On June 30, 2014, in Burwell v. Hobby Lobby Stores, Inc., the United States Supreme Court held that a closely held corporation cannot be required to provide contraceptive coverage under its group health plan if doing so would conflict with the sincerely held religious beliefs of the corporation’s owners. The so called “contraceptive mandate” is part of regulations issued under the Affordable Care Act, and generally requires health plans to cover contraceptives without cost sharing, as a type of preventive health service. The Supreme Court held that the mandate could not be applied if doing so would violate the rights of corporate owners under a Federal law called the Religious Freedom Restoration Act (RFRA) and, in so holding, ruled for the first time that a for-profit corporation can assert rights under RFRA.
It is not clear how (or if) the Obama administration can ensure contraceptive coverage for female employees of closely held corporations that opt out of the mandate on religious grounds. The majority opinion suggests that the administration could provide for-profit corporations the same “accommodation” it already provides to religious nonprofits. Under that accommodation, the insurer or third party administrator (TPA) of a religious nonprofit’s health plan must arrange for contraceptive coverage and seek reimbursement for any resulting costs from the Federal government.
This important decision has greatly expanded RFRA rights and may spur RFRA-based challenges to other health care mandates, such as vaccinations.
Because the New York Insurance Law has its own contraceptive mandate, which is not subject to challenge under RFRA, New York employers with insured health plans cannot use the Hobby Lobby decision to avoid providing contraceptive coverage under their insured plans.
The Contraceptive Mandate
The Affordable Care Act requires all non-grandfathered health plans to cover specific preventive services, such as vaccinations and tests, without cost sharing. Regulations issued in 2011 require that the required preventive services include all FDA-approved forms of contraception and patient education and counseling for all women with reproductive capacity.
The Exemption for Churches and the Religious Nonprofit “Accommodation”
From the start, the Federal agencies that administer the Affordable Care Act – the Health and Human Services Department (HHS), the Department of Labor and the Internal Revenue Service – exempted churches, integrated auxiliaries and conventions of churches, and the exclusively religious activities of religious orders from the contraceptive mandate. After widespread objections from non-exempted religious nonprofit organizations, the agencies established a special accommodation for such organizations in 2012. Under the special accommodation, a nonprofit organization that holds itself out as a religious organization, and opposes providing contraceptive coverage on religious grounds, is excused from directly arranging for the provision of such services through its health plan. Instead, if the plan is insured, the group health insurer must provide the required contraceptive coverage; and if the plan is self-insured, the third party administrator (TPA) must arrange with an insurer to provide coverage. Agency regulations prescribe ways by which the insurer or TPA can recoup any resulting costs from the Federal government. In order to qualify for the special accommodation, a religious nonprofit must certify in writing that it meets these eligibility requirements, and the insurer or TPA must cover or arrange for coverage of the requisite services as long as it is given a copy of the nonprofit organization’s written certification.
Many for-profit employers who objected to the contraceptive mandate initiated lawsuits challenging the mandate as a violation of their rights under the First Amendment to the Constitution rights or RFRA.1 Some Federal courts sided with the government, and some with the objecting employers. The Supreme Court has now resolved the for-profit cases in favor of the objecting employers.
In addition, many religious nonprofit organizations also sued (see footnote 1), alleging that the contraceptive mandate violated their First Amendment and RFRA rights even if they qualified for the special accommodation. The Supreme Court has yet to resolve these claims, although on July 3, 2014, the Court enjoined the administration from enforcing the mandate against any nonprofit corporation that certifies to HHS that it holds itself out as a religious organization and objects to the mandate on religious grounds, even if the organization refuses to provide a copy of the written certification to the insurer or TPA, as required by the special accommodation.2
The Hobby Lobby Decision
Burwell v. Hobby Lobby Stores, Inc. was decided together with Conestoga Wood Specialties Corp. v. Burwell. Both companies are family owned corporations, the owners of which objected on religious grounds to the contraceptive mandate, and specifically to four of the twenty contraceptive methods covered by the mandate.3 In the consolidated decision, the majority of the Court – consisting of the five justices appointed by Republican Presidents – ruled that:
- Closely held for-profit corporations, like Hobby Lobby and Conestoga Wood, can assert rights under the Religious Freedom Restoration Act (RFRA) based on the religious beliefs of their owners.
- The contraceptive mandate “substantially burdens” the corporations’ exercise of religion within the meaning of RFRA4 , given the owners’ presumptively sincere belief that use of any of the four contraceptive methods would destroy a human life.
- Since the mandate imposes a substantial burden on religious exercise, it would comply with RFRA only if it represents the “least restrictive means” of achieving a compelling government interest. The mandate fails the “least restrictive means” test because making the nonprofit accommodation available to for-profit companies is a less restrictive alternative.
Four justices – those appointed by Democratic Presidents – dissented. In her dissenting opinion, Justice Ginsburg sharply disagreed with the majority’s rulings on each of the issues summarized above, and warned that the Court had “ventured into a minefield” by interpreting RFRA too broadly.
What Comes Next
The Contraceptive Mandate
The Hobby Lobby decision creates numerous practical difficulties for the Obama administration with respect to the contraceptive mandate. The immediate consequence is that closely held corporations, the owners of which object to the mandate on religious grounds, cannot be compelled to provide any contraceptive coverage to their employees.
It is possible that the administration will follow the Court’s suggestion and simply make the religious nonprofit accommodation (see “The Exemption for Churches and the Religious Nonprofit Accommodation”, above) available to closely held for-profit corporations. New regulations would be required in order to accomplish this.
As noted earlier (see footnote 2), however, this accommodation has itself been enjoined by the Supreme Court, at least as it would apply to religious nonprofit organizations. Furthermore, experts have questioned whether this accommodation – which requires the insurer or third party administrator (TPA) to provide or arrange for the requisite contraceptive coverage and then seek reimbursement from the Federal government for its resulting costs – is even workable, especially for self-insured plans with independent TPAs (those not owned by an insurance company). The President of the Self-Insured Institute of America recently stated that “no independent TPA -- there are more than 300 in the U.S. -- has found an insurer willing to join with it” to provide contraceptive coverage pursuant to the nonprofit accommodation.5
Note: Employers in New York State who sponsor insured health plans probably cannot opt out of the contraceptive mandate based on the Hobby Lobby decision. The New York Insurance Law has its own contraceptive mandate, which applies to all group health insurance policies (other than those sponsored by churches and religious orders) in the state, and RFRA does not provide a defense to enforcement of state laws.
Other Health Plan Mandates
Though the majority opinion insists that the holding applies only to the contraceptive mandate, the Court’s reasoning apparently would permit RFRA-based challenges to the mandated provision of other health care services, such as vaccinations, blood transfusions and antidepressants. We will have to wait to see whether nonprofit or for-profit employers will assert these kinds of challenges in the future.