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Hobby Lobby Decision – Contraceptive Mandate Not Applicable To Certain For-Profit Employers

Under certain circumstances, the Patient Protection and Affordable Care Act’s (“ACA”) “contraceptive mandate” cannot be enforced against closely held for-profit corporations.

The ACA requires non-exempt employers to offer female employees health insurance plans that cover preventative care and screenings without any cost sharing requirements. “Preventative care” includes contraceptive methods that can prevent a fertilized egg from implanting into the uterus and developing further. Non-profit religious organizations are expressly exempt from the ACA but for-profit employers are not.

The issue before the Supreme Court was whether the ACA’s contraceptive mandate was enforceable as applied to closely held for-profit corporations.

Hobby Lobby, a closely held for-profit corporation, argued that it did not have to comply with the ACA’s mandate because it was covered by the Religious Freedom and Restoration Act (“RFRA”). The RFRA prohibits the “‘Government [from] substantially burden[ing] a person’s exercise of religion even if the burden results from a rule of general applicability’ unless the Government ‘demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.’” See Burwell v. Hobby Lobby Stores, Inc., Nos. 13–354, 13–356, 2014 WL 2921709, at*1 (U.S. June 30, 2014) (emphasis added).

The Department of Health and Human Services (“HHS”) disagreed. It argued that Hobby Lobby, and other closely held for-profit corporations, were not “persons” covered by the RFRA and therefore had to comply with the contraceptive mandate.

The Supreme Court held that (1) closely held for-profit corporations qualify as persons protected by the RFRA and (2) the ACA’s contraceptive mandate, as applied to closely held corporations whose owners have sincerely held religious beliefs that using contraceptives is immoral, violates the RFRA. Closely held for-profit corporations qualify as persons under the RFRA because holding otherwise “would leave merchants with a difficult choice: give up the right to seek judicial protection of their religious liberty or forgo the benefits of operating as corporations. RFRA’s text shows that Congress designed the statute to provide very broad protection . . . and did not intend to put merchants to such a choice.” Id. at*2.  The ACA’s contraceptive mandate violates the RFRA because it places a substantial burden on the exercise of a religious belief even though there are less restrictive means of achieving the stated compelling interest of insuring that all women have access to FDA approved contraceptives without cost sharing. Id. at*23.

The Court identified two alternatives that it believes would be workable. Id. at*24-25. HHS could cover the costs of contraceptives when a closely held employer had a valid religious objection under the RFRA. Id. In the alternative, HHS could make the accommodation that currently only applies to religious non-profit employers available to closely held for-profit employers. Id. Under that accommodation, the employer files a certificate of religious objection with the insurer and the insurer uses separate funds to purchase the objectionable contraceptives without imposing any cost sharing on the objecting employer. But in light of the Court’s subsequent holding in Wheaton v. Burwell, it is questionable whether applying the accommodation reserved for religious non-profit employers is a feasible option. No. 13A1284, 2014 WL 3020426 (U.S. July 3, 2014) (granting preliminary injunction pending appellate review in favor of Wheaton College, a non-profit religious institution, that refused to submit a certificate of religious objection to its third party insurance provider on the basis that doing so would make it morally complicit in the provision of contraception).