In what continues to be a controversial and developing area of employment law, a federal appellate court recently validated the Affordable Care Act’s (ACA) “opt out” provision, finding that requiring nonprofit employers to opt out did not substantially burden their religious rights. The Second Circuit Court of Appeals held in Catholic Health Care System v. Burwell that an employer’s rights under the Religious Freedom Restoration Act (RFRA) were not violated when they exercised the “opt out” accommodation to preclude the employer’s payment for contraception services. The ruling is noteworthy for religiously based nonprofit employers and is yet another chapter in the wake of the Supreme Court’s 2014 Hobby Lobby ruling on the tension between the ACA and religious exercise.

What the ACA Requires

The ACA requires employers with 50 or more full-time employees to offer group health insurance coverage, through either an insured plan or a self-insured plan with a third-party administrator. Part of the minimum essential coverage requires “preventive care and screenings” for female employees without any cost sharing; specifically including FDC-approved contraceptive methods for women. The ACA provides, however, an exemption to the contraception coverage requirement for religious non-profit organizations that object to covering contraception on religious grounds. To qualify for the exemption, the objecting employer must submit a notification form to the Department of Labor and its insurer or third-party administrator or send a letter to the Department of Health and Human Services (HHS) detailing their religious objections. Once the exemption request is submitted, employee beneficiaries still have access to contraception coverage through alternative mechanisms with the third-party administrator paying for the services. Under the exemption, none of the costs for the contraception services are charged to the employer or group health plan.

What the Second Circuit Was Considering in this Case

The Catholic Archdiocese of New York initiated the Catholic Health Care lawsuit arguing that the contraceptive coverage mandate violated their rights under the RFRA, which provides that the government “shall not substantially burden a person’s exercise of religion” unless that burden is done by the least restrictive means. The Catholic Archdiocese and the affiliated plaintiffs subscribe to the Catholic Church’s teaching that life begins at the moment of conception and that “abortion-inducing” contraceptives are immoral. Further, the plaintiffs explained that any actions that would make them complicit in the delivery of these services (i.e., paying for or facilitating access to contraceptives) likewise was forbidden. At the heart of the controversy is the plaintiffs’ belief that even the accommodation exemption, which is funded by the third-party administrator through government incentives, still violates their religious convictions.

The lower court found that the ACA regulations violated the archdiocese’s rights under RFRA. On appeal, the Second Circuit reversed that ruling, specifically finding that organizations that wanted to exempt themselves from the ACA’s coverage mandate were not substantially burdened by having to file a single sheet of paper with the DHS. The Catholic Archdiocese maintained that the act of opting out still violated its religious beliefs as an insurer or a third-party administrator would be providing the contraception services to its beneficiaries and the archdiocese would be complicit in that act. The court, however, found that the “opt out” accommodation operated in a straightforward fashion to provide eligible non-profits “the opportunity to freely express their religious objection to such coverage as well as to extricate themselves from its provisions” but still require that individuals not be deprived of receiving contraceptive coverage. The obligation imposed on the archdiocese of merely identifying themselves as religious objectors through a “modicum of paperwork” was found not to be a substantial burden on the plaintiffs: “Assessing this obligation objectively, we cannot conclude that the simple act of completing the notification form imposes a substantial burden on Plaintiffs’ religious exercise.”

What This May Mean Going Forward

The Catholic Health Care decision is one of many in the wake of the Supreme Court’s 5-4 decision in Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014).In Hobby Lobby, the Court held that under RFRA closely held for-profit corporations were exempt from the contraceptive mandate to which its owners religiously objected if there was a less restrictive means to further the statute’s interest. The opinion was limited to closely held corporations, however, and mentioned that the ACA’s “opt out” provision for non-profit religious objectors was not available to for-profit corporations.

The Second Circuit’s opinion falls in line with other post-Hobby Lobby opinions in which religiously based non-profits have challenged the accommodation provision of the ACA.

Future cases will continue to address the tension between the ACA’s requirements for employers and the extent to which the Hobby Lobby decision would exempt certain employers based on religious convictions. The take away from the Catholic Health Care decision, however, for non-profit employers with religious objections is that the “opt out” provision under the ACA will be viewed as a valid accommodation to religiously based objection.