Thursday, March 24, 2016

The Zubik oral argument (Part I): Of substantial burdens and "hijacking"

Marty Lederman

The transcript of yesterday's argument is here.

Several early reports predict that the Justices will split 4-4 and not issue an opinion.  I think that assumption is premature, and not only because the practical effect of an affirmance by an equally divided Court would be to deny cost-free contraceptive coverage to women who work for objecting religious nonprofit employers in Arkansas, Iowa, Minnesota, Missouri, Nebraska, and the Dakotas, but to guarantee such coverage to beneficiaries of health insurance plans elsewhere in the nation.  (Alternatively, if the Justices are split they could decide to set the argument for rehearing when the Court has a ninth Justice--but in that case, there would be likely be litigation about whether the stays currently in place should remain in effect for another year or more.  Or the Court could affirm the judgments before it, and then hold the government's petitions in the Eighth Circuit cases, Nos. 15-774, Burwell v. Dordt College, and 15-775, HHS v. CNS Int'l Ministries, until there is a full Court.)

The predictions appear to be based upon Justice Kennedy's evident skepticism of the government's argument that the nonprofit accommodation does not "substantially burden" the claimants' exercise of religion.  If that is the basis for the 4-4 predictions, however, they overlook the aspect of the case on which the outcome is likely to turn.

Notwithstanding the fact that the government has prevailed on the "substantial burden" question in almost all the courts of appeals, it has become increasingly evident over the past few months that that is the RFRA ground on which the government is least likely to prevail, in light of the plaintiffs' insistence that the government's arrangement with their insurers would make them complicit in their employees' use of contraceptives (or nonprocreative sex out of marriage); the evolution and strengthening of counsel's description of the "complicity" claims as the cases have reached the Court (so that they are no longer principally based upon mistakes of law); and the Court's deep reluctance to interrogate such religious claims.

Justice Kennedy, like several of the other Justices, expressed concern during the argument that the petitioners' theory of "substantial burden" proves too much, in that it would virtually foreclose judicial assessment whenever a RFRA plaintiff claims that she believes a law makes her impermissibly complicit in sinful conduct, no matter how attenuated and implausible the claim of complicity is.

Even so, Justice Kennedy did not appear to be amenable to the government's proposed limiting principle.  The government (echoed by Doug Laycock and the Baptist Joint Committee for Religious Liberty) is asking the Court to announce a new category of claims that do not "substantially burden" religious exercise as a matter of law, just as the Court did in Bowen v. Roy and Lyng v. Northwest Indian Cemetery Protective Ass'n.  In those cases, the Court held that plaintiffs cannot demonstrate a cognizable burden on their religious exercise by virtue of the government's own "internal" conduct, notwithstanding that the government action in question might in fact have a catastrophic impact on the plaintiffs' religious exercise (such as, in Lyng, by destroying the conditions at Native American sacred sites "without which the[ir] [religious] practices cannot be conducted").  The government proposes in Zubik that the Court should likewise hold that there is no substantial burden, as a matter of law, when RFRA plaintiffs challenge the government's arrangements with independent third parties "in order to fill a regulatory gap . . . created by the government granting an exemption to a religious entity," even if the plaintiffs insist that such third-party arrangements will make them complicit in sin in a way their religion forbids.

Justice Kennedy appeared to be unsympathetic to this "no substantial burden as a matter of law" proposal, at least where the government is not challenging the plaintiffs' allegations of complicity in sin.  He said at argument that if the government is not questioning the plaintiffs' assertions that they believe the accommodation coerces them to be "complicit in [a] moral wrong"--and the government is not challenging that claim--"well, then it seems to me that that's a substantial burden [on their exercise of religion]."

Even if Justice Kennedy does not support the government's "substantial burden" argument, however, that hardly resolves the case.  As Kennedy himself said at the argument, "it seems to me then the analysis has to be whether or not there are less restrictive alternatives" for advancing the government's compelling interests in reducing unplanned pregnancies and ensuring women's equal affordable access to needed health care.

Not surprisingly, then, the "least restrictive means" (LRM) question dominated the argument--or at least the Solicitor General's portion of the argument.  (I, among others, thought that it might be the key to the case, which is one reason why I and my academic colleagues filed this brief largely devoted to the LRM question.)  In particular, the oral argument focused on one of the petitioners' proposed alternatives: as Justice Alito described it, "a woman who does not get contraceptive coverage under . . . a plan offered by a religious nonprofit [would] obtain a contraceptive-­only policy free of charge on one of the Exchanges."

It seems to me the outcome of the case may well turn on whether four or more Justices conclude that this proposed "subsidized contraception-only exchange plan" alternative is a "less restrictive means" of advancing the government's compelling interests, for purposes of RFRA.  I'll discuss that proposed alternative in my next post.

Before I do so, however, in this post I'll briefly address two misleading characterizations that came up in the oral argument:  (i) the idea that, under the accommodation, the government "hijacks" the employer's insurance plan; and (ii) the idea that the accommodation requires objecting employers to "authorize" insurance companies to provide contraception coverage by submitting forms that become "plan instruments" designating those companies as plan administrators.

"Hijacking" the Plan

As Dahlia Lithwick and Lyle Denniston have reported, the Word of the Day was "hijack."  Paul Clement introduced that metaphor early in his argument, and it was repeated throughout, by advocates and Justices alike.  According to Clement, under the accommodation the government "hijacks" the employer's health insurance plan and "provide[s] contraception coverage through their health care plans."  To give the metaphor even more color, he invoked the analogy of the government "com[ing] in to one of the Little Sisters [retirement] homes and set[ting] up shop [to] operate[] a Title X clinic out of our homes."  "I think everyone would understand that, of course, we are complicit in the coverage that's provided on our premises," said Clement.  "And just because this [the alleged plan "hijacking"] is more intangible, I don't think the principle is any different."

Even if Clement's "Title X clinic in our nursing homes" hypo would substantially burden Little Sisters' religious exercise, however--and surely, at the very least, such a commandeering would be deeply insensitive and objectionable on all sorts of grounds, whether or not it made Little Sisters complicit in the use of the birth control distributed there--that hypo isn't analogous to what happens under the accommodation, especially not with respect to Little Sisters.

Clement was referring to cases involving "self-insured" employee insurance plans that are not "church plans," in which the government requires the third-party plan administrator (TPA) to make payments for contraception.  (The government then reimburses the TPA in the form of a reduction in ACA exchange user fees.  For greater detail on how the accommodation works for a self-insured plan, see my posts here and here.)  Notably, this describes the plans of only three of the 37 petitioners: Thomas Aquinas College, East Texas Baptist University, and Southern Nazarene University.  When the TPA of such a plan provides coverage under the accommodation, neither the employer nor the plan pays for anything, directly or indirectly; the TPA must notify employees of the availability of separate contraceptive coverage, in materials that are separate from materials distributed in connection with the plan coverage provided by the employer; and the TPA must make clear to the beneficiaries that the employer “does not administer or fund contraceptive benefits.”  So far, that sounds like the furthest thing in the world from a "hijacking."

It is true, however, that in the case of these three petitioners (but not the other 34, including Little Sisters), ERISA would consider the TPA's payments as being part of the same ERISA plan the employer offers to employees, as a technical matter of ERISA law.  But this is nothing like using a room in the employer's nursing home, or commandeering its airplane to fly people somewhere against their will.  Not only is the government not using any tangible property of the employers; there's really no intangible thing at issue, either (such as intellectual property).  There's merely a legal construct--a set of legal rules under ERISA.  If ERISA did not deem the payments part of the same "plan," the arrangement would, for all that appears, work the same way and look just the same.  (And not even this much is true for Little Sisters, which offers the employees of its nursing homes an ERISA-exempt "church plan."  The government cannot require the TPA of such a church plan to provide the coverage; and if the TPA does so voluntarily, that coverage cannot be "part of" the employer’s ERISA-exempt plan, even as a technical legal matter.)

What is more (and this is important), in the unlikely event that the religious obligations of one of the three employers in question, Thomas Aquinas College, East Texas Baptist University, and/or Southern Nazarene University, turned on the technical ERISA status of the payments--i.e., that one of those schools concluded that the technical ERISA fact that "its" plan is being used meant that it is morally complicit in the employees' eventual use of contraceptives, despite all the separation the accommodation insists upon--that school could simply switch over to an "insured" plan, which is the sort of plan that most employers use, and which is, in fact, what Southern Nazarene University itself uses for its student plan.  If the school did so, the "issuer" of that plan--an insurance company--would make the contraceptive payments independently, not only with all of the forms of employer separation the accommodation requires for all plans, but also outside the auspices of the plan itself, even as a technical ERISA matter.  The regulations specifically provide that the insurer must “[e]xpressly exclude contraceptive coverage from the group health insurance coverage provided in connection with the group health plan” and must instead “[p]rovide separate payments” for contraceptive services.  45 C.F.R. 147.131(c)(2)(i).  In other words, such a plan is not (as Noel Francisco put it at the argument) "the vehicle to delivering the objectionable coverage" to employees, even in a technical ERISA sense.  Any perceived "hijacking" of a self-insured plan, therefore, can easily be avoided by the employer itself.

That brings us to the Chief Justice's quite different notion of "hijacking."  He did not make the same mistake of saying that the government hijacks (or even uses) the employer's plan.  Instead, he said at oral argument that the "objection is that the government is hijacking their process, their insurance company, their third-party administrator that they have hired and set up to provide these services."  The Chief Justice is onto something here, although I don't think "hijacking" is a very apt metaphor for what it is.

The Chief Justice is right:  It is important to the government that the coverage be offered by the particular insurance company that administers the employer's plan, rather than by a company that has no relationship to that plan.  Why?  Because that insurance company, by virtue of its involvement with the underlying employee plan, already has unique, preexisting relationships with the employees on the one hand (namely, information about the employees, such as verification that the women work for the employer, and their addresses), and with their providers (doctors, hospitals, pharmacists) on the other.  Preserving these relationships among parties other than the employer is necessary to ensure that a woman's actual insurance "coverage" is seamless--that the woman does not have to deal with two different insurers for different aspects of her health care, including, probably, different aspects of a particular doctor's care, or even of a single visit to the doctor.  See 80 Fed. Reg. 41328-29.

Those relationships among third parties are the "infrastructure" to which the Chief Justice referred (taking his cue from the more than 40 times the word appears in one of the petitioners' briefs).  To be sure, those particular relationships exist (rather than relationships with a different insurance company) by virtue of the fact that the employer has previously made particular contractual arrangements with the insurer in question and with particular employees--say, Aetna and Jane Smith, rather than Blue Cross and Joe Jones.  But then, that is likewise true in, e.g., the case of a subpoena:  If the government were investigating a case of possible insurance fraud, it would seek information from the particular employees, doctors and insurance companies thought to be involved, rather than from complete outsiders.  And that choice will, of course, be a function of the contracts that the employer chose to make with the insurer and the employees in the first instance.

That hardly seems akin, however, to "hijacking" the employer's room, or plane, or property.  Indeed, to the extent one insists on characterizing this, as the Chief implied, as the government "hijacking" the insurers themselves or its relationships with employees and doctors, in either the subpoena case or the contraceptive accommodation . . . well, in that case the "hijacking" is not of the employer, or of something that belongs to the employer, even in a technical ERISA sense.

"Authorizing" the insurance company to provide contraceptive coverage

There are two ways in which an objecting employer can opt out:  By sending an "EBSA Form 700" to the insurer or TPA, or by sending a notice to HHS.  (Many more details here.)  During the argument, Justice Alito asked Paul Clement whether "the Form 700 or the notice to HHS . . . becomes a plan instrument."  That question is relevant, again, only with respect to self-insured ERISA plans (which only three of the 37 petitioners use), because of another technical aspect of ERISA--namely, that in order for a TPA of such a plan to provide coverage, it must be designated a "plan administrator" by a "plan instrument."

Clement's response was this:  "In both cases, Your Honor, it becomes a plan instrument.  They take our objection and then they provide that objection to the third-party administrator, and at least with the self-insured plans, that becomes every bit as much a plan document as the EBSA Form 700."

That's not correct.  If the employer sends a notice to HHS, then that notice does not become a plan instrument that designates the TPA as a plan administrator.  (As the SG noted, it merely serves to exempt the employer.)  Instead, in that case, the Department of Labor sends a separate notification to the TPA, and the regulations treat that DOL notification as the plan instrument designating the TPA as the plan administrator responsible for providing separate contraceptive coverage.  29 C.F.R. 2510.3-16(b).*

Moreover, once again this technical question of ERISA "designation" of plan administrators is not even relevant to 34 of the 37 petitioners and, in particular, it is inapposite to insured plans, because the insurer of such plans already has a separate and independent statutory obligation to provide coverage separate from the plan when the employer opts out.  Therefore, to the extent Thomas Aquinas College, East Texas Baptist University, or Southern Nazarene University did actually conclude (i) that its actions were "designating" the TPA as a plan administrator (even though they're not), and (ii) that such designation turns morally innocent opting out into morally culpable opting out (color me dubious), that school would have the option of switching over to an insured plan, where such concerns do not even theoretically arise.

* One amicus has argued that DOL lacks the statutory authority to so designate a plan administrator.  I confess that I don't know remotely enough about ERISA to offer a view on the merits of this question.  But even if the amicus were correct, it would only mean that, contrary to the government's view, the TPA is not obligated to provide the coverage.  Accordingly, if a particular TPA believes that DOL lacks authority to designate it as a plan administrator, that TPA can sue DOL and argue that the agency is acting ultra vires and that therefore it does not have to offer coverage.  But whatever the right answer to that ERISA question might be in such a hypothetical suit, it would not change the fact that under the regulation the employer with a self-insured ERISA plan -- i.e., Thomas Aquinas College, East Texas Baptist University, and Southern Nazarene University -- does not have to "designate" the TPA as a plan administrator, even as a technical matter under ERISA.

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