Labor & Employment Law Blog

On June 30, 2014, the United States Supreme Court ruled that closely held for-profit corporations may object to the Affordable Care Act (“ACA”) mandate to offer health insurance with access to certain contraceptive methods under the Religious Freedom Restoration Act (“RFRA”).  In a 5-4 decision, the Court found that corporations are protected under the RFRA, as an extension of the protection of the religious liberty of the persons who own and control such corporations.  The Court concluded that the ACA’s contraceptive mandate substantially burdened the corporations’ exercise of religion, and that the contraceptive mandate was not the least restrictive means of furthering the government’s interest in guaranteeing cost-free access to the challenged contraceptive methods.  Burwell v. Hobby Lobby Stores, Inc.

 Background

In this case, the owners of three closely held for-profit corporations contended to hold sincere religious 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 corporations included Hobby Lobby, Inc., and Conestoga Wood Specialists.  Two challenges in the lower courts were consolidated for argument before the Supreme Court.

After the ACA was passed in 2010, the Department of Health and Human Services issued regulations in August 2011 on Women’s Preventative Service Guidelines, part of the ACA’s requirement that employers’ group health plans furnish “preventative care and screenings” for women without “any cost sharing requirements.”  The regulations carved out exceptions for “religious employers,” including churches, but did not provide any exemptions for corporations whose ownership may hold religious beliefs that did not allow for provision of access to such contraceptives through insurance.

Under the ACA, these corporations faced difficult choices for following their religious belief and not offering health insurance coverage that made available the objectionable contraceptive methods.  If the corporations continued to provide insurance but without provision of such contraceptives, they would face a $100 per day per participant excise tax for failure to comply with the ACA’s group-health-plan requirements.  For example, Hobby Lobby, with more than 13,000 employees could face penalties of $475 million per year.  And opting to not offer health insurance at all would subject the corporations to a $2,000 per year per full-time employee penalty if any full-time employee went to a state ACA Marketplace and obtained a subsidy for health insurance through the Marketplace.  Such penalties could have amounted to $26 million per year.

The Court ruled in favor of Hobby Lobby and Conestoga Wood Specialists, finding that the government could find other means of achieving its desired goals without imposing a substantial burden on the exercise of religion.  The Court was careful to characterize its holding as a narrow one, stating that its decision should not provide a shield for employers who might cloak illegal discrimination as a religious practice.  The Court also stated that its holding should be limited to the immediate contraceptive issue, and that its decision was not to be understood to hold that all insurance-coverage mandates, for example vaccinations or blood-transfusions, must fail if they conflict with an employer’s religious beliefs.  However, with the Court opening the door on such religious objections to the ACA, it would not be surprising if attempts at expanding the holding in Hobby Lobby are forwarded under different religious objections to the ACA mandates and other laws.  It should also be noted that Hobby Lobby may be of limited impact where state laws regulate insurers and the provision of contraceptives, such as in California.