Source: https://balkin.blogspot.com/2013/12/hobby-lobby-part-iiitheres-no-employer.html
Timestamp: 2019-04-22 20:06:16+00:00

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The plaintiffs’ theory is that by requiring the companies to offer their employees access to a health insurance plan that guarantees coverage without cost-sharing for certain forms of contraception, the HHS Rule allegedly forces the individuals who own and operate such companies to “participate in,” pay for and “support” their employees’ use of “abortion-causing drugs and devices” (quoting from the Hobby Lobby complaint)—something their religion is said to forbid.
I hope to be able in later posts to examine whether the courts must defer to the plaintiffs’ counterintuitive assertion that such a requirement would compel the plaintiffs to be complicit in their employees’ use of contraceptives in a way their religions prohibit. For now, however, I’ll assume that such deference is appropriate.
Even so, the plaintiffs’ argument about an irresolvable clash between civic and religious obligations runs into a serious obstacle at the outset—namely, that federal law does not impose such a legal duty: the so-called “contraception mandate” is a misnomer.
Rather, what Congress has done under the ACA is to establish a new social benefit to which everyone in the United States is entitled--affordable health insurance, including for certain categories of preventive care--and to offer large employers a choice between two ways of sharing in the societal burden of paying for that new entitlement. At least one of those two employer options almost certainly would not impose a substantial burden on the plaintiffs’ exercise of religion—even on their own account of their religious obligations. Moreover, with respect to that one of the two options a RFRA claim is virtually foreclosed by the Court’s unanimous 1982 decision in United States v. Lee.
As far as I know, every single court that has considered a challenge to the HHS Rule has failed to address this argument, because virtually every court has assumed, incorrectly, that the plaintiff employers are under a legal obligation, enforced by “fines” or “penalties,” to offer their employees access to a health insurance plan. Once it is understood that there is no such obligation, the RFRA claims ought to be seen in a very different light.
1. The Operation and Effect of the HHS Rule—What Must Health Care Plans Include?
OK, one might then ask, but if an employee health insurance plan must include contraception coverage, doesn’t the HHS Rule thereby de facto obligate all large employers to make such contraception coverage available to their employees, since such large employers are required by law to offer, and to partially subsidize, an employee plan? Isn’t that what the Affordable Care Act “employer mandate” is all about?
What the ACA does, instead, is to impose a tax on large employers (just as with Social Security), ensuring that they share in the national burden of the new public entitlement—but with an option allowing such employers to avoid the tax if they offer a health insurance plan to their employees.
The Act requires the nation’s largest employers to share in the national burden of ensuring the comprehensive social benefit of comprehensive, affordable health insurance coverage. In this respect, the Act resembles the Social Security Act, with one very important difference—namely, that the ACA offers employers greater discretion, a choice, about how to satisfy that social obligation. In the case of Social Security, employers must contribute taxes to the government, and the government in turn provides the benefit to individuals. Under the ACA, by contrast, Congress acted against the backdrop of a recent practice in which many large employers offered health insurance to their employees. The legislature decided to build upon, and incorporate, that existing practice in its new scheme. Accordingly, Congress afforded large employers two alternatives: they can, as with Social Security, pay a tax to help subsidize the government’s provision of the benefit (Option iv above)—or they can offer their employees access to an insurance plan itself that gives employees the full scope of the universal benefit (Option iii above).
The statute itself expressly refers to this payment as a “tax,” see id. § 4980H(c)(7), 2 U.S.C. § 18081(f)(2)(A), as well as an “assessable payment.” The amount of the tax is $2000 per year for 30 fewer than the total number of the employer’s full-time employees. (Part-time employees are not counted in this calculation.) So, for example, if Hobby Lobby has 13,000 full-time employees, as it has alleged, then its annual assessment would be 12,970 x $2000 = $25,940,000. As I explain below, this is almost certainly far less than the employer would spend on insurance premiums and/or outlays if it offered its employees a health-insurance plan.
Indeed, because of recent “transition relief” extended by the IRS, if Hobby Lobby and/or Conestoga were to drop their insurance plans today, they would not owe any assessment to the federal government until 2015, and their employees would be entitled to government-subsidized insurance on the exchanges without any cost to the employers for the next year.
When the assessment obligation goes into effect, in 2015, the taxes submitted by large employers without employee plans would go into general revenues at the Treasury Department (as far as I know). They thereby will indirectly help to subsidize the premium tax credit or cost-sharing reduction that the federal government offers to most individuals who have no option but to purchase their health coverage on a health insurance exchange. Critically, such individuals include, of course, the employees of those employers that choose not to provide a health-insurance plan.
Virtually every court of appeals that has decided one of these contraception cases—including the courts in Hobby Lobby and Conestoga Wood—has assumed that § 4980H imposes a “penalty” or “fine” upon an employer for failing to abide by a legal requirement to provide employee health insurance. See, e.g., Hobby Lobby, 723 F.3d at 1125 (CTA10) (“If the corporations instead drop employee health insurance altogether, they will face penalties of $26 million per year.”); Conestoga Wood, 724 F.3d at 393 (CTA3) (“In the alternative, Conestoga presumably could drop employee health insurance altogether, and it would then face a reduced fine of $2,000 per full-time employee per year (totaling $1.9 million).”); Autocam Corp. v. Sebelius, 730 F.3d at 621 (CTA6) (“Autocam would still face substantial financial penalties if it chose to drop coverage entirely because it is required to provide health insurance to its employees due to the company's size.”); Korte v. Sebelius, 735 F.3d at 660 (CTA7) (“If an employer discontinues offering a health plan altogether, the penalty is $2,000 per year per employee.”); see also Thomas More Law Center, 651 F.3d at 534 (CTA6) (§ 4980H “requires certain large employers to offer health insurance to their employees”); New Jersey Physicians v. POTUS, 653 F.3d at 237 (CTA3) (§ 4980H “penalizes such employers if they fail to offer their full-time employees the opportunity to enroll in an employer-sponsored insurance plan”); Florida v. HHS, 648 F.3d at 1260 (CTA11) (“The Act imposes a penalty, also housed in the Internal Revenue Code, on certain employers if they do not offer coverage, or offer inadequate coverage, to their employees.”).
Sound familiar? It should. Courts of appeals offered virtually the same exact mistaken reading of the ACA in the so-called “individual mandate” cases—until the Solicitor General and then the Supreme Court corrected them in the landmark Health-Care Cases (a/k/a NFIB v. Sebelius). You may recall that § 5000A of the Act—the provision at issue in the Health Care Cases—actually provides that an individual “shall” maintain a minimum level of health coverage, and that a “penalty” shall be imposed on any person who “fails to meet th[at] requirement.” Even in light of this language of obligation, the Court held that the “shared responsibility payment” of § 5000A “merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance,” 132 S. Ct. at 2597.
So, too, § 4980H merely imposes a tax that employers may lawfully choose to pay “in lieu of” offering their employees access to a health insurance plan. And, most importantly, here, too, “[n]either the Act nor any other law attaches negative legal consequences to not [providing employee] health insurance, beyond requiring a payment to the IRS,” so that if an employer “chooses to pay rather than [provide] health insurance, they have fully complied with the law.” Id. at 2597. Indeed, in this respect, construing § 4980H to offer a choice among lawful options is a considerably easier task than it was for § 5000A, for there are no comparable terms of apparent compulsion (such as “shall provide insurance”) in § 4980H—the requirement of an “assessable payment” to the IRS, denominated a “tax” rather than a “penalty,” is all there is.
To be sure, even in the absence of an express regulatory duty, a tax can in effect be so disproportionate to its condition that it can only be understood as a penalty for engaging in, or not engaging in, certain conduct—a “mere penalty with the characteristics of regulation and punishment.” NFIB, 132 S. Ct. at 2599. For example, if federal law did require employers to provide employee health insurance, then even though the ACA does not in so many words expressly impose a legal requirement that such insurance cover contraception and other preventive services, the extremely onerous taxes assessed by § 4980D—in effect putting employers to the choice between including such coverage and shutting down their business—would impose a de facto legal obligation to include such coverage.
The § 4980H(a) assessment, by contrast, does not even come close to being a “mere penalty” for failing to offer health insurance to one’s employees, especially since it will generally be far less costly to an employer than retaining an employee health insurance plan. To be sure, Congress might have designed § 4980H(a) to provide some incentive, at least at the margin, for large employers to retain their employee health insurance plans. But “taxes that seek to influence conduct are nothing new.” NFIB, 132 S. Ct. at 2596; see also Steward Machine Co. v. Davis, 301 U.S. at 589-590 (“[E]very rebate from a tax when conditioned upon conduct is in some measure a temptation. But to hold that motive or temptation is equivalent to coercion is to plunge the law in endless difficulties.”).
Accordingly, neither the ACA nor any other federal law imposes any duty upon Hobby Lobby and Conestoga Wood to provide employee insurance coverage, let alone to provide coverage for the purchase of contraceptives. Instead, the ACA affords those companies, and other large employers, “a lawful choice,” NFIB, 132 S. Ct. at 2600, about how to share in the burden of ensuring the new national entitlement: They must either offer their full-time employees and their dependents an opportunity to obtain coverage under an employer-sponsored health insurance plan, or pay assessments to the federal government, so that the government can in turn subsidize health insurance on an “exchange” for otherwise-uninsured employees, including the employer’s employees. This explains why provisions such as these are colloquially known as “Pay or Play”--because both paying and “playing” are valid, lawful options.
3. The Effect of the § 4980H Employer Choice on Plaintiffs’ RFRA Claims.
How does § 4980H(a) affect the RFRA question in our two cases? Crucially, it means that the plaintiffs cannot prevail unless they demonstrate that each of their two lawful options would “substantially burden” their exercise of religion.
Even so, federal law does not require the employers to provide their employees with access to such insurance—they can make a § 4980H tax payment instead, and thereby remain fully in compliance with the law. The question thus becomes whether the plaintiffs have pleaded facts that, if proved, would demonstrate that RFRA requires an exemption from payment of the § 4980H(a) tax. I don’t think they have. Indeed, their claims likely would not get beyond the RFRA threshold inquiry, since plaintiffs have not alleged facts that would demonstrate that paying the tax would substantially burden their religious exercise.
Indeed, a central component of plaintiffs’ own RFRA arguments is that a “less restrictive” means for the government to further its interests without substantially burdening plaintiffs’ religious exercise would be for the government to use its own revenues to subsidize contraceptive use by Hobby Lobby and Conestoga Wood employees. Well, that is exactly what would occur if those employers were to choose to make a § 4980H(a) payment rather than offering their employees access to an employer plan.
For this reason, plaintiffs have not alleged, and presumably would not argue, that their religion prohibits making the payment itself, or that § 4980H somehow requires them to violate a religious injunction.
That does not end the “substantial burden” analysis, however. To understand why, I’m afraid a bit of background is in order concerning the “substantial burden” prong of RFRA. Those who don’t wish to be bothered with the legal minutiae can skip ahead a few paragraphs.
As I noted in my first post, Congress intended RFRA to incorporate by reference the Supreme Court’s Free Exercise Clause doctrine from the period between Sherbert v. Verner (1963) and Employment Division v. Smith (1990), a body of case law that Congress determined to be “a workable test for striking sensible balances between religious liberty and competing prior governmental interests.” 42 U.S.C. § 2000bb(a)(5). The committee reports made clear that courts should “look to free exercise cases decided prior to Smith for guidance in determining whether the exercise of religion has been substantially burdened and the least restrictive means have been employed in furthering a compelling governmental interest. . . . [T]he compelling interest test generally should not be construed more stringently or more leniently than it was prior to Smith.” S. Rep. No. 111, 103d Cong., 1st Sess. 8-9; accord H.R. Rep. No. 103-88, 103rd Cong., 1st Sess. 7 (1993); see also id. at 14-16 (views of Reps. Hyde, Sensenbrenner, McCollum, Coble, Canady, Inglis, and Goodlatte) (“A major issue of contention in the 102nd Congress was whether the bill was a true ‘restoration’ of the law as it existed prior to Smith or whether it sought to impose a statutory standard that was more stringent than that applied prior to Smith. . . . Several changes were made to the bill during the Judiciary Committee markup in late September of 1992 and prior to the bill’s introduction in 103rd Congress. [ML: Most importantly, earlier proposed versions of RFRA had required the government to show that denial of an exemption was “essential to” a compelling government interest; but RFRA as enacted requires the government merely to show that the denial is “in furtherance” of a compelling interest.] These changes resolved the ambiguity about the standard to be applied and made it clear that the bill does not reinstate the free exercise standard to the high water mark as found in Sherbert v. Verner and Wisconsin v. Yoder, but merely returns the law to the state as it existed prior to Smith. . . . The amendments . . . make clear that the purpose of the statute is to ‘turn the clock back’ to the day before Smith was decided.”).
In particular, RFRA’s use of the phrase “substantial burden” was designed to refer to the sorts of burdens on religious exercise that the Court of the pre-Smith era would have recognized as triggering the requirement for the government to justify denial of an exemption under the “compelling interest” test.

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