit corporation can be a “person” under
RFRA “… effectively dispatches any argument that the term does not reach for-profit
corporations…” and specifically rejected HHS’ position that would limit RFRA to religious
organizations and not-for-profit corporations.
They found that HHS’s contraceptive mandate substantially burdens the exercise of
religion, and:
2. o They rejected “friend of the court” arguments that Hobby Lobby could have
dropped health coverage in favor of the less expensive $2,000 per full time
employee employer shared responsibility penalty tax. Instead, the court noted that
HHS never asserted this alternative nor was it evaluated by the lower courts, and the
Supreme Court concluded that: “… it is far from clear that the net cost to the
companies of providing insurance is more than the cost of dropping their insurance
plans and paying the ACA penalty. …”
o They did not find that cost-free-access to the four challenged contraceptive methods
was a “compelling governmental interest” – noting the exemptions affecting “tens
of millions” of people, those of religious employers, the statutory exemption of
grandfathered plans, and, indirectly, employers with less than 50 full time employee
equivalents, etc. However, they reasoned that even assuming those four methods
did serve a compelling government interest, they held that HHS did not select the
least restrictive means to further that interest. They found that other, less
burdensome options were available – such as having the government provide the
coverage directly or extending the same accommodation that HHS already provided
for religious, non-profit organizations.
What does it mean?
Closely held, for profit corporations (presumably the same would apply to other forms of
ownership such as LLCs, partnerships, sole proprietorships and the like as the same reasoning
would apply to those entities) with comparable religious objections cannot be compelled to
include the four specific items in their coverage. The court specifically confirmed that the decision
concerns only the contraceptive mandate “… and should not be understood to hold that all
insurance-coverage mandates … must necessarily fall if they conflict with an employer’s religious
beliefs. Nor does it provide a shield for employers who might cloak illegal discrimination as a
religious practice. … ”
Therefore, if the contraceptive mandate would violate a religious belief of the owners of a non-
public entity, the employer would not be required to provide those services in its group medical
plans and could carve them out. It would likely take a plan amendment in many cases to make
those distinctions and presumably an insured plan might still make an offering for those services
similar to that of a religious employer. But this does provide employers with those religious
beliefs an option to avoid paying for such services. Presumably HHS will provide some clarifying
regulations to follow up on the court’s holding.
What’s next?
Many expect the federal government will soon announce an expansion of the existing
accommodation already in place for non-profits that certify religious objections to contraceptives.
3. It is not clear how this decision may affect corporations that are not “closely held”. And, it is not
clear how this decision may affect other entities with related claims – such as the claim by the
Little Sisters of the Poor, the University of Notre Dame, and hundreds of others who object to the
self-certification accommodation as an endorsement, an action that “compel[s] affirmation of a
repugnant belief”. That is, it is not clear whether it will be sufficient to extend the existing
accommodation.
Simply, we haven’t seen the end of the litigation over PPACA.
The information in this publication is not intended as legal or tax advice and has been prepared
solely for informational purposes. You may wish to consult your attorney or tax adviser
regarding issues raised in this publication.