Wheaton College Order Changes Landscape of Contraceptive Mandate for Religious Nonprofit Organizations

by Nexsen Pruet, PLLC
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Last Thursday, while many of us were preparing for the long weekend ahead, the U.S. Supreme Court was hard at work, issuing an order that may have far-reaching implications for religious nonprofit organizations. 

Background

Contraceptive Mandate

The Affordable Care Act (specifically, Section 2713 of the Public Health Service Act) requires all non-grandfathered health plans to cover contraceptive services for women without cost sharing.  However, interim regulations under the act, which is also known as the ACA, granted the government authority to devise a system whereby certain religious nonprofit employers could receive an exemption from this mandate. 

After publishing proposed regulations and receiving over 400,000 comments from concerned parties, final regulations were published June 28, 2013.  The regulations sought to both ensure access to contraceptive coverage for women and protect nonprofit organizations with religious objections from having to contract, arrange, pay, or refer to such coverage.

Under the final rules, a religious nonprofit employer could file a religious objection with its health insurance issuer or third-party administrator using EBSA Form 700. Once filed, the issuer or administrator would expressly exclude contraceptive coverage from the organization’s health plan, and be required to provide direct payment for contraceptive services at no cost to the plan or its members.  These regulations appeared to be win-win, giving employees access to contraceptives at no charge and offering nonprofit employers with bona fide religious objections the ability to avoid involvement in providing contraceptives.

Hobby Lobby Decision

Just over a year later, the Supreme Court significantly limited the scope of the contraceptive mandate in Burwell v. Hobby Lobby.  It found that requiring closely held, for-profit corporations to pay for insurance coverage for contraception under the ACA violated the Religious Freedom Restoration Act.  The court was careful to limit the decision both to the contraceptive mandate and to closely held corporations (while the decision does not explicitly define the term, the Internal Revenue Service defines it as one where more than 50 percent of the stock is owned by five or fewer individuals).  In other words, other insurance coverage mandates will not necessarily fail solely because they conflict with an employer’s religious beliefs.

Under the court’s analysis, because the contraceptive mandate imposed a substantial burden on the companies’ religious liberty, it had to be both (1) in furtherance of a compelling governmental interest, and (2) the least restrictive means of furthering that interest.  The court acknowledged that access to contraceptives could be a compelling governmental interest, but found that there were less restrictive ways of furthering that interest, other than requiring that employers provide insurance coverage for contraceptives without exception.

Interestingly, in finding for the plaintiffs, the Supreme Court seemed to look favorably on the religious employer exemption regulations and the use of EBSA Form 700, which it described as an “accommodation for nonprofit organizations.”  So the court essentially acknowledged the regulations allowing employers to file EBSA Form 700 to claim a religious objection to the contraceptive mandate as a less restrictive means of implementing the contraceptive mandate, but not necessarily the least restrictive means.

Wheaton College Order

That last point is important, because only three days later, in Wheaton College v, Burwell, the court issued an order prohibiting the use of the EBSA Form 700 and calling into question the validity of the accommodation regulations for religious nonprofits.  In Wheaton College, the plaintiff, a religious nonprofit organization, challenged the accommodation regulations and the requirement that it “execut[e] the government’s Form to designate, obligate, and incentivize the third-party administrator to provide religiously objectionable drugs on its behalf.” 

While the court’s order does not ultimately determine the validity of the accommodation regulations, it does suggest that there may be a less restrictive alternative to them.  If the regulations are not the least restrictive means of implementing the contraceptive mandate, then under the same analysis used in Hobby Lobby, the regulations will be found invalid.

Although the issue remains undecided, the order did provide some clarity by making it far easier for religious nonprofit organizations to avoid the application of the contraceptive mandate.  Under the order, instead of filing the form with its insurance issuer or third party administrator, nonprofit religious organizations can avoid the contraceptive mandate by simply notifying the Department of Health and Human Services that they are  religious organizations with religious objections to providing contraceptive coverage. 

Conclusion

As the immediate impact of the Wheaton College order unfolds, there are important steps that religious organizations should consider immediately with respect to the insurance coverage provided to their employees. 

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IRS CIRCULAR 230 NOTICE: Any federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending any transaction or matter addressed in this communication.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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