Supreme Court Extends Religious Exemption from H.H.S. Contraception Mandate to Closely Held For-Profit Corporations

The Affordable Care Act (“ACA”) requires employers above a certain size to provide health insurance coverage to employees, and requires all such plans to include “preventative care.” The U.S. Department of Health and Human Services (“HHS”) has defined “preventative care” to include all forms of FDA approved female contraception, as well as sterilization (“the Mandate”). Most of the FDA approved medications prevent fertilization, but some act on already fertilized eggs.

Hobby Lobby is a closely held, family owned for-profit corporation that runs a chain of hobby stores. It is large enough to be subject to the ACA and the Mandate. Hobby Lobby maintains a health plan for its employees that includes most of the contraceptives covered by the Mandate, but the owners objected to providing four forms of contraception that acted after fertilization on the ground that such medications extinguish an existing human life, in violation of the owners’ sincerely held religious beliefs. Hobby Lobby claimed that requiring it to be the provider of such medications would force it to violate its conscience, i.e., the consciences of its individual owners. When HHS refused to accept Hobby Lobby’s objection, Hobby Lobby sued and ultimately prevailed in the Supreme Court on a 5-4 opinion written by Justice Alito and joined by Justices Scalia, Thomas, Roberts and Kennedy. Justice Ginsburg dissented, joined by Justice Sotomayor and (in most parts) Justices Breyer and Kagan.

The Religious Freedom Restoration Act of 1993 (RFRA) is a federal statute requiring exemptions from neutral, generally applicable federal laws that substantially burden a person’s free exercise of religion, unless the government can show a compelling interest and that it has employed the least restrictive means in furthering the compelling interest. RFRA was enacted by a unanimous House of Representatives and a virtually unanimous Senate, and signed into law by President Bill Clinton, in response to a Supreme Court decision limiting claims for free exercise exemptions from neutral, generally applicable laws to a far less exacting “rational basis” test. Thus, the free exercise right protected by RFRA is statutory and, in that sense, distinct from the free exercise clause of the First Amendment. 

Under RFRA, Hobby Lobby argued that the Mandate substantially burdened its exercise of religion by forcing it to choose between staying in business or violating its conscience. Hobby Lobby further argued that the government had no compelling interest in requiring it to be the provider of abortifacient drugs and, in any event, the government had many less restrictive alternatives for ensuring access to such drugs.

Before reaching the merits of the religious liberty argument, the Supreme Court first had to address the interesting question of whether a for-profit corporation was a “person” protected by RFRA; that is, could a for-profit corporation “exercise religion” in the first place?

Holding in a new context that corporations were legal “persons,” the court held that a for-profit, closely held corporation could bring a claim under RFRA because (i) RFRA’s statutory definition of “persons” expressly includes corporations, without distinguishing between for-profit and not-for-profit; and (ii) a closely held corporation is really just the group of human beings who seek to do business in a manner that is consistent with their religious beliefs.  The Supreme Court also held that whether or not an organization is a “charity” is irrelevant to the application of RFRA because the statute itself contains no such requirement. In essence, the right to freely exercise religion includes the right to function in society — including conducting a business — in accord with the owner’s religious beliefs.

Next, the Court found that Hobby Lobby’s RFRA claim had merit. First, a law that compels a person to violate his or her conscience is a per se substantial burden on the person’s exercise of religion. Thus, compelling Hobby Lobby to provide coverage for medications that, in Hobby Lobby’s view, make it complicit in the taking of human life (in violation of its sincerely held religious beliefs) DOES substantially burden its exercise of religion.

Second, the Court “assumed” for the sake of argument that the government had a compelling interest in requiring employers to provide all of the mandated contraceptives. The question of whether the government really has such a compelling interest remains open.

Instead (and third), the Court held that, even if the government did have a compelling interest, it did not employ the least restrictive means to further that interest. Specifically, even assuming that it was of paramount public importance to ensure that employees of closely held for-profit corporations could receive ALL of the mandated contraceptives at no cost (irrespective of the employer’s religious objection), the government still had many alternative ways to provide for this without forcing the employer to violate its conscience. Obviously, the government could simply provide the contraceptives itself. Alternatively, it could enlist a different organization to do so. Requiring a less restrictive alternative would not defeat the purpose of the Mandate or the regulatory scheme in which it was promulgated.

As the Court makes clear, the Hobby Lobby decision is narrow. It applies only to closely held for-profit corporations with religious objections to the contraception Mandate. Nonetheless, the decision is important in a number of respects, regardless of the identity of the objector. First, it removes any doubt about whether RFRA applies to separate statutes enacted after RFRA, including the ACA. Second, it makes clear that laws forcing a person to comply with the contraceptive Mandate in violation of his or her sincerely held religious beliefs do constitute a substantial burden on the exercise of religion under RFRA and such laws cannot be enforced because there are less restrictive ways to accomplish the goal of providing the mandated contraceptives to employees.

Justice Ginsburg’s vigorous dissent argues that the majority’s approach would allow businesses to claim exemption from a wide variety of important regulations and anti-discrimination laws solely on the basis of a purported religious belief.

The battle over the HHS Mandate now shifts back to the not-for-profit world. The Mandate itself contains an exemption for what might be described as “core religious organizations,” such as religious denominations and places of worship. The exemption does not appear to extend to religiously affiliated charities, hospitals, educational institutions and other bodies that profess religious missions and are not-for-profits. In order to address this, HHS has promulgated an “accommodation” for such groups, under which they can avoid directly providing coverage for the mandated contraceptives if they certify that they are religious organizations and have sincere religious objections to the Mandate. Unfortunately, HHS has designed the accommodation such that the objecting organization is required to tender a form not only to the government (stating the objection), but also to the objector’s insurance provider, based on which the insurer will then provide the mandated contraceptives and collect reimbursement from the government.

The problem with this approach is that, in the eyes of some groups, the act of tendering the form to the insurer constitutes a de facto instruction to the insurer to provide the mandated contraceptives, thereby implicating the objecting organization in the very act to which it is objecting. Objectors have called this a “trigger,” and have argued in various courts that they should be exempt under RFRA from the Mandate itself, and from the particular requirement that they be the “trigger” of the accommodation for the same reasons Hobby Lobby was exempt: the government can easily accommodate them without requiring them to be the trigger of the coverage. As simple a change as allowing the groups to tender their objections only to the government might accomplish this.

The Supreme Court majority in Hobby Lobby does not indicate how it will rule on the religious objections to the accommodation for non-exempt, religiously affiliated entities. In one place, the Court majority expressly states that it is not offering any opinion on how such accommodation cases will or should come out.  In another place, however, the Court points to the accommodation as an example of how Hobby Lobby might have been accommodated. As noted above, Hobby Lobby was decided on a 5-4 split, with Justice Kennedy in his usual role as the swing vote. Justice Kennedy joined the majority, but also wrote a separate concurring opinion emphasizing the availability of less restrictive alternatives and specifically endorsing the very accommodation that religious not-for-profits continue to challenge:

[T]he means to reconcile those two priorities [of religious liberty and the government’s compelling interest] are at hand in the existing accommodation the Government has designed, identified and used for circumstances closely parallel to those presented here.

Justice Kennedy’s comments are dicta, of course, but they certainly provide a clue to how he might approach the issue when the not-for-profit cases reach the Supreme Court. A number of lower courts have reached different conclusions about this, and the matter is likely to be decided by the Supreme Court next term. In the meantime, the Supreme Court has entered a temporary injunction pending appeal, prohibiting the government from enforcing the Mandate against certain religious affiliates objecting to the accommodation.This article was prepared by James C. Geoly, a constitutional lawyer and member of the Firm’s Religious and Litigation Practices. Mr. Geoly can be reached at jgeoly@burkelaw.com or 312/840-7080.