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SCOTUS: Obamacare Contraceptive Rule Failed to Accommodate Corporate Owner’s Religious Rights

Posted in Judicial Review & Remedies, Regulatory Process

The United States Supreme Court (SCOTUS) today required the Obama Administration to implement Obamacare (Patient Protection and Affordable Care Act or PPACA) and it’s regulations to permit closely held corporations to decline to purchase preventative or contraceptive health care coverage that would violate their owners’ religious beliefs in Burwell v. Hobby Lobby.  SCOTUS found that the Administration failed to show that the Department of Health and Human Services (HHS) regulations were the least restrictive means for advancing the government’s interest in providing health care and therefore were inconsistent with the Religious Freedom Restoration Act (RFRA).  SCOTUS did not reach any grand constitutional questions of whether Obamacare violated the United States Constitution First Amendment’s protection of freedom of religion, but answered only the technical question of the regulation’s consistency with a statute limiting the government’s reach.  At bottom, the HHS implementing regulations failed to comport with the RFRA, restating a standard lesson that any regulations must be promulgated in accord with all such statutes of general applicability.

Background:  SCOTUS granted certiorari to review a complicated and growing intercircuit conflict between multiple United States Courts of Appeal, here represented by two variants:

  • Tenth Circuit held in Hobby Lobby v. Sebelius, (now Burwell) holding that a for-profit corporation has Article III standing as “persons” under the RFRA (and not deciding whether the individual owners had standing), and that the contraceptive-coverage requirement constitutes a substantial burden on plaintiff’s exercise of religion that was invalid as applied because the requirements were not the least restrictive means of advancing a compelling governmental interest.
  • Third Circuit held in Conestoga Wood Specialties v. US Dept. OF HHS, holding on the threshold issue that a for-profit, secular corporation cannot engage in religious exercise under RFRA and the Free Exercise Clause of the First Amendment.

The Obamacare statute provided that employers must provide insurance coverage for services specified by the Department of Health and Human Services (HHS) in a complicated administrative process.  The HHS implementing regulations included contraceptive coverage and provided only a very limited exception for religious organizations (not for-profits) that depended on acquiring insurance from a provider that would cover contraceptive services from the larger insurance pool rather than charge the costs of contraceptive services as part of the excepted policy holder’s premium.

Several other circuits have resolved variations of these issues.  More courts of appeal have resolved issues raised by non-profit and religiously affiliated organizations – the “second wave” that is now approaching SCOTUS.

SCOTUS QuestionBurwell, represented by the Department of Justice (DOJ) Solicitor General, loaded the question as whether:

The [RFRA] provides that the government “shall not substantially burden a person’s exercise of religion” unless that burden is the least restrictive means to further a compelling governmental interest.  ….  The question presented is whether RFRA allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners.

The Solicitor General here arrogated statutory contraceptive coverage to a “right” equivalent to the RFRA’s implementation of the First Amendment, and limitation on government, which confuses the nature of RFRA’s minimum standards for governmental action.  Conestoga presented the question of whether the religious owners of a family business, or their closely-held, for-profit corporation, have free exercise rights that are violated by the application of the contraceptive-coverage Mandate of the ACA.

SCOTUS AnswerHobby Lobby answers a technical statutory and regulatory implementation issue – not a broad First Amendment claim as some in the general press have asserted.  Courts will decide cases normally at the lowest level of the legal hierarchy at which the case can be resolved – regulatory first, then statutory, and finally constitutional only if the court must decide that issue.  Hobby Lobby resolves the issue as one of regulatory failure to comply with statute (in this case, the RFRA).

In Hobby Lobby, SCOTUS found that Congress showed no intention of departing from the traditional fiction included in the Dictionary Act that corporations are persons and, therefore, these closely held corporations can exercise rights under the RFRA.  The closely-held corporations in these cases are each owned and controlled by a family and their sincerity has never been disputed – these are not publicly traded corporations of diverse and shifting ownership.  The RFRA, SCOTUS held, requires the Administration to provide to closely-held corporation objectors the same accommodation that has been provided to nonprofit organization objectors.

The narrow scope is clear from Justice Alito’s opening:

We must decide in these cases whether the Religious Freedom Restoration Act of 1993 (RFRA), … permits the United States Department of Health and Human Services (HHS) to demand that three closely held corporations provide health-insurance coverage for methods of contraception that violate the sincerely held religious beliefs of the companies’ owners.  We hold that the regulations that impose this obligation violate RFRA, which prohibits the Federal Government from taking any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest.

At bottom, SCOTUS affirmed the judgment of the Tenth Circuit, and reversed and remanded the judgment of the Third Circuit for further proceedings consistent with SCOTUS’ opinion.

SCOTUS does not address whether the requirement that non-profits certify their objection is consistent with the RFRA, but seems to assume that certification is acceptable.  The Administration may amend the regulations to clarify this certification.  The Administration may also pay for the coverage itself – assuming that it has appropriated funds for that purpose.  These are issues for the Administration, not SCOTUS, but any new Administration regulation will be subject to further litigation.

The ruling reiterates a basic tenet of structural administrative law:  an agency is bound by its programmatic statute and must adopt regulations consistent with all applicable statutes.  Here, HHS failed to sufficiently consider and respond to the issue of religious freedom and the application of the RFRA, and Hobby Lobby is an application of a general rule that agencies must comply with all applicable statutes.  HHS was well aware of the issue at the time it promulgated the rule and simply failed to adequately respond and the result is no different than if HHS had failed to comply with the Administrative Procedure Act (APA) or any other statute of more general applicability.