July 1, 2014
On June 30, 2014, the United States Supreme Court partially struck down the Affordable Care Act’s contraceptive mandate. The case was Burwell v. Hobby Lobby Stores, Inc., decided by a 5-4 vote, with the majority opinion written by Justice Alito.
The ACA’s Contraceptive Mandate
To review, the ACA mandates that if employers offer health benefits to their employees (other than through “grandfathered” plans), the plans must provide certain basic benefits, including some preventive services, without cost sharing. The Department of Health & Human Services issued regulations, which included all Food and Drug Administration approved contraceptive methods on the list of mandated preventive services.
HHS fully exempted “religious employers” from the contraceptive mandate, and permitted certain religious nonprofit organizations, called “eligible organizations,” to opt out of the mandate. If an eligible organization opts out of the mandate, its insurer (or third-party administrator, in the case of self-insured health plans) is required to take the contraceptive benefits out of the employer’s health plan and, with no additional charge, provide those benefits itself.
The Hobby Lobby Decision
Hobby Lobby is a large family-owned corporation that provides health benefits to employees. As a for-profit corporation, Hobby Lobby was not permitted to opt out of the contraceptive mandate. It stated that providing contraceptive benefits is contrary to the religious beliefs of its owners, and sued to prevent enforcement of the mandate, claiming that the mandate violated the company’s rights under the Religious Freedom Restoration Act of 1993.
The Supreme Court majority held that Hobby Lobby is a “person” protected by the RFRA, that its religious freedom was burdened by the contraceptive mandate and that the mandate was not the government’s least restrictive means of accomplishing its objective. The government could either provide the benefits itself, or permit companies like Hobby Lobby to opt out, like eligible organizations.
What the Hobby Lobby Decision Means Here
Certain closely-held for-profit employers probably must be permitted to opt out of the contraceptive mandate. Justice Alito stated that it is unlikely that a publicly-held company could show religious objections to the mandate. State corporate law will determine “the corporation’s” religious views.
The Court’s decision may not affect employers whose health plans are insured through policies issued in states that mandate contraceptive coverage. The Oregon Insurance Code requires health insurance policies that provide prescription drug coverage to cover prescription contraceptives, subject to an exception for “religious employers.” The Washington Insurance Commissioner’s regulations provide a similar mandate (with no explicit exception for religious employers). So, a Pacific Northwest employer seeking to follow in Hobby Lobby’s footsteps might have to offer either a self-insured health plan, or a health plan that is insured under a policy issued and delivered in a state without a mandate similar to Oregon’s or Washington’s.
To review, until we receive further guidance from HHS, the rules after the Hobby Lobby decision appear to be the following.
Employers’ grandfathered health plans are not subject to the ACA’s contraceptive mandate, but if the employer buys health insurance in Oregon or Washington, the state mandates may apply.
Religious employers are not subject to the ACA’s or Oregon’s contraceptive mandate, but they may be subject to Washington’s mandate if they buy health insurance there.
Employers that don’t offer health plans are not subject to any contraceptive mandate (though “larger” (50+ employees) employers may be subject to the ACA’s “play-or-pay” rules).
Eligible organizations may opt out of the ACA’s contraceptive mandate, but if they buy health insurance in Oregon or Washington, the state mandates may apply.
Closely-held, for-profit corporations with religious objections to the contraceptive mandate also may opt out of the mandate, but if they buy health insurance in Oregon or Washington, the state mandates may apply.
If an eligible organization or closely-held for-profit corporation validly opts out of the mandate, the employer’s insurer or TPA must provide the contraceptive benefits that would otherwise have been included in the employer’s plan.
Employers seeking to follow in Hobby Lobby’s footsteps will want to consult their insurance or other benefits consultants and their attorneys, to understand their rights and obligations relating to federal and state contraceptive mandates.
Obviously, this is an area of law that is rapidly changing. We will report from time to time on new developments related to healthcare reform. Please feel free to contact us at any time about healthcare reform or other labor, employment, or benefits issues.