In a 5-4 decision, the United States Supreme Court ruled on June 30, 2014 that closely-held, for-profit corporations, may be exempt from the Affordable Care Act’s requirement that employer-sponsored health plans cover contraceptives, if complying with the mandate violates the sincerely-held religious beliefs of the corporation’s owners.

The Contraceptive Mandate

The Affordable Care Act (“ACA”) requires that non-grandfathered employer-sponsored health plans cover certain preventive services for women, including contraceptives, at no cost to the plan participant. The law requires that plans cover all FDA-approved contraceptive methods and sterilization procedures, along with patient education and counseling for all women with reproductive capacity.

Religious Objections

Many employers objected to the contraceptive mandate due to a religion-based opposition to contraception. As a result of these objections, the Department of Health and Human Services (HHS) issued guidance that provided for two exceptions to the contraceptive mandate: an exemption for religious employers, and an “accommodation” for eligible organizations that oppose the contraceptive mandate for religious reasons.

To qualify for the “eligible organizations” accommodation, the organization must certify that it:

  • objects on religious grounds to providing coverage of contraceptive services,
  • is organized as a non-profit entity, and
  • holds itself out as a religious organization.

When the insurance company or third-party administrator receives notice that an organization is seeking this accommodation, the carrier or administrator will exclude contraceptive coverage from the employer-sponsored plan and must provide separate coverage for the excluded contraceptive coverage—without charging the employer or the plan participant for the benefits.

Hobby Lobby/Conestoga Wood Cases

In the cases decided on June 30, 2014 – Burwell v. Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corporation v. Burwell – the companies are both family-owned, closely-held corporations that were not religious organizations or non-profit entities. The owners, however, objected to covering certain contraceptive services on religious grounds. The Court held that these companies cannot be forced to provide free contraceptive services as part of their employer-sponsored health coverage if they assert a religious belief that reflects “an honest conviction.”

This decision was based on the Religious Freedom Restoration Act of 1993 (the RFRA). The RFRA forbids Congress from passing any law that places a substantial burden on an individual’s free exercise of religion, unless the law serves a compelling government interest. Even if the burden is justified by a government interest, the law must serve that interest through the least restrictive means possible.

The Court found that by not extending the accommodation to all religious objectors to the contraceptive mandate, HHS failed to use the least restrictive means possible to achieve its objective. The Court suggested that the same accommodation system that is available to religiously affiliated non-profits should be available for all closely held corporations, whether or not the corporation is religiously-affiliated, and whether it is organized as a non-profit or for-profit corporation.

What’s Next

We expect guidance from HHS on how this ruling will be applied to for-profit employers who have a religious objection to the contraceptive mandate. The procedures are expected to be similar to the current accommodation process for eligible organizations.

But, what does this ruling mean for other benefits and coverage provided by both religious and other employers? Can employers assert a religious objection to providing other types of coverage? How will this ruling affect small group coverage and carriers that currently provide contraceptive coverage to everyone? As Justice Ginsburg indicated in her dissenting opinion, the ultimate result and breadth of the opinion cannot be known.

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This article refers to regulations issued through June 1, 2014.  It is intended to be a summary of important issues and should not be considered legal or tax advice.

© Bell Associates and “Ask the Professionals,” 2014. Unauthorized use and/or duplication of this material without express and written permission from Bell Associates is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Bell Associates and “Ask the Professionals” with appropriate and specific direction to the original content.