Source: http://balkin.blogspot.com/2013/12/hobby-lobby-part-iiitheres-no-employer.html
Timestamp: 2015-03-28 05:16:26
Document Index: 31374261

Matched Legal Cases: ['§ 4980', '§ 4980', '§ 18081', '§ 4980', '§ 4980', '§ 4980', '§ 4980', '§ 4980', '§\n5000', '§ 4980', '§ 4980', '§\n5000', '§ 4980', '§ 4980', '§ 4980', '§ 4980', '§ 4980', '§\n4980', '§ 4980', '§ 4980', '§ 4980', '§ 2000']

Balkinization: Hobby Lobby Part III—There is no “Employer Mandate” [UPDATED 12/18]
offer a health insurance plan to their employees. As
Joey Fishkin explained here, the whole point of the ACA is to create a new
universal entitlement—affordable health insurance, including for the specified preventive services. Individuals generally
receive such coverage in one of four ways: (i) through Medicaid,
if they’re eligible; (ii) through Medicare, if they’re eligible; (iii) through
an employer-provided insurance plan, if their employer offers one; or (iv) on
the government “exchange,” if the individual is not covered in one of the other
three ways. With respect to individuals who have no choice but to purchase their insurance on the exchange, the creation of the
exchange itself makes the cost of insurance lower; and most such persons also receive a premium tax credit or cost-sharing reduction
from the federal government to make the purchase affordable. (The
government subsidies for this fourth option are calibrated to family income; my
understanding is that the premium tax credit and cost-sharing reduction are not
available for those families with income above 400% of the federal poverty
level, or about $94,000 for a family of four. But even for more well-to-do employees, the cost of health
insurance on the exchanges will be considerably less than what the market price
would be in the absence of the ACA.)
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).
statutory provision in this regard is 26 U.S.C. § 4980H(a), which bears the appropriate title “Shared responsibility for employers.” It amends the Internal Revenue Code to provide that a large
employer (one that employed
an average of at least fifty full-time employees during the preceding year) must make an “assessable payment” to the IRS if it
chooses not to offer its full-time employees participation in an
employer-sponsored health insurance plan. (The assessment only kicks in in months where at least one
full-time employee of the company receives a government-provided premium tax credit or
cost-sharing reduction for enrollment in a health plan on the exchange. I
assume this will be true in virtually every month for these employers.) 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.
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.”).
mistaken. There is no underlying “employer mandate” that requires large employers
to offer an employee health insurance plan. There is only § 4980H itself. And as the Court of Appeals for the Fourth Circuit recently explained in
University case, § 4980H “does not
punish unlawful conduct”—instead, it “leaves large employers with a choice for complying with the
law—provide adequate, affordable health coverage to employees or pay a tax.” 733 F.3d at 98. (The court further explained that the amount
of the exaction “is proportionate” to the need to ensure universal coverage, “rather
than punitive.” Id.) 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
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.
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.”). And
more to the point, the principal function of the assessment is merely to ensure
that large employers make a reasonable contribution to the cost imposed upon the
federal government to provide affordable insurance to individuals on the
exchanges—including the employers’ own employees, if they are forced onto the
exchange by virtue of the employer’s choice to discontinue its own plan. (In this respect, it is a compensatory
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
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
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.
assume, for present purposes, that the first of those two options—offering employees
access to health insurance with coverage of the 18 required, FDA-approved forms of birth control—would
“substantially burden” the exercise of religion of Hobby Lobby’s and Conestoga Wood’s owners for purposes of RFRA. (Time
permitting, I may subject that assumption to further examination in future
posts . . . but we can accept it as true for now.)
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
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.
starters, it would be untenable for the plaintiffs to argue—and they have not
alleged—that making the payment itself would violate their religion by making them
complicit in, or responsible for, the use of contraceptives by anyone who
subsequently uses insurance purchased from a government exchange. After all, plaintiffs’ tax dollars already are used by the federal
government to subsidize insurance provided on the exchanges, as well as through Medicaid
and Medicare . . . and, with good reason, these employers do not argue that the
government’s tax assessments substantially burden their religious exercise by
virtue of the fact that a tiny fraction of the federal treasury is used in a
way that eventually subsidizes the use of contraception. (Federal dollars are, after all, used
to pay for many things that are religiously or morally objectionable to many
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
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
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
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. Older Posts