Summary of the Supreme Court’s Decision in Hobby Lobby

Summary of the Supreme Court’s Decision in Hobby Lobby

Executive Summary

Initial summary of the Burwell v. Hobby Lobby Supreme Court decision, including what it means for women, including how the Court arrived at its holding, who it applies to and remaining protections in place at the state level for women seeking access to comprehensive health insurance.

In Burwell v. Hobby Lobby Stores, Inc., the Supreme Court held that some for-profit, closely held corporate employers who raise a religious objection do not have to comply with the Affordable Care Act (ACA) requirement to include coverage of contraception in their employee health plans.

The ACA requires most new health plans to cover certain preventive services without cost-sharing, including, among other things, such additional women’s health preventive care and screenings as provided for in guidelines supported by the Health Resources and Services Administration (HRSA). The HRSA guidelines, which adopt the independent Institute of Medicine evidence-based recommendations, require coverage of eight preventive services, including all FDA-approved methods of contraception, without cost-sharing.

The plaintiffs in these (consolidated) cases are three secular, for-profit corporations and their owners who object to certain contraceptive methods because they have a religious belief, albeit factually erroneous, that those methods are abortifacients. The corporations filed suit under a federal statute, the Religious Freedom Restoration Act of 1993 (RFRA), and the U.S. Constitution, asking that the Court allow the companies to exclude contraceptive coverage from their employee health plans. The Court never reached the constitutional claims, but the outcome of the RFRA claims is disturbing.

In a 5-4 decision, the Court held that RFRA allows corporate employers to deprive women of health care benefits – contraception – that medical experts recognize as critical to ensuring women’s health and well-being. As a result of the Court’s decision, some closely held corporations can refuse to provide their employees with insurance coverage that includes at least some (and potentially all) types of contraception. This means that women employed by companies like Hobby Lobby, Mardel, Conestoga Wood, or the dozens of other for-profit companies who have filed similar suits, might be left with health insurance coverage that fails to meet their health care needs. However, because RFRA applies only to federal laws, not state laws, the Court’s decision does not affect state contraceptive equity laws.

Further, according to the Court, its decision is limited to the requirement that health plans cover contraception. The Court wrote that it was not addressing other coverage requirements, such as immunizations, or handing a shield to employers seeking to discriminate in hiring on the basis of race or other prohibited factors. While, of course, those issues were not before Court, the Court did not explain why its analysis would not apply equally to these other contexts.

The Decision

RFRA provides that the government shall not “substantially burden a person’s exercise of religion” unless the burden “(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.”

1. Closely Held For-Profit Corporations Are Persons for the Purposes of RFRA

To prevail under RFRA, the challenged government action must substantially burden a “person’s exercise of religion.” The threshold question in the case was accordingly whether corporations are persons under RFRA. The Court said that closely held for-profit corporations are “persons” within the meaning of RFRA. RFRA makes no mention of for-profit corporations, and does not define “person.” So, the Court turned to the Dictionary Act. Enacted in 1871, the Dictionary Act identifies the meanings of certain words found in federal law, unless the “context indicates otherwise.” According to the Dictionary Act, a “person . . . include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” The Court concluded that the context did not justify any other interpretation of “person,” finding unpersuasive the government’s argument that for-profit corporations, which exist primarily to make money, cannot exercise religion. Justice Ginsburg in her dissent disagreed with the majority. According to Justice Ginsburg, the context called for a different interpretation because, among other things, case law does not support the majority’s notion that a for-profit corporation can have free exercise rights. Nonetheless, according to the majority, because for-profit corporations can pursue “worthy objectives” like “costly pollution-control and energy conservation measures,” there is no reason they cannot also exercise religion.

It remains to be seen how many and which types of corporations could assert RFRA claims under this holding. The Internal Revenue Service defines a closely held corporation as one that is not a personal service corporation and in which more than fifty percent of its outstanding stock is owned directly or indirectly by five or fewer individuals at any time during the last half of the tax year. But, the Court did not define a closely held corporation. The Court also assumed without explanation that “corporate giants . . . will not often assert RFRA claims” [emphasis added], but it did not resolve whether publicly traded companies could assert such claims. Indeed, Justice Ginsburg wrote in her dissent that “[a]lthough the Court attempts to cabin its language to closely held corporations, its logic extends to corporations of any size, public or private.” It is clear that the Court thought that the corporations before it, “closely held corporations, each owned and controlled by a single family,” are persons within the meaning of RFRA, but which other corporations could potentially assert RFRA claims is not immediately clear from the decision. What is clear is that under this holding, there will be other corporations that seek to use RFRA to discriminate against their employees.

Indeed, last Tuesday, the Court granted petitions for review in for-profit cases out of the D.C. and Sixth Circuits. In the decision below in Gilardi v. U.S Department of Health & Human Services, the D.C. Circuit affirmed the district court’s denial of Freshway Foods’ (the closely held corporation owned by the Gilardis) RFRA claim, finding that a secular, for-profit corporation is not a person within the meaning of RFRA. The D.C. Circuit concluded, however, that the Gilardis’ (the owners) could bring a RFRA challenge to a requirement to cover all FDA-approved methods of contraception imposed on their closely held corporation. The Government and Freshway Foods then sought the Court’ review. Last Tuesday, the Court denied the Government’s petition, but granted Freshway Foods’ petition for review, summarily vacated the opinion, and remanded to the D.C. Circuit for consideration of the company’s RFRA claim in light of Hobby Lobby.

Further, the Sixth Circuit in Eden Foods v. Burwell and Autocam v. Burwell rejected both closely held companies’ RFRA claims, finding that secular, for-profit companies cannot exercise religion, and that their owners lack standing to challenge rules that apply to the companies, not to the owners. Here, too, the Court granted the companies’ petition for review, summarily vacated the lower court opinions, and remanded. On remand, both the D.C. and Sixth Circuits must apply Hobby Lobby and decide whether the closely held companies in those cases are also “persons” for purposes of RFRA, and therefore entitled under RFRA to opt out of the contraceptive coverage requirement.

It is not yet clear how to identify exactly which companies are persons for the purposes of RFRA, and thereby permitted under the Court’s decision to refuse to cover contraception. And, it is possible that this question will be resolved only on a case by case basis as companies file lawsuits under RFRA. Of course, most companies include contraception in their employee health plans, and most women 15-44 years of age who have ever had sexual intercourse with a male have used contraception. It is unlikely that all of these companies will attempt to use the Court’s decision to discriminate against their employees in this (or some other) way.

2. The Contraceptive Coverage Requirement Substantially Burdens the Corporations’ Exercise of Religion

Having concluded that the closely held corporations can assert RFRA claims, the Court turned to whether the contraceptive coverage provision substantially burdens their religious exercise. Again, the Court answered this question affirmatively. The Court noted that the employers are faced with a choice of incurring a tax penalty or doing something that violates their religious beliefs – providing insurance coverage for certain contraceptives that they believe may result in the destruction of an embryo after conception. In determining that the burden felt by the employers was “substantial,” the Court refused to consider the fact that providing insurance is several steps removed from an employee’s decision to use contraceptives or the scientific evidence that the contraceptives to which the employers objected do not in fact cause an abortion.

The Court was also unpersuaded by the Government’s argument that the companies were not burdened because they could drop their employee health insurance altogether and thereby avoid the $100 per day per employee tax they would incur if their insurance coverage did not cover contraception. If they stopped providing insurance, the companies could face penalties of $2,000 per employee per year, which would be less than the cost of actually providing health insurance. The Court concluded that this was not a realistic alternative for the companies because their religious beliefs compelled them to provide insurance to their employees. In the end, the Court assumed that the burden is substantial because the corporations sincerely believed it was substantial. According to Justice Ginsburg’s dissent, in doing so the Court failed to properly apply RFRA: a Court must accept as true, factual allegations that religious beliefs are sincerely held, but whether government action imposes a substantial burden is a legal conclusion that a court is required to analyze.

3. The Court Declined to Decide Whether the Contraceptive Coverage Requirement Furthers Any Compelling Governmental Interests 

Because the Court decided that the contraceptive coverage provision failed the least-restrictive means test, the Court found it unnecessary to decide whether the contraceptive coverage provision furthers legitimate governmental interests. Instead, the Court “assumed” there is a compelling government interest, and moved forward with the RFRA analysis.

4. There are Other Less Restrictive Means of Ensuring that Women Have Access to Contraception 

The Court concluded that the contraceptive coverage provision was not the least restrictive means of furthering compelling government interests, which it defined “as guaranteeing cost-free access to the four challenged contraceptive methods.” The Court opined that the “most straightforward way” of furthering this interest would be for the Government to pay for the contraception of women working for employers who object to contraception. The Court did not “rely on that option,” however, because according to the Court, the Department of Health and Human Services was already using a less restrictive means for some religious nonprofits with religious objections to contraceptive coverage, i.e., the “accommodation,” discussed below. In his concurrence, Justice Kennedy recognized that the right to religious exercise did not give rise to the right to restrict other people’s interests. He concluded, however, that the accommodation, which he characterized as “designed, identified, and used for similar circumstances,” would “reconcile those two priorities.” But, as Justice Ginsburg pointed out, “in view of what Congress sought to accomplish, i.e., comprehensive preventive health care for women furnished through employer-based health plans, none of the proffered alternatives would satisfactorily serve the compelling interests to which Congress responded.”

Under the accommodation, which is also being challenged in federal courts throughout the country, nonprofit religious entities that hold themselves out as such can complete a self-certification form, which allows them to refuse to contract, arrange, or pay for contraception. The health insurance issuer or third party administrator of the employer-sponsored plan then has to assume sole responsibility for providing separate payments for contraceptive services directly to plan beneficiaries without cost-sharing. The Court concluded that the accommodation was a less restrictive means of furthering the government’s interests here, but declined to say whether the accommodation would actually withstand a RFRA challenge.

Conclusion

The Supreme Court held last Monday that the “contraceptive coverage provision, as applied to closely held corporations, violates RFRA.” There are unanswered legal and policy questions, and the practical reach of this decision remains to be seen.

However:

  • Most new health plans must still comply with the contraceptive coverage provision.
  • In the future, other corporations might be able to assert RFRA claims allowing them to discriminate against their employees and refuse to offer health plans that cover contraception or other benefits.
  • The Court’s decision does not affect current or future state contraceptive equity laws.
  • The Administration and Congress can and should act to ensure that women impacted by the Court’s decision have access to contraception.

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