Could the Hobby Lobby Ruling Unleash a ‘Parade of Horribles’?

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In a 5-4 decision early this week, the Supreme Court ruled that closely held for-profit corporations with sincerely held religious beliefs do not have to provide a full range of birth control to their employees, dramatically limiting the contraceptive mandate in the Affordable Care Act.

The families that own the two companies named in the case, craft goods chain Hobby Lobby and cabinet maker Conestoga, claimed that the mandate forced them to make a choice between going against their faith or paying significant fines. The government and its supporters, meanwhile, countered that there was a difference between the owners of closely held corporations, who have every right to their religious beliefs, and the company they have incorporated. It is the corporation, rather than the families, that employs the workers. As such, it should be required to follow federal laws — such as the Affordable Care Act – and provide health care benefits, including contraception, to its employees.

Most of the Supreme Court judges disagreed with the government. Writing the majority opinion, Justice Samuel Alito noted that since the judgment applies just to closely held corporations, the impact was unlikely to be widespread. He added that the case could be made for other health mandates depending on the overarching goal they are designed to achieve. Dissenting from the majority view, Justice Ruth Bader Ginsberg wrote in her opinion that the decision opens the door for businesses to try to opt out of other medical coverage. For example, she noted, companies whose owners practice Judaism, Islam or Hinduism might now be able to deny their employees blood transfusions, vaccinations or medications derived from pigs on the grounds that these violate their religious beliefs.

In this podcast, Wharton legal studies and business ethics professor Amy Sepinwall discusses her reaction to the decision and its potential ripple effects.

An edited transcript of the conversation appears below.

Knowledge@Wharton: Could you tell us a little bit about your reaction to the Court’s decision?

Amy Sepinwall: I wasn’t terribly surprised because I think the doctrine compelled the outcome. Given the law as it stands, the Court had to decide as it did. I wasn’t particularly surprised that Justice Alito had written the opinion on behalf of the majority. He seems to be the Justice who is most inclined to take on questions that have moral dimensions.

Knowledge@Wharton: In terms of the opinion and the dissent — what do you think are the notable points that were made?

Sepinwall: One of them — and I think this is of special relevance to your readers or listeners — goes to the extension of the Religious Freedom Restoration Act to for-profit corporations. This was the first case that allowed that for-profit corporations could claim rights of religious free exercise under this statute — the Religious Freedom Restoration Act, or RFRA for short. That’s a very important move, and to my mind it’s not an untoward move.

“The dissent thinks that once you go into the world of profit-making, that’s your central purpose and it doesn’t make sense to view the for-profit corporate entity as the kind of entity that has any kind of religious interests.”

The dissent takes the majority to task for treating for-profit corporations in the same way that it would treat not-for-profit religious organizations like, for example, a religious university. The dissent thinks that once you go into the world of profit-making, that’s your central purpose and it doesn’t make sense to view the for-profit corporate entity as the kind of organization that has any kind of religious interests.

I believe that’s a very cynical take on what corporations are about. It is certainly not the kind of take to which I would subscribe. It is [also] a potentially dangerous take insofar as it would seem to license corporations to do nothing but pursue profits. In point of fact, many corporations do things other than simply pursue profits. Many of them are engaged in philanthropy. Many of them have the kind of commitments that propel them to want to safeguard the environment or take care of their workers. That’s all to the good.

If we’re going to celebrate those aspects of the corporation then I think it’s important to also recognize that some of the convictions that a corporation might have are religiously motivated and, within limits, to accommodate those convictions.

Knowledge@Wharton: What do you expect to be ripple effects from this decision?

Sepinwall: I think a number of for-profit corporations probably will seek an exemption from some or all of the contraceptive mandate. I think it becomes incumbent upon the federal government to provide alternative ways for women to get the contraceptive coverage that they wouldn’t get if their corporation receives an exemption.

It may be that corporations will seek religious exemptions from other parts of the Affordable Care Act. The dissent raises a potential parade of horribles. Religions that prohibit the use of vaccinations — where a corporate owner is an adherent of that religion — that corporation might seek an exemption from health coverage for vaccinations or blood transfusions. But if the Court is careful in its application of [the] Hobby Lobby [judgment] — and I very much hope that it will be — it will treat each of those on a case-by-case basis. So, the fact that Hobby Lobby received an exemption from the contraceptive mandate won’t automatically entail that the corporation whose owners are religious and object to blood transfusions or object to vaccinations automatically receive an exemption from having their health insurance plans cover those items.

Knowledge@Wharton: There has been a lot of talk about that “list of horribles” from the dissent coming to pass from those who are against the ruling. But it sounds like what you’re saying is that the case doesn’t necessarily mean that any of those things are now fair game. Could you explain that?

Sepinwall: The case applies a three-part test. The first part requires that the person who is raising the religious objection show that the rule or law in question imposes a substantial burden on them by virtue of their religious commitments. And then, if they can establish that the rule does impose a substantial burden, the Court looks to what interest the government had in passing the rule or law. That interest has to be compelling.

If it is compelling, the next question is, “Has the government identified a way of serving that interest that imposes the least burden — the lowest burden — on the religious believer?” So, even though the rule or law conflicts with the believer’s belief, so long as it does so in the least restrictive way, the law will be upheld.

Take the case of blood transfusions, for example. Suppose again an owner objects to blood transfusions on religious grounds and doesn’t want the health care package that he or she offers to include coverage for blood transfusions. It’s probably the case that, just in virtue of the religious belief following from Hobby Lobby, the owner will succeed in establishing that the rule requiring that the insurance include coverage for blood transfusions constitutes a substantial burden. So, that part of the test would be satisfied. At the same time, surely the government has a compelling interest in ensuring that people who get health insurance have coverage for blood transfusions if they’re life-saving in many instances. So, the government can establish that its requirement is sustained by a compelling interest.

“It becomes incumbent upon the federal government to provide alternative ways for women to get the contraceptive coverage that they wouldn’t get if their corporation receives an exemption.”

Then the last part of the test, again, looks to whether this is the least restrictive means. There it would seem like the government would have a very strong argument that employer-issued health care coverage is the norm for most working Americans and there really isn’t an alternative way for individuals to get coverage, or least not an established alternative way for individuals to get coverage for blood transfusions.

That’s in contrast to the contraceptive case where the government had already set up an alternative regime for employees of not-for-profit religious organizations. It had already set up an accommodation whereby it had gotten insurance companies to agree to offer that contraceptive coverage that the not-for-profit organizations didn’t want to fund. The insurance companies will offer that to the female employees of these not-for-profit organizations at no charge at all to the employees and at no charge at all to the religious organization that objects to them.

So, given that this accommodation has already been established for not-for-profit organizations with religious objections to contraception … it was very easy for the Court and Hobby Lobby to say, “You can just use the very same arrangement for for-profit corporations that have religious objections to some parts of the contraceptive mandate.”

Knowledge@Wharton: Do you expect there to be — or do you think there needs to be some legislation passed or debated in reaction to this decision, particularly with relation to the Affordable Care Act?

Sepinwall: I would certainly welcome an amendment that guaranteed that women would not be adversely affected by religious exemptions to the contraceptive mandate. [The amendment could establish that] whether it’s the government that pays for the contraception or the insurance companies themselves, there will be a ready alternative at hand for the women in question.

Knowledge@Wharton: You have written an opinion piece for the Washington Post back in March about this case. And you noted that the way the health care system is structured in the U.S. plays a large part, as does this question of whether corporations can have consciences. Can you talk a little bit about what you see as the interplay between those two?

Sepinwall: I don’t know that there is an interplay. There has been scholarly commentary to the effect on the one hand, that corporations can themselves practice religion and have consciences. And on the other hand, commentary that takes that line of argument to be completely implausible. My own view is that it isn’t relevant because whether or not the corporation can itself practice religion doesn’t decide the question of what we should do about the fact that some individuals come to own businesses … and those individuals have religious convictions. It seems to me that a state that takes seriously its obligations to respect religious free exercise has to understand that individuals are not going to want to leave their religious convictions at the corporate office door, as it were. They’re going to want to have those convictions respected within the context of their day-to-day work life.

The question of a corporate conscience is something of a red herring. There is this entirely separate issue of how we should go about structuring health care, as you note. And you’re finding me in Canada today on Canada Day. And so, I’m perhaps especially drawn to the idea of government-funded health insurance. One of the virtues of government-funded health insurance is that it … completely eliminates the need to think about how providing health care coverage might or might not interfere with a person’s moral or religious convictions, right? The government is just in charge of administering the whole system. And as a result, no one has to feel like their own conscience is implicated in conferring health care benefits on employees because they are not, in fact, conferring health care benefits on employees. It’s the government that does so. Now, I don’t mean for that to be a knock-down argument in favor of government-funded health care. There are certainly lots of disadvantages that go along with it. I just mean to identify one particular virtue that government-funded health care has.

Knowledge@Wharton: What do you think this decision will mean for consumers and then also for rank and file employees? Do you feel that this is going to play into people’s decisions to work in a particular place?

Sepinwall: It might.

Knowledge@Wharton: Or shop at a particular store?

“It’s possible that consumers who object to the decision will vote with their dollars as it were — will take their business elsewhere where it makes sense to do so.”

Sepinwall: I think that depends on what the government ends up doing in response vis-à-vissupplementing the coverage that may now be missing if a corporation is granted a religious exemption from the contraceptive mandate. If the alternative that the government provides is a really convenient and easy one, I don’t know that it would affect anyone’s decision about where to work. But if there isn’t that kind of alternative, it might very well affect someone’s decision about where to work. I think it’s possible that consumers who object to the decision will vote with their dollars as it were — will take their business elsewhere where it makes sense to do so. But it’s not clear to me that this is the kind of decision that’s going to elicit so much of a backlash that we’re going to see it in consumer provinces.

Knowledge@Wharton: Now, what about employers, because it’s been interesting to me to see some of the coverage where you’ve got various websites publishing a list of the companies that have brought cases up related to this issue. Maybe some are companies that no one would have known what kind of religious or moral values their owners had before this, and now it is all over the Internet. How do you think that impacts the companies? Do you think the potential for backlash plays into the decision of an employer to try to invoke a religious exemption to the contraceptive mandate?

Sepinwall: One of the questions that is going to come up whenever a corporation does seek a religious exemption is, “Is this in fact a corporation that is run according to the owner’s religious beliefs?” Right? Because presumably these corporations are now going to have pay less in terms of health-care coverage subsidization than they would have had to pay had they had to cover all of the 20 contraceptive methods that would ordinarily fall under the law.

Companies that are accorded the religious exemption are going to save money. And you wouldn’t want it to be the case that some other company that doesn’t, in fact, have a genuine religious objection to contraception nonetheless seeks an exemption because it’s a money-saving prospect. So you would want to look to various pieces of evidence that support the company’s asserted religious conviction. Maybe their charter says something about the fact that the company should be run in accordance with the owner’s religious beliefs. Or other pieces of evidence — that the company’s stores are closed on Sundays, for example. Again, you’d want for the corporation to be organized in such a way that one could be confident that it sincerely held the religious beliefs that it’s asserting before granting it an exemption

Knowledge@Wharton: Are there any other aspects of the case that I’ve missed? Anything else you find that’s particularly notable?

Sepinwall: There are lots of sort of subtleties in the reasoning and there’s certainly a lot of work for a scholar to be doing in response to the case. But it’s not clear that those have immediate significant impact. Maybe one thing to be said on this score is that the doctrine in the case law as it stands doesn’t do a very good job of thinking about how accommodating someone’s religious belief impacts third parties and what we should do when it does impact third parties’ interests.

Consider some of the classic conscientious objection cases. Suppose, for example, an employee is fired from her job because she doesn’t want to work on Sundays and she is then denied unemployment insurance because it’s taken to be the case that it was her decision not to work on Sundays. You could argue that the denial of unemployment insurance violates the Constitution because she has a right to exercise her freedom of religious belief. That’s a case — someone not wanting to work on a Sunday — where it’s hard to see how third-party interests are deeply implicated. That’s the classic conscientious objection case. Or, again, someone may not want to serve in the military for religious reasons, but they may still have to do some other kind of service. It’s hard to see how someone else is disadvantaged as a result.

But [the Hobby Lobby] cases really do implicate third-party interests directly, and the dissent is at pains to try to find a way to work third-party interests into the analysis. And it’s really difficult to do so. I think that suggests that there’s something wrong with the law because you wouldn’t want it to be the case that third-party interests have to completely yield to the religious believer’s convictions any time the religious believer objects to a particular law that affects third parties.

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6 Comments So Far

Headline on the piece posted “dramatically limiting the contraceptive mandate in the Affordable Care Act” is highly misleading in that of the 20 contraceptive drugs/devices in the regulations, Hobby Lobby objected to four of these that cause or lead to the termination of a pregnancy. In my opinion, access to 80% of the contraception drugs/devices covered in the regulations does not warrant a headline or statement of being “dramatically limiting”. This is highly misleading and colors all following comments and discussion on this topic by this speaker, since an honest discussion of the facts does not appear to be on the agenda.

Inflammatory headline and picture. The answer is “No”. The Court majority correctly held that the RFRA limits the Obamacare contraception mandate, and in doing so it reiterates the important point that people organized as corporations are still entitled to important constitutional and statutory rights. Even Justice Ginsburg recognised this when she conceded that the RFRA applies to certain church groups (who are not natural persons).

The Professor’s view was interesting to read, but K@W should set the tone in a professional and accurate way based on knowledge, rather than in a manner more resembling Planned Parenthood.

Patricia

People have choices. Hobby Lobby apparently already provides 16 to 20 other contraceptive choices for women. If you don’t like those choices then either 1) pay for what you want or 2) go work somewhere else.

This would have never been a supreme court case if the White House Administration had taken shots are our freedom of religious right or liberty.

The thing I do agree with is – things will not end here. But it’s because some parts of the law are just plain wrong.

paul@retirementmensch.com

I agree about the picture and headline. So now a corporation can have religious beliefs, contribute unlimited amounts to political campaigns and be salvaged by the government if it is too big to fail. How long will it be before corporations, closely-held or not, will run for political office?

The court erred in creating the religious exemption for the corporation. If a “corporation” is merely an extension of the owners, sharing their moral and ethical ideals and religious affiliation, then it is not a separate entity from the owner, and there is no justification for extending to the owners the financial protections inherent in the corporate form. An owner that wants to claim a religious exemption for there place of business should form as a sole proprietorship or partnership, in which case their individual preferences and biases could be taken into account because they, individually or severally, were parties to the employment contracts. The court’s ruling in this case seems designed to upend centuries of business law by clouding the distinction between the corporation and its owners. While corporations are deemed “artificial persons”, this terminology was instituted so that they could legally enter into contracts and provide an entity that could be sued in lieu of the owner(s), protecting the owners’ fortunes from accidents or the poor judgment of subordinates. It has not implied an equivalent legal status to a “natural person” prior to the Roberts court.

There was a far less destructive remedy that the court ignored, and we will waste much time and effort in reforming large swaths of corporate law around this mistaken judgment.

Nowhere in the article, or anywhere else for that matter, have I seen what the government’s compelling interest is in even making contraceptives available, much less forcing third parties to pay for it. If anything, one would think that a product that, when used according to its purpose, denies the government of future taxpayers (and their tax revenue) would be something that would be in the government’s interest to prohibit.

In any case, it seems to me that a larger point is being missed. Contraception is not a medically necessary product; it is optional. If someone wants contraceptives, they ought to pay for them. Period. The fact that a segment of our population is intent on forcing third parties to pay for them is to me simply another indication of the ongoing infantilization and dependency of our society.