Stay tuned to Health Affairs Blog in the days ahead for more commentary about today’s Supreme Court decision.

Note: This post was updated on July 1, 2014, to discuss ongoing challenges to potential accommodations for employers that object to covering contraception.

1. Update. In its Hobby Lobby decision the Supreme Court majority concluded that the implementing agencies could not require the plaintiffs to cover contraceptive services for their employees because there was a less restrictive alternative that the agencies could use to achieve their presumably compelling interest in ensuring women access to contraceptives without cost-The alternative specifically referred to by the majority was the accommodation that the agencies had already offered non-profit organizations.

Under that accommodation, non-profit organizations may certify to their insurer or third-party administrator that they are conscientiously opposed to providing coverage for contraception.  Once they do so, the insurer or third party administrator is responsible for covering contraception, with insurers using the funds they save by not covering pregnancies and third party administrators using payments they can recover from insurers who will pay them from funds that the insurers would otherwise pay to exchanges for exchange participation.

About 50 non-profit organizations are currently suing challenging that accommodation.  The lawsuits raise a host of claims, but basically the organizations claim that the certification that they must make to their insurers and TPAs impermissibly entangles them in the obligation of the insurers and TPAs to offer coverage in violation of RFRA and the First Amendment.  They also claim that a provision of the regulation prohibiting them from interfering with coverage of contraceptives by their insurers and TPAs violates their First Amendment freedom of expression rights.

So far over two dozen courts have entered temporary injunctions protecting the non-profits from complying with the accommodation.  But a half dozen courts have refused injunctions, including the 6^th and 7^th circuits, rejecting all of the plaintiff’s claims as unlikely to prevail on the merits.  The Supreme Court’s Hobby Lobby majority opinion, and in particular Justice Kennedy’s concurrence seemed to approve of the non-profit accommodation, although the Court made it clear in footnotes 9 and 40 that it was not conclusively deciding the question of the permissibility of the non-profit accommodation, which was not before it.

Surprisingly, therefore, later in the day on June 30 the Supreme Court issued a very temporary injunction barring the enforcement of the accommodation pending appeal in one of the non-profit cases, Wheaton College v. Burwell. In Wheaton College the district court had denied an injunction, relying on the 7^th Circuit authority. The Supreme Court injunction only lasts until the Court can consider the government’s response, due July 2 by 10 a.m., and the college’s reply, due by 5 p.m. the same day, but signals that the Court may be prepared to resolve the issue, or at least address it, soon.  Justices Breyer and Sotomayor dissented from the Court’s order. 

Original post

On June 40, 2014, the Supreme Court issued its opinion in Hobby Lobby v. Burwell and Conestoga Wood Products v. Burwell. The Court’s decision has very important ramifications for religious liberty in the United States, for women’s access to health care, for employers’ and employees’ rights, even for corporate law. Its importance justifies its being released on the final day of the term, an honor usually reserved for only the most notable cases. But unlike the Court’s decision in National Federation of Independent Business v. Sebelius on the last day of its term two years ago, Hobby Lobby does not pose a serious threat — indeed any threat at all — to the Affordable Care Act.

From the perspective of the ACA, the case involves only the application of one particular provision of a regulation to one particular group of employers. The Court’s decision does not invalidate any provision of the ACA. It does not even fully invalidate any regulatory requirement. It simply says that the implementing agencies must extend to one group of employers an accommodation they have already extended to another group.

The backdrop. The back story of this litigation has been covered often previously on this Blog here, here, here, here, here and here.  The contraceptive mandate at issue in Hobby Lobby is perhaps most controversial single issue presented by the Affordable Care Act, other than the individual mandate. Indeed, from the perspective of the plaintiffs, Hobby Lobby and Conestoga Wood, the case involved what is undoubtedly the most single controversial issue in American politics — abortion — since both plaintiffs objected only to contraceptives that they believe cause abortions.

The ACA requires non-grandfathered group health plans and health insurers to offer to women without cost sharing coverage of preventive services including “such additional [women’s] preventive care and screenings . . . as provided for in comprehensive guidelines supported by the Health Resources and Services Administration for purposes of this paragraph.” Based on an Institute of Medicine study, HRSA in 2011 identified as women’s preventive services “all Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity.” Pursuant to this designation, the Department of Health and Human Services (HHS) listed contraceptives services and counseling as required preventive services.

Some religious groups, however, consider the use of contraceptives, or of certain contraceptives, to be sinful. The Departments of HHS, Labor, and Treasury attempted from the beginning to accommodate the objections of religious organizations. In 2011, the agencies published interim final rules exempting from the requirement religious employers, such as churches and other houses of worship. These rules were made final in 2012.

The 2012 rules, however, did not exclude religious organizations other than houses of worship — such as hospitals, universities, and charities — from the contraceptive coverage requirement. On June 28, 2013, the Departments issued final regulations exempting certain religious organizations and employers from having to provide themselves contraceptive services to their employees. This final rule provided an accommodation under which contraceptives would instead be made available independently through insurers or third-party administrators to the employees of these organizations.

The tri-agency rule expressly did not make accommodation for for-profit employers. Nearly fifty for-profit employers have subsequently filed federal court cases challenging the contraceptive requirement or some aspect of it. Many of these lawsuits raise First Amendment freedom of religion issues, but most rely primarily on the Religious Freedom Restoration Act (RFRA).

Congress adopted RFRA in 1993 in the wake of a Supreme Court decision that had held Congress did not have to show a compelling governmental interest when it adopted a “neutral law of general applicability” limiting religious practice in some way. In RFRA, Congress rejected this position, prohibiting any law (including neutral laws of general applicability) that “substantially burden a person’s exercise of religion” unless the law is justified by a compelling governmental interest and is the least restrictive approach to furthering the governmental interest.

Two of these cases, Hobby Lobby and Conestoga Wood, made it to the Supreme Court. In both cases the plaintiffs had sought a preliminary injunction to block the application of the contraceptive services requirement against them. Both cases are brought by Protestant employers, which do not object to all contraceptives but only to those that they view as abortifacients because they arguably work post-conception, such as Ella, Plan-B and IUDs.

In Hobby Lobby, the entire 10th Circuit federal court of appeals reversed an earlier 3-judge decision and found that the plaintiffs had shown that they would likely win on the merits of their claim.  In Conestoga Wood, the 3rd Circuit affirmed a denial of the plaintiff’s request for a preliminary injunction. The Supreme Court agreed to resolve the conflict between the circuits.

The ruling. The Supreme Court’s majority opinion, written by Justice Alito for himself, the Chief Justice, and Justices Scalia, Thomas, and Kennedy, is not — despite the protests of the dissenting opinion written by Justice Ginsburg — a “decision of startling breadth.” It is rather a very narrow decision. It does not fundamentally challenge the ACA, nor even the contraception requirement, which it assumes is justified by a compelling governmental interest—an assumption emphatically “confirmed” by Justice Kennedy, the fifth and deciding vote. Rather, the Court concluded that the agencies can make available to for-profit employers that object to contraceptive coverage the accommodation they have already made available to religious organizations, and that this is a “less restrictive alternative” required by the law.

The first, and perhaps most important question, addressed by the Court is whether for-profit corporations can hold religious beliefs protected by RFRA. The Court opined that the RFRA protects “persons,” and “person” is defined in the Dictionary Act to include corporations. Moreover, courts have already held that non-profit corporations can exercise religious rights and that individuals operating for-profit (kosher butchers for example) can assert religious rights as well. The Court left for another day the question of whether publicly held corporations can have religious beliefs, but decided that closely held corporations can.

Second, the Court held that the regulation imposes a substantial burden on the plaintiffs’ exercise of their beliefs. There was never a question about the sincerity of the plaintiffs’ beliefs concerning the contraceptives at issue. If the plaintiffs continued to provide insurance to their employees but refused to cover contraceptives, Hobby Lobby would face penalties of $475 million a year; Conestoga of $33 million. They could drop insurance and reduce their fines to $26 million for Hobby Lobby, $1.8 million for Conestoga, but they would then have to pay their employees enough for the employees to cover insurance, and in any event the plaintiff’s claimed that they also believed they should provide insurance.

The Court also concluded that the question of whether the moral responsibility for the use of contraceptives falls on the employer who pays for coverage or the employee who decides to use it is itself a religious question. The Court decided that it cannot second guess the validity of the plaintiffs’ belief that it would be immoral to even provide payment for contraceptive coverage, even though ultimately employees must decide whether or not to use that coverage. The Court determined, therefore, that the plaintiffs’ free exercise rights are substantially burdened.

The Court had then, under RFRA, to turn to the question of the justification of the mandate: Is it the least restrictive means to promoting a compelling governmental interest? The government argued that the mandate served the compelling interests of promoting public health and gender equality. In fact, as the dissent pointed out, women of child-bearing age spend 68 percent more out-of-pocket than men, in part because of the cost of contraception. Insertion of IUDs, one of the forms of contraception to which the plaintiffs objected, can cost $1000, nearly equal to a month’s wages for a minimum wage employee. A study released by HHS on June 27, 2014 found that the number of women accessing contraceptive coverage without cost-sharing increased from 1.2 to 5.1 million between 2012 and 2013, saving these women $483.3 million, because of the ACA requirement.

The plaintiffs had argued that the exceptions to the requirement—for grandfathered plans, for religious employers (houses of worship), for small employers (who are in fact covered by the requirement if they provide health insurance, but not required to provide insurance), and for non-profit religious organizations (such as Catholic hospitals, universities, and charities)—demonstrated that the mandate in fact did not promote a compelling interest.

The Court did not engage this argument, however, but rather said it would assume that the interest of the government is providing cost-free contraception was compelling. Justice Kennedy, the fifth and deciding vote, stated more emphatically, “It is important to confirm that a premise of the Court’s opinion is its assumption that the HHS regulation here at issue furthers a legitimate and compelling interest in the health of female employees.” Further, discussion later in the majority opinion as to the limited nature of the Court’s decision suggests that the Court would also find that other preventive services, such as vaccinations, are supported by a compelling governmental interest.

In the end, however, the Court concluded that the government has a less restrictive means of making contraception available. The Court suggested that perhaps Congress could establish a new program to fund contraceptive coverage. Our Congress currently seems barely capable of keeping the government open, and certainly is not likely to create any new programs to benefit workers or women. Of course, the Supreme Court is perfectly capable of ignoring reality, but in this case the Court found a more feasible alternative.

The Court found that the agencies need merely extend to closely held for-profit corporations the same accommodation the agencies already extend to non-profit religious organizations. The companies would not have to pay for contraceptive coverage themselves. Rather the coverage could be provided by their insurers or third-party administrators without cost to the employers.  Until such an accommodation is offered, the plaintiffs can presumably offer insurance that does not cover contraceptives.

Questions remain. This leaves aside the question of whether the accommodation itself is legal. This issue is being contested by non-profit religious organizations in at least 51 cases across the country.  The plaintiffs in those cases argue that the requirement that they certify to their insurers and third-party administrators that they object to offering coverage and not interfere with their insurers and third-party administrators covering contraception also itself violates their RFRA rights. Twenty-six of these cases have resulted in preliminary injunctions for the plaintiffs, including a favorable judgment from the District of Columbia Circuit. At least six cases have rejected injunction requests, including decisions from the Sixth and Seventh Circuit.

The Court expressly avoided deciding these cases, which were not before it. It is hard to see how the Court could endorse this approach for for-profit corporations, however, and then turn around and reject it for non-profits.

In a press conference following the decision, the White House called on Congress to provide contraceptive coverage for women denied coverage by the Court and suggested that it had not decided to extend the non-profit accommodation to cover for-profits at this time. There is no reason why the administration could not do so, however. There was no explicit statutory authorization for the non-profit accommodation and there is no explicit statutory bar to extending it to for-profit employees.

There are a great many closely-held corporations in the United States –3.2 million S Corporations according to a 2006 report — in addition to 2.3 million limited-liability companies and partnerships, but few of them likely object to contraceptive coverage. Ninety-nine percent of women aged 15-44 who have had sexual intercourse have used birth control, and surely denying contraception to their employees is the last thing on the mind of most employers. Moreover, RFRA only applies to religious beliefs, not philosophical or political beliefs. A general objection to “Obamacare” will not excuse an employer from compliance with the law under RFRA.

Only fifty for-profit organizations nationwide have sued challenging the regulation. The religious organization accommodation is already in place for religious organizations employing no doubt tens of thousands of employees. HHS could extend the accommodation to closely held for-profit corporations through an interim-final rule, perhaps through guidance. It should consider doing so as quickly as possible.

One footnote. States cannot under federal law mandate employer coverage, but they can mandate services that insurers must cover. Twenty-eight states require insurers to cover contraceptive services. Twenty states have exceptions from religious organizations, only one state has an exception for secular employers. Although the federal RFRA does not apply to the states, eighteen states have religious freedom acts and thirteen more have court decisions recognizing similar rights.  It is possible, therefore, that Hobby Lobby may not be the end of litigation on the contraceptive issue.