Friday, February 21, 2014

Hobby Lobby Part IX: There is no "employer mandate," redux: The plaintiffs' arguments about the option of not offering an employee health insurance plan

Marty Lederman

In my most recent post, I explained why the individual plaintiffs in Hobby Lobby--members of the Green family who are the directors of two for-profit companies--may have failed to allege facts sufficient to demonstrate that they would be required to do something their religion prohibits if federal law required Hobby Lobby and Martel to provide their employees with contraception insurance coverage.

But even if I'm wrong about that--i.e., even if such a legal requirement would require the Greens to do something their religion forbids--that would not be sufficient to demonstrate that federal law imposes a substantial burden on the Greens' religious exercise because, as I've argued in several posts here [see posts III, III-A and III-B below], there is no such legal requirement.

The Hobby Lobby brief mischaracterizes the law on this point.  At page 3, for example, the brief asserts that the Affordable Care Act "imposes an 'employer mandate,' which requires certain employers to provide 'minimum essential' health coverage to employees" (citing 26 U.S.C. § 4980H).  Three pages later, the brief again states that "small businesses with fewer than fifty employees—96% of all firms in the United States—are exempt from the ACA requirement that employers provide health insurance to their employees."

There is, however, no such legal requirement that any employers provide health insurance to their employees.  In support of the second quotation above (at page 6), the Hobby Lobby brief cites only one source of authority--a White House document that says no such thing.  Indeed, the very first sentence of the document Hobby Lobby cites states exactly the opposite:  "The Affordable Care Act does not include an employer mandate" (emphasis added).

In my previous posts I've explained how the law in fact operates:  If any employer, large or small, offers its employees a health insurance plan, that plan -- like all other health insurance plans in the U.S., employer-sponsored or not -- has a legal duty to include an array of required services, including cost-free coverage of many preventive services, one of which is coverage of 18 FDA-approved contraceptive methods.  But any employer, large or small, is legally entitled to decline to offer its employees a health insurance plan, as many employers do.  And in such a case its employees will then be able to purchase health insurance on an exchange -- from a plan that meets all the applicable federal standards, including contraception coverage -- and most such employees will be able to purchase such a plan with generous government subsidies.

To be sure, the provision of the ACA that Hobby Lobby cites, 26 U.S.C. § 4980H, requires employers such as Hobby Lobby and Conestoga Wood to make an assessment to the government if they do not offer employee health insurance, in order to help offset the cost of the government subsidy for the employees' purchases on the exchange.  As that same White House document explains:  "In 2014, as a matter of fairness, the Affordable Care Act requires large employers to pay a shared responsibility fee only if they don’t provide affordable coverage and taxpayers are supporting the cost of health insurance for their workers through premium tax credits for middle to low income families."

That assessment, however, is not a "penalty" or a "fine" (as the Conestoga Wood brief argues) for violation of a legal duty.  It is merely a tax.  Moreover, the cost of that tax to the employer will almost certainly be far less than what the employer would have paid (in premiums and administrative costs) to sponsor the insurance plan.

Because this option is legally available to an employer such as Hobby Lobby, plaintiffs cannot establish that federal law imposes a substantial burden on the Greens' exercise of religion unless federal law imposes substantial pressure on the Greens not to avail themselves of this alternative option and instead to offer their employees an insurance plan that includes contraception coverage. 
Hobby Lobby asserts in its brief (p.11) that dropping its health care plan would result in "crippling consequences."  But plaintiffs have not alleged, either in their complaint or their brief, any facts that would support such a conclusion, let alone allegations that are specific enough to satisfy Iqbal and Trombley pleading standards.

The closest Hobby Lobby comes on this point is its bald assertion (p.10) that "[d]ropping insurance would place [Hobby Lobby and Martel] at a competitive disadvantage, and hobble their employee recruitment and retention efforts."  (In its brief, Conestoga Wood likewise asserts (pp. 39-40), without any supporting factual allegations, that the company would be put at "a competitive disadvantage in the marketplace.")

There are several problems with this. 

First, that option might or might not "hobble" employee recruiting efforts on the whole:  Many employees will likely be better off if they receive subsidized plans on the exchange and some marginal increase in salary (in lieu of the plan premiums that the employers would otherwise offer in exchange for their employees' labor) . . . which is one reason why many employers will, in fact, drop or decline to retain their employee plans.  We simply have no way of knowing what the overall effect will be on employee recruiting and retention efforts in this particular case, because that depends on a complex array of market forces and context-specific characteristics of the workforce of these employers and their competitors (most of which are not the result of federal law), and plaintiffs have not pleaded any facts to establish any disadvantage, let alone "hobbling."

What's more, even if the plaintiffs had pleaded facts sufficient to establish some degree of harm to their employee recruiting and retention efforts (which they have not), they have not alleged any facts that would establish that such harms would be so significant as to impose substantial pressure on the companies to retain their plans, even if it meant providing contraceptive coverage.  To be sure, it may be fair to assume that Hobby Lobby and Martel would, on the whole, prefer to retain their plans, for a variety of reasons, since they suggest that they would do so.  But that does not mean that they are subject to substantial pressure to do so, let alone substantial pressure imposed by federal law--it might, on the whole, be a modest or tentative or ambivalent preference.  The important point, though, is that the plaintiffs have failed to allege facts sufficient to show that federal law would substantially pressure them to keep their plan, even if that required contraception coverage.

Hobby Lobby adds one final assertion:  "[Dropping its plan] would also harm the employees who currently depend on Hobby Lobby’s generous health insurance—and would undermine Respondents’ desire to provide health benefits for their employees, which is itself religiously motivated."  (See also the Conestoga Wood brief at 8 ("as well as depriving its employees of their generous insurance plan so they are left to obtain insurance elsewhere").)

Again, this statement does not satisfy the RFRA standard.  Hobby Lobby (or the Greens) may well be "religiously motivated" to ensure that its employees are "provide[d] health benefits."  But dropping its plan will not result in those employees going without benefits, for they would then be entitled to obtain an affordable plan on the exchange -- a plan that meets all the federal standards.  (And Hobby Lobby would presumably increase their salaries to account for any loss of "generous" benefits beyond the federal minimums.)  Moreover, even if some employees ended up with insurance benefits that were less generous in some respects than what they have received from Hobby Lobby's plan, the plaintiffs provide no allegations at all about why that would impose substantial pressure on Hobby Lobby itself not to drop its plan.

My Posts on Hobby Lobby and other contraceptive-coverage cases


Compendium of posts on Hobby Lobby and related cases

Hobby Lobby Part I -- Framing the issues

Hobby Lobby Part II -- What's it all about? (contraception?  abortifacients?  other religious objections to elements of health insurance?)

Hobby Lobby Part III -- There is no "employer mandate"

Hobby Lobby Part III-A -- Does federal law substantially pressure employers to offer health insurance coverage in violation of religious obligations, even though there is no “employer mandate”?

Hobby Lobby Part III-B -- Is it necessary that the government-imposed pressure to violate a religious obligation be substantial?

Hobby Lobby Part IV -- The myth of underinclusiveness

Hobby Lobby Part V -- Whose Religious Exercise?  Of corporations, for-profit employers, and individual plaintiffs acting in their various corporate capacities

Hobby Lobby Part VI --  The parties' common ground . . . and a fundamental divide about religious exemptions for for-profit employers

Hobby Lobby Part VII -- Hobby Lobby's arguments on compelling interest and the alleged exemption "honeycomb" 

Hobby Lobby Part VIII -- Hobby Lobby's identification of the "precise religious exercise at issue here," and some thoughts on whether federal law substantially burdens it

Hobby Lobby Part IX -- There is no "employer mandate," redux: The plaintiffs' arguments about the option of not offering an employee health insurance plan

How to Understand Hobby Lobby [on SCOTUSblog]

* * * *

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]

Government brief in Little Sisters

Little Sisters State of Play

Not With a Bang . . . (The Supreme Court wisely preserves the status quo in Little Sisters)

Older Posts
Newer Posts