Potential Supreme Court tie on Obamacare contraceptives could snarl health insurers

March 14, 2016

By Michael Blissenbach, Regulatory Intelligence

(Thomson Reuters Regulatory Intelligence) – The U.S. Supreme Court on March 23 will hear arguments in a major Obamacare case over insurance and contraception, with a range of potential outcomes that became more complicated with the death of Justice Antonin Scalia.

The court will consider the case of Zubik v. Burwell, a consolidated group of seven cases brought by religious nonprofit organizations challenging the so-called contraceptive mandate under the Affordable Care Act (ACA). The mandate is a regulation issued by the U.S. Health and Human Services Department that requires health insurance plans to provide coverage of all FDA-approved contraceptive drugs and devices for women at no cost to the women.

The question facing the court is whether the federal government can compel religious nonprofits that are opposed to contraception to facilitate access to contraception via the contraceptive mandate.

If the government prevails, the religious nonprofits will be forced to ensure access to contraception coverage for their female employees. If the religious nonprofits prevail, then they will not be forced to cooperate in providing contraceptive coverage for their employees. The female employees would still likely be able to get coverage through an alternative means instituted by the government, but they may have to take a more active role in obtaining it than they would under the contraceptive mandate.

If there is a tie vote among the remaining eight justices on the court, the outcome gets more complicated, and could include a patchwork of regional variations across the United States.

Under the contraceptive mandate some religious employers, such as churches, are exempt. There is also an “accommodation” available to religious non-profit groups such as religious social service agencies and “closely-held” businesses that have religious objections to contraception. The “accommodation” requires the religious nonprofit or closely-held business to file a notice with their health insurance issuer or with the Secretary of the Department of Human Services that, among other information, must include the “plan name and type … and the name and contact information for any of the plan’s third party administrators and health insurance issuers.”

Once the notice is filed, the responsibility for providing the contraceptive coverage falls on the health insurance issuer for the religious nonprofit or closely-held business, and the issuer must provide the coverage separately without seeking reimbursement from the employer and without passing the cost onto the covered women. If the religious nonprofit or closely-held business fails to send the notification, it is still on the hook for providing contraceptive coverage, and if it refuses to do so, it may face a daily federal penalty of $100 for each uncovered employee.

This “accommodation” is what is challenged by the religious nonprofits who are the plaintiffs in the cases. One of the plaintiffs is the Little Sisters of the Poor, a Catholic order of nuns that operates nursing homes for the elderly. The Little Sisters of the Poor argue in their brief that the mandate substantially burdens their ability to operate in accordance with Catholic teaching on human sexuality, which states that provision and usage of any form of contraception is gravely immoral.

Such a substantial burden of the free exercise of religion is barred by the federal Religious Freedom Restoration Act (RFRA) unless the government can demonstrate a “compelling interest” and has used the “least restrictive means” to accomplish that interest. The Little Sisters argue that the government wants them “to forfeit their ability to provide health plans to their employees … in a manner consistent with their religious beliefs, and instead supply the paperwork and the plan infrastructure that the government needs to get contraceptive coverage to their employees through its preferred mechanism for achieving that goal.”

That and the steep fines they would face for refusing constitute a substantial burden under RFRA, the Little Sisters argue. The government has less restrictive means available to provide contraceptives to women without involving religious nonprofits in that effort, the Little Sisters contend, so the “accommodation” would violate RFRA.

The federal government insists in its brief that the accommodation does not substantially burden the exercise of religion. “An adherent may not use a religious objection to dictate the government’s conduct of its internal affairs,” it says.

The government also argues that the less-restrictive alternatives proposed by the Little Sisters of the Poor and the other plaintiffs are unfeasible. “The legal authority to implement those alternatives does not now exist,” and would place the burden on women to take the initiative to sign up for those alternative programs, it says.

Such a burden placed on women, the government argues, would “thwart the basic purposes of the Women’s Health Amendment [to the ACA], which was enacted to ensure that women receive equal health coverage and to remove barriers to the use of preventive services.”

The outcome of this case is unclear, particularly after the vacancy left by the conservative Scalia’s death in February increased the prospects of tie votes on cases that divide along ideological lines. Although Scalia once wrote the court’s majority opinion in Employment Division v. Smith, rejecting a religious freedom argument for who smoke peyote for spiritual reasons, he had more recently become a reliable vote on the court for supporters of religious liberty.

For example, in Burwell v. Hobby Lobby Stores, Inc., a 2014 case similar to Zubik v. Burwell, the court held 5-4 that the contraceptive mandate as applied to closely-held corporations violated RFRA, with Scalia joining the majority.

If the remaining eight justices on the court vote in the Zubik case the same way they voted in Hobby Lobby, the result would be a 4-4 split. In the case of a tie vote, the court has two options. It can either refrain from issuing a decision and reargue the case next term, after Scalia’s successor has presumably joined the court, or it can issue a decision. If it issues a decision, the result is that the judgment of the particular circuit Court of Appeals is affirmed, but the lower courts in other circuits are not bound to follow that decision.

Since different federal appeals courts have reached different conclusions regarding whether the “accommodation” violates RFRA, there would be different standards applying to insurance plans for religious nonprofits and closely-held businesses that object to provision of contraception on religious grounds.

In the 8th Circuit, which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota, the appeals court held that the accommodation violated RFRA and forbid the government from enforcing it in a decision issued last fall. All the other federal appeals courts that have ruled on the topic have upheld the accommodation, on the grounds that it does not violate RFRA. If the Supreme Court issues a 4-4 decision in Zubik, the result would be a federal regulation that is invalid in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota and valid in every other state and federal territory (unless another Court of Appeals or lower federal court rules the accommodation is invalid).

If, however, the Court rules 5-3, 6-2, 7-1 or unanimously in favor of the government or the religious nonprofits, then a decision binding on the lower courts would still be issued by the court, and a situation where the accommodation is valid or invalid depending on the area of the country would be averted.

Zubik v. Burwell, thus, is a case that raises interesting questions about the proper balance between governmental authority and religious freedom. It holds important consequences for religious nonprofits, for women seeking contraceptive coverage, and for health insurance companies. All will be closely watching the arguments and the ultimate ruling.

 (This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on March 9. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters)

(Michael Blissenbach is a compliance attorney and writer for Thomson Reuters Regulatory Intelligence.)

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