Hobby Lobby & the Religious Freedom Restoration Act of 1993

July 7, 2014

Authored by: benefitsbclp

SCOTUSYou’ve seen all the headlines…  Supreme Court issued its decision in the Hobby Lobby case on the last day of its 2013-2014 term.  Sure, maybe it wasn’t as closely watched and groundbreaking as the Court’s -2012 decision upholding key provisions of the Patient Protection and Affordable Care Act (“ACA”), but it is a very big deal for certain employers.  Which ones?

Well, as discussed in our post following the Hobby Lobby oral arguments, the owners of certain closely-held for-profit organizations (namely Conestoga, Hobby Lobby, and Mardel) challenged the ACA’s preventive care requirement mandating coverage of all FDA-approved contraceptive drugs, devices, and related services.

While these companies do not object to most contraceptives now required to be provided by ACA’s market reforms, they oppose certain forms of emergency contraception (which they believe are abortifacients) and certain contraceptive devices (IUDs) on religious grounds.  The crux of the lawsuit is that these organizations believe the ACA’s contraceptive mandate  violates the rights afforded them both statutorily – under the Religious Freedom Restoration Act (“RFRA”) –  and constitutionally – under the Free Exercise Clause of the First Amendment.  Legally, the primary issue before the Court was whether RFRA’s protections for any “person” whose religious exercise is substantially burdened by government extends to corporations.

In a 5-4 ruling, the high Court held that the HHS contraceptive mandate violates RFRA as applied to closely-held corporations.  Writing for the majority, Justice Alito described that the court saw no reason to hold closely-held corporations to a different standard than non-profits.  Relying on the definition of “person” set forth in the Dictionary Act, the majority indicated there was no justifiable basis to exclude for-profit corporations from this definition (particularly in light of the government’s concession that nonprofit can be a person under RFRA and the lack of any reason to distinguish these two groups of corporations).

After dismissing certain arguments made by HHS (including that the objecting for-profits could simply drop coverage and pay the “play or pay” penalty) the majority found that since HHS was able to make an “accommodation” available to nonprofit corporations that have religious objections to the contraceptive mandate, it saw no reason why the same system could not be made available when the owners of for-profit corporations have similar religious objections.

The accommodation at issue here is one that allows “eligible organizations” (i.e., certain nonprofits) that oppose providing coverage for some or all of any contraceptive services otherwise required to be covered on religious grounds to certify their status and objections to their insurer or TPA. By certifying, they do not have to cover the objectionable contraceptive coverage under their plans.  The insurer or TPA receiving this certification must separately make the objectionable contraceptives available for women in the health plan of the nonfprofit, at no cost to the women or to the organization.

Interestingly, the Court also stated that the government could, if it chose, directly pay for the contraceptives to which the companies objected as another “least restrictive means” of accommodating the contraceptive mandate.  However, the Court did not articulate, and we are not aware of, any statutory authority that would permit such a direct payment by HHS.  Therefore, while this is a theoretical possibility, it does not appear to be a practical one.

While the majority concluded that “th[e] system [applied to non-profits] constitutes an alternative that achieves all of the Government’s aims while providing greater respect for religious liberty”, it is unclear at this stage whether the HHS will extend the same or a similar accommodation to closely-held organizations. What is clear is that the majority’s decision means that the contractive mandate cannot be enforced against objecting closely-held corporations.

Justice Alito expressly stated that the majority’s ruling is very specific, and since the decision relies on RFRA statutory grounds, it did not reach the constitutionality issue.  Thus, it does not expressly hold whether a corporation has religious rights under the First Amendment.