Affordable Care Act and Religious Accommodations
The First Amendment to the U.S. Constitution ensures various liberties, including religious freedom. Since its adoption, there have been numerous cases addressing the balance between religious freedom and legal responsibilities. Several recent “free exercise” cases have centered on the Affordable Care Act (aka Obamacare).
One of the religious accommodation cases prior to ACA, but relevant to the cases focusing on ACA and religious accommodation, is Employment Division, Department of Human Resources of Oregon v. Smith. In Smith, two people were fired for their use of peyote, a hallucinogenic drug, for sacramental purposes at a ceremony of their Native American Church. Prior to Smith:
- Exercise of religion involved not only belief and profession, but the performance of, or abstention from, physical acts.
- Freedom to act, unlike freedom to believe, is not absolute.
- To restrain conduct, the government needed to justify any substantial burden on religiously motivated conduct by a compelling state interest and by means narrowly tailored to achieve that interest.
On remand from the U.S. Supreme Court, the Oregon Supreme Court held sacramental peyote use violated, and was not excepted from, the state law prohibition, but concluded the prohibition was invalid under the Free Exercise Clause. Upon return to the U.S. Supreme Court, the Court rejected the “balancing test” whereby governmental actions that substantially burden a religious practice must be justified by a "compelling governmental interest." This test was developed in a context -- unemployment compensation eligibility rules -- that lent itself to individualized governmental assessment of the reasons for the relevant conduct. It is inapplicable to an across-the-board criminal prohibition on a particular form of conduct. The Court was concerned that holding for examining “compelling interest” would create an extraordinary right to ignore generally applicable laws and enmesh judges in an impermissible inquiry into the centrality of particular beliefs or practices to a faith. If prohibiting the exercise of religion is not the object of the law, but merely the incidental effect of a generally applicable and otherwise valid provision, there is no First Amendment violation.
As a consequence of Smith, in 1993, Congress passed the Religious Freedoms Restoration Act (RFRA). Congress found Smith basically provided no restraint on government regulation if the law was of general applicability, i.e. applied a “rational relationship test.” It changed the analysis back to a “balancing test” – if there is a burden on religious exercise, then the government must have a compelling interest and the means to achieve that interest narrowly tailored. RFRA affects religious exercise, but does not have any effect on issues concerning religious establishment. Regarding incorrect application or abuse of RFRA, Congress asserted the courts could identify false religious claims and apply a different standard regarding compelling interest when dealing with prison issues or the military.
Among the changes ACA enacted to providing health care coverage was a requirement to cover various preventive health care services without cost to the insured, including birth control. Perhaps obviously, many organizations affiliated with recognized religions, e.g. Catholic affiliated hospitals, have objected to that requirement. However, the religious objections have not been limited to religion affiliated entities; some closely-held, for-profit entities also have objected.
The owners of Hobby Lobby (and a related company, Mardel) and the owners of Conestoga Wood Specialties objected to the requirement of their insurance plans covering contraceptive products. The owners asserted that under RFRA their Christian religious beliefs would be burdened by the contraceptive mandate and their closely-held corporations should be exempt from the contraceptive mandate. This lead to Burwell v. Hobby Lobby Stores, Inc., et al which decided RFRA applies to regulations governing the activities of closely-held, for-profit corporations like Conestoga, Hobby Lobby and Mardel. Ultimately, the Court was concerned that to hold otherwise would put the business owners in the position of having to choose between the liability protections of the corporate form of doing business and being able to exercise their religious beliefs only if they chose to operate in as a sole proprietor or partnership.
Some key points to consider in the Hobby Lobby decision:
- Although Hobby Lobby is a “free exercise” case, the decision is based on applying the standards for review required by RFRA. Without RFRA, the case may have been decided differently, and probably would have given the Smith case.
- If a “free exercise” burden is asserted, a court likely will accept that.
- A court may be reluctant to inquire into the sincerity of a religious belief or whether the entity “holds” that belief, but this is not precluded.
- If a closely-held, for-profit entity can prevail, then it would seem a non-profit entity affiliated with and “controlled by” a recognized religious/church organization should be excepted from the contraceptive mandate, regardless of whether the affiliated/controlled non-profit entity can establish “church plan” status under IRC 414(e) or ERISA 3(33).
The government has issued several iterations of regulations (and FAQs) regarding the requirement for preventive services without cost sharing. These modifications were made, in part, in response to Hobby Lobby.
Under the current version of the regulations, to obtain the accommodation allowing an employer not to provide “contraceptive services,” the organization must be an “eligible organization” (EO) which involves meeting the following criteria:
- Opposed to providing coverage for some or all of any contraceptive items or services.
- Organized and operated as a nonprofit entity and holds itself out as a religious organization; or the organization is organized and operates as a closely-held, for-profit entity and the organization's highest governing body has adopted a resolution or similar action, under the organization's applicable rules of governance and consistent with state law, establishing that it objects to covering some or all of the contraceptive services on account of the owners' sincerely held religious beliefs.
EOs that have contracts with one or more third party administrators (TPAs) or insurers, must provide a copy of the self-certification to each TPA or insurer or a notice to the Department of Health and Human Services (HHS) that it is an EO and its religious objection to all or a subset of contraceptive services. Once the TPA or insurer receives the notice, it shall provide or arrange for contraceptive services at no cost sharing or extra premium to the eligible organization, plan or participant.
Various “non-profit religious organizations” (NRO) have objected to the notice requirements in the regulations on the basis the action of creating and providing the notice directly triggers coverage of contraceptive services and the public policy objectives of ACA could be accomplished by allowing the NRO to purchase insurance policy or implement a health care plan that does not include contraceptive services. Seven courts held the notice provision did not violate RFRA, but one court held otherwise. David A. Zubik, et al, v. Sylvia Burwell was a consolidation of seven cases that rejected challenges by NROs. Instead of ruling on the merits of the case, the U.S. Supreme Court vacated the seven earlier decisions and remanded the cases so the seven circuit courts of appeal could fashion a reasonable compromise between NROs and the federal government.
As it stands now, “free exercise” of religion as analyzed under RFRA restricts implementing a broad policy that is on its face general in application and not targeted at religion, but which may be implemented in a different way. What is “least restrictive” may be difficult to predict, but does not mean no impact. RFRA took away some of the leeway given to the government by Smith, but ultimately, the courts will still engage in balancing the compelling interests of government with the method of implementing the policy.
Should you have any questions or concerns regarding the Affordable Care Act, please contact Scott E. Hamner.
Disclaimer: The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.