Employment Matters Blog

The Affordable Care Act—Countdown to Compliance for Employers, Week 25 (Early Edition): What Hobby Lobby Means for the Affordable Care Act—Absolutely Nothing

Posted in Affordable Care Act, Healthcare, IRS, Supreme Court

Written by Alden J. Bianchi

To call the Supreme Court’s recent decision in Burwell v. Hobby Lobby Stores, Inc. much-anticipated or highly controversial is an understatement. And, to be clear, any time the Supreme Court weighs in on bed-rock constitutional principle—particularly as it affects the church-state relationship, it is a big deal. But for anyone seeking intelligence on the prospects, efficacy, or fate of the Affordable Care Act, this is not the place to look.

Statutory Background

The Religious Freedom Restoration Act of 1993

The Religious Freedom Restoration Act of 1993 (RFRA) generally prohibits the government from “substantially burdening 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 the person: (1) Is in furtherance of a compelling governmental interest; and (2) Is the least restrictive means of furthering that compelling governmental interest.”  According to the Court, RFRA covers “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.”

The Affordable Care Act’s Contraceptive Mandate

The Affordable Care Act requires that health insurance issuers and group health plans provide coverage for certain women’s preventive services. An amendment to the Public Health Service Act requires group health plans and health insurance issuers in the group and individual markets to provide coverage and prohibits them from imposing any cost-sharing requirements for the following services:

  • Evidence-based items or services that have in effect a rating of “A” or “B” (i.e., recommended) in the current recommendations of the United States Preventive Services Task Force;
  • Immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved;
  • With respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration; and
  • With respect to women, generally such additional preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA).

In August, 2011, the HRSA released guidelines that mandated coverage for all FDA-approved contraceptives, but which include a narrow exemption for religious employers. To qualify for this exemption, a religious employer must (i) have the inculcation of religious values as its purpose, (ii) primarily employ persons who share its religious tenets, (iii) primarily serve persons who share its religious tenets, and (iv) be a non-profit organization. Thus, the exemption applied primarily to group health plans established or maintained by churches, synagogues, mosques, and other houses of worship, and religious orders. The religious exemption was subsequently expanded to accommodate religious nonprofit organizations with religious objections to providing coverage for contraceptive services. Under this accommodation, an insurance issuer must exclude contraceptive coverage from the employer’s plan and provide plan participants with separate payments for contraceptive services without imposing any cost sharing requirements on the employer, its insurance plan, or its employee beneficiaries. But the accommodation did not include for-profit, private sector companies.

The Issue in Hobby Lobby

The issue that the Supreme Court was called on to decide is stated succinctly in the opening paragraph of the opinion:

“We must decide in these cases whether the Religious Freedom Restoration Act of 1993 . . . permits the United States Department of Health and Human Services (HHS) to demand that three closely held corporations provide health-insurance coverage for methods of contraception that violate the sincerely held religious beliefs of the companies’ owners.”

Key Holdings

The Supreme Court’s opinion fell squarely along partisan lines: Justice Alito delivered the plurality opinion, which was joined by Justices Roberts, Scalia, and Thomas; Justice Kennedy provided the “swing vote” in a concurring opinion; and Justices Ginsberg, Sotomayor, Breyer and Kagan filed a dissenting opinion.

The Court’s central holding was that the HHS could not by regulation require that group health plans of closely-held businesses cover contraceptive services that violate the sincerely held religious beliefs of the companies’ owners.

Other key holdings from the decision include the following:

  • The RFRA applies to regulations that govern the activities of closely held for-profit corporations.

The Court rejected HHS’s claim that Hobby Lobby and other companies involved in the case could not sue because they are for-profit corporations, and that the owners cannot sue because the regulations apply only to the companies. According to the Court, this would leave merchants with a difficult choice: give up the right to seek judicial protection of their religious liberty or forego the benefits of operating as a corporation. Simply put, corporations are people for RFRA purposes.

  • HHS’s contraceptive mandate substantially burdens the exercise of religion.

The Court determined that the HHS regulations governing contraceptive coverage violate the sincere religious belief of the claimants that life begins at conception. Noting that, “[i]f they and their companies refuse to provide contraceptive coverage, they face severe economic consequences.”

  • HHS failed to show that the contraceptive mandate is the least restrictive means of furthering the government’s interest

The Court assumed “that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is a compelling governmental interest,” but it was not persuaded that this was the least restrictive means of furthering that interest. The Court faulted HHS for failing to show that it “lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion.” For example, might it simply extend the accommodation that HHS has already established for religious nonprofit organizations to non-profit employers with religious objections to the contraceptive mandate?

The Hobby Lobby Case and the Affordable Act

The ACA includes about twenty different insurance market reforms that include required coverage of adult children up to age 26, a bar on pre-existing conditions, required coverage of preventive health services with no cost-sharing (i.e., deductibles and co-pays), a ban on lifetime limits and annual limits, a prohibition on discrimination under insured group health plans, rules governing provider choice, rules governing uniform summaries of benefits and coverage, appeals process mandates, a ban on rescissions of coverage (except in the case of fraud or intentional misrepresentations), premium rebates for purchasers of certain health insurance, and access to additional medical data, among others. The contraceptive mandate is a part of one particular reform, i.e., the reform relating to preventive health services.

Moreover, the decision of the Court is a narrow one: the manner in which HHS implemented the contraceptive services mandate is problematic only when applied to closely held businesses. We expect that HHS will re-write the rule, perhaps along the lines suggested by the Court.

Supreme Court decisions implicating any of the Affordable Care Act’s provisions are routinely seized on by proponents and opponents of the Act as evidence of the correctness of their position. Their positions are then picked up by and amplified in media coverage, often resulting in confusion on the part of the public or by employers. From the perspective of Constitutional scholars, this decision may have important significance, but to employers implementing the requirements of the Act, it means little. The challenge for HHS is to ensure access to contraceptive coverage while not unnecessarily offending religious beliefs—something it appears to have already accomplished under the religious accommodation rule described above.