July 1 (Bloomberg) -- Small companies across the U.S. will be forced to make hard decisions about whether to offer employees coverage for contraception following yesterday’s Supreme Court ruling.
The court decided in a 5-4 vote that two closely held companies, Hobby Lobby Stores Inc. and Conestoga Wood Specialties Corp., don’t have to comply with a requirement of the Patient Protection and Affordable Care Act that their health plans cover birth control without cost to their workers. Democrats and proponents for abortion rights and women’s health criticized the decision, which is likely to factor into this year’s congressional campaigns.
While the ruling appeared to damage the health law by raising the possibility that other medical services, even life- saving procedures such as blood transfusions, could be rejected on religious grounds, such a step is unlikely, benefits experts and lawyers said. Scaling back health coverage in such a way would hamstring an employer in labor markets, they said.
“This is a very narrow decision and the prospects of using it to justify cutting other health benefits is highly unlikely,” Steve Wojcik, vice president of policy at the National Business Group on Health, a Washington trade association for large employers, said in a phone interview. “This ruling was mainly, if not exclusively, about religious freedom, not health care.”
About 116.6 million Americans were employed in the private sector in May, according to data compiled by Bloomberg. It’s unknown how many are at closely held companies covered by the Supreme Court decision. The category includes anything from people who are self-employed to huge corporations such as Cargill Inc., which has about 143,000 workers and recorded $137 billion in revenue in 2014.
Forty-nine for-profit companies have sued the Obama administration over the birth-control requirement, according to the Becket Fund for Religious Liberty, which represented Hobby Lobby and other firms. Forty won injunctions, sparing them from complying with the requirement while the issue wound its way through the courts, according to the fund.
“Clearly some companies are going to go down this road with contraception,” Paul Fronstin, director of health research and education at the Employee Benefit Research Institute in Washington, said in a phone interview. “They’re doing it because of their beliefs and maybe helping to attract like- minded people.”
The largest closely held companies in the country, such as Cargill and Mars Inc., aren’t among those suing the government. Spokesmen for Cargill and Mars didn’t immediately return phone messages about the ruling. A spokeswoman for the U.S. Department of Health and Human Services, Erin Shields Britt, referred questions about the ruling to the White House.
H-E-B Grocery Company LP, a chain of grocery stores in Texas and Mexico that had $19.4 billion in sales in 2013, won’t change its health benefits in response to the ruling, Dya Campos, a company spokeswoman, said in an e-mail. The company’s vice chairman, Howard E. Butts Jr., a son of the company’s founder, is a devout Christian. H-E-B hasn’t sued the government over the birth-control requirement.
Michael Roth, a spokesman for Anschutz Entertainment, controlled by billionaire Philip Anschutz of Denver, whose philanthropy supports Christian causes, declined to comment on the ruling. The company has “never before discussed details about our insurance offerings and plans relating to employee benefits,” he said in an e-mail. Anschutz also isn’t among companies that have sued the government.
The National Federation of Independent Business, a Washington-based group representing small business, declined to comment about the court’s decision.
The Supreme Court’s decision troubled experts in corporate law and advocates for expanded health coverage. The ruling isn’t consistent with a long-standing principle that corporations are separate entities from their owners, said Aaron Katz, a partner at Ropes & Gray in Boston. And at closely held companies, the decision opened the door to the possibility that some health benefits besides contraception would be covered at the whim of workers’ bosses, said Sara Rosenbaum, a professor of health policy at George Washington University,
“Why couldn’t a company’s owner say they’re morally opposed to treating patients with HIV?” Rosenbaum said. “Morally opposed to blood transfusions? To immunizations?”
More lawsuits may follow if other closely held companies use the court’s decision to challenge federal requirements under the law known as Obamacare or other laws, such as the Civil Rights Act. Publicly traded companies, which have diverse shareholders and can’t plausibly claim to adopt the personal views of their owners, aren’t affected, the court said.
The suit was brought by Hobby Lobby, a nationwide chain of 600 craft stores with at least 15,000 full-time employees based in Oklahoma City, and Conestoga Wood Specialties Corp., an East Earl, Pennsylvania-based company owned by a Mennonite family. They sued the Obama administration over a requirement under the Affordable Care Act that company health plans cover all U.S.- approved contraceptive drugs and devices without requiring cost- sharing by workers.
While both companies’ employee health plans cover most contraceptives, they exclude two drugs the companies’ owners believe cause abortions, Teva Pharmaceutical Industries Ltd.’s Plan B One-Step and Actavis Plc’s Ella, and some intrauterine devices.
Plan B is available over-the-counter to girls as young as 15, meaning workers who can afford the drug’s retail price -- the pill costs $49.99 at Drugstore.com -- needn’t seek a prescription or use insurance coverage. Ella requires a prescription.
Justice Samuel Alito, in an opinion for the majority of the court, said the government’s requirements to cover birth control violate a 1993 law, the Religious Freedom Restoration Act. The court ruled that the law applies to corporations as well as individual citizens.
“This decision concerns only the contraceptive mandate and should not be understood to hold that all insurance-coverage mandates, e.g., for vaccinations or blood transfusions, must necessarily fall if they conflict with an employer’s religious beliefs,” Alito wrote. “Nor does it provide a shield for employers who might cloak illegal discrimination as a religious practice.”
Paul Clement, a lawyer for Hobby Lobby and Conestoga, dismissed the idea that a “parade of horribles” could result from a ruling for the companies. U.S. courts can “separate the sheep from the goats,” he told the court in March, if companies use the decision to justify far-reaching challenges to Social Security contributions or the minimum wage.
The Obama administration made an accommodation to the birth-control requirement for churches and organizations closely tied to them, such as Catholic hospitals and colleges. Those groups don’t have to pay for birth-control directly; the benefit to their workers instead is provided by companies that administer their insurance claims. Alito suggested the same accommodation could be provided to for-profit companies with religious objections.
“There are lots of different ways for courts to get contraceptives to people without forcing religious objectors to pay for it themselves,” Mark Rienzi, a lawyer for the Becket Fund, said in a conference call after the ruling.
Amy Gordon, a partner at McDermott Will & Emery who works on health and welfare benefits for large and mid-size employers, said she doubted that many companies would reduce coverage of health benefits in response to the ruling.
“Even people who are 100 percent behind the Affordable Care Act and think it’s a great thing felt that requiring birth control mandates of religious organizations, whether for-profit or not-for-profit and owned by individuals with religious opinions, may have been a step too far,” she said in a telephone interview.
Fifty-one religious nonprofits have sued the Obama administration over the accommodation it made for them, arguing they shouldn’t have to file a notice with the government about their opposition to covering birth control. The notice authorizes their insurance carriers to cover birth control without payment from the nonprofits. Twenty-seven of the nonprofits have won injunctions, according to the Becket Fund.
Justice Ruth Bader Ginsburg, who wrote a dissenting opinion, questioned how far such an accommodation may have to extend.
“Where is the stopping point to the ‘let the government pay’ alternative?” she wrote. “Suppose an employer’s sincerely held religious belief is offended by health coverage of vaccines, or paying the minimum wage?”
The exemption Alito laid out for birth-control under the religious freedom law, Ginsburg wrote, may extend to businesses controlled by Jehovah’s Witnesses who object to blood transfusions; Scientologists, who object to antidepressants; or even Muslims, Jews and Hindus who oppose medications derived from pigs such as anesthesia or pills coated with gelatin.
Before 2012, U.S. companies weren’t required to cover specific medical care and yet no business denied coverage of the procedures Ginsburg named, Rienzi said.
“It’s a fake case that is not likely to happen,” he said. “To the extent it happened, though, the test is going to be the same: Is it a substantial burden on someone’s religion, and does the government have a compelling interest in forcing someone to provide it?”
--With assistance from Greg Stohr and Carlos Torres in Washington, Esme E. Deprez in New York and Leslie Patton in Chicago.