ACA News & Publications

ACA Pathways: Supreme Court Rejects Contraceptive Mandate For Some Companies

On June 30, 2014, the U.S. Supreme Court ruled that the Affordable Care Act (ACA)'s contraceptive mandate, as applied to closely held corporations with sincere religious objections, violates the Religious Freedom Restoration Act (RFRA).

The U.S. Supreme Court issued its ruling in two related cases challenging the ACA's contraceptive coverage mandate. These cases involved the owners of three closely held for-profit corporations, Hobby Lobby Stores, Mardel and Conestoga Wood Specialties, who argued that they should not be required to comply with the contraceptive mandate because covering certain types of contraceptives under their health plans violates their sincere religious beliefs.

The Supreme Court was asked to decide whether a for-profit business organized as a corporation has the right to "exercise" religious beliefs under the RFRA and, if so, to what extent is it protected from government interference. In a 5-4 ruling, the Supreme Court held that:

  • The RFRA applies to the closely held corporations; and
  • The contraceptive mandate violates the RFRA because there are less restrictive ways for the federal government to ensure that all women have cost-free access to FDA-approved contraceptives.

ACA's Contraceptive Coverage Mandate

The ACA required non-grandfathered health plans to comply with certain preventive care guidelines for women, effective for plan years beginning on or after August 1, 2012. These guidelines, which were issued by the Department of Health and Human Services (HHS), require non-grandfathered health plans to cover women's preventive health services, including contraceptive methods, without charging a copayment, a deductible, or coinsurance. Under the guidelines, plans must cover all FDA-approved contraceptive methods, sterilization procedures and patient education and counseling for all women with reproductive capacity. Under the ACA, employers with group health plans that violate the contraceptive mandate may be subject to an excise tax of $100 per individual per day of noncompliance. Additional excise taxes potentially apply should employers choose to no longer offer coverage.

Special Rules for Churches and Nonprofit Employers

Group health plans sponsored by churches, other houses of worship and their affiliated organizations are exempt from the requirement to cover contraceptive services altogether.

Nonprofit employers that do not provide contraceptive coverage to their employees because of religious belief were granted an extension to delay covering contraceptive services until the first plan year beginning on or after January 1, 2014. This extension covers church-affiliated organizations that do not qualify for the exemption for churches, such as schools, hospitals, charities and universities.

For plan years beginning on or after January 1, 2014, HHS created an accommodations approach for eligible nonprofit religious organizations that oppose providing coverage for some or all of the required contraceptive services based on religious objections. Under the accommodation, eligible organizations do not have to contract, arrange, pay or refer for any contraceptive coverage to which they object on religious grounds. However, separate payments for contraceptive services are provided to female employees by an independent third party, such as an insurance company or third-party administrator (TPA), directly and free of charge.

For-profit employers that object to providing contraceptive coverage on religious grounds are not eligible for the exemption, the delayed effective date or the accommodations approach that apply to churches and nonprofit religious organizations.

Companies Involved In The Cases

Hobby Lobby Stores and Mardel are two closely held corporations owned and operated by the Green family, devout members of the Christian faith. Each member of the Green family has signed a pledge to run the businesses in accordance with the family's religious beliefs and to use the family assets to support Christian ministries. Conestoga Wood Specialties is a closely held corporation owned and operated by the Hahn family, devout members of the Mennonite Church. The Hahns believe that they are required to run their woodworking business in accordance with their Christian religious beliefs. This is reflected in their corporate vision and mission statements.

As such, the owners of Hobby Lobby Stores, Mardel and Conestoga Wood Specialties objected to providing health coverage for certain types of contraceptives that are inconsistent with their sincere Christian religious beliefs that life begins at conception.

RFRA

The RFRA prohibits the federal government from substantially burdening a person's exercise of religion, even if the burden comes from a rule of general applicability. If the federal government substantially burdens a person's exercise of religion, the RFRA entitles the person to an exemption from the rule, unless the government can show that the rule furthers a compelling governmental interest and is the least restrictive means of furthering that interest.

The Supreme Court Ruling

Noting that the RFRA provides very broad protection for religious liberty, the Supreme Court held that the RFRA's protections afforded to individuals also extend to individuals who wish to run their businesses as for-profit corporations in a manner that is consistent with their religious beliefs. Thus, the closely-held for-profit corporations involved in these cases have the right to exercise their religious beliefs under the RFRA.

In addition, the Court ruled that HHS' contraceptive coverage guidelines substantially burden the companies' exercise of religion. By requiring the owners to arrange for this coverage, the guidelines would require them to engage in conduct that seriously violates their religious beliefs. Heavy excise taxes will also apply should the owners and their companies choose not to comply with the mandate.

Although the Court assumed that the contraceptive mandate serves a compelling government interest, it ruled that the mandate is not the least restrictive means of serving that interest. According to the Court, there are other ways Congress or HHS could equally ensure that women have access to contraceptives on a cost-free basis. For example, the federal government could assume the cost of providing contraceptive coverage to women who are unable to obtain coverage due to their employers' religious objections. Also, the Court noted that HHS could extend the accommodations approach that applies to nonprofit religious organizations to for-profit corporations with religious objections.

Impact of Ruling

The Supreme Court's ruling appears to have little impact on the ACA itself. It creates a narrow exception to the ACA's contraceptive mandate for closely held businesses that object to providing coverage for certain types of contraceptives based on their sincere religious beliefs. For all other for-profit employers, the contraceptive coverage mandate will continue to apply. It is anticipated that HHS will issue guidance in the future to address how the Court's ruling should be implemented.

In addition, the Court cautioned that its decision only applies to the ACA's contraceptive mandate. Other insurance coverage requirements, such as immunizations, may be supported by different interests (for example, the need to combat the spread of infectious diseases) and may involve different arguments about the least restrictive means of providing them.

However, ultimately, it is not clear how far-reaching the decision will be. Some, including the dissenting justices in this case, have argued that the Court's decision could go far beyond contraception, and allow corporations to object on religious grounds on a wide variety of other issues.

More Information

The Supreme Court's ruling is available at http://www.supremecourt.gov/opinions/13pdf/13-354_olp1.pdf.

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits
949.833.2983
inquiries@burnhambenefits.com


This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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