On March 25, 2014, the U.S. Supreme Court heard arguments in two related cases challenging the Affordable Care Act’s (ACA) contraceptive coverage mandate. In these cases, two privately held for-profit companies—Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corp.—argue that they should not be required to comply with the contraceptive coverage mandate because covering certain types of contraceptives under their health plans violates their religious beliefs.
The broad question the Supreme Court is expected to decide is whether a private, for-profit business organized as a corporation has the right to “exercise” religious beliefs and, if so, to what extent is it protected from government interference.
Required Contraceptive Coverage
The ACA requires non-grandfathered health plans to cover preventive health services without imposing cost-sharing requirements. This mandate generally became effective for plan years beginning on or after Sept. 23, 2010. The preventive care services that must be covered are described in a series of guidelines.Plans and issuers must also comply with additional preventive care guidelines for women, effective for plan years beginning on or after Aug. 1, 2012. These additional guidelines require non-grandfathered health plans to cover women’s preventive health services, including contraceptives, without charging a copayment, a deductible or coinsurance.
Under the guidelines, plans must cover all FDA-approved contraceptive methods, sterilization procedures and patient education and counseling for all women with reproductive capacity. The owners of Hobby Lobby Stores and Conestoga Wood Specialties object to providing health coverage for certain types of contraceptives that are inconsistent with their religious beliefs.
Employers with group health plans that violate the ACA’s contraceptive coverage mandate may be subject to an excise tax of $100 per individual per day of noncompliance.
Special Rules for Churches and Nonprofit Employers
Group health plans sponsored by churches, other houses of worship and their affiliated organizations are exempt from the requirement to cover contraceptive services.
The Department of Health and Human Services (HHS) also provided a temporary safe harbor, allowing nonprofit employers that do not provide contraceptive coverage to their employees because of religious beliefs to delay covering contraceptive services until the first plan year beginning on or after Jan. 1, 2014. This extension covers church-affiliated organizations that do not qualify for the exemption for churches, such as schools, hospitals, charities and universities.
For plan years beginning on or after Jan. 1, 2014, HHS created an accommodations approach for eligible nonprofit religious organizations that oppose providing coverage for some or all of the required contraceptive services based on religious objections. Under the accommodations, eligible organizations do not have to contract, arrange, pay or refer for any contraceptive coverage to which they object on religious grounds. However, separate payments for contraceptive services are provided to female employees by an independent third party, such as an insurance company or third-party administrator (TPA), directly and free of charge.
For-profit employers that object to providing contraceptive coverage on religious grounds are not eligible for the exemption, the delayed effective date or the accommodations approach that apply to churches and nonprofit religious organizations.
The Hobby Lobby Stores and Conestoga Wood Specialties cases reached the Supreme Court due to a split in decisions at the federal appeals courts level. In these lower court decisions:
– Three appeals courts (10th Circuit, D.C. Circuit and 7th Circuit) ruled that private, for-profit businesses may claim a religious exemption to the contraceptive coverage mandate.
– Two appeals courts (3rd Circuit and 6th Circuit) ruled that private, for-profit businesses cannot challenge the ACA’s contraceptive coverage mandate on religious grounds because they are not individuals and do not have their own right to exercise religion.
Impact of Ruling on Contraceptive Coverage Mandate
Hobby Lobby Stores and Conestoga Wood Specialties are seeking an exemption from the contraceptive coverage mandate based on their religious beliefs. They are not challenging the constitutionality of the mandate itself. Thus, even if the Supreme Court decides in the companies’ favor and a narrow exemption is provided for certain employers, the contraceptive coverage mandate will continue to apply to all other for-profit employers with group health plans.
The Supreme Court is expected to issue its ruling by the end of June 2014.