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Obamacare Rebuffed by High Court in Contraception Ruling

Contraceptive Insurance Rule Demonstrators
Demonstrators from both sides of the U.S. contraceptive insurance rule issue gather in front of the Supreme Court in Washington, D.C., on June 30, 2014. Photographer: Mark Wilson/Getty Images

June 30 (Bloomberg) -- The U.S. Supreme Court dealt a blow to President Barack Obama’s health-care law, ruling that closely held companies can refuse on religious grounds to offer birth-control coverage to their workers.

Voting 5-4, the justices today said family-run businesses including the craft-store chain Hobby Lobby Stores Inc. can claim a religious exemption from the requirement that they include contraceptives in their health-care plans. The companies say they regard some forms of contraception as immoral.

The ruling carves a hole in Obama’s biggest legislative initiative, the 2010 health-care law that the Supreme Court upheld two years ago. More broadly, the decision marks an expansion of corporate rights, saying for-profit companies, like people, can claim religious freedoms under federal law.

Safeguarding the religious rights of corporations “protects the religious liberty of the humans who own and control those companies,” Justice Samuel Alito wrote for the court. He said the administration had options for ensuring contraceptive coverage without infringing those rights.

The case divided the court along ideological lines. Alito’s majority opinion was joined by Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy. Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan dissented.

Gender Discrimination

Ginsburg said the ruling may foster employer objections to other types of health-care coverage, including blood transfusions and vaccines, or let companies try to opt out of gender-discrimination laws on religious grounds.

“The court, I fear, has ventured into a minefield,” she wrote.

The decision was the last of the court’s nine-month term, coming as sign-carrying advocates on both sides of the issue demonstrated in front of the marble building.

The birth-control rule stems from the health-care law’s requirement that any insurance coverage offered by employers meet minimum standards.

White House spokesman Josh Earnest told reporters the decision “jeopardizes the health of women” and added, “We will work with Congress to make sure that any women affected by this decision will still have coverage.”

‘Jeopardizes’ Health

The case centered on the 1993 Religious Freedom Restoration Act, which says the U.S. government may “substantially burden a person’s exercise of religion” only when it meets a demanding test.

Alito said Congress included for-profit corporations -- at least closely held ones -- within the definition of “persons.” He said a corporation “is simply a form of organization used by human beings to achieve desired ends.”

Only Ginsburg and Sotomayor dissented on that point. Breyer and Kagan said they didn’t need to reach the question.

“The court confirmed that Americans don’t give up their religious freedom when they open a family business,” Mark Rienzi, a lawyer for the Becket Fund for Religious Liberty, which represents Hobby Lobby, said in a conference call with reporters. “If the government thinks everyone has got to have a certain drug, the government has got to be prepared to step up and pay for it.”

The Obama administration argued that, even if the law covers corporations, the government’s interests outweighed any religious rights the companies possess.

Hobby Lobby

The administration said contraceptive coverage is crucial to women’s health and economic well-being, arguing that almost half of all pregnancies are unintended. Women of childbearing age spend 68 percent more than men in out-of-pocket health-care costs, the government contended.

Hobby Lobby, which had $3.3 billion in sales last year, has 600 craft stores across the country and at least 15,000 full-time employees. The Oklahoma City-based company’s five owners, led by founder David Green, have all signed statements declaring their religious faith and committing to run the business accordingly.

The company closes all its stores on Sunday to ensure that employees can spend time at church and with their families. On its website, a mission statement commits to “honoring the Lord in all we do by operating the company in a manner consistent with Biblical principles.”

The Supreme Court also ruled in favor of Conestoga Wood Specialties Corp., a Pennsylvania woodworking business owned by a Mennonite family. Conestoga, which has more than 950 employees, is controlled by five family members -- Norman and Elizabeth Hahn and their three sons.

Other Options

The two companies’ lawsuits are among at least 50 filed by for-profit businesses opposed to the contraception requirement, according to the Becket Fund.

Alito said the Obama administration has other options for ensuring contraceptive coverage. He said the U.S. could “assume the cost of providing the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employers’ religious objections.”

Alito also said the government could extend an “accommodation” that already lets nonprofit religious employers avoid providing coverage directly, instead shifting the duty to the insurer.

Catholic Dioceses

That accommodation, crafted by the Department of Health and Human Services, is itself under legal fire. Religious groups, including the University of Notre Dame and Catholic dioceses across the country, say the arrangements still require them to facilitate coverage. Today’s ruling didn’t directly say how the court might rule on that question.

One question now will be whether the department tries to expand the accommodation to include for-profit companies. Erin Shields Britt, an HHS spokeswoman, referred questions about the ruling to the White House.

Hobby Lobby argued that the 1993 law requires the government to show that it is pursuing a compelling interest and that its approach is the least restrictive way of accomplishing that goal. Alito said the government failed the second part of that test.

Alito wrote that if the companies fail to comply, “the economic consequences will be severe.” He said Hobby Lobby could be fined as much as $475 million a year for noncompliance.

Supporters of the requirement said the law gives employers another choice: not providing health coverage at all. Employers taking that approach must pay a penalty of as much as $3,000 per employee.

Substantial Penalty

Alito said the argument that the companies should take that approach “entirely ignores the fact that the Hahns and Greens and their companies have religious reasons for providing health-insurance coverage for their employees.” He also said the penalty would be substantial -- roughly $26 million for Hobby Lobby and $1.8 million for Conestoga.

Cecile Richards, president of Planned Parenthood Action Fund, called it a “stunning ruling” issued by “five male justices.”

For women, “decisions about their health care are being made by people who never need to use birth control,” Richards told reporters on a conference call.

The cases are Burwell v. Hobby Lobby Stores, 13-354, and Conestoga Wood Specialties v. Burwell, 13-356.

To contact the reporter on this story: Greg Stohr in Washington at

To contact the editors responsible for this story: Patrick Oster at Mark McQuillan, Jodi Schneider

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