Supreme Court Sides with Employer in Contraception Case

July 7, 2014
Legal Update

In a 5-4 ruling, the U.S. Supreme Court held in Burwell v. Hobby Lobby Stores, Inc., that closely held for-profit corporations cannot be required to provide insurance coverage for methods of contraception that violate the sincerely held religious beliefs of the companies’ owners.

The Patient Protection and Affordable Care Act (ACA) and its regulations generally require that group health plans provide no cost access to twenty different FDA-approved contraceptive methods, including four contraceptives that prevent an already fertilized egg from developing further by inhibiting its attachment to the uterus.  Hobby Lobby and Conestoga—for-profit corporations each owned entirely by one family—argued this “contraception mandate” contravened the Religious Freedom Restoration Act (RFRA) by violating their owners’ free exercise of their deeply held religious beliefs that life begins at conception.  Under the RFRA, if a federal law substantially burdens a person’s exercise of religion, that person is entitled to an exemption from the law unless the government demonstrates the burden on that person furthers a compelling government interest and is the least restrictive means of furthering that compelling interest. 

In its decision, the Supreme Court held that, as applied to closely held corporations like Hobby Lobby and Conestoga, the ACA’s regulations requiring employer-sponsored group health plans to provide female employees with no-cost access to contraception violate the RFRA.  In reaching its holding, the majority first found the RFRA applied to protect the companies’ free exercise of religion.  The majority then concluded the HHS regulations substantially burdened those employers’ free exercise of religion by forcing them to act in contravention with their sincerely held religious beliefs, face penalties of up to $100 per day per participant for sponsoring a group health plan that violates the ACA, or decide to drop health coverage for its employees entirely (and, thereby, face potential penalties of up to $2,000 per year per full-time employee for failing to offer health coverage). 

Finally, assuming the government had an important interest in requiring employers to provide female employees with no-cost access to the four types of contraception at issue, the majority nonetheless held the contraceptive mandate was not the least restrictive means of furthering that interest.  The majority pointed out it would be easier and less burdensome on the companies to promote the provision of free contraception to female employees through the exemption already available to religious non-profit corporations.  Under that exception, certain religious non-profit corporations can opt out of providing the coverage by satisfying notice and certification requirements, but their female employees can still receive the coverage, with either the insurer or the plan’s third-party administrator arranging for it on a cost-free basis.

Although the majority emphasized the decision was a narrow one, it is a win for Hobby Lobby, Conestoga, and the families who own them, who now can provide female employees with health insurance without covering forms of birth control they find contrary to their religious beliefs.

The majority clarified the decision does not allow an employer to automatically avoid paying for a particular kind of insurance coverage (for example, vaccinations or blood transfusions) just because it has religious objections to it, nor does it provide cover for employers to rely on religion to discriminate on the basis of race.  Notwithstanding the Court’s caveats, the decision’s impact on potential challenges to other religiously based challenges by for-profit employers remains to be seen.

For further information, contact Amy Crotty, or any attorney in Frost Brown Todd’s Labor and Employment Practice Group or Employee Benefits Law Service Team.

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