U.S. Supreme Court Holds That Contraceptive Mandate Does Not Apply to Closely Held Companies

 In Healthcare Reform FAQ
This morning, the U.S. Supreme Court, in a 5-4 ruling in Burwell v. Hobby Lobby, held that PPACA’s contraceptive mandate, as it applies to closely held for-profit employers, violates the Religious Freedom Restoration Act of 1993 (RFRA). As background, PPACA requires non-grandfathered group health plans to provide coverage for women’s preventive services – including Food and Drug Administration-approved contraceptive services (e.g., birth control) – with zero cost-sharing to the participant. On the contraceptive services, there is a limited exception for religious employers and their affiliates. However, that exception does not extend to private for-profit employers.

In this case, various for-profit employers (including Hobby Lobby Stores and Conestoga Wood Specialties Corporation), based on their owners’ sincere religious beliefs, objected to covering some or all contraceptive services mandated by PPACA. The essential question addressed by the court was whether for-profit corporations can be considered “persons” that can have and exercise their own religious beliefs — a right protected under the RFRA. Very generally, the RFRA prohibits the government from substantially burdening a person’s religion unless the government demonstrates that the burden has a compelling governmental interest and is the least restrictive means of furthering that interest.

The U.S. Supreme Court held that the government failed to show that the contraceptive coverage mandate is the least restrictive means of advancing its interest in guaranteeing cost-free access to birth control. Thus, PPACA’s contraceptive mandate cannot be imposed on a closely held for-profit company, meaning such companies do not have to provide contraceptive coverage at zero-cost sharing. Importantly, the ruling is limited only to the contraceptive mandate, and should not be understood to mean that all insurance mandates (e.g., those for blood transfusions or vaccinations) necessarily fail if they conflict with an employer’s religious beliefs.

Finally, the ruling applies specifically to “closely held corporations,” a term generally defined by state corporate law, but which very generally includes companies whose stock is not publicly traded and whose ownership is controlled by members of a single family or a limited number of investors. Thus, the ruling does not appear to apply broadly to other for-profit companies, such as publicly traded corporations; rather, it applies only to those that are closely held by families and limited investors with sincere religious beliefs. It remains unclear whether closely held corporations will be required to certify their religious objections; future guidance will hopefully address that issue.

NFP Benefits Compliance will continue to monitor these developments, and will provide additional information in Compliance Corner, our biweekly benefits compliance newsletter.

Burwell v. Hobby Lobby

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