Closely-Held ‘Corporate Christians’ Win Crusade Against Contraceptive Coverage

By Michelle Oxman, JD, LLM, Sheila Lynch-Afryl, JD, MA, and Danielle Capilla, JD

In a 5-4 decision, the Supreme Court ruled that HHS regulations requiring employer-sponsored health plans to include all FDA-approved contraceptives among the preventive services covered without cost sharing could not be applied to for-profit corporations with religious objections to some of the contraceptive methods. The Court ruled that the regulations violate the Religious Freedom Restoration Act (RFRA), which requires that federal government requirements that substantially burden religious freedom must serve a compelling interest and be the least restrictive means of furthering that interest. The Court rejected the government’s arguments that the corporate employers were separate from their owners and that for-profit organizations do not “exercise religion” (Burwell v Hobby Lobby, June 30, 2014, Alito, S).

Barbara Green, co-founder of Hobby Lobby, said in a statement, “Today the nation’s highest court has re-affirmed the vital importance of religious liberty as one of our country’s founding principles. The Court’s decision is a victory, not just for our family business, but for all who seek to live out their faith.”

The Rev. Barry W. Lynn, executive director of Americans United for Separation of Church and State, which filed a friend-of-the-court brief in the case, said, “The justices have set a dangerous precedent. While the Obama administration may arrange for the government to provide contraceptives, a future administration could easily take that away. In years to come, many women may find their access to birth control hanging by a thread.”

The Preventive Services Coverage Requirement

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) amended Public Health Service Act sec. 2713 to require employer-sponsored health insurance plans to cover the preventive services rated A or B by the United States Preventive Services Task Force and any additional preventive services for women recommended in comprehensive guidelines issued by the Health Resources and Services Administration (HRSA). As Wolters Kluwer has reported, HRSA added all FDA-approved contraceptives to the list based upon the recommendations in a report by the Institute of Medicine. HHS adopted the HRSA list in a Final rule in July 2010.

The RFRA Issues

Hobby Lobby, Inc. owns a national craft store chain. Conestoga Wood Specialties, Inc. (Conestoga) owns a for-profit business manufacturing wood parts that are incorporated into the products of others. Both Hobby Lobby and Conestoga are closely-held corporations owned by members of one family. The Greens, owners of Hobby Lobby and a chain of Christian bookstores called Mardel, are Christians who believe that both emergency contraception and two intrauterine devices (IUDs) cause abortion, so that coverage violates their beliefs. The Hahns, owners of Conestoga, believed that two forms of emergency contraception approved by the FDA cause abortion, so that coverage violates their Mennonite beliefs. The corporations and their individual shareholders sought injunctions against the enforcement of the contraceptive coverage mandate against them.

In both cases, the government argued that the rights of the individuals to free exercise of religion were not violated because the mandate applied to the corporations, not to them as individuals, and a fundamental principle of the law of corporations is that they are legal “persons” separate and apart from their owners. Further, the government argued, for-profit corporations do not exercise religion; they do not pray, perform sacraments, or have religious beliefs. Therefore, the corporations must be bound by the law just like any other employer of their size.

The Lower Court Decisions

Initially, the district court in Oklahoma denied Hobby Lobby’s request for an injunction, and the district court in Pennsylvania denied Conestoga’s request. Both courts accepted the government’s argument that for-profit corporations do not exercise religion. Therefore, neither court found that the plaintiffs were likely to succeed on the merits. On appeal, the Tenth Circuit reversed and directed the district court to enter the injunction in favor of Hobby Lobby. The Third Circuit upheld the denial of the injunction requested by Conestoga.

The Solicitor General filed a petition for writ of certiorari for the Hobby Lobby case, asking the Supreme Court to determine whether the RFRA allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners. Conestoga also sought review in the Supreme Court, and the cases were consolidated.

Corporations as Separate Persons

The majority opinion rejected the government’s argument that closely held corporations’ legal obligations were separate from those of the owners. It framed the government’s position as forcing the owners of family businesses to choose between protection of their right to practice their faith in the operation of their business and the advantages of incorporation. The court reasoned that the corporate form exists to protect the human beings who create them and the corporation acts only through those human beings.

The Application of RFRA

The Court found that the language of the RFRA referred to “persons” but did not define the term. Therefore, the Court determined that the definition in the Dictionary Act in the U.S. Code applied “unless the context suggests otherwise.” That definition included corporations as well as partnerships, individuals, and other entities, and it did not distinguish between for-profit and other corporations.

HHS argued that the RFRA was intended to restore the state of the law as it existed before Employment Division, Dept. of Human Resources of Oregon v Smith, 494 U.S. 872 (1990). It relied on the findings in RFRA, which cited specifically to two Supreme Court decisions. Wisconsin v Yoder (406 U. S. 205 (1972)) had upheld the right of Amish parents to keep their children out of public school, and Sherbert v Werner (374 U. S. 398 (1963)) held that the state could not deny unemployment compensation to a former employee who was terminated because she would not work on the Sabbath. Both of these cases involved religious practices of individuals.

For-Profit Corporations

All parties agreed that the RFRA had been properly applied to churches organized as nonprofit corporations. The majority referred to them as nonprofit corporations and held that there was no basis for distinguishing among nonprofits or between nonprofits and for-profit corporations.

Compelling Interest Test

The RFRA requires that the federal law serve a compelling interest and provide for the least restrictive means of accomplishing that interest. The Court declined to rule on whether the government’s interest was compelling because it found that the agency did not use the least restrictive means to accomplish its goal. The agency had created an exemption for religious institutions, as defined in the tax code, and it had created an “accommodation” for certain related nonprofit entities, whereby the insurer administered the contraceptive benefit separately (76 FR 46621, August 3, 2011). The majority saw no reason why a similar accommodation could not be made for the for-profit plaintiffs.

Justice Kennedy’s concurring opinion stressed that the majority was ruling only on the contraceptive coverage mandate and that the logic of the case should not be extended to other medical procedures to which employers might object, such as blood transfusions. In addition, the RFRA could not be used as a back-door means to evade antidiscrimination laws.

The Dissents

Justices Ginsburg, Sotomayor, Breyer, and Kagan dissented, guided largely by their concern for women’s health issues, as embodied in the Women’s Health Amendment to the ACA, which required coverage of preventive services specific to women. The dissent, written by Justice Ginsburg, accused the majority of stepping into a “minefield … by its immoderate reading of RFRA” and characterized the majority’s decision, one of “startling breadth,” as allowing commercial enterprises to “opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.”

Incidental Effect

The dissent concluded that any Free Exercise Clause claim the plaintiffs assert is foreclosed by the Supreme Court’s decision in Smith. In Smith, two members of the Native American Church were fired from their jobs after ingesting peyote at a religious ceremony. The Court in that case held that no First Amendment violation occurs when prohibiting the exercise of religion is an incidental effect of a generally applicable and otherwise valid regulation. Justice Ginsburg asserted that the ACA’s contraceptive coverage requirement applies generally, is “otherwise valid,” and “trains on women’s well-being,” not on the exercise of religion, such that the effect it has on such exercise is incidental.

Interests of Third Parties

Justice Ginsburg also cited the rule that accommodations as to religious beliefs must not significantly impinge on the interests of third parties. According to the dissent, the exemption sought by the plaintiffs would override the “significant interests” of the corporations’ employees and dependents and “deny legions of women who do not hold their employers’ beliefs access to contraceptive coverage that the ACA would otherwise secure.”

RFRA Claim

The dissent criticized the majority’s view of the RFRA. Justice Ginsburg reasoned that the RFRA reinstated the law as it was before Smith; however, the majority saw the RFRA as setting a new course departing from pre-Smith jurisprudence. The RFRA applies to government actions that “substantially burden a person’s exercise of religion.” Justice Ginsburg contended, however, that there is no support for the idea that free exercise rights apply to a for-profit corporation. While religious organizations exist to serve a community of believers, no religion-based criterion can restrict the work force of for-profit corporations, which use labor to make a profit, not perpetuate religious values. For this same reason, Justice Ginsburg disagreed with the majority’s suggestion that the accommodation afforded to nonprofit religious-based organizations be extended to commercial enterprises.

Justice Ginsburg further found that the connection between the families’ religious objections and the contraceptive coverage requirement is too attenuated to be considered “substantial,” as required by the RFRA.

Breyer and Kagan

Justices Breyer and Kagan agreed with the dissent’s conclusion that the challenge to the contraceptive coverage requirement failed on the merits but asserted that it was unnecessary to decide whether for-profit organizations may bring claims under the RFRA.

Further Response to Verdict

Lori Windham, senior counsel for The Becket Fund for Religious Liberty and counsel for Hobby Lobby, said “This ruling will protect people of all faiths. The Court’s reasoning was clear, and it should have been clear to the government. You can’t argue there are no alternative means when your agency is busy creating alternative means for other people.” According to the Beckett Fund, over 100 cases against the mandate have been filed, almost equally divided between for profit and not-for-profit companies.

Louise Melling, deputy legal director of the American Civil Liberties Union, which also filed a friend-of-the-court brief, said that “for the first time, the highest court in the country has said that business owners can use their religious beliefs to deny their employees a benefit that they are guaranteed by law.”

The case numbers are 13-354 and 13-356.

Closely-held Corporate Christians Win Crusade Against Contraceptive Coverage

The Supreme Court issued a 5-4 ruling in Burwell v Hobby Lobby, holding that closely held corporations cannot be required to provide contraception coverage. The court was asked to determine if the Religious Freedom Restoration Act (RFRA) (P.L. 103-141) allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objection of the corporation’s owners.  Justice Alito issued the majority opinion, joined by the Chief Justice and Justices Scalia, Thomas, and Kennedy. Justice Kennedy wrote a concurring opinion. Justice Ginsburg wrote a dissent in which she was joined by Justice Sotomayor; she was also joined in part by Justices Breyer and Kagan, who separately issued a dissent.

In 2012, Hobby Lobby, a national craft store chain, filed suit against then-HHS Secretary Kathleen Sebelius and various federal government entities, alleging that the preventive care services provision of the ACA, which requires Hobby Lobby to cover FDA-approved contraception in its employee health plans, violated its rights. Hobby Lobby objected because it considers some forms of contraception to be abortifacients, such as Ella®, Plan B One-Step®, and intrauterine devices, and subsequently argued that the preventive care services provision violated the RFRA, the Free Exercise Clause of the First Amendment, and the Administrative Procedure Act. At the direction of the Tenth Circuit, the district court granted Hobby Lobby a preliminary injunction barring the federal government from enforcing the preventive services provision of the ACA.

The Solicitor General petitioned the Supreme Court to hear the case, and the petition was granted. At that time the case was consolidated with a Conestoga Wood Specialties Corp v Sebelius (now Conestoga Wood Specialties Corp. v Burwell), which involved a secular for-profit corporation alleging that the mandate violated its shareholders’ Mennonite beliefs. The Third Circuit had upheld the denial of a preliminary injunction in the case.

For a full history of the cases, please click here.

In-depth analysis of this case will be posted later in the week.

 

Hobby Lobby & Conestoga Decision Anticipated; History of Litigation

On Monday, June 30, the U.S. Supreme Court is expected to deliver its decision in Sebelius v. Hobby Lobby (No. 13-354). The Affordable Care Act’s provision requiring group health plans (whether offered by an employer or through the health insurance Marketplace) and individual health plans to include specific preventive health services, including contraception coverage at no extra cost to the insured, has generated more litigation than any other part of the law.

Since November 2012, Wolters Kluwer Law & Business has published over a dozen articles on the two cases at the heart of the litigation involving Hobby Lobby and Conestoga Wood Specialties Corp. These articles have appeared in Health Law Daily and Health Reform WK-EDGE. The decisions themselves, as well as related decisions on the contraception coverage controversy involving for-profit and not-for-profit institutions, appear in Wolters Kluwer’s Health Reform KnowlEDGE™ Center.

In this Special Briefing, we have gathered together all of Wolters Kluwer’s reporting on these two cases. When the Supreme Court releases its decision, our analysis of the decision will be available within hours of the release for our Health Law Daily and Health Reform WK-EDGE subscribers. For our blog readers, please expect news of the decision on Monday, with more in-depth analysis later in the week.

See the Special Briefing here.

 

SCOTUS Won’t Review Abortion Providers’ Admitting Privileges Requirement Law

On June 23, 2014, the Supreme Court denied the petition of Wisconsin officials for review of the Seventh Circuit Court of Appeals decision affirming the preliminary injunction against implementation of the state’s law requiring physicians who perform abortions to have admitting privileges at a hospital within 30 miles of the site of the abortion. The denial of certiorari in Van Hollen v Planned Parenthood of Wisconsin is not a ruling on the merits of the case and is not precedential.

The Statute

 As we have reported, on Friday, July 5, 2013, the Wisconsin legislature enacted Wis. Stat. sec. 253.095. The statute became effective Monday, July 8, 2013, so that on the next business day after enactment, any physician who performed abortions in Wisconsin without having admitting privileges was breaking the law. Planned Parenthood of Wisconsin and Affiliated Medical Services, both of which operate clinics where abortions are performed, immediately sued in federal court to enjoin enforcement of the law. The district court first entered a temporary restraining order preserving the status quo.

The Trial Court

Within a few weeks, the court held a hearing and entered a preliminary injunction pending a trial on the merits of the case. The clinics presented testimony that two clinics would be forced to close and a third would need to limit its abortions to half of the number it usually performed. Hospitals may choose whether to grant privileges regardless of the physician’s qualifications. The court found that the law placed undue burdens on women seeking abortions, especially for women in remote parts of the state, who would travel another hundred miles if the Appleton clinic closed. In addition, the absence of any similar requirement for physicians who perform more dangerous procedures in outpatient clinics suggested that the real purpose of the law was to restrict access to safe, legal abortion.

The Appeal

State officials appealed to the Seventh Circuit, which upheld the injunction in December 2013. The appeals court noted that state argued that the purpose of the law was to protect the health of pregnant women, but the legislature did not consider any evidence of the medical necessity of the requirement; in fact, most of the discussion concerned a requirement that the patient undergo an ultrasound before the abortion. The court also observed that the penalty for violating the law, i.e., an award of civil damages to the father or grandparent of the “aborted unborn child,” did not depend on any injury to the woman. It also considered the absence of similar regulations of physicians performing other surgical procedures with higher rates of complication and more serious risks.

Both the district court and the appeals court rejected the state’s argument that the providers of abortion services lacked standing to challenge the law. The appeals court noted that the interests of the patients and the providers were the same, and that the physicians are subject to penalties for violating the statute.

The issue is likely to come before the Supreme Court in the future, as two other circuits have decided similar cases in favor of the state.