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Healthcare crossroads: What's an employer to do?

Summary: Employers around the country are at a healthcare crossroads, as more Obamacare employer mandates come on line and court challenges to parts of the law ...

Employers around the country are at a healthcare crossroads, as more Obamacare employer mandates come on line and court challenges to parts of the law heat up. In the past few months, two federal appellate courts have issued conflicting rulings with the potential to gut the law and eliminate the requirement that employers pay a penalty tax if they do not provide certain levels of health coverage for employees. And, in a more limited ruling, the U.S. Supreme Court held in its Hobby Lobby decision that for-profit corporations with religious objections could not be forced by the law to provide healthcare coverage that included certain forms of contraception.

No one knows how the conflict between the federal appellate courts will be resolved, but the Supreme Court's ruling in Hobby Lobby is now the law of the land, and employers should understand the resulting consequences for their health plans.

The Supreme Court ruled in Hobby Lobby that excluding four specific types of contraceptive coverages from an employer's health plan was an exercise of religion. Under a law known as the Religious Freedom Restoration Act (the RFRA), the federal government could not "substantially burden" that exercise unless it showed that it had a compelling interest in doing so, and that the infringement was the least restrictive means of furthering the government's compelling interest. The Court found that the plaintiffs, a closely held, for-profit corporation, were substantially burdened because if they did not offer the contraceptive coverage required under Obamacare regulations, the companies would be subject to millions of dollars in fines. The Court then assumed (but did not hold) that the government had a compelling interest in requiring that health coverage included contraception, but balked at the "least restrictive" part of the test. The Court pointed out that Obamacare exempted thousands of smaller or religious non-profit employers from the mandate, and that the government could even provide contraceptive coverage itself if so inclined.

Since Hobby Lobby, all sorts of political spin has been placed on the ruling, and everyone from Wiccans to the National Organization for Women have jumped into the fray. Even Justice Ginsburg, who wrote the primary dissent in the ruling, has been quoted about the consequences of the decision, noting that healthcare coverages in addition to contraception were susceptible to the same attack. These included "blood transfusions (Jehovah's Witnesses), antidepressants (Scientologists), medications derived from pigs, including anesthesia, intravenous fluids, and pills coated with gelatin (certain Muslims, Jews and Hindus), and vaccinations."



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Justice Ginsberg may be correct that the future will see more religion-based attacks on one-off aspects of Obamacare, but the Hobby Lobby decision was more limited than many assume.

First, it is clear that only those corporations whose owners have sincere religious beliefs can challenge Obamacare or other Federal laws under the RFRA. In Hobby Lobby, the plaintiff corporations were owned by families that were clearly committed to the religious principles they sought to protect. Not only did the corporations have track records establishing their commitments, but they had corporate charters embodying their religious beliefs. While some closely-held for profit corporations will be able to meet this test, it is virtually impossible for diverse, publicly held corporations to do so. And secular closely-held for profits will also find the RFRA approach unavailable.

Second, broad-based attacks on employment discrimination laws based on the RFRA are unlikely. The majority opinion in Hobby Lobby noted, "The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal." Commentators (and some organizations) have suggested that religious objections to homosexuality could support employment discrimination based on sexual orientation. However, current federal discrimination laws do not prohibit discrimination based on sexual orientation. And in the realm of Obamacare, the law does not require coverage of same or opposite sex spouses in the first place. That said, the Obama administration recently imposed sexual orientation non-discrimination requirements on Federal contractors, and these may be subject to challenge under the RFRA, but in view of the U.S. Supreme Court's earlier landmark ruling in U.S. v. Windsor striking down portions of the Defense of Marriage Act, these challenges face an uphill battle.

Finally, the RFRA does not affect state laws, many of which also bar employment discrimination. Nor does it affect state insurance laws, which mandate many of the coverages provided under insured rather than self-insured health plans.

The bottom line is that Hobby Lobby will likely be extended so that for-profit, closely held corporations will be able to avoid all contraceptive coverages that violate the sincere religious beliefs of their owners. Indeed, even before the Hobby Lobby decision was issued, the 7th and 10th Circuits had refused to overturn preliminary injunctions barring the government from enforcing Obamacare contraceptive requirements against several corporations expressing the sincere Catholic views of their owners who opposed all forms of artificial birth control. And, in certain cases similar to those raised by Justice Ginsburg, there may be room for further limitations on Obamacare mandates. But even those attacks are aimed only at small parts of Obamacare, and do not threaten the overall statute. Moreover, it may be that plaintiffs will be unable to show that the government has less restrictive options to enforce its compelling interests in these cases.

In the end, the Hobby Lobby case will likely be limited in application and have little impact on Obamacare compliance by most employers. But don't expect this outcome to tone down the rhetoric and dire predictions that will likely color the political landscape as campaigns wind down to elections this fall.

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Publication:Inside Counsel
Date:Oct 1, 2014
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