Tuesday, January 21, 2014

Hobby Lobby Part IV: The Myth of Underinclusiveness

Marty Lederman

As I explained in an earlier post, the Affordable Care Act guarantees that virtually all Americans will be entitled to a wide array of “preventive health services,” which their insurance plan must make available without cost to plan participants and beneficiaries.  42 U.S.C. § 300gg-13.  These guaranteed cost-free services include cholesterol screening; colorectal cancer screening; diabetes screening for those with high blood pressure; certain immunizations; “evidence-informed preventive care and screenings” for infants, children, and adolescents, and “with respect to women, such additional preventive care and screenings . . . as provided for in comprehensive guidelines supported by the Health Resources and Services Administration.”  Id. § 300gg-13(a)(4). 

Hobby Lobby and Conestoga Wood are seeking a religious exemption from the requirement that their employee insurance plans provide coverage of one such preventive health service for women—namely, certain forms of FDA-approved birth control.  (I discuss in this post which methods of contraception might be implicated.) 

If the plaintiffs were to receive the relief they seek, it would mean that their female employees would have to pay for such contraception themselves—and thus they would not enjoy a virtually universal new health care benefit that will be available to more than 99% of other women in the United States.

There are several different reasons why the plaintiffs might not be entitled to such an exemption under RFRA, including the possibility that federal law as a whole does not impose a substantial burden on their religious exercise.  (In a series of posts, I have begun to examine that “burden” question, focusing primarily on the fact that federal law does not actually require the employers to offer contraception coverage to their employees.)  But even if the plaintiffs could show that the law imposes a substantial burden on religious exercise (at least with respect to the owners of the companies, if not on the corporations themselves), RFRA still would not require an exemption if denying such an exemption would be the “least restrictive means” of furthering “a compelling governmental interest.”  Id. § 2000bb-1.

In its opening brief, Conestoga Wood makes several arguments about why the government’s interests here are not “compelling.”  Most insistently, CW argues (see pp. 58-60) that the requirement here has so many “holes” that “tens of millions of women” are not covered—and that if the government is willing to live with such vastly underinclusive coverage, its interests must not be all that compelling.  This was also one of the grounds on which the Court of Appeals for the Tenth Circuit held in favor of Hobby Lobby—it concluded that the law “‘cannot be regarded as protecting an interest of the highest order [because] it leaves appreciable damage to that supposedly vital interest unprohibited’” (quoting Church of Lukumi Babalu Aye v. City of Hialeah).

Eugene Volokh has already explained why such an underinclusiveness argument might be unavailing even if the exceptions to the law were as extensive as the plaintiffs claim.  As Eugene has elaborated, countless complex laws have a large set of exceptions, because such laws typically serve multiple competing interests.  The Court has nevertheless held that the state can have compelling reasons for not granting religious exemptions to such less-than-absolute legal requirements.  In cases such as Hernandez v. Commissioner (1989) and United States v. Lee (1982), for example, the Court refused to recognize religious exemptions to tax obligations even though, as Eugene points out, the tax code is chock full of a vast range of secular exceptions.  And in Gillette v. United States (1971), the Court rejected a religious objection to fighting in what the petitioner viewed as an unjust war, even though the draft already recognized secular exceptions that allowed many others to avoid compulsory service. 

Eugene also explains why the Court’s RFRA decision in O Centro is distinguishable from this case and from cases such as Lee and Gillette.  The Solicitor General further explains (p.56 of his Hobby Lobby brief) that the religious exemption sought in O Centro was essentially indistinguishable from a peyote exemption that federal law already recognized; that is to say, the existing exemption and the requested exemption would have had substantially the same impact on the whole range of government interests in question.  O Centro was fundamentally a case about a proposed religious exemption that was not different in kind from an existing exemption.  Hobby Lobby/Conestoga Wood is not such a case.

My focus in this post is a bit different:  I want to question the factual predicate of the underinclusiveness argument itself.  The Court does not even need to reach Eugene’s objections, in other words, because the statute here is not nearly as full of “holes” as the plaintiffs would have it.  It does not “leave appreciable damage” to the government’s interests unaddressed. 

Conestoga Wood—like Hobby Lobby and the Tenth Circuit—points to several alleged “exemptions” to the contraception rule that supposedly establish the vast underinclusiveness.  I’ll briefly discuss each of those so-called “exemptions,” culminating in the provision on which plaintiffs place their most reliance, the “grandfathering” provision of the ACA.  The upshot is that most of the purported “exemptions” are not exemptions at all; and the one principal exception—HHS’s exemption for churches—will affect very few female employees who would otherwise make claims for cost-free contraception coverage.  The contraceptive coverage here, therefore—like the other preventive care services the statute requires—is a benefit to which virtually all women in the United States will be entitled. 

Moreover, as I explain at the end of the post, one of the provisions plaintiffs cite -- the grandfathering provision of the ACA -- does have an impact on the RFRA analysis, but in a way that further undermines, not supports, the plaintiffs' claims.

1.  The HHS church exemption.

HHS has exempted churches and their auxiliaries from the requirement to include contraception if they offer an employee health insurance plan.  The employees of such churches are virtually the only women in the United States who ultimately will not, in fact, be entitled to cost-free contraception coverage.  This is, in other words, a true, if very limited, exemption.  But it will not have remotely the same impact on the government’s interests that a patchwork series of religious exemptions for for-profit employers would have.  Federal law permits churches—unlike for-profit employers—to discriminate in hiring in favor of coreligionists, and therefore most employees of such churches share the church’s views, or at least understand that they may be expected to conform to the church’s religious teachings.  Therefore, as HHS explained, it “anticipates that the impact on employees of exempted organizations will be minimal, given that any religious objections of the exempted organizations are presumably shared by most, if not all, of the individuals actually making the choice as to whether to use contraceptive services--largely employees of houses of worship.”

Moreover, the Court has never suggested that if the government voluntarily offers one defined religious accommodation, it must provide exemptions to all religious objectors.  To the contrary, the Court has rejected exactly such arguments in cases such as Lee (see 455 U.S. at 260-61) and Gillette.  This makes good sense, because if the state were not permitted to craft reasonable qualifying criteria for religious exemptions—criteria that do not discriminate on the basis of sect or church—that would create a huge disincentive for the state to offer religious exemptions in the first instance.  Given a choice between all and nothing, the state will most often choose the latter.  That is not a recipe for promoting religious liberty.

2.  The other so-called religious “exemptions.”

Conestoga Wood also cites three other alleged religious “exemptions” for nonprofit employers.  As I just explained, even if there were such exemptions, that would hardly require extension of the exemptions to for-profit employers:  Federal, state and local laws contain thousands of exemptions for religious nonprofit organizations and employers, which virtually never extend to for-profit employers.  If the Court were to hold that for-profit and nonprofit entities must be treated equally, that could be the death knell for permissive accommodations of religious nonprofits.

In any event, none of these three alleged “exemptions” would have the effect that the Conestoga Wood exemption would have; indeed, two of them would not result in denying female employees access to cost-free coverage for any of the identified preventive services.

a.  Conestoga first invokes what I’ve called HHS’s “secondary accommodation” for nonprofit religious employers other than churches.  But in those cases, the plan insurer or third-party administrator is required to offer separate contraception coverage to the employer’s employees (at no cost to the employer).  Therefore the government’s interests are not compromised in such cases.

b.  Conestoga then notes the minor lacuna in the secondary accommodation for the outlier cases such as Little Sisters—namely, that HHS and the other agencies have not yet figured out how to provide contraception coverage in cases where (i) the 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.  This is likely to be a temporary gap:  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.”  In any event, the number of cases in which all four conditions for this “gap” are met presumably will be very small, affecting very few employees who wish to have such coverage. 

c.  Finally, Conestoga Wood suggests that the required coverage “does not reach members of certain discrete religious groups or participants in health care sharing ministries,” citing 26 U.S.C. § 5000A(d)(2)(A).  But that provision is completely inapposite to the preventive services coverage regulations.  What it establishes is that individuals who meet those criteria are exempt from the requirement (at issue in NFIB v. Sebelius) to either maintain health insurance or pay the § 5000A tax.  If such individuals choose not to maintain health insurance, then of course they won’t benefit from a plan at all.  But if instead they choose to participate in their employers’ plan, that plan, like virtually all others, must include the specified, cost-free preventive services coverage.  Section 5000A(d)(2)(A) does not exempt any employer or any plan from the preventive services requirement.

3.  The mythical “small employer” exception. 

Many federal laws imposing burdens on employers make exceptions for small employers, since it may be much more difficult for those employers to absorb the costs of compliance.  This has never been a ground for denying that the state has a compelling interest in denying religious exemptions.  (The fact that Title VII’s ban on race and sex discrimination does not apply to small employers, for example, does not give religious employers the right to discriminate on those grounds.)

But that’s not even an issue here, because under the ACA there is no such exception for the health insurance plans of small employers.  Small employers that choose to offer health insurance plans to their employees must provide coverage for recommended preventive services -- including contraceptive services -- without cost-sharing, just as larger employers do.

Conestoga Wood points out that the ACA does not require employers with fewer than 50 full-time employees ”to offer healthcare coverage at all.”  That’s true.  But as I’ve explained at great length in previous posts, the ACA doesn’t require any employer to offer healthcare coverage.  If an employer -- large or small -- does not offer an employee plan, its employees will be eligible for coverage on a government-subsidized exchange, which must include the required preventive services.  In such cases, large employers must pay an assessment to help subsidize the government’s costs—and small employers do not have to make such a payment.  But this does not result in any gap when it comes to the government’s interests:  In all such cases—large employer or small; under an employer plan or not—employees will be entitled to the full range of required, cost-free preventive services coverage.

4.  The grandfathering “exemption.”

With all of those weak arguments out of the way, we can focus upon the plaintiffs’ principal alleged source of underinclusiveness—“grandfathered” health insurance plans, under which, plaintiffs claim, “tens of millions of women” will be denied contraception coverage. 

The so-called grandfathering “exception,” in section 1251 of the Act, is not in truth an exception at all, but instead merely a commonplace “phasing in,” or timing, provision, which allows plans a transition period for compliance with several of the Act’s requirements, including the preventive services requirement. 

As HHS has explained, section 1251 is “designed to ease the transition of the healthcare industry into the reforms established by the Affordable Care Act by allowing for gradual implementation of reforms through a reasonable grandfathering rule.”  Thus it merely reflects a reasonable effort to balance competing interests in the context of a complex and novel statutory scheme.

Pursuant to HHS regulations, a plan will have to comply with the preventive services coverage requirement, as well as various other statutory requirements, whenever it first significantly raises participants’ out-of-pocket costs, increases co-insurance rates, decreases annual benefit limits, decreases employer contributions by more than five percent, or the eliminates coverage for any previously covered condition.

This scheme hardly demonstrates that the government lacks a compelling interest in ensuring cost-free preventive services coverage.  To the contrary, Congress surely expected that virtually all plans would lose their grandfathering status eventually--and likely sooner rather than later.  There’s not much incentive for plans to avoid, for years on end, making any of the sorts of changes that would trigger such a change of status.  It's not surprising, therefore, that the percentage of employees in grandfathered plans is declining rapidly, from 56% in 2011 to 48% in 2012 to 36% in 2013.  See Table 13.3, p. 199.  In the not-so-distant future, the number of remaining grandfathered plans should be vanishingly small.

Under plaintiffs’ view, apparently an interest cannot be compelling unless Congress chooses to impose it on everyone all at once.  But that would hardly make sense.  Indeed, it’s not much different from arguing that a newly enacted law cannot advance a compelling governmental interest because Congress went many years without enacting that law.

Congress’s quite laudable intent in creating the grandfathering system in the ACA was to allow plans to avoid the costs and impact of certain required major changes until such time as they were making other significant changes.  The idea that the legislature therefore didn't really care very much about the required preventive services, and expected many people not to be able to take advantage of them for many years, is implausible. 

Does anyone really think, for example, that the grandfathering provision reflects a less-than-compelling governmental interest in guaranteeing the affordability of measles immunizations, or colorectal cancer screening, or preventive care and screenings for infants and children?

OK, but even if almost all plans will be “ungrandfathered,” predominantly in the short term, Conestoga Wood stresses that employers have a “right” to keep their plans grandfathered indefinitely.  That is technically true, at least under current law—but that fact undermines Conestoga Wood’s case more than the government’s.

As noted above, it was reasonable for Congress to assume that virtually all plans would have sufficient incentives to make the sorts of changes that would bring an end to their grandfathering status eventually:  Given the dynamics of the economy and the workplace, plans are rarely static for very long.  If that assumption turns out to have been incorrect, and many plans deliberately eschew changes for the very purpose of avoiding preventive services coverage, Congress could amend section 1251 to place an outer limit on the period of grandfathering.  But unless and until it does so, there’s no basis for concluding that such outlier plans undermine what would otherwise be a compelling government interest in guaranteeing affordable preventive health services.

Now, as it happens, Conestoga Wood’s point about the “right” of an employer to retain its plan grandfathered status is relevant to the RFRA analysis, but not in the way Conestoga Wood imagines.  Instead, that “right” makes even more implausible Conestoga Wood’s (and Hobby Lobby’s) argument that federal law imposes a substantial burden on its owners’ religious exercise.

As I’ve explained earlier, federal law does not require Conestoga Wood to offer its employees an insurance plan including contraception coverage, because it may lawfully cease offering a plan at all—and it has not alleged facts to demonstrate that if it opts for that choice, federal law would place substantial pressure on its owners to violate their religious obligations.

Even if I were incorrect about the impact of that second option, however, Conestoga Wood is right to explain that in fact it had a third option under the law:  If it did not wish to have its plan include contraception coverage, it could have simply avoided taking steps that would cause its plan to lose its grandfathered status.

In its complaint, Conestoga Wood alleges (paragraph 86) that its plan is no longer grandfathered because Conestoga did not provide notification to plan participants that its plan was grandfathered for the 2011 plan year . . . and that it did not do so because “the plan was not considered grandfathered.”  Nothing further:  Conestoga Wood does not explain what changes its plan made to remove its grandfathered status.  Similarly, Hobby Lobby alleges, also without further specification (see paragraph 59 of its complaint), that it “made the decision not to retain [its plan’s] grandfathered status.”

Neither set of plaintiffs explains why they took steps to end their plans’ grandfathered status—let alone allege facts to show that federal law imposed substantial pressure on them to do so.  It is therefore fair to say that they chose to expose themselves to the preventive services requirement, although federal law did not require them to do so.

[This paragraph UPDATED]  Both Conestoga Wood and Hobby Lobby point out that their choice to end their plans’ grandfathered status occurred before HHS and other agencies proposed to include contraception among the required preventive services.  But surely they knew that was a serious possibility, for the statute specifically requires coverage of women’s preventive services to be determined by HRSA; the initial impetus in the Senate for covering such women’s preventive care in the 111th Congress included “family planning [and] contraceptive equity” as among the proposed covered services; and when the Senate debated the Mikulski Amendment that added the women's preventive health provision, several proponents explained that it would cover "family planning" and "contraception."  See, e.g., 155 Cong. Rec. S12025, S12027, S12052, S12114, S12271, S12274 (Dec. 1-3, 2009) (Sens. Boxer, Gillibrand, Franken, Feinstein, Murray).  Senator Franken explained, for example (id. at S12052):
It is also a top priority for me that health reform includes another crucial women's health service, which is access to affordable family planning services. These services enable women and families to make informed decisions about when and how they become parents. Access to contraception is fundamental, a fundamental right of every adult American, and when we fulfill this right, we are able to accomplish a goal we all share-all of us on both sides of the aisle to reduce the number of unintended pregnancies. And so I believe that affordable family planning services must be accessible to all women in our reformed health care system. 
What's more, the question of whether HRSA should include such services was already a mater of considerable public debate after the law was enacted but before Conestoga Wood and Hobby Lobby relinquished their plans’ grandfathered status:  In response to a request for comments on interim final regulations, the Departments received dozens of comments in September 2010 recommending that HRSA Guidelines include contraceptive services for all women and that this requirement be binding on all group health plans and health insurance issuers, with no religious exemptions.  Several other commenters—including Americans United for Life, the Catholic Medical Association, and the National Catholic Bioethics Center—urged the agencies not to include contraception coverage, or at least to craft religious exemptions. 

In light of this, the companies here could have waited to see what HHS would do before they took whatever steps they took to “ungrandfather” their plans in early 2011.  This road not taken is yet an additional reason why they have failed to demonstrate that federal law substantially burdens their owners’ exercise of religion.  See Tony & Susan Alamo Foundation v. Secretary of Labor (1984) (Fair Labor Standards Act requirement of payment of wages to employees did not impose a constitutionally cognizable burden on the employees’ exercise of religion, even though they were religiously prohibited from accepting wages for services, because the law afforded them the option of “returning the amounts [of cash compensation tendered] to the Foundation . . . voluntarily”).

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