Editor’s Note: This blog was originally published on our sister blog – Employee Benefits Law Report - last week and we wanted to share it with our blog readers here as well.
The United States Supreme Court held in a 5-4 decision issued on Monday, June 30 that regulations issued under the Affordable Care Act (the “ACA”) that compel closely held corporations to provide contraception coverage for their employees violated the Religious Freedom Restoration Act of 1993 (the “RFRA”). Two cases actually are involved in this opinion, including Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialties v. Sebelius (referred to hereafter simply as Hobby Lobby). In an opinion written by Justice Samuel Alito, the court’s conservative block (all five of the so-called conservative justices appointed by Republican presidents) concluded that closely held corporations such as Hobby Lobby Stores Inc. and Conestoga Wood Specialties Corp. cannot be required to provide contraceptive coverage if doing so would be contrary to sincerely held religious beliefs of the corporation’s owners. For the first time, the Court has ruled that the RFRA covers corporations–or at least certain corporations. In yet another example of the partisan divide on the Court, the four so-called liberal justices (three of whom are women, and all of whom were appointed by Democratic presidents) did not support the majority opinion and, in doing so, warned of future efforts to use religious beliefs to trump the application of laws and regulations that are perceived to be undesirable. Presumably as an expression of her angst with the majority opinion, Justice Ruth Bader Ginsburg read a portion of the dissent that she authored from the bench when the decision was announced on Monday.
The dispute over contraception coverage in Hobby Lobby arose from a provision in the ACA that requires heath care plans to offer free preventive care. While means of contraception are not specifically referenced in the ACA, under regulations issued by the Obama administration the term preventive care was interpreted to include all contraception and sterilization measures approved by the United States Food And Drug Administration, including birth-control pills, intrauterine devices and the morning-after pill.
The owners of Hobby Lobby, an Oklahoma-based arts-and-crafts chain owned by founder David Green, an evangelical Christian, and other family members and the Mennonite owners of Conestoga Wood Specialties, a Pennsylvania-based cabinetmaker, brought actions to challenge the ACA requirement that health care plans cover certain contraceptives. Although not entirely clear, it appears that Hobby Lobby and Conestoga Wood Specialties did not object to all required contraception methods, but specifically rejected morning-after pills and intrauterine devices–that objection was the basis for their law suits. Notwithstanding this more narrow concern, the Court’s opinion (while limited in certain respects) seems broad enough to apply to other forms of contraception as well.
In Monday’s decision, closely held profit-making corporations were found to have a legal right under the RFRA not to be forced to include contraception coverage under their plans if doing so would be contrary to sincerely held religious beliefs of the corporations’ owners. Justice Alito tried to emphasize that this decision was limited in its breadth, and that it did not necessarily open the door to other challenges based on religious convictions. Moreover, the majority explained that the opinion only applied to closely held corporations. In a short concurring opinion, Justice Anthony Kennedy tried to reinforce the limited nature of this opinion. As a means to alleviate a resulting lack of contraception coverage, Justice Alito suggested in the majority opinion that the Obama administration offer to for-profit companies the same accommodation previously extended by the administration to religiously affiliated non-profits that also objected to contraception coverage in their plans. Under this accommodation (which applies to both insured and self-insured plans, although in different ways) insurers or third party administrators are required to provide contraceptive coverage without charging premiums to employers or copayments to covered individuals. Alternatively, the court stated that the federal government simply could pay for contraceptive coverage with a subsidy (although it is unclear whether that approach would be possible without enabling legislation). Surely the Obama administration already has begun consideration of alternatives to ensure contraception coverage. New White House Press Secretary Josh Earnest stated on Monday that the White House is reviewing the decision and determining its options, including pursing a legislative fix (although the legislative route seem quite unlikely in this tumultuous partisan place called Washington).
Leaving aside political intrigue (which the majority of Americans would be only too happy to do), the practical implications of the Hobby Lobby decision are uncertain. While it is not entirely clear how the Court would define a closely held corporation, based on recent studies a sizable percentage of small businesses are not even subject to the ACA mandates (including contraception coverage) because they have fewer than 50 full-time employees. Moreover, according to a study prepared by Mercer Human Resources Group, approximately 90 percent of all employers in the United States (regardless of size) already offered contraception coverage. Wholesale changes in the prevalence of contraception coverage even after this decision may well be unlikely.
It must be noted that employers also will have to review the possible application of any state laws that might require contraception coverage despite the holding in Hobby Lobby. Many states have enacted laws that require employers that offer prescription drug coverage to cover certain contraceptives as well. Since the Court’s decision in Hobby Lobby was based on the application of the RFRA, it does not invalidate those state laws (although employers that sponsor self-funded plans may be able to evade such state laws under ERISA’s preemption doctrine).
The Hobby Lobby decision certainly ended the Supreme Court’s term with a bang (and was announced as protestors on both sides of the issues demonstrated in front of the Supreme Court building in Washington, D.C.). Coming just two years after the Supreme Court held that the ACA was constitutional, even though the Court at that time invalidated the mandatory expansion of Medicaid, some will view this decision as both a legal and a political defeat for President Obama. Others will view the decision as a setback for women’s rights, even though the majority opinion (as well as Justice Kennedy’s concurring opinion) tried to frame this case as a matter of religious freedom and even then as a decision with a very narrow application. To no one’s surprise, the decision has set off a frenzied partisan debate that seems likely to play out through the November congressional elections and into the future over religious and reproductive rights. Both parties have launched fundraising initiatives based on the decision.
Perhaps the more significant but as yet unknowable legacy of the Hobby Lobby opinion will be its possible extension to other laws and regulations that might be considered to clash with religious beliefs held by owners of closely corporations–and whether these principles get extended to other forms of corporations. In her dissent, Justice Ruth Bader Ginsburg stated that she believed the Court inadvertently “ventured into a minefield.” Only time will tell if she is correct.