Balkinization: Not Quite Hobby Lobby: The Nonprofit Cases (including Little Sisters and Notre Dame), and Opting Out as Complicity [with UPDATE on Little Sisters "church plan" situation]

Not Quite Hobby Lobby: The Nonprofit Cases (including Little Sisters and Notre Dame), and Opting Out as Complicity [with UPDATE on Little Sisters "church plan" situation]

Marty Lederman

I'm interrupting my series of posts on Hobby Lobby and Conestoga Wood not only to wish Balkinization readers a happy and healthy new year, but also to explain a bit about the religious nonprofit organization cases that are suddenly in the news.

The government's two religious accommodations

As some of you may know, the Executive branch has provided two types of religious accommodations to nonprofit employers that object to the HHS Preventive Heath Services Rule:

First, some such employers--primarily, churches and their auxiliaries--are exempt altogether from the requirement that they include contraceptive coverage if they offer a health-insurance plan to their employees. The women who work for such churches thus are virtually the only women in the United States who will not be afforded this new national benefit, which I described in further detail in this post. The government's explanation for this exemption is, in effect, that because such employers typically can and do prefer to hire employees who are coreligionists who can be assumed to share the churches' religious commitments, such employees are less likely to wish to purchase birth control: "[H]ouses of worship and their integrated auxiliaries that object to contraceptive coverage on religious grounds are more likely than other employers to employ people of the same faith who share the same objection, and who would therefore be less likely than other people to use contraceptive services even if such services were covered under their plan." 78 Fed. Reg. 39,874 (July 2, 2013).

Under what I will call the "secondary accommodation," other religious nonprofits who object to contraceptive coverage also can exclude it from their employee (and student) health-insurance plans. These nonprofit organizations need only certify that they have religious objections to providing coverage for contraceptive services, in which case they will not be required “to contract, arrange, pay, or refer for contraceptive coverage.” 78 Fed. Reg. 39,872. But with respect to most of this category of religious employers--in contrast to churches--the government has created a system in which their employees, who are not typically coreligionists, can still receive contraceptive coverage without cost-sharing, albeit from a different source. If a religious nonprofit organization opts out, the insurance company that issues the policy to the employer, or the third-party administrator that administers the organization's self-insured group health plan, generally must assume responsibility for contraceptive coverage and provide or arrange separate payments to employees for contraceptive services. Such insurance issuers and third-party administrators are expressly prohibited from imposing any premium, fee, or other charge, directly or indirectly, on the employer/university or its group health plan with respect to contraceptive coverage. 45 C.F.R. § 147.131(c)(2)(ii); see also 78 Fed. Reg. 39,876-77. The government has determined that insurance issuers, such as Aetna, will actually save money by providing separate contraceptive coverage (since it will thereby avoid the costs of unintended pregnancies). And in the case of self-insured group health plans, the costs of coverage that would be incurred by the third-party administrator are borne instead by the federal government, in the form of an adjustment to the user fees paid by that third-party administrator on the federally administered exchange.

A few dozen nonprofit religious organizations have brought RFRA challenges to this secondary accommodation, even though the whole purpose and effect of the exemption is to relieve them of any obligation “to contract, arrange, pay, or refer for contraceptive coverage” if they offer health insurance to their employees (or students). What could these nonprofit organizations possibly be complaining about? In particular, how can they allege that a rule that exempts them from the condition that applies to for-profit employers such as Hobby Lobby nevertheless "substantially burdens" their exercise of religion?

Good questions. I'll examine them a bit below.

[UPDATE: A couple of readers have written to complain that I've buried the lede--at least insofar as the current emergency application to Justice Sotomayor in the Little Sisters of the Poor case is concerned. So here it is: As explained below, because of an unanticipated gap in the government's "secondary accommodation" regulation, and the unusual circumstances of this particular case, if the plaintiffs were to sign a self-certification stating that they oppose providing coverage for contraception, their employees would not receive such coverage. Thus, it is hard to see even why the plaintiffs have standing to object to the self-certification requirement, since their requested relief would not affect in the slightest whether their employees receive such coverage. On the other hand, precisely because the Little Sisters case is, in this respect, so idiosyncratic, I think the more interesting and important questions are raised in the Notre Dame and similar cases, also discussed below the fold.]

[FURTHER UPDATE, 01/03: The government has flled its brief in opposition in Little Sisters; more details here.]

But first, a procedural update:

The nonprofit state of play

Approximately 20 of the plaintiff nonprofit organizations sought emergency or preliminary injunctions against application of the HHS Rule before it took effect today (January 1). All but one of those plaintiffs received such injunctions or stays, most from district court judges. Parties who were unsuccessful in district court took four appeals to the courts of appeals over the past week. Yesterday, the U.S. Court of Appeals for the D.C. Circuit granted an injunction pending appeal by a 2-1 vote (Judges Henderson and Brown, with Judge Tatel dissenting) in the consolidated Priests for Life and Roman Catholic Archdiocese of Washington cases; and the U.S. Court of Appeals for the Sixth Circuit likewise granted an injunction pending appeal by a 2-1 vote (Judges Batchelder and Siler, with Judge Stranch dissenting) in the Catholic Diocese of Nashville case, even though the majority noted that "it is not clear that the accommodation violates the RFRA."

In the Little Sisters of the Poor Home for the Aged case, by contrast, the U.S. Court of Appeals for the Tenth Circuit (Judges Kelly and Lucero) denied the motion for an injunction yesterday. Little Sisters of the Poor promptly applied to Circuit Justice Sotomayor for a stay of the judgment pending appeal. Justice Sotomayor last night temporarily enjoined the executive agencies from enforcing the law against the applicants "pending the receipt of a response and further order of the undersigned or of the Court," with the government's response due on Friday, January 3d, at 10 a.m.

That leaves only one plaintiff organization that was unsuccessful in seeking an injunction: The University of Notre Dame. On Monday, a panel of the U.S. Court of Appeals for the Seventh Circuit (Judges Posner, Flaum and Hamilton) unanimously denied Notre Dame's motion for an injunction pending appeal, but expedited the appeal process, with oral argument to be scheduled for mid-February. Notre Dame chose not to seek relief from Circuit Justice Kagan. According to a statement issued by a University Vice President, it appears that Notre Dame will certify that it objects to contraception coverage, which means that Notre Dame students will receive contraceptive coverage from an insurance company (Aetna) and Notre Dame employees will receive such coverage from Notre Dame's third-party administrator (Meritain Health, Inc.), which will be reimbursed by the federal government. The Notre Dame Vice President added, however, that "the program may be terminated once the university's lawsuit on religious liberty grounds against the HHS mandate has worked its way through the courts."

What's the Substantial Burden?

In order to examine the sorts of arguments nonprofit plaintiffs are making in these cases, I'll use the examples of Notre Dame and Little Sisters of the Poor as illustrative.

Notre Dame

Notre Dame, like virtually all plaintiffs in these cases, alleges that the government "requires" it to provide contraceptive coverage in an employee (and/or student) health-insurance plan, thus forcing it to choose between violating its religious obligations and "paying enormous penalties." In my two most recent posts, I have explained that this is mistaken as a matter of law: Notre Dame, like Hobby Lobby and Conestoga Wood, has the perfectly lawful option of not offering a health insurance plan at all.

But it's not even necessary to get that far in the nonprofit cases, since the whole point of the government's "secondary" accommodation is to allow nonprofits such as Notre Dame to refuse to “contract, arrange, pay, or refer for contraceptive coverage,” even if they do offer health insurance.
Why isn't that enough to alleviate any possible, alleged burden on Notre Dame's religious exercise?

i. Notre Dame's principal argument is that by filing a certification asserting that it opposes contraceptive coverage, as the HHS Rule requires, it would thereby "authorize" third parties--Aetna and Meritain Health, Inc.--to provide such coverage, and thereby become morally responsible for the use of the contraceptives subsidized by those other parties.

This argument, however, is premised on a simple mistake of fact and law (not religious doctrine): The self-certification Notre Dame would sign--substantively identical to the assertions of objection that it makes in its very RFRA complaint--merely notifies the relevant third parties that Notre Dame is eligible for and exercising the available religious accommodation because it objects to providing contraceptive coverage. By certifying, Notre Dame would not "authorize" anything: Federal law does that work. As the district court explained, “[i]f Notre Dame opts out of providing contraceptive coverage, as it always has and likely would going forward, it is the government who will authorize the third party to pay for contraception.”

Of course, Notre Dame is correct that its certification of religious objection would have a legal effect: As with any religious accommodation of this kind, the whole point of the accommodation is that the opting out by the objector would shift the responsibility to someone else (whether a state actor or, as here, another private party) to do what the religious objector declines to do. But if that is enough to establish a substantial burden on Notre Dame's religious exercise, then it would effectively mean that governmental religious accommodations taking the form of "opt outs" for dissenters would themselves often create the very conflict with religion that they are designed to alleviate--and would thus threaten to prevent the state from both accommodating religion and satisfying its state interests through an alternative means, such as the use of a non-objecting party.

For example, take a law that permits individual religious pharmacists to refuse to dispense certain drugs, and that provides that in such a case the drugs shall be dispensed by a nonobjecting pharmacist. Under Notre Dame's theory, the first pharmacist could object to the accommodation--and insist that customers not receive the drug at all--because its refusal to dispense would "trigger," or "authorize," the second pharmacist to commit a morally objectionable act.

Or consider the federal law permitting a district court judge to recuse himself from a case in which his impartiality might reasonably be questioned or where he has a bias or prejudice. In a 1998 article, former Notre Dame professor (now President of Catholic University) John Garvey argued that a judge who adheres to Catholic doctrine on the death penalty would have to invoke this law to recuse himself from the sentencing hearing in a capital case. In such a case, the federal law provides that "any other judge" can step in and conduct the hearing. Under Notre Dame's theory in the current case, however, the Catholic judge would be able to object to the sentencing hearing altogether--not only to his own participation in it--on the theory that his recusal would "trigger" or "authorize" the replacement judge to act immorally.

Or consider a religious conscientious objector to war: Because his refusal to fight means that some other young person will take his place to kill and and be killed, does that mean that he has a valid religious objection to the continuation of the war itself (or at least to the drafting and deployment of any further troops)?

For obvious reasons, it would be deeply counterintuitive to construe RFRA--or the pre-1990 Supreme Court case law that RFRA incorporates--to recognize a "substantial burden" on religious exercise in such cases.

In its briefs to the court of appeals, Notre Dame briefly floats some other arguments, as well. But they, too, rely upon mistaken views of how the law operates. (Unless otherwise noted, the quotations here are from Notre Dame's latest filing, the reply brief it submitted last Friday in support of its Emergency Motion in the Seventh Circuit.)

ii. For example, Notre Dame argues that it is complicit in third parties' reimbursement for, and use of, contraceptives, because the University is "indispensable to the regulatory scheme"--its certification is said to be "a necessary precondition to providing the mandated coverage to employees and students." Likewise, Notre Dame's complaint in the case alleges that its employees and students would receive contraception reimbursement because they are enrolled in, or employed by, the University. Such arguments suggest, in other words, that Notre Dame is complicit because it is a "but for" cause of the reimbursement.

But even if this "but for" theory would be sufficient to establish complicity (which is contrary to my understanding of the Catholic doctrine of cooperation with evil), and thus to create a "substantial burden" under RFRA (not at all clear), it simply misunderstands the nature of the new law. As I explained in a previous post, Congress and HHS have determined that virtually all women in the United States are now entitled to obtain certain preventive health services without cost--it is a universal benefit. Some women will obtain it through Medicare or Medicaid; others (including those whose employers do not offer access to an insurance plan) on a federally subsidized exchange; still others through their employer-provided plan. That is to say, a woman receives such coverage not because she works for or studies at Notre Dame, but because she lives in America.

The HHS rule and the religious accommodation do not concern who will be eligible for the benefit, but merely how, and by whom, it will be conveyed. As Judge Tatel explained in his dissenting opinion is a similar case yesterday, the employees will, indeed, receive contraceptive coverage if their employer self-certifies its objection—"but not because [it] self-certif[ies]."

iii. Notre Dame also argues that it is forced to "participat[e] in an employer-based group health plan that serves as the vehicle for the ultimate provision of objectionable products and services." But even if such "participation" in an insurance plan that otherwise (i.e., apart from the employer's participation) engages in immoral activity were sufficient to render the "participant" morally culpable (again, that is not my understanding of Catholic doctrine, FWIW), once again, this suggestion is based on a faulty foundation: Pursuant to the HHS accommodation, the Notre Dame health plan would not be the "vehicle" for the reimbursement of contraceptive services, which will be provided via a separate instrument. Indeed, the regulations specifically provide that an insurance issuer must "[e]xpressly exclude contraceptive coverage from the group health insurance coverage provided in connection with the . . . [emloyer-sponsored] plan,” 45 C.F.R. § 147.131(c)(2)(i)(A), and “segregate premium revenue collected from the [objecting employer] from the monies used to provide payments for contraceptive services,” id. § 147.131(c)(2)(ii). (Elsewhere in its brief, Notre Dame calls its health insurance plan the "pipeline through which contraceptive benefits may flow to its students and employees"--but use of that colorful metaphor does not affect the facts, which are otherwise.)

iv. Notre Dame suggests that it will be required to send enrollment paperwork related to the reimbursement coverage to its students and employees. But whatever hypothetical effect such a requirement would have on the "substantial burden" question, the HHS Rule imposes no such duty. As Judge Tatel emphasized yesterday, "Appellants’ participation is limited to complying with an administrative procedure [the certification] that establishes that they are, in effect, exempt from the very requirements they find offensive."

v. Finally, I should mention another argument, distinct from a complicity claim, that is hinted at in paragraph 65 of Notre Dame’s complaint but that Notre Dame has not stressed in the briefing of the case—a claim that the government has compelled Notre Dame to violate the doctrine of "scandal," which Notre Dame defines as "leading by words or example other persons to engage in wrongdoing." See also Catechism of the Catholic Church paragraph 2284 (“Scandal is an attitude or behavior which leads another to do evil.”). According to the complaint, even if it seeks the accommodation, Notre Dame would have to "pay for, facilitate access to, and/or become entangled in the provision of" contraceptives "in ways that will lead many to think Notre Dame condones these services."

There are at least two problematic things about this “scandal” argument. First, as discussed above, the whole point of the accommodation is to ensure that Notre Dame does not have to "pay for, facilitate access to, and/or become entangled in the provision of" contraceptives. In any event, it is deeply implausible that anyone—let alone “many”—would think Notre Dame “condones” contraceptive services. Indeed, the self-certification process itself provides Notre Dame an occasion to make a formal, very conspicuous statement that it opposes such services, something no reasonable observer could misunderstand; the regulation actually requires the insurer or TPA to notify plan participants and beneficiaries that their employer/university "will not contract, arrange, pay, or refer for contraceptive coverage," 45 C.F.R. § 147.131(d); and promulgation of the contraception rule more broadly has afforded Notre Dame the opportunity to make its views on contraception and complicity much more widely known and understood than was previously the case. Moreover, nothing in the law limits Notre Dame’s ability to speak out further against contraception, the HHS Rule, and/or the ACA, or to otherwise “educate others on a matter of religious and moral significance” (Complaint paragraph 65).

Little Sisters of the Poor

In the case now before Justice Sotomayor, the Little Sisters of the Poor make many of the same arguments that Notre Dame does. In particular, they argue that their signing of the self-certification form identifying Little Sisters as an objecting nonprofit religious organization will not only "authorize" but also "direct" the third-party administrator (TPA) of their employee health-insurance plan--Christian Brothers Services--to provide contraception coverage to LSP employees.
As explained above, the certification would have no such legal effect. Any "direction" to Christian Brothers Services would come from federal law, not from Little Sisters of the Poor.

But in the Little Sisters case, there is yet another, antecedent reason why this "authorize and direct" argument is faulty--namely, that, in contrast to the Notre Dame case, the federal government disclaims the legal authority even to require the Little Sisters' TPA to offer contraception coverage. The reasons for this are a bit technical. In short, ERISA is the authority for HHS's requirement that the TPAs of self-insured plans provide contraception coverage where the religious employer opts out; but the Little Sisters provide insurance through a self-insured "church plan," a statutory category that is exempt from the relevant ERISA provisions. Therefore, as the district court explained, the government agrees that it lacks any statutory authority to require Christian Brothers Services to offer such coverage.

What this means, in practical effect, is that Little Sisters' certification as an objecting nonprofit employer would not guarantee that their employees receive the controverted coverage. Their employees would receive that benefit only if Christian Brothers Services were to voluntarily choose to provide such coverage. And, as it happens, the President of Christian Brothers Services filed a declaration in the case explaining that CBS also is religiously opposed to providing contraception coverage ("Christian Brothers Trust and Christian Brothers Services believe that it would be immoral and sinful for them to intentionally facilitate the provision of contraceptives, abortifacient drugs, sterilizations, and related education and counseling, as would be required by the Final Mandate. Similarly, it would be a violation of Christian Brothers Services’ sincerely held Catholic beliefs for it to act as a “third party administrator” under the Final Mandate because it would have to contract for, arrange for or otherwise facilitate the provision of abortifacients, sterilizations and contraception in violation of Catholic teachings."). The district court therefore found that CBS "does not intend" in the future to provide Little Sisters' employees "with access to sterilization, contraception, and abortion-inducing drugs and services."

Which means that if Little Sisters signs the self-certification that it opposes providing coverage for contraception, its employees will not receive such coverage. In this respect, any possible connection between the Little Sisters' religious objection and their employees' use of contraception would be even more attenuated than Notre Dame's. Indeed, it's not at all obvious why the plaintiff has standing to object to the self-certification requirement: How could the Little Sisters be complicit in their employees' use of contraceptives if those employees will not receive reimbursement for those services? And how would any judicial relief alter the status quo?

[UPDATE: Obviously, the Little Sisters case reveals a lacuna in the government's "secondary accommodation" regulation that the government itself presumably did not anticipate--namely, that the regulation does not guarantee contraception coverage for female employees where (i) their employer is a nonprofit religious organization that objects to such coverage; (ii) the employer self-insures; (iii) the health plan is a "church plan"; and (iv) the third-party administrator of the church plan itself objects to providing such coverage. The government represented to the district court in Little Sisters that it "continues to consider potential options to fully and appropriately extend the consumer protections provided by the regulations to self-insured church plans." If and when the government amends its regulations to deal with such a situation, perhaps the Little Sisters case will look more like the Notre Dame case. But in the meantime, the Little Sisters' employees would not receive contraception coverage if the Little Sisters were to make the self-certification of their objection.]

Posted 5:24 PM by Marty Lederman [link]