February 20, 2013
Authored by: benefitsbclp
Texas state Rep. Jonathan Stickland is trying to help companies that refuse to comply with the Affordable Care Act’s (ACA) contraceptive mandate, which took effect January 1 for most companies. This freshman representative is protesting “ObamaCare” by introducing a bill (TX H.B. 649) that would grant companies a tax break if they offer healthcare to their employees (as required by ACA) but refuse to include emergency contraceptive coverage because of the religious convictions of their owners.
This bill attempts to neutralize any federal fines by giving a business a tax break equal to the amount paid in federal penalties, up to the total amount the company pays in state taxes. Fines for violating ACA’s contraceptive mandate are $100 per employee per day, which can add up quickly for large employers. For example, Oklahoma-based Hobby Lobby recently announced it would not comply with the mandate and faces a fine of approximately $1.3M per day. The Texas bill, if passed, could mean huge reductions in Texas state tax income.
However, the reach of the contraceptive mandate seems to be narrowing. On February 1, the federal government proposed updated guidelines that would expand the exemption allowing certain religious-based nonprofits a means to opt out of the contraceptive mandate. Instead, employees would be permitted to obtain contraceptive coverage through separate health policies. In addition, numerous religious-based businesses have sued over this hot-button issue. Adding fuel to the fire, at least two circuit courts have issued injunctions to stop the government from enforcing the contraceptive mandate against for-profit secular employers pending the outcome of their appeals. See Grote v. Sebelius (7th Cir) and Annex Medical Inc. v. Sebelius (8th Cir).
One looming question (at least for benefits practitioners) is whether this type of law would be preempted by ERISA. Generally, ERISA preempts any state law to the extent it “relates to” an employer-sponsored benefit plan. However, if the ACA’s contraceptive mandate merely imposes a federal tax for non-compliance and is not really a federal “mandate,” similar to the Supreme Court’s holding that the ACA’s individual coverage mandate is merely a tax and not a federal mandate, ERISA may not preempt these types of laws. What do you think?