Saturday, July 5, 2014

What Does the Hobby Lobby Decision Mean for Religious Nonprofits?

ImagesThere has been an enormous amount of academic, other commentator, and media coverage of the Supreme Court's recent decision in Burwell v. Hobby Lobby Stores.  Included in the discussion has been much speculation about how the decision, involving a closely-held, family-owned, for-profit corporation, impacts ongoing litigation involving religious nonprofit corporations challenging whether the limited accommodation provided for them under the same rule (requiring  coverage of contraceptive services) is sufficient under the federal Religious Freedom Restoration Act.  Language in the majority opinion (slip op. p. 44) and in Justice Kennedy's concurring opinion (slip op. p. 3) seems to suggest although not hold that it is, but on Thursday the Court issued an injunction barring the federal government from requiring Wheaton College to use the form prescribed by the government to implement the accommodation, pending resolution of the College's appeal.  The order generated a strong dissent from Justice Sotomayor (joined by Justice Ginsburg and Justice Kagan), who concluded the College had not stated a viable claim under RFRA.  The dissent is unusual, especially given that the order on its face makes it clear that it "should not be construed as an expression of the Court's views on the merits."

My understanding of what is going on here is as follows.  First, many religious nonprofits (my employer, the University of Notre Dame, included) are not flatly exempted from the requirement to cover contraceptive services.  The existing flat exemption is limited to churches and, using terms familiar to nonprofit scholars and practiti0ners and indeed defined by reference to Internal Revenue Code § 6033, conventions or associations of churches, integrated auxiliaries of churches, and the exclusively religious activities of any religious order.  Other religious nonprofits instead are accommodated by being given the opportunity to complete the above-mentioned form stating their objection to providing some or all of the required coverage.  The effect of this form differs depending on whether the nonprofit otherwise would provide such coverage through a third-party insurer or through a third-party administrator because the nonprofit is self-insured.

The University of Notre Dame provides a good example of both of these situations and how they differ, particularly from the perspective of the nonprofit (and indeed Notre Dame is challenging the sufficiency of the accommodation in court).  These facts are drawn from the Seventh Circuit's recent opinion adverse to Notre Dame, although it should be noted that many similarly situated religious nonprofits have won similar cases in the lower federal courts (pre-Hobby Lobby).  For those students at Notre Dame who need health insurance, Notre Dame has a contract permitting students to purchase such insurance from an insurance company, Aetna.  The effect of Notre Dame completing the above form (EBSA Form 700) is to tell Aetna Notre Dame (and its students) will not pay for such coverage, which effectively requires Aetna to do so because under the Affordable Care Act health insurance companies have to provide such coverage.  So by completing the form, Notre Dame effectively shifts the cost of such coverage from itself (and its students) to Aetna.

For faculty and staff at Notre Dame who need health insurance, the situation is subtlely different.  Notre Dame is self-insured, which means it pays for all covered health insurance (subject to a modest employee up-front contribution and co-pays) although it hires a third-party to administer this coverage (Meritain).   The difference here is that Meritian is not a health insurer, so it is not obligated to provide coverage for contraceptive services even if Notre Dame refuses to do so absent an additional legal step.  The additional legal step providing by the current accommodation is that Notre Dame's completion of the EBSA Form 700 triggers a new requirement that Meritain provide this coverage, accompanied by a right for Meritain to obtain reimbursement of at least 110 percent of its costs of doing so from the federal government.  My understanding is that under Notre Dame's understanding of the theological concept of cooperating with evil, since the effect of Notre Dame completing the form is to trigger a new requirement that Meritain provide contraceptive coverage (albeit ultimatley paid for by the federal government), being required to complete the form is viewed by Notre Dame as a greater  burden on its exercise of religion that exists when the coverage is provided by a third-party health insurer (although I assume Notre Dame is continuing to argue that the accommodation in that situation is also not sufficient under RFRA).  As the Supreme Court majority noted in the Hobby Lobby decision (slip op. pp. 36-38), whether a particular act is sufficiently connected to the ultimate evil objected to make that act itself morally objectionable is itself a religious belief and so subject only to test of sincerity in the courts (which test I assume Notre Dame would have no trouble passing).

Bottom line, the Hobby Lobby decision does not clearly resolve the cases involving religious nopnrofits that are not flatly exempt from the contraceptives services coverage requirement but instead accommodated as described above.  Furthermore, those religious noprofits that provide health coverage through self-insurance as opposed to a through a third-party insurer have a subtely stronger claim  that the existing accommodation is not sufficient under RFRA.  Whether the lower courts, and ultimatley the Supreme Court, believe this difference is determinative remains to be seen.

Lloyd Mayer

http://lawprofessors.typepad.com/nonprofit/2014/07/what-does-the-hobby-lobby-decision-mean-for-religious-nonprofits.html

Federal – Legislative, In the News | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef01a3fd2bb598970b

Listed below are links to weblogs that reference What Does the Hobby Lobby Decision Mean for Religious Nonprofits?:

Comments

Post a comment