- The Supreme Court’s Ruling in Hobby Lobby that Closely Held, For-Profit Companies Should Receive Religious Exemptions From ObamaCare’s Conception Mandate Likely Will Have Little Practical Impact Immediately in the Employment Arena
- July 9, 2014 | Authors: Gregg A. Fisch; Nick Schnermann
- Law Firms: Sheppard, Mullin, Richter & Hampton LLP - Los Angeles Office ; Sheppard, Mullin, Richter & Hampton LLP - Washington Office
On June 30, 2014, the US Supreme Court decided the case of Burwell v. Hobby Lobby Stores, Inc. in a 5-4 decision along partisan lines. The Court ruled that closely held, for-profit companies are entitled to certain religious freedom protections from generally applicable regulations that violate the sincerely held religious beliefs of their owners. Specifically, the majority held that such companies are exempt from the requirement under the Affordable Care Act (the “ACA” a/k/a Obamacare) to provide birth control coverage for their employees.
Under regulations promulgated by the Department of Health and Human Services (“HHS”), through authority granted by the ACA, nonexempt employers are required to provide coverage for the 20 contraceptive methods approved by the FDA at no cost to the covered employee. The regulations provide an explicit exemption for insurance provided by religious employers, such as churches. HHS also provides an accommodation for religious, non-profit groups, such as religiously-affiliated hospitals and universities, under which the insurer provides separate payment for contraceptive services without passing on the cost to either the religious employer or the covered employee. Under this accommodation, the cost of the coverage ultimately is borne by the government. This accommodation, however, was not extended to religious, for-profit corporations, which includes Hobby Lobby, a for-profit chain of arts and crafts stores. The issue raised by Hobby Lobby in its suit was whether closely held, for-profit companies (those that have 5 or fewer individuals who own more than 50% of the business’s outstanding stock) could be required to comply with the ACA’s contraception mandate over the religious objections of their owners.
Justice Alito, who wrote the decision for the majority, found that this portion of the ACA’s Employer Mandate violated the Religious Freedom Restoration Act (RFRA), which prohibits the “Federal Government from taking any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest.” In the decision, the Court found that the contraception mandate was indeed a substantial burden on the free exercise of religion. Although the Court presumed that the ACA regulations at issue served a compelling government purpose, it held that the government could find less restrictive means of achieving that interest.
The decision is only hours old at the time of this writing, but already commentators representing both sides of the political aisle are hailing the overwhelming significance of the ruling. With the issues being addressed, such as contraception, religious freedom, and ObamaCare, it is easy to understand why this case has touched such a political nerve and is causing such a heated response. In terms of practical effects in the employment arena, however, the immediate impact on employers and employees likely will be limited for the foreseeable future.
As a preliminary matter, the ruling applies only to closely held companies whose owners object on sincerely held religious grounds to the contraception mandate set forth in the ACA. Although Hobby Lobby alone employs over 18,000 people, the vast majority of Americans should not be affected by the ruling at this time, since there likely are very few closely-held companies whose owners properly can raise such an objection. In addition, the decision repeatedly states that it applies only to the contraception mandate under the ACA and does not hold that any “insurance-coverage mandate must necessarily fail if it conflicts with an employer’s religious beliefs.” Justice Ginsburg, in the dissenting opinion, expressed concern that the logic of this decision will lead to religious exemptions for insurance coverage of blood transfusions, antidepressants, and vaccinations, all of which are forbidden under different religious traditions. Although this decision may invite religious employers to seek to discontinue coverage of other types of treatments or otherwise file additional lawsuits objecting to other insurance mandates that purportedly violate their specific beliefs, the expressed limited scope of this decision leads to the conclusion (at least for the time being) that those apprehensions may not become a reality.
Finally, even for those employees of the for-profit corporations affected by the issues raised in this case, the decision seems to invite a fairly obvious solution. Justice Alito explicitly notes that the accommodation provided to religious non-profit groups, whereby contraception coverage is provided separately with the cost assumed by the government, “constitutes an alternative that achieves all of the Government’s aims while providing greater respect for religious liberty.” Although the Court did not explicitly order HHS to provide this exemption to for-profit corporations with religious objections to the ACA contraception mandate, it is likely that this same accommodation ultimately will be provided to employees working for those types of companies as well. If such a result indeed comes to pass - likely resulting from action by President Obama or Congress - employees of these religious corporations still will have insurance coverage for the contraception methods mandated by the ACA regulations.