US Supreme Court Holds That Closely Held For-Profit Corporations Can Avoid ACA Contraception Mandate

    View Author June 2014

    The Supreme Court has issued a 5-4 decision in which it found that three closely held for-profit corporations were not required to comply with an Affordable Care Act (ACA) requirement that their group health plans provide certain types of contraceptive coverage without cost sharing.

    In reaching their decision in Burwell v. Hobby LobbyStores, Inc. et al., the justices ruled that the Religious Freedom Restoration Act of 1993 (RFRA) applies to “closely held” corporations. Thus, closely held corporations are entitled to certain religious freedom protections based on their sincere religious beliefs. In the cases decided by the Court, the corporations were permitted to exclude certain types of contraceptive coverage from the health insurance plan coverage offered to their employees.

    The scope of this decision in relation to potential exemptions to the ACA is not yet clear. Four justices joined the majority option, while Justice Kennedy filed a concurring opinion that might be viewed as more limited in scope. Now that the Court has recognized that the RFRA applies to closely held corporations, it is expected that other businesses may present additional challenges to other medical provisions under the ACA, based on arguments that they also are at odds with sincere religious beliefs of the business.

    For employers, another point of interest is that the opinion makes no attempt to define the scope and meaning of the term “closely held” corporation. In addition, the Court’s opinion is such that it appears that its holding would be extended to other types of legal entities, such as partnerships and other types of business entities. Likewise, it is unclear how to determine when a “sincere religious belief” is held by a closely held corporation (or perhaps other business organization).

    In that regard, it may be significant that the majority opinion stated that “the cases before us are closely held corporations, owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs”. Meanwhile, the dissent warned that although the decision was limited to closely held corporations, the logic could eventually extend to “corporations of any size, public or private.”

    This case is expected to have a considerable effect on similarly filed cases around the country. We would expect that future litigation will have to address such matters.

    For more information please consult a Squire Patton Boggs advisor listed in this publication.