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Supreme Court Upholds For-Profit Corporations’ Exemption Claim From Contraceptive Mandate

In a 5-4 decision, the Supreme Court has held that, as applied to closely held corporations, regs issued by the Department of Health and Human Services under the Affordable Care Act (ACA) that contained the so-called “contraceptive mandate” violate the Religious Freedom Restoration Act of ’93. Under the regs at issue, specified employers’ group health plans were required to make certain types of contraception, including four types that the corporations’ owners objected to for religious reasons, available to their female employees at no cost.

Click here for Burwell, Secretary of Health and Human Services, et al, v. Hobby Lobby Stores, Inc., et al, (2014, S.Ct.) No. 13-354.

Background on the contraceptive mandate. Under ACA (P.L. 111-148), employers with 50 or more full-time employees are generally required to offer “a group health plan or group health insurance coverage” that provides “minimum essential coverage.” (Code Sec. 5000A(f)(2); Code Sec. 4980H(a); Code Sec. 4980H(c)(2)) Any covered employer that does not provide such coverage may be required to pay $100 per day for each “affected individual.” (Code Sec. 4980D)

§1001 of ACA added §2713 to the Public Health Service Act (PHSA), relating to preventive care. ACA also added ERISA § 715(a)(1) and Code Sec. 9815(a)(1), making PHSA §2713 applicable to group health plans and health insurance coverage in connection with group health plans.

PHSA §2713 and its regs generally require that group health plans and health insurance issuers offering group insurance coverage provide preventive health services without cost-sharing requirements. (42 USC 300gg-13(a)(4)) Guidelines adopted by the Health Resources and Services Administration (HRSA) (an agency of the Department of Health and Human Services (HHS)) specifically require group health plans to provide coverage of contraceptive care on a no-cost basis (the “contraceptive mandate”).

However, as permitted by HHS regs, the HRSA guidelines allow an exemption from the contraceptive services requirement for certain “religious employers” (e.g., churches) and the group health insurance plans they sponsor, as well as for religious nonprofit organizations with religious objections to providing coverage for contraceptive services. (T.D. 9541) For these types of organizations, the obligation to provide the objected-to coverage is essentially passed on to the plan itself after the organization files a form with the government claiming an exemption.

RIA observation: The requirement to file a form wasn’t at issue in this case, but it has been disputed in other cases and may prove to be a larger issue going forward.

Background on the Religious Freedom Restoration Act of ’93 (RFRA). RFRA prohibits the government from “substantially burden[ing] a person’s exercise of religion even if the burden results from a rule of general applicability” unless the Government “demonstrates that application of the burden to that person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.” (42 USC 2000bb-1(a); 42 USC 2000bb-1(b) )

Facts. In this case, the owners of closely held, for-profit corporations have sincere Christian beliefs that life begins at conception and that it would violate their religion to facilitate access to contraceptive drugs or devices that operate after that point (the relevant HHS regs require nonexempt employers to provide coverage for 20 contraceptive methods, including four that have the effect of preventing an already fertilized egg from developing any further). They brought separate actions seeking to enjoin application of the contraceptive mandate insofar as it requires them to provide health coverage for the four objectionable contraceptives.

In both cases, the district courts denied the requests for a preliminary injunctions. On appeal, the Third Circuit affirmed one decision, finding that a for-profit corporation couldn’t “engage in religious exercise” under RFRA or the First Amendment and that the mandate imposed no requirements on the company owners in their personal capacity. In the other case, however, the Tenth Circuit reversed, holding that the businesses are “persons” under RFRA, and that the corporations had established a likelihood of success on their RFRA claim.

Majority’s opinion. Writing for the majority (including Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas, with Kennedy concurring in a separate opinion), Justice Alito stated that the regs at issue requiring employers to provide certain methods of contraception (HHS regs) in violation of the owners’ sincere religious beliefs violate RFRA. In so holding, the majority rejected the argument that RFRA doesn’t apply to a for-profit corporation, noting that: (i) RFRA applies to “a person’s” exercise of religion, and that under the Dictionary Act, the word “person” includes, among other things, corporations; and (ii) there is no convincing reason, especially in light of the existing exemption for religious non-profit corporations, to conclude that a for-profit corporation can’t engage in the “exercise of religion.” The Court then held that the HHS regs substantially burdened the business owners’ exercise of religion because of the financial consequences of not complying with the mandate. The Court further concluded that there are other ways that Congress or HHS could ensure women’s cost-free access to the disputed contraceptives, and that the contraceptive mandate thus also failed to be the least restrictive means of achieving access to same.

The majority also noted that its holding “is very specific” and took issue with statements to the contrary in the dissent. It stated that “our decision in these cases is concerned solely with the contraceptive mandate” and “should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer’s religious beliefs” (e.g., blood transfusions).

In his concurring opinion, Justice Kennedy also emphasized that “the Court’s opinion does not have the breadth and sweep ascribed to it by the respectful and powerful dissent” and that, since a mechanism for accommodating similarly situated employers is already in place (i.e., the existing regime for religious non-profit corporations), “this is not a case where it can be established that it is difficult to accommodate the government’s interest.”

Dissents. In the principal dissent (which was joined by Justice Sotomayor and joined with respect to all but one part by Justices Breyer and Kagan), Justice Ginsberg characterized the majority’s decision as holding “that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.” She stated that, in the majority’s view, “RFRA demands accommodating of a for-profit corporation’s religious beliefs no matter the impact that accommodating may have on third parties who do not share the corporation owners’ faith.” She traced the legislative history of RFRA and concluded that it didn’t so much create new rights for any religious practices but rather overturned a specific Supreme Court case (Employment Div., Dept of Human Resources of Ore. v. Smith, (1990, S.Ct.) 494 U.S. 872, which the Court described in a later case as ruling that, under the First Amendment, “neutral, generally applicable laws may be applied to religious practices even when not supported by a compelling governmental interest”) by providing that the government “shall not” substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability. According to Justice Ginsberg, this left intact the pre- Smith methodology for evaluating free exercise (i.e., First Amendment) claims and, under this framework, Hobby Lobby’s exemption claim would clearly fail. She also drew a clear distinction between religious non-profit organizations and for-profit corporations, noting that while religious organizations “exist to serve a community of believers,” “[f]or-profit corporations do not fit that bill.”

In a second dissent, Justices Breyer and Kagan wrote separately only to state that they “need not and do not decide whether either for-profit corporations or their owners may bring claims” under RFRA.

Political reaction. In a statement, Senate Finance Committee Chairman Ron Wyden (D-OR) said that the decision “flies in the face of the ongoing effort to eliminate gender discrimination in the workplace.” He said that it potentially opens “the door to roll back civil rights protections more broadly” and that “[w]hen it comes to personal health decisions, employers have no right to come between women and their doctors.” Senate Majority Leader Harry Reid (D-NV) released a similar statement saying that the decision “jeopardizes women’s access to essential health care” and promising that Democrats “will continue to fight to preserve women’s access to contraceptive coverage and keep bosses out of the examination room.”

On the other side of the aisle, Senate Minority Leader Mitch McConnell (R-KY) said that the Court’s decision “makes clear that the Obama administration cannot trample on the religious freedoms that Americans hold dear.” He continued to state that “Obamacare is the single worst piece of legislation to pass in the last 50 years.” Senator Jerry Moran (R-KS) stated that the decision “rightly rejects the federal government’s intrusion into an individual’s religious liberty” and “protects religious practice beyond places of worship without harm to others.”

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