Friday, July 04, 2014

What next in Wheaton College? Is it also a "win/win" compromise?

Marty Lederman

[Originally published in slightly different form at SCOTUSblog, together with an excellent supplemental post by Tom Goldstein, as to which I've incorporated a couple of responses, noted herein.]

By a 6-3 vote yesterday afternoon, the Supreme Court issued this interim order in an “ACA contraceptive coverage” case brought by a religious nonprofit organization, Wheaton College:

If the applicant informs the Secretary of Health and Human Services in writing that it is a non-profit organization that holds itself out as religious and has religious objections to providing coverage for contraceptive services, the respondents are enjoined from enforcing against the applicant the challenged provisions of the Patient Protection and Affordable Care Act and related regulations pending final disposition of appellate review.  To meet the condition for injunction pending appeal, the applicant need not use the form prescribed by the Government, EBSA Form 700, and need not send copies to health insurance issuers or third-party administrators.

Moreover, and critically, in the Court’s view, “[n]othing in this interim order affects the ability of the applicant’s employees and students to obtain, without cost, the full range of FDA approved contraceptives.” 

In other words, the Court apparently believes that its interim order will, like its resolution of Hobby Lobby on Monday, result in a “win-win” situation, in which the plaintiff does not have to do the thing that it claims would violate its religion (namely, submit Form 700), and yet its employees (and its students, too) will still be able to receive cost-free contraception coverage from the third-party administrators (TPAs) of Wheaton’s self-insured health plans--Blue Cross/Blue Shield (BC/BS) for the employee plans, and Companion Life Insurance Co. for the student plan.  (For convenience, I'll often simply refer to Blue Cross here.)   

But the Court might be wrong about that.  If my understanding of the law—and of Wheaton’s religious objection—is correct, it may be very difficult to square the circle here, i.e., to accommodate both parties' asserted interests simultaneously.  Nevertheless, the Court’s own opinions in Hobby Lobby and Wheaton College may themselves contain a seed of a solution.  (Caveat:  The following analysis is necessarily tentative, based upon my reading of the briefs and a rudimentary reading of the Employee Retirement Income Security Act (ERISA) and relevant regulatory provisions.  I will amend it if and when I learn more.)
The principal problem with the Wheaton College order is the Court’s assumption that a change in the form of Wheaton’s objection will have no legal effect on the government’s ability to ensure that Wheaton’s employees and students obtain cost-free contraception coverage.  That assumption appears to be based upon a misunderstanding of the parties’ representations to the Court. 

It is true, as the Court writes, that Wheaton College “has already notified the Government— without using EBSA Form 700—that it meets the requirements for exemption from the contraceptive coverage requirement on religious grounds.”

It is also true, as the government argued to the Court in its filing and as Justice Sotomayor writes in her dissenting opinion, that “[a]ny provision of contraceptive coverage by Wheaton’s third-party administrator . . . would result from the relevant law and regulations.”  As Justice Sotomayor explains, “[t]he law and regulations require, in essence, that some entity provide contraceptive coverage.  A religious nonprofit’s choice not to be that entity may leave someone else obligated to provide coverage instead—but the obligation is created by the contraceptive coverage mandate imposed by law, not by the religious nonprofit’s choice to opt out of it. . . . .  If a religious nonprofit chooses not to pay for contraceptive services, it is true that someone else may have a legal obligation to pay for them, just as someone may have to go to war in place of the conscientious objector.  But the obligation to provide contraceptive services, like the obligation to serve in the Armed Forces, arises not from the filing of the form but from the underlying law and regulations.”

To put it in terms of the Wheaton College self-insured plan, in particular:  The legal obligation for Blue Cross and Companion to reimburse Wheaton employees and students, respectively, for contraceptive services, without any payment from or involvement by Wheaton, would arise from the underlying law and regulations promulgated by the federal government, rather than from Wheaton’s filing of Form 700 . . . or, for that matter, from any other choice made, or action taken, by Wheaton College.  That is the government’s principal argument, and it is at the heart of Justice Sotomayor’s dissent.  As I have explained in a couple of previous posts, it is also a very strong reason why the accommodation does not violate RFRA . . . just as being afforded conscientious objector status does not impinge upon the objector’s religion even though conferral of such status empowers the government to require someone else to march off to war.  After all, even if it is the case, as the Court concluded in Hobby Lobby, that identifying “the circumstances under which it is wrong for a person to perform an act that is innocent in itself but that has the effect of enabling or facilitating the commission of an immoral act by another” is a “difficult and important question of religion and moral philosophy,” it is hard to imagine any belief system in which crossing the line of complicity turns on whether one’s conduct results in a technical change of status of another entity under the Employee Retirement Income Security Act.

Yet the matter is not quite as simple as that.  The key legal point the Court’s opinion appears to gloss over is that although the filing of Form 700 is not the source of Blue Cross’s coverage obligation, the filing of that document, or of some other document with the same legal effect, is a necessary prerequisite to the government being able to exercise its authority under ERISA to impose the coverage obligation upon Blue Cross—and it’s that aspect of Form 700 that is the source of Wheaton’s alleged religious objection.

Here is where the Court has gone astray, I believe:

The Court’s conclusion depends upon a particular (mis)understanding of what the United States and Wheaton College have argued.  According to the Court, “[t]he Government contends that the applicant’s health insurance issuer and third-party administrator are required by federal law to provide full contraceptive coverage regardless whether the applicant completes EBSA Form 700”; and Wheaton “contends, by contrast, that the obligations of its health insurance issuer and third-party administrator are dependent on their receipt of notice that the applicant objects to the contraceptive coverage requirement.”

But the Court is mistaken on both scores:  The Government and Wheaton have not, as far as I know, made any such contentions . . . because they would not be accurate under ERISA. 

The Government has certainly argued, correctly, that it is federal statutes and regulations, not Form 700, that would be the source of Blue Cross’s obligation to provide coverage.  It has not argued, however, that that obligation can become operative “regardless whether the applicant completes EBSA Form 700.”  To the contrary:  In its brief to the Court (p.36) it represented that “an injunction pending appeal would deprive hundreds of employees and students and their dependents of coverage for these important services.”

As for Wheaton College, it does not contend that Blue Cross’s obligations are dependent simply upon notice of Wheaton’s objection to the contraceptive coverage requirement:  Wheaton argues, in addition, that such obligations cannot take effect unless and until the instrument by which the Wheaton health insurance plan is operated is effectively amended to designate Blue Cross as a “plan administrator” under ERISA.  (See footnote 6 of its reply brief in support of its emergency application.)

This is the relevant underlying law, as far as I can tell: In the case of a "self-insured" plan, such as those at Wheaton College, the defendant agencies do not have any affirmative authority under ERISA to require TPAs such as Blue Cross and Companion to use their own funds to provide the contraception coverage to Wheaton employees and students unless the TPAs are “plan administrators” for purposes of ERISA.  ERISA defines such a plan administrator as:

(i) the person specifically so designated by the terms of the instrument under which the plan is operated;
(ii) if an administrator is not so designated, the plan sponsor; or
(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary may by regulation prescribe.  [29 U.S.C. 1002(16)(A)]

According to Wheaton (see footnote 6 of its reply brief), Blue Cross and Companion are not designated as plan administrators according to the terms of the instruments under which the Wheaton health insurance plans are operated.  Therefore, without more, the government would appear not to have the authority under ERISA to direct Blue Cross and Companion to provide contraceptive coverage to Wheaton employees and students.

That’s where Form 700 enters the picture.  As part of the preventive services regulations, the Department of Labor prescribed the following rule for self-insured plans:

In the case of a self-insured group health plan established or maintained by an eligible organization [i.e., an organization eligible for the religious accommodation], . . . the copy of the self-certification [i.e., Form 700] provided by the eligible organization to a third party administrator (including notice of the eligible organization's refusal to administer or fund contraceptive benefits) . . . shall be an instrument under which the plan is operated, shall be treated as a designation of the third party administrator as the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered . . . to which the eligible organization objects on religious grounds, and shall supersede any earlier designation.  [29 C.F.R. § 2510.3–16(b).]*

The Court and Justice Sotomayor therefore appear to be mistaken in assuming (in Justice Sotomayor’s words) that “the filing of the self-certification form merely indicates to the third-party administrator that a religious nonprofit has chosen to invoke the religious accommodation.”  To be sure, filing Form 700 would provide such notice.  But it also does something more, and legally more significant—namely, amend the instrument under which the insurance plan is operated to designate the TPA, Blue Cross/Blue Shield, as an ERISA “plan administrator”**—a designation that, in turn, affords the federal government the authority under ERISA to impose the contraceptive coverage obligation upon BC/BS.

It would therefore appear that Wheaton’s informal notification to the government that it meets the requirements for exemption from the contraceptive coverage requirement on religious grounds might be legally insufficient under ERISA to give the federal government the authority to require Blue Cross to use its own funds to pay for contraceptive services of Wheaton employees.  If so, then the Court’s order would not be a win-win at all:  The women who work for Wheaton College would not receive cost-free reimbursement for their purchase of contraceptives.  In footnote 6 of her opinion, Justice Sotomayor hints at this problem of legal insufficiency:  Wheaton’s third-party administrator bears the legal obligation to provide contraceptive coverage only upon receipt of a valid self-certification,” she writes (citing 26 CFR § 54.9815–2713A(b)(2) (2013); 29 CFR § 2510.3–16(b) (2013)).  “Today’s injunction thus risks depriving hundreds of Wheaton’s employees and students of their legal entitlement to contraceptive coverage.”***
The Court’s own order, however, may fix the problem—at least from the government’s perspective.  The Court’s opinion includes the following key sentence:

Nothing in this order precludes the Government from relying on [Wheaton’s] notice [of its religious objection], to the extent it considers it necessary, to facilitate the provision of full contraceptive coverage under the Act.”

This sentence could be read in at least two ways.  

First, the Court might be suggesting that the Government does not need Wheaton to file Form 700 in order to have the authority under ERISA to direct Blue Cross to provide coverage--that is to say, that Wheaton’s notification to the Government itself can (in the Labor Department’s words) “be treated as a designation of the third party administrator as the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered.”

Justice Sotomayor wonders where the Court gets the authority to “rewrit[e] administrative regulations.”  Tom Goldstein responds that this is merely a formal objection, since the Department of Labor could readily issue a notice decreeing that, from this point forward, a religious objection filed with HHS will, like Form 700, be treated as the designation of the objector's TPA as an ERISA "plan administrator."  

Tom may well be correct that such a simple new notice would satisfy the regulatory requirement.  The more difficult question, however, is whether such a "solution" would satisfy Wheaton College.  Wheaton claims to object to filing Form 700 precisely because the Government treats that form as a designation of Blue Cross as a plan administrator, and thus as creating the necessary conditions for the government’s directive to BC/BS to provide contraception coverage.  Wheaton claims that (however implausibly) this would make it complicit in the use of contraception.  If, under the Court’s ruling, the government can treat Wheaton’s informal notice as having precisely the same legal effect, presumably Wheaton would insist that its religious exercise is still substantially burdened in exactly the same way, notwithstanding the nominal change in the form.  I tend to agree with Tom's assessment that Wheaton College would be likely to lose that RFRA challenge, based upon the signals in Hobby Lobby, especially those in Justice Kennedy's concurrence.  But that remains to be seen and, more to the point, if the government were to do what Tom suggests, that would require the Court to make at least a preliminary assessment of the merits of the RFRA question as applied to an objection to the secondary accommodation, something it took care to avoid in Hobby Lobby and in its Wheaton College order yesterday.

There is another reading of the Court's key sentence, however--“Nothing in this order precludes the Government from relying on [Wheaton’s] notice [of its religious objection], to the extent it considers it necessary, to facilitate the provision of full contraceptive coverage under the Act.”--that just might thread the needle.   

Perhaps the Court is indicating that, notwithstanding ERISA, RFRA itself (a later-enacted statute) gives the government the authority to require a third-party administrator such as Blue Cross to provide contraception coverage in order to alleviate an employer’s alleged religious burden—at no cost to the administrator, since the government will compensate it in the form of a reduction in user fees (see Hobby Lobby footnote 8)—even without designating the TPA as a “plan administrator” for purposes of ERISA. 

There is language in the Court’s Hobby Lobby opinion that could support such a theory of RFRA as an authorization statute.  The Court there wrote that RFRA “surely allows” modification of an existing government program in order to accommodate a religious objection, and that “both RFRA and its sister statute, RLUIPA, may in some circumstances require the Government to expend additional funds to accommodate citizens’ religious beliefs” (citing 42 U.S.C. § 2000cc–3(c), a RLUIPA provision stating that “this chapter may require a government to incur expenses in its own operations to avoid imposing a substantial burden on religious exercise”).

In other words, RFRA may in certain circumstances authorize the government to take affirmative steps to accommodate religion (even absent a new statutory appropriation) that it would not have been authorized to take under the corpus of federal statutory law in the absence of RFRA. 

It remains to be seen whether that construction of RFRA would work here, i.e., whether the government will conclude that it can now simply notify Blue Cross/Blue Shield of a new obligation it has under the Court’s understanding of RFRA.  But if the government does so, Wheaton College presumably would not object, since that scenario would be indistinguishable, even on formalist grounds, from the conscientious objector model that the College argued would not make it complicit in the use of contraception (see footnotes 4 and 5 of its reply brief).

The ball is in the government’s court, and it will be interesting to see what it does.  Stay tuned.


*In response to comments questioning the Department’s authority to treat Form 700 as such a designation and plan instrument, the Department of Labor explained that “it has legal authority to require the third party administrator to become the plan administrator under ERISA section 3(16) for the sole purpose of providing payments for contraceptive services if the third party administrator agrees to enter into or remain in a contractual relationship with the eligible organization to provide administrative services for the plan.  The Department of Labor has broad rulemaking authority under Title I of ERISA, which includes the ability to interpret the definition of plan administrator under ERISA section 3(16)(A)(i).  The Department of Labor's interpretation of the self-certification described herein as one of the ‘instruments under which the plan is operated’ is consistent with the plain meaning of the term because it identifies the limited set of plan benefits (that is, contraceptive coverage) that the employer refuses to provide and that the third party administrator must therefore provide or arrange for.”  78 Fed. Reg. 39,879 (July 2, 2013).

** The Government’s brief to the Court specified that Form 700 “‘will be treated as a designation of the third party administrator(s) as plan administrator and claims administrator for contraceptive benefits’” (quoting 78 Fed. Reg. 39,879).

*** This issue does not arise with respect to non-self-insured plans eligible for the secondary accommodation, because in such cases the government can simply require the issuer, such as Aetna, to pick up the tab, without the need for any further ERISA designation.  Nor does the distinction make a difference in a case, such as Little Sisters of the Poor, where the insurance plan is a "church plan" for purposes of ERISA.  As I explained in a couple of earlier posts and as Justice Sotomayor notes in footnote 6 of her dissenting opinion in Wheaton College, because of a quirk in ERISA the government does not have the authority to require third-party administrators of "church plans" to provide reimbursement for contraceptive services in any event.  Therefore the nature of the form used by the employer will not affect whether its employees get such coverage.

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