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Hobby Lobby ruling bodes well for nonprofits also challenging law

Hobby Lobby ruling bodes well for nonprofits also challenging law

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In a blow to the Obama administration that may hint at how a similar challenge will play out next year, the U.S. Supreme Court held Monday that the Affordable Care Act’s requirement that employer-funded health care plans cover certain contraceptives at no cost to employees violates the rights of religious owners of closely held private companies.

The decision in Burwell v. Hobby Lobby Stores, Inc. (formerly Sebelius v. Hobby Lobby Stores Inc. consolidated with Conestoga Wood Specialties Corp. v. Sebelius), No. 13-354, provides a limited, common-sense statutory interpretation of the law, according to lawyers for the companies challenging the mandate and other employer-side attorneys.

“The court confirms that Americans don’t give up their religious freedoms when they open a family business,” said Hobby Lobby’s attorney Mark Rienzi, senior counsel at The Becket Fund for Religious Liberty in Washington.

“What the court held is really very simple,” said Andy Lester, founding member of Lester, Loving & Davies in Edmond, Okla. “A corporation is protected just as much as an individual is protected under [federal law].”

But legal advocates for reproductive rights groups said the decision requires women to unfairly bear the burden of religious beliefs they may not share, and creates a slippery slope for future challenges that object not only to certain forms of contraception but also to other types of medical treatment.

“The decision is a bitter pill for women to swallow,” said Marcia Greenberger, co-president of the National Women’s Law Center in Washington. “These closely-held companies will not only have a license to harm their female employees in the name of the company’s religion [but also to] ignore [women’s] religion, their moral beliefs and other practical considerations.”

The ruling could bode well for a similar challenge brought by nonprofit religious groups, which could land before the court as early as next term.

More challenges ahead

The ruling will likely have an effect beyond closely-held private companies, although lawyers disagree as to how broad that effect will be.

“I do believe that the less closely-held a company is, the more difficult it will be for the company to assert a religious objection,” Lester said. “Not impossible, but certainly more difficult.”

The ruling does not apply to publically-held or large private corporations, which are still required to comply with the law. Religious organizations such as churches are exempt from the mandate altogether.

Currently, nonprofit groups such as religiously-affiliated schools and hospitals are required to either comply with the law or submit a form to the Department of Health and Human Services that allows full no-cost coverage to be provided through third-party administrators.

Some nonprofit groups have challenged this opt-out provision, arguing that it violates their rights under RRFA. One group, Little Sisters of the Poor, an order of Catholic nuns that runs an elderly care facility in Denver, sought preliminary injunctive relief from the requirement that it sign the form authorizing third-party coverage.

In an unusual move, the Supreme Court granted relief in February in a one-page, unsigned order while the 10th Circuit considers the merits of the challenge. But the order came with a twist: It required the nuns to notify the Department of Health and Human Services of their objection to the law.

That ruling was cited by the justices in Hobby Lobby as evidence that the government’s requirements were far from the least restrictive way of furthering its interest in providing health care.

The same rationale could be applied in the nonprofits’ challenges, its lawyers argue.

“The court talks about the accommodation for nonprofits in a way that sends a strong message that [the opt-out form] is likely to be found to be impermissible and invalid under RFRA,” said Rienzi, who also represents the Little Sisters of the Poor.

Greenberger disagreed.

“It is completely inappropriate and unacceptable for women to be expected to look to some special [rule] to accommodate what is a core and basic health care need,” she said.

Peter Marathas Jr., a partner in the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center in Proskauer Rose LLP’s Boston office, said that in future cases, the government could have a tough time convincing courts on the issue that the Supreme Court skipped over entirely: Whether the government’s interest in requiring smaller, religious employers to provide no-cost contraception is compelling.

“In my opinion, that is frankly the weakest part of” the government’s argument, Marathas said, noting that small for-profit employers and nonprofit groups make up a tiny portion of the nation’s employer base.


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