On Tuesday, March 25, the U.S. Supreme Court heard oral arguments in two highly anticipated cases involving the Affordable Care Act (ACA) and competing claims of religious freedom and the access to contraception.
The ACA (also known as Obamacare) requires employers that provide health insurance to employees to cover several types of contraception. Two for-profit employers, Hobby Lobby and Conestoga Wood Specialties, object to four of the twenty forms of required contraception which company owners believe cause abortions.
The penalty for failure to provide coverage for these additional forms of contraception could cost Hobby Lobby upwards of $475 million a year for its 13,000 employees, or almost $37,000 a year in fines per employee.
The key issue is whether the Religious Freedom Restoration Act (RFRA), passed by Congress in 1993, which protects the exercise of religion in all but extreme cases, applies to for-profit secular businesses, and whether the religious beliefs of the owners can “pass through” the corporate veil and define corporate religious values that may violate a provision of federal law.
Under RFRA, the Court must determine whether Hobby Lobby’s religious practice is “substantially burdened” by the contraception requirement in its insurance plan. If the practice is substantially burdened, the government needs to justify the requirement by showing that the government has a “compelling state interest” and is using the “least restrictive means” to achieve this goal.
In contrast, the federal government argues that the ACA is generally applicable to all companies and does not specifically discriminate against companies owned by individuals who object to the ACA on moral grounds. The government also argues that corporations do not have the same rights as individuals to exercise religious beliefs.
Hobby Lobby and Conestoga Wood are arguing that because the Court found that corporations have free speech rights and can spend money in federal elections in Citizens United v. Federal Election Commission (2010), that corporations also have religious rights under the First Amendment.
During the oral argument, Justices Elena Kagan and Sonio Sotomayor suggested that the companies could avoid the controversy altogether if they stopped providing health insurance and simply paid the $2,000 per employee annual tax for not buying health insurance, which would amount to $26 million per year, far less than the cost of insurance itself.
In response, Chief Justice John Roberts said that “I thought that part of the religious commitment of the owners was to provide health care for its employees.”
The Court is unlikely to come to a consensus on this case and a split decision is anticipated in June. The Court may rule narrowly that corporations can seek an exemption from certain forms of contraception and that further issues along these lines need to be handled on a case-by-case basis. While the Hobby Lobby case may have an impact on the future of corporate law and how broadly free exercise of religion is defined, the decision will not likely have a significant effect on the ACA which the Court previously found constitutional, or the way that the insurance industry will interpret and apply the law.
Michael D. Peabody is a Partner out of B&B’s Woodland Hills office. He can be reached at mpeabody@bradfordbarthel.com.
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