Supreme Court Preview: The ACA Contraception Challenge
On March 25th, the Supreme Court will hear combined oral arguments in two cases challenging the Affordable Care Act’s contraceptive coverage requirement: Sebelius v. Hobby Lobby Stores, Inc., and Conestoga Wood Specialties Corp. v. Sebelius. This preview memo explains what the cases are about, what the Court could decide, and what that ruling could mean for policymakers and the rest of the country.
What the Cases Are About
The ACA’s Contraceptive Coverage Requirement
The Affordable Care Act (ACA) requires employer health insurance plans to cover a broad range of preventive services without co-payment from the patient, including all forms of birth control approved by the Food and Drug Administration (FDA). Churches and other houses of worship are exempt from this rule, and after an initial backlash, the Administration also established an accommodation for religiously-affiliated non-profit organizations. These organizations may exempt themselves from the policy by simply filling out a form certifying that they 1) are organized as a non-profit, 2) hold themselves out as a religious organization, and 3) have a religious objection to contraception. At that point, a private insurance company will reach out to their employees to find out whether those workers would like to obtain contraceptives, and if so, to provide that service directly without co-payment. Of course, no employee is required to take advantage of this coverage—it is simply an option.
In contrast to non-profit religious organizations, for-profit companies are not eligible for this accommodation. A for-profit business is required to follow the law, regardless of the personal beliefs of its CEO.
The Cases Challenging the Coverage Requirement
Though the process of accommodation for religiously-affiliated non-profits has also been challenged in the courts, both cases being heard by the Supreme Court later this month have been brought by for-profit businesses who object to the contraceptive coverage requirement. Hobby Lobby, Inc. was founded over 40 years ago and today boasts 600 stores and 13,000 employees in 47 states.1 Conestoga Wood, which manufactures wholesale kitchen cabinets, was founded in 1964 and employs approximately 950 people.2 Hobby Lobby’s CEO describes himself as a Christian endeavoring to “run our business in harmony with God’s laws,” and Conestoga Wood’s CEO is a Mennonite.3 Both companies argue that they should not have to comply with the ACA’s coverage requirement because doing so would violate their CEOs’ privately-held religious beliefs opposing certain forms of contraception.
Hobby Lobby took its case to the 10th Circuit, which ruled 5-3 for the craft store, finding that corporations are entitled to assert religious liberty rights under the Religious Freedom Restoration Act (RFRA), and thus this for-profit company should be able to refuse to provide contraception coverage to its 13,000 employees. The Court came to this decision based on the “First Amendment logic of Citizens United,” the case in which the Supreme Court held that corporations are people for the purposes of political donations. The appeals court ruling said, “We see no reason the Supreme Court would recognize constitutional protection for a corporation’s political expression but not its religious expression.”4
But in the 3rd Circuit, the Court of Appeals ruled against Conestoga Wood, finding that while the owners personally have religious liberty rights, the company is a distinct entity that does not. This ruling said, “We simply cannot understand how a for-profit, secular corporation—apart from its owners—can exercise religion. A holding to the contrary…would eviscerate the fundamental principle that a corporation is a legally distinct entity from its owners.”5
The Religious Freedom Restoration Act (RFRA) Argument
Both Conestoga Wood (in part) and Hobby Lobby (in whole) rest their cases on the Religious Freedom Restoration Act—a 1993 law that prohibits the federal government from imposing laws on a person that substantially burden that person’s exercise of their religion without strong justification. Under RFRA, if a federal law substantially burdens a person’s exercise of religion, the government must show that the law is the least restrictive means of furthering a compelling governmental interest.6 That means for the corporations to prevail in this case, they must be able to prove that they are ‘persons’ for the sake of RFRA, and that the burden of complying with the coverage requirement is a substantial one. Even then, the requirement could still be upheld if the government can show that expanding access to contraception without co-payment, ensuring women have equal access to healthcare services, or promoting public health are a compelling governmental interest and that the coverage requirement is the least restrictive way of furthering one or all of them.
The government will contend that these corporations are not people, and as such they cannot use RFRA to assert religious liberty rights. This view is consistent with past precedent in the area of corporate law, which has long considered owners of corporations to be separate and apart from a corporate entity—a distinction which serves to protect owners and shareholders personally from the liability of the greater corporation. But should the Court rule that corporations are people for the sake of RFRA, the government will still make the case that compliance with the coverage requirement does not constitute a substantial burden on these corporations—employers providing health insurance must simply offer a comprehensive plan that includes contraception coverage. This would mean at most a few dollars may indirectly go towards facilitating the private healthcare decisions of their female employees—although since contraception is a cost-saver, it may be closer to nothing. Finally, even if that argument should fail, the government will contend that it has a compelling interest in this case—such as ensuring nearly all Americans have access to preventive healthcare—and that regulating the availability of that care through the employment-based health insurance system is the least restrictive way to further that interest.
The Free Exercise Clause Argument
In addition to the RFRA claim, Conestoga Wood also raised a constitutional issue, arguing that the coverage requirement violates the company’s free exercise rights under the First Amendment. Since 1990, the Supreme Court has interpreted the Free Exercise Clause to say that so long as a law is generally applicable and religiously neutral—that is, no single religious group or belief is purposely targeted (for example, purposely outlawing a specific item or action that a single religious group uses to practice their faith, just because you don’t like that group)—religious believers do not need to be exempted, even if the law accidentally or unintentionally interferes with their practices or beliefs. If the religious objectors can show that the law is either not generally applicable or targets them in particular, the government would have to prove it has a compelling interest under strict scrutiny, the most difficult constitutional test for any law to pass.7
In order to win on its Free Exercise claim, Conestoga Wood must demonstrate that a cabinetry business is capable of exercising a religion. That could be a high hurdle, though it is possible that the Court will accept the “pass through” theory, under which an owner’s religious beliefs could be seen as passing through to their company.8 If the company can successfully argue that the business can exercise religion, next it must prove that the contraceptive coverage requirement is not generally applicable—that is, that the existing exemption for churches and accommodation for religiously-affiliated non-profit organizations render the law so full of loopholes that it cannot be considered generally applicable and religiously neutral. If the Court agrees, and Conestoga Wood can convince the Justices that the law is interfering with the corporation’s exercise of religion, the government will have to prove that there is a compelling interest for the coverage requirement and this is the least restrictive way to further that interest. If not, the company would be entitled to an accommodation.
What the Court Could Decide
The Supreme Court could decide these cases in at least three ways: 1) upholding the contraceptive coverage requirement under both RFRA and the First Amendment, 2) deciding that the requirement for these companies violates either RFRA or the First Amendment, or both, or 3) altering the requirement to exclude the particular types of contraception singled out by Hobby Lobby and Conestoga Wood.
To uphold the coverage requirement, the Court would have to rule against the corporations on both their RFRA and free exercise arguments. The Court could do so by deciding that corporations are not ‘people’ under RFRA and are incapable of exercising a religion under the First Amendment. The Justices could also reach this result if they decide the burden of compliance is not substantial and that the law is generally applicable. Even if the burden is substantial or the law isn’t deemed generally applicable, the Court could uphold the coverage requirement for these companies if they are convinced that at least one of the governmental interests at stake here is compelling and that the coverage requirement is the least restrictive way to achieve it.
To strike down the contraceptive coverage requirement for these companies, the Court would have to agree with the corporations on either the RFRA or free exercise arguments (or both). As a starting point, the Court would need to rule that a corporation is either a person under RFRA or capable of religious exercise for the purposes of the First Amendment. From there under RFRA, the Justices would need to determine that the corporation’s religious exercise is substantially burdened by the coverage requirement under RFRA, and that the government’s interest behind the coverage requirement either isn’t compelling enough or the law isn’t the least restrictive way to further that interest. At that point, RFRA would require the government to accommodate the companies by giving them an out from providing no-cost contraception coverage. Alternatively, the Justices could rule under the First Amendment that the law is not generally applicable, based on the existing exemption and accommodation. They would also have to find that the governmental interest at stake cannot stand up to strict scrutiny (either the governmental interest is not compelling or the coverage requirement is not narrowly tailored to further that interest). Should the Court strike down the law, it is likely to do so under RFRA rather than the Free Exercise Clause, as RFRA was intended to grant more protection to free exercise rights than what the First Amendment has been interpreted to provide.
The third option, and also the least likely, is that the Court will rewrite the parameters of the coverage requirement, exempting the specific types of contraception targeted in these lawsuits. Between them, the CEOs of Hobby Lobby and Conestoga Wood are opposed to four specific methods of contraception—out of the seventeen approved by the FDA.9 The methods at issue are two types of intrauterine devices (IUDs) and two types of emergency contraception (also known as the “morning after pill”). It is technically possible, though not especially probable, that the Court could uphold the coverage requirement as a whole, but also rule that it can no longer include these four contraceptive methods.
What a Ruling Could Mean
The consequences of a decision striking down the contraceptive coverage requirement for these companies could be far-reaching, depending on how broadly or narrowly the Court crafts its opinion. Millions of women could be cut off from access to contraception without co-payment, an important piece of preventive care. Even a decision limiting the exemption to only the four specifically contested types of contraception would be problematic for access: IUDs are one of the most effective types of contraception with extremely minimal user error, but the higher upfront cost discourages many would-be users. A 2012 study by researchers at Washington University School of Medicine in St. Louis found that when women were offered a range of free contraceptive methods, more than half (56%) chose IUDs, and as a result unplanned pregnancies and abortion rates decreased 62-78%.10 And contraception access isn’t the only part of healthcare that could be affected. Allowing corporations to manipulate their health insurance policies in accordance with their CEO’s religious beliefs could mean that someone could be denied coverage for a blood transfusion, or see their child be denied coverage for the measles vaccine if their boss objects. In short, it would pose a serious threat to public health.
And should the Court rule that a corporation is a “person” who has religious liberty rights, the consequences would be even broader than just denying millions of Americans healthcare services. Corporations could try to justify ignoring all manner of federal protections for employees and customers—including non-discrimination laws and industry-wide regulations—based on the privately-held religious beliefs of their CEOs. For example, some could even try to apply such a ruling to allow business owners nationwide to turn someone away based on their race or sexual orientation, similar to the bill recently vetoed by Republican Governor Jan Brewer in Arizona. And if the Court holds an owner of a corporation can impute his religion onto the business, the corporate veil may be irreparably damaged. This would begin to erase the distinction between owners or shareholders and the corporation itself, potentially opening both sides up to increased liability and decreased rates of money lending, entrepreneurial activity, and strategic risk-taking.11
It is likely for reasons like these that none of the Fortune 500 companies have joined Hobby Lobby or Conestoga Wood in their suits at the nation’s highest court. Nor did the National Chamber of Commerce, who was an important supporter of corporate personhood during the Citizens United trial. Also noticeably silent in these contraceptive challenges is the National Federation of Independent Business (“the voice for small businesses in the nation’s courts”), who participated in the earlier Supreme Court challenge to the ACA as a whole.12 As these organizations can see, a ruling for Hobby Lobby and Conestoga Wood could threaten public safety and health and unravel the long-held distinction in our laws between non-profit religiously-affiliated organizations and for-profit businesses in the stream of commerce.
Later this month, the nine Justices of the Supreme Court will hear oral arguments from both sides in the Hobby Lobby and Conestoga Wood challenges to the ACA contraceptive coverage requirement. No one knows how they will rule. But should the Court come down against the requirement, the consequences could be felt across the country—and not only in doctors’ offices, but in break rooms, boardrooms, and courtrooms far beyond the context of the ACA.
For more information, contact Sarah Trumble at (202) 384-1722 or email@example.com.