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Supreme Court Strikes Down ACA Contraception Mandate for Certain Employers




by:
Duane Morris LLP - Philadelphia Office

 
July 10, 2014

Previously published on July 1, 2014

In a highly anticipated case under the Patient Protection and Affordable Care Act (ACA), the United States Supreme Court examined whether regulations requiring that group health plans furnish preventive care and screenings for women without any cost-sharing requirements was constitutional. Specifically, Burwell v. Hobby Lobby Stores, Inc. involved the issue of whether the Religious Freedom Restoration Act of 1993 (RFRA) 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. The Court held that the HHS regulations imposing the contraception mandate violate the RFRA.

The 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" is in the furtherance of a "compelling governmental interest" and is the "least restrictive means" of furthering that compelling governmental interest.

The HHS regulations at issue require that nonexempt employers provide coverage for 20 contraceptive methods approved by the U.S. Food and Drug Administration, including four that may have the effect of preventing an already fertilized egg from developing any further by inhibiting its attachment to the uterus. Religious employers, such as churches, are exempt from this mandate. In addition, HHS previously exempted religious nonprofit corporations with religious objections to providing coverage for contraceptive services. Under this accommodation, an employer must certify that it holds itself out as a religious organization and opposes providing coverage for some or all of the contraceptive services to be covered on account of religious objections. When the insurance issuer receives notice that one of its clients has invoked this provision, it must exclude contraceptive coverage from the employer's plan and provide participants with separate payments for contraceptive services without imposing any cost-sharing requirements on the employer, its insurance plan or its employee beneficiaries. Although this procedure requires the insurance issuer to bear the cost of these services, HHS has determined that this obligation will not impose any net expense on insurance issuers because its cost will be less than or equal to the cost-savings resulting from the services.

In the aggregated cases at issue in Burwell, the owners of three closely held for-profit corporations challenged the contraception mandate based on their 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 (i.e., the four contraceptive drugs referenced above).

In holding that RFRA applies to regulations that govern the activities of closely held for-profit corporations, the Court found that protecting the free-exercise rights of closely held corporations protects the religious liberty of the humans who own and control them. The holding of Burwell is limited to closely held corporations and the Court does not consider the applicability of RFRA to publicly traded corporations; however, the Court believes that publicly traded corporations are unlikely to assert RFRA rights due to the numerous practical restraints that would prevent that from occurring (i.e., unrelated shareholders, including institutional investors, agreeing to run a corporation under the same religious beliefs).

The Court then ruled that the HHS contraception mandate "substantially burdened" the exercise of religion, based on the fact that it requires objecting employers to engage in conduct that seriously violates their sincere religious belief that life begins at conception. In addition, if those employers refuse to provide contraceptive coverage, they face potentially severe economic consequences under the ACA of up to $100 per day for each affected individual, or if the employer was to simply drop coverage, it would face penalties under the ACA of $2,000 per year for each of its full-time employees.

The Court acted under the assumption that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is a compelling governmental interest (as required by the RFRA), but found that the government did not show that the contraception mandate is the least restrictive means of furthering that interest. The Court ruled that the government did not show that it does not have other means of achieving its desired goal without imposing a substantial burden on the exercise of religion. The government could assume the cost of providing the four contraceptives to women unable to obtain coverage due to their employers' religious objections, or it could extend the HHS accommodation for religious nonprofit organizations outlined above to closely held corporations.

The Court is quick to note what the Burwell holding is not: It is not to be understood as a ruling that all insurance-coverage mandates must necessarily fall if they conflict with an employer's religious beliefs. Other coverage requirements, such as immunizations, may be supported by different interests (for example, the need to combat the spread of infectious diseases) and may involve different arguments about the least restrictive means of providing them. In addition, the holding is to provide no shield for employers with respect to discrimination in hiring cloaked as religious practice.

Burwell is a key decision under the ACA as it is the first ruling of the Court since its 2012 decision upholding the employer mandate as constitutional. While the impact of Burwell is significant for potentially impacted employers, its limitations should be noted—in fact, the Court itself states that its holding is "very specific"—and it is applicable only to closely held for-profit corporations. It is not applicable to publicly held corporations. In addition, the contraception mandate is applicable to "large employers" only—i.e., those with 50 or more full-time employees. Employers with fewer than 50 employees are not required to provide health insurance at all. In addition, grandfathered health plans—those that existed prior to March 23, 2010 and that have not made specified changes after that date—need not comply with the contraception mandate.

Employers who have a sincere religious belief with respect to this issue may want to examine their group health plan in light of the Burwell holding to determine their options under the ACA.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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