Supreme Court Rules Certain Employers Do Not Have To Cover Birth Control In Health Care Plans Provided To Employees

On June 30, 2014, the United States Supreme Court ruled that closely held for-profit companies possess the same religious freedoms as their owners when it comes to contraceptive coverage under health care plans offered to employees under the Affordable Care Act of 2010 ("ACA").

The court decided consolidated cases that challenged a provision of the ACA that required companies with more than 50 employees to cover preventive care services, which includes such contraceptives as morning-after pills, diaphragms and IUD's, without any cost sharing requirements. Among the challengers were for-profit corporations, Conestoga Wood of Pennsylvania, owned by a family of Mennonite Christians, and Hobby Lobby, a family owned chain of arts and craft stores founded on biblical principles.

Among the arguments in this multi-faceted challenge, was that the use of certain contraceptives was the equivalent of abortion, destroying a human life by preventing a fertilized egg from developing any further. It was argued that requiring such coverage would violate religious beliefs of the owners who oppose abortion.

As predicted, the Supreme Court ruling was a narrow 5-4 opinion. The decision was written by Justice Samuel Alito and was joined by Chief Justice Roberts and Justices Scalia, Kennedy and Thomas. There were two dissenting opinions.

The challenges were brought under the First Amendment's Free Exercise (of Religion) Clause as well as the Religious Freedom Restoration Act of 1993 ("RFRA"). That law provides, in pertinent part, that the government is prohibited 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." 42 U.S.C. §§2000 bb – 1(a),(b). The RFRA covers "any exercise of religion, whether or not compelled by, or central to, a system of religious belief."  42 U.S.C. §2000 cc – 5(7)(A).

Pursuant to regulations issued under the ACA by the Department of Health and Human Services ("HHS"), non-exempt employers were generally required to provide coverage for 20 different contraceptive methods approved by the Food & Drug Administration, including the four challenged methods. Religious employers, such as churches were already exempt from this mandate. HHS also effectively exempted religious non-profit organizations with religious objections to providing coverage for contraceptive services.

At issue in the Hobby Lobby case was whether the RFRA applied to a closely held for-profit corporation where its owners may have sincere Christian beliefs that would be violated by the regulations. A significant legal issue is whether for-profit corporations can be considered "persons" under the RFRA. Even though religious freedoms are generally exercised by individuals, the Court ruled that closely held corporations, where individual owners have established religious beliefs, can also come under the protection of the RFRA. The Court recognized that since the HHS conceded that a non-profit corporation can be a person under the RFRA there were no legitimate distinctions between non-profit and for-profit corporations for this purpose. The argument of the dissent that corporations cannot "exercise religion" was not found to be persuasive. To be exempt, closely held companies must demonstrate "sincere" religious beliefs. What will qualify as such is left to future cases. The definition of what is a closely held business was also not specified.

The Court also found that the contraceptive mandate substantially burdens the exercise of religion by requiring the owners of those corporations to engage in conduct that seriously violates their sincere religious belief (that life begins at conception). While the Court agreed that the interest in guaranteeing cost-free access to contraceptive methods is a compelling governmental interest, the Court held that the government failed to show that the contraceptive mandate is the least restrictive means of furthering that interest. There are 20 government-approved contraceptives in the United States. The appellants were challenging only four. The Court found, however, that the challengers are exempt from all 20. The Court ruling means that certain businesses can now refuse to pay for birth control pills or any other type of contraception if they so choose.

The Court's decision was very narrow. The Court did not hold that all insurance coverage mandates (such as those for vaccinations or blood transfusions) necessarily fail if they conflict with an employer's religious beliefs. The Court also ruled that employers cannot illegally discriminate against employees as a religious practice. Clearly, not all employers are covered by this ruling, only "closely held" corporations with 50 or more employees can deny contraceptive coverage to employees on religious grounds. Women who work for family owned businesses such as those in the case, can still secure contraceptives, they just have to do so privately.

The case is going to impact many pending cases. At least eight Michigan businesses, representing more than 1,000 employees, have brought court challenges to the HHS regulations. The Supreme Court specifically ordered the 6th Circuit Court of Appeals to reconsider its decision against two Michigan companies.

Despite concerns by the dissent, the Court tried to tailor an opinion limited in focus. Arguably, the decision does not give closely held religious employers latitude to make faith-based decisions regarding its employees outside the scope of the contraception mandate.

For more information on this matter, please contact William Moore, (313) 965-8674 or wmoore@clarkhill.com , or another member of Clark Hill's labor and employment practice group.