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Impact of Hobby Lobby: Closely Held Corporations May Object to ACA’s Contraceptive Mandate


Impact of Hobby Lobby: Closely Held Corporations May Object to ACA’s Contraceptive Mandate

July 2, 2014

In a highly anticipated decision in Burwell v. Hobby Lobby, 573 U.S. ___ (June 30, 2014), the United States Supreme Court ruled that the contraceptive mandate of the Patient Protection and Affordable Care Act (ACA) as applied by the Department of Health and Human Services (HHS) to closely held corporations violates the Religious Freedom and Restoration Act.

The Hobby Lobby challenge arises from the employer mandate in the Affordable Care Act, which requires “large” employers to provide employees with minimal essential coverage. This includes “preventive care and screenings” for women without “any cost sharing requirements.” 42 U. S. C. §300gg–13(a)(4). The Affordable Care Act itself does not specify the types of preventive care that must be covered; Congress authorized the Health Resources and Services Administration (HRSA), a component of the Department of HHS, to make that decision.

The HRSA subsequently promulgated the Women’s Preventive Services Guidelines, which provide that nonexempt employers are generally required to provide “coverage, without cost sharing” for all Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling.” While many of the required, FDA-approved methods of contraception work by preventing the fertilization of an egg, four of those methods work by preventing an already fertilized egg from developing any further by inhibiting its attachment to the uterus. It is these four methods of contraception that gave rise to the challenge in Hobby Lobby.

Hobby Lobby is owned and operated by David and Barbara Green and their three children, Christians who own and operate the family business. Forty-five years ago, David Green started an arts-and crafts store that has grown into a nationwide chain of 500 stores and more than 13,000 employees. Meanwhile, Norman and Elizabeth Hahn and their three sons are devout members of the Mennonite Church, a Christian denomination. The Mennonite Church opposes abortion and believes that the fetus in its earliest stages shares humanity with those who conceived it. Fifty years ago, Norman Hahn started a wood-working business in his garage, and that company, Conestoga Wood Specialties, has 950 employees.

As “large” employers, both Hobby Lobby and Conestoga Wood Specialties are subject to the Affordable Care Act employer mandate, which includes the obligation to provide female employees with contraceptive coverage “without cost sharing.” Alleging that the requirement to pay for and provide contraceptive methods that work by inhibiting the attachment of a fertilized egg to the uterus violates the Religious Freedom and Restoration Act — which prohibits the federal government from taking any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest — the Greens, Hahns, and their businesses sought relief in the courts.

The Supreme Court’s application of the RFRA to the ACA contraceptive mandate is straightforward. First, the court found that the contraceptive mandate substantially burdens the exercise of religion by the owners of these businesses, noting that the owners of the businesses have religious objections to abortion, and according to their religious beliefs, the four contraceptive methods at issue are the equivalent of abortion. The Greens and Hahns believe that complying with the HHS mandate is tantamount to facilitating abortions; and conversely, the failure to comply would be prohibitively expensive, as much as $475 million per year in the case of one of the companies.

The court also found that the HHS contraceptive mandate requirement satisfies the RFRA requirement that a burden on religious exercise must serve a compelling government interest. Therefore, under the court’s RFRA analysis, the final question is whether the contraceptive mandate constitutes the least restrictive means of serving the governmental interest in providing preventative care services for female employees. Noting that there are other ways by which the HHS could effectively ensure the governmental interest that every female employee has cost-free access to all of the FDA-approved contraceptives, the court concluded that the contraceptive mandate violates the RFRA.

In particular, the Supreme Court notes that the HHS has already devised and implemented a system that seeks to respect the religious liberty of religious not-for-profit corporations while ensuring that the employees of these entities have precisely the same access to all FDA-approved contraceptives as employees of companies whose owners have no religious objections to providing such coverage. The employees of these religious not-for-profit corporations still have access to insurance coverage without cost sharing for all FDA-approved contraceptives. According to the HHS, this system imposes no net economic burden on the insurance companies that are required to provide or secure the coverage at no cost to the employer.

Although the HHS has made this alternative system available to religious not-for-profits that have religious objections to the contraceptive mandate, the agency has not provided any reason why the same system cannot be made available when the owners of for-profit corporations have similar religious objections. The court concluded that the HHS’s system for religious nonprofits constitutes an alternative that achieves all of the government’s interests in this area while providing greater respect for religious liberty of employers. Therefore, the court ruled that the enforcement of the HHS contraceptive mandate against the Greens, Hahns, and their companies is unlawful under the RFRA.

The Hobby Lobby ruling provides a narrow opportunity for owners of a closely held corporation to object to the contraceptive mandate of the Affordable Care Act for religious reasons. Assuming that the HHS makes the same system that it uses for religious not-for-profits available to closely held for-profit companies with religious objections, this ruling should have little practical effect for any affected employees, as insurance carriers will be required to cover these contraceptive services without sharing any of the cost with the employee or the employer.

If you have questions about how this decision may impact your business, please contact: