Background

The Patient Protection and Affordable Care Act (ACA) requires certain employers to cover women’s preventive health care under their nongrandfathered group health plans at no cost to employees.  The U.S. Department of Health and Human Services (HHS) promulgated regulations defining the scope of services that must be offered to comply with this preventive health care requirement.  These regulations require covered group health plans to offer the 20 contraceptive devices approved by the U.S. Food and Drug Administration (FDA) in order to comply with the women’s provisions of the preventive care mandate under the ACA (Contraception Mandate). 

The Supreme Court of the United States (the Court) case was brought by three plaintiffs: Hobby Lobby, a family-owned, for-profit corporation, a religious book store owned by the family that owns Hobby Lobby and Conestoga Wood Specialties Corp., another closely held family-owned, for-profit corporation.  The families who own these businesses are devoutly religious and argued that compliance with the Contraception Mandate substantially burdened their exercise of religion.  Thus, these families filed lawsuits in federal court seeking a judicial order that their businesses did not need to comply with a portion of the Contraception Mandate.

Specifically, the business owners objected to being required by the government to provide four of the 20 FDA-approved contraceptive devices: two forms of emergency contraception colloquially known as “morning after” pills and two intrauterine devices.  The business owners did not object to the 16 other contraceptive devices, because those devices work by preventing fertilization.  The four contraceptive devices at issue in Burwell v.Hobby Lobby Inc., however, work by preventing further development of an already fertilized egg.  Plaintiffs argued that because these contraceptive devices act on already fertilized eggs, they violate the plaintiffs’ Christian belief that life begins at conception.

The claims that the Court considered in Hobby Lobby began at the district court level as separate cases.  In both cases, the district courts rejected the plaintiffs’ arguments.  On appeal, however, the reviewing courts reached different conclusions.  The U.S. Court of Appeals for the Third Circuit affirmed the district court, holding that because for-profit corporations cannot engage in religious exercise in the first place, it would be impossible for government action to impede corporate religious exercise.  The U.S. Court of Appeals for the Tenth Circuit, on the other hand, reversed the lower court decision, holding that for-profit corporations are indeed “persons” capable of religious exercise.  The ACA’s Contraception Mandate, according to the Tenth Circuit, violated the businesses’ religious freedom. 

The Supreme Court agreed to review both cases to settle the dispute between the Third and Tenth Circuits.  The Court’s opinion is summarized below.  View the full decision here.

The Majority Opinion in Hobby Lobby

Justice Alito delivered the Court’s majority opinion, in which Chief Justice Roberts and Justices Scalia, Kennedy and Thomas joined.  The Court held that requiring the plaintiffs, which are closely held for-profit corporations, to comply with the Contraception Mandate violates the Religious Freedom Restoration Act of 1993 (RFRA).  The Court relied solely on RFRA for its conclusion that the Contraception Mandate violated plaintiffs’ religious freedom, and did not engage in First Amendment analysis in reaching its decision.  Ironically, the actual decision did not limit the ruling to the four contraceptive devices originally at issue.  The actual holding was broader and applied to the entire ACA Contraception Mandate.

RFRA prohibits the federal government from taking any action that substantially burdens the exercise of religion, unless that action constitutes the least restrictive means of serving a compelling government interest. 

Do For-Profit Corporations Exercise Religion? 

Before the Court could consider whether the Contraception Mandate violated RFRA, it had to decide whether RFRA applied at all to for-profit corporations.  The government had taken the position, with which several lower courts had agreed, that for-profit corporations do not have standing to bring claims under RFRA because it only protects persons who exercise religion, and for-profit corporations are incapable of meeting that definition because they are not persons and do not exercise religion (i.e., a corporation cannot pray or attend church).  The Court rejected this argument and concluded that nothing in RFRA suggests that closely held corporations were to be excluded from its scope.  The Court further concluded that the word “person” includes not only a nonprofit corporation, but also a for-profit corporation.  The majority emphasized that its Hobby Lobby holding is limited to closely held corporations, suggesting that Hobby Lobby might not apply generally to publicly traded public corporations.  Nevertheless, under Hobby Lobby, closely held for-profit corporations now have clear standing to bring claims under RFRA.

Does the Contraception Mandate Impose a “Substantial Burden” on Hobby Lobby’s Religious Exercise?

The Court agreed with the plaintiffs that the Contraception Mandate imposes a substantial burden on their exercise of religion.  In reaching this conclusion, the Court noted that the Contraception Mandate left plaintiffs with three choices.  First, they could violate their religious belief that life begins at conception by providing the contraceptive devices at issue in Hobby Lobby.  Second, they could exclude the objectionable contraceptive devices from their group health coverage, in which case they would have to pay an ACA penalty equal to $100 per day per affected individual (or approximately $475 million per year in Hobby Lobby’s case).  Third, they could stop providing group health coverage to their employees altogether.  However, if they chose this route and at least one of their full-time employees received subsidized coverage on an ACA Health Insurance Marketplace Exchange, they would be required to pay an ACA tax for failing to provide coverage to their full-time employees of $2,000 per full-time employee, minus 30 full-time employees.  This penalty would be approximately $26 million per year in Hobby Lobby’s case, significantly less than the penalty for offering group health coverage that does not provide morning after pills and intrauterine devices at no cost to employees, but still significant.  To the Court, this trio of alternatives imposed a substantial burden on plaintiffs’ ability to exercise their religion.  Essentially, the government presented plaintiffs with a choice between violating their religious beliefs on the one hand and paying millions of dollars in annual Internal Revenue Service penalties on the other hand.

Does the Contraception Mandate further a “compelling governmental interest” and, if so, is it the “least restrictive means” of doing so?

The Court declined to rule on whether the Contraception Mandate furthers a “compelling governmental interest,” though the majority hinted that it had doubts about whether the government could satisfy this requirement by noting that it seemed odd the government was claiming a compelling interest in ensuring employers provide free access to all 20 FDA-approved contraceptive devices, given that the government itself had exempted religious nonprofit organizations, group health plans of employers with under 50 employees and grandfathered health plans from satisfying the Contraception Mandate—the latter for no apparent reason except administrative convenience.  Rather, the Court focused its inquiry on whether the Contraception Mandate is the “least restrictive means” that the government could have chosen to serve its compelling interest in providing women with free access to contraception, assuming that it has such a compelling interest.  The “least restrictive means” test is one of the most demanding standards in constitutional jurisprudence, and the Court concluded that the government failed to satisfy that demanding test in Hobby Lobby.  The government “has not shown,” wrote the Court, “that it lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion by the objecting parties in these cases.” 

The Court gave examples of less restrictive means the government could utilize, such as the government itself providing contraception to women who are unable to obtain it through employer-sponsored health insurance policies due to their employers’ religious objections.  Most compelling was the fact that the government had already established an accommodation for the religious nonprofit organizations that the government exempted from the Contraception Mandate.  HHS regulations completely exempt a certain narrow set of religious employers from the Contraceptive Mandate, and for nonprofit religious organizations, the government provides an accommodation by requiring those entities to certify their religious objections to their insurance issuer or third-party administrator.  The insurance issuer or third-party administrator then excludes the objectionable contraceptive services from the employer’s group health plan and assumes the cost and responsibility of providing those contraceptive services directly to any employees who request them without imposing any cost-sharing requirements on the employer, its insurance plan or its employee beneficiaries.  According to the Court, it would be permissible under RFRA for the Court to extend this same approach to for-profit corporations that harbor religious objections to the Contraception Mandate.  The Court however failed to include any procedure on how a religious for-profit company would raise a similar objection as a religious nonprofit organization in this instance.  In addition to this case, in other currently pending cases, this accommodation is being challenged by other religious organizations who believe the request for the accommodation itself is a violation of their religious beliefs. 

The Hobby Lobby Holding

In light of the foregoing analysis, the Court held that the Contraception Mandate, as applied to closely held corporations, violates RFRA.  Because the Court was able to adjudicate the claim under RFRA, the Court did not assess the plaintiffs’ First Amendment claims.  

The Court dismissed the concern raised in Justice Ginsburg’s dissent (as well as in media accounts of the Hobby Lobby decision), that Hobby Lobby could encourage businesses to identify religious beliefs as a pretext for engaging in deleterious conduct, such as discriminatory hiring practices, by observing, “The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.”  Several commentators have noted that the Court’s reference to racial discrimination seemed misplaced and perhaps ominous for advocates of laws prohibiting discrimination on the basis of sexual orientation.  After all, these commentators note, the vast majority of contemporary business owners’ claims that non-discrimination rules infringe religious freedom involve sexual orientation, not race.  Yet the Court made the presumably conscious decision to omit any reference to sexual orientation.

The Court also dismissed the dissent’s prediction that Hobby Lobby will invite both closely held and public corporations of all sizes to seek regulatory exemptions on religious grounds.  On this point, the Court observed, “it seems unlikely that … corporate giants … will often assert RFRA claims” and “numerous practical restraints” would likely prevent that from occurring.     

What It All Means

For the business owners who filed the Hobby Lobby case, the Court’s decision means that the government cannot require them to comply with the Contraception Mandate.  These companies can now offer group health coverage that does not include contraception without having to pay any penalties or taxes under the ACA.     

It remains to be seen whether the Obama administration will take action to ensure that if a woman’s employer does not offer the comprehensive panoply of FDA-approved contraceptive devices, she will still have free access to those devices.  For example, will the government accept the Court’s invitation to directly provide contraceptive devices to women affected by Hobby Lobby?  Or will the government extend to for-profit corporations its existing accommodation for religious nonprofit organizations, under which the employer certifies its religious beliefs to an insurance issuer or third-party administrator, who in turn provides the contraceptive services at issue to plan participants?  Another open question is who will actually pay for these contraceptive devices as it is established that it will not be the religious employer or the woman seeking the contraception.  Will for-profit corporations be able to challenge other aspects of the ACA on religious grounds?  All of that remains to be seen in the wake of Hobby Lobby.      

More broadly, Hobby Lobby now stands for the proposition that closely held for-profit corporations have standing to bring claims under RFRA.  It is expected that a growing number of corporate litigants will bring RFRA claims arguing that government rules or regulations impinge on their religious freedom.  Whether the courts hearing these claims will apply Hobby Lobby beyond its specific facts is unclear, though the Court certainly gave lower courts ample bases via which to distinguish future claims from Hobby Lobby by emphasizing the intended limits of the Hobby Lobby holding (i.e., that the holding only applies to the plaintiffs, family-owned corporations that have ascertainably infused their businesses with their religious beliefs).