Implementing Health Reform (March 29 update). In a curious turn of events, the Supreme Court on March 29, 2016 ordered the parties in the contraceptive cases to submit supplemental briefs addressing the question of:

Whether and how contraceptive coverage may be obtained by petitioners’ employees through petitioner’s insurance companies, but in a way that does not require any involvement of petitioners beyond their own decision to provide health insurance without contraceptive coverage to their employees.

The order suggests, for example, that petitioners could contact their insurer, rather than the government, and inform their insurer that they do not want to provide contraceptive coverage. The insurer would then independently provide cost-free coverage, informing insured employees that the coverage was not paid for by the petitioner and was not provided under the petitioner’s health plan.

This solution might take care of insured plans, which are in any event independently required by the ACA to provide coverage, but it is difficult to see how it would work for third party administrators of self-insured plans, which would have no obvious authority for providing such coverage absent a direction from the petitioners or the government. It is also difficult to see how this would be acceptable to the petitioners, who would still see themselves as complicit in the provision of contraceptive coverage.

The Court is obviously searching for a less restrictive alternative to the current accommodation, as it is counseled to do by the Religious Freedom Restoration Act. The order suggests that a majority of the court did not find the alternatives offered by the petitioners at the oral argument to be acceptable and are pushing them to come up with additional alternatives that they would accept but which would meet the goal of seamless coverage articulated by the government. There may not be a alternative that meets these criteria.

Update On Justice Alido’s Colloquy. At the close of General Verrilli’s oral argument in the Zubik case there was a brief colloquy that I failed to note in my earlier analysis. In retrospect, it seems worth further comment.

Justice Alito said:

Before you sit down, General Verrilli, could I just ask you this informational question about this particular situation of the Little Sisters?

Their regular third-party administrator also will not provide—has said it will not provide the coverage if—even if they were to comply with the — form of the notice requirement. And, therefore, you say they probably cannot be — there is probably no way under ERISA to obtain contraceptive coverage for their employees unless you can find another third-party administrator that you could deal with there.

In that situation, would the Little Sisters still be subject to fines for failing to comply?

To which General Verrilli responded: “No, we don’t think so.”

The Little Sisters of the Poor have been very much the face of the Zubik litigation. Mr. Clement named this sympathetic group of nuns repeatedly in his argument. Their picture was all over the news the day of the argument.

But the Little Sisters cover their employees through Christian Brothers Services, a self-insured church plan. The government has acknowledged all along that it has no authority under ERISA to require self-insured church plans to provide contraceptives for their enrollees. The Tenth Circuit below recognized this as one more reason why the religious beliefs of the Little Sisters and other similarly situated religious groups were not substantially burdened by the contraceptive regulation — the Little Sisters are effectively not subject to it. Indeed, other groups that object to contraceptive coverage could also conceivably obtain coverage through self-insured church plans, thus avoiding the requirements of the rule.

It is thus, again, unfortunate that the government’s argument failed to explore the substantial burden issue more thoroughly, focusing instead on the compelling interest and least restrictive alternative issues.

Original Post. On March 23, 2016 the Supreme Court once again heard oral arguments in a case involving the Affordable Care Act. The case, Zubik v. Burwell, does not involve a challenge to the constitutionality of the statute, as did National Federation of Independent Business v. Burwell, or even a claim that the government has violated the Affordable Care Act in its implementation of the statute, as did King v. Burwell, but rather a claim that a particular regulation implementing a particular provision of the ACA violates a separate statute, the Religious Freedom Restoration Act (RFRA).

The Legal Background

The Affordable Care Act provides that group health plans and health insurers in the individual and group market must cover without cost sharing preventive services, including women’s preventive services identified in guidelines supported by the Health Resources and Services Administration. The HRSA guidelines, based on recommendations from the National Academy of Medicine, required coverage of all contraceptives approved by the Food and Drug Administration.

Certain religious groups, however, believe that the use of contraceptives (or in the case of some groups, contraceptives that they consider to be abortifacients) is sinful. Recognizing this, the original preventive services regulations created an exception from the contraceptive requirement for churches and similar organizations. Amendments to the regulation recognized an additional accommodation for other nonprofit religious organizations, such as universities, hospitals, or charities affiliated with religious entities, but not for-profit organizations.

Dozens of religious organizations—and dozens of for-profit corporations owned by persons with religious beliefs opposed to contraceptives—filed lawsuits challenging the rule. Although the lawsuits were filed under a number of theories, they were primarily based on RFRA. Congress passed RFRA in the wake of Supreme Court decisions that held that the First Amendment did not prohibit generally applicable regulatory requirements that might incidentally affect religious beliefs. RFRA provides that federal regulations may not substantially burden a person’s exercise of religion unless the federal requirement is the least restrictive means of furthering a compelling governmental interest.

The litigation challenging the contraceptive requirement met mixed results in the federal courts. In 2014 in Burwell v. Hobby Lobby, the Supreme Court settled one of the issues raised by this litigation when it concluded that RFRA protects the religious beliefs of not just of natural persons and religious organizations, but also of closely-held for profit corporations.

In an order entered in another case a few days later, the court suggested that if religious organizations were simply required to notify the government of their objection to the contraceptive requirement, allowing the government to ensure contraceptive coverage, the regulatory accommodation for them might pass muster. Thereafter, HHS amended its regulation to permit this approach as well: religious organizations would only have to notify HHS of their beliefs and identify their insurers or third party administrators (TPAs); HHS would then require the insurers or TPAs to provide contraceptive coverage to employees and students.

Religious nonprofits continued to challenge this accommodation, claiming that it violated RFRA by requiring them to identify their insurers and third-party administrators to the government so that it could enlist them to provide the contraceptives to which the organizations objected. To date, eight of the twelve federal courts of appeal have upheld the accommodation: the second, third, fifth, sixth, seventh, tenth, eleventh, and District of Columbia circuits. Only one, the eighth, has ruled against the government.

Oral Arguments

The Supreme Court oral argument involved appeals from seven of the decisions that ruled in favor of the administration. The one decision unfavorable to the government was not explicitly before the court, although the Court’s decision could affect its ultimate outcome. Paul Clement, who represented the state challengers in the NFIB case, argued the case for the religious organizations, joined by Noel Francisco. Solicitor General Verrilli argued the case for the government.

The Petitioners’ Challenge To The Regulatory Accommodation

Mr. Clement and Mr. Francisco divided up the petitioners’ case, with Mr. Clement arguing that the accommodation imposed a substantial burden on his clients while Mr. Francisco arguing that it was not supported by a compelling governmental interest. Mr. Francisco was also apparently prepared to argue that the accommodation was not the least restrictive alternative for furthering the government’s interest but ran out of time.

Debating The Meaning Of Requiring An Objection To Contraceptive Coverage And The Conscientious Objector Analogy

Mr. Clement began by arguing that his clients, the Little Sisters of the Poor (not the petitioner whose name appears in the case but clearly the most sympathetic of the petitioners) faced millions of dollars in penalties unless they took steps that they believed to be religiously and morally objectionable to provide contraceptive coverage. Seconds into his opening, he was interrupted by Justice Sotomayor who raised a hypothetical that had persuaded a number of the judges below: how is this case different from that of conscientious objectors who have gone to jail because they believed that their registration as conscientious objectors would cause others to serve in their stead?

Mr. Clement responded that it would be difficult to administer a draft system if the government did not know who objected, but that notice of an objection must not be as important here, because churches are under the rule absolutely exempt from the contraceptive requirement without notifying the government.

More to the point, however, Mr. Clement argued that a better analogy would be if conscientious objectors not only had to give notice of their objection, but also list the name of an individual who would serve in their stead. The petitioners, he noted, are not only required to notify the government of their objection, but also to identify their insurer or TPA, which the government will then require to cover contraceptive services.

In response to Justice Kennedy’s prompting to return to his argument, Mr. Clement stated that his client does not “object to objecting,” that is, to putting the government on notice of its position, but rather to the consequences of that objection. Justice Kagan then asked again how the situation of the petitioners was different from that of conscientious objectors who object to objecting because it will make it easier for the government to fill their slot. Mr. Clement responded by suggesting that neither the substantiality of the burden nor his clients’ beliefs were at issue, but that they were not “objecting to objecting” since they did not have a problem with the government providing contraceptive services in some other way to their employees, perhaps through the exchanges, through the Title X family planning program, or some sort of insured national contraceptive program.

In response to further probing by Justice Kagan, Mr. Clement stated that his clients viewed the objection that they are asked to file with the government not as an opt-out form, to which they would not object, but as an authorization form, authorizing their insurer or TPA to provide contraceptives. Here Mr. Clement raised a trope that recurred throughout the argument—the claim that the government was “hijacking” the petitioners’ health plans to provide coverage against their will. In response to further questioning from Justice Sotomayor he clarified that his clients’ objection was not to objecting to the government but rather to having to identify their insurer or TPA so the government could use the insurer or TPA to provide contraceptive coverage.

Justice Ginsburg joined the fray, asking why simply identifying the insurer or TPA was a problem. Mr. Clement responded that his clients were not simply being asked to identify their insurer or TPA but to authorize the insurer or TPA to provide coverage. Justice Ginsburg moved on to discussing the compelling interest supporting the accommodation, but Justice Alito picked up on Mr. Clement’s point, arguing that at least for a self-insured plan, the notice form was a plan instrument authorizing coverage. Justice Ginsburg pointed out that this may have been true under the initial accommodation rules but was no longer true, but Mr. Clement asserted that it continues to be the case under the new accommodation.

At this point Justice Kennedy asked Mr. Clement whether the essence of his clients’ objection to the accommodation was that contraceptive coverage was being provided through their health plans. Mr. Clement agreed, contending that the situation was as if the government moved into one of the Little Sisters’ homes and set up a Title X family planning clinic in it.

When If Ever Can The Government Question A Religious Objector’s Sincere Beliefs?

Justice Kennedy then asked what, I would have thought, was the central question of the case: Does the Court always have to accept a religious objector’s sincere beliefs as to its complicity in the action of third parties or as to the causation of its actions of the subsequent actions of third parties? In an extended answer, Mr. Clement essentially said “yes,” courts cannot question religious beliefs, including beliefs regarding causation. Some of the courts below had rejected this response, holding that causation is a legal question, not a religious question, but the Justices did not push this.

Justice Breyer launched at this point an extended soliloquy, asking how society could function if everyone had a legally protected right to refuse to obey any law to which they objected. Could Quakers refuse to pay war taxes, or Christian Scientists to report an accident that might result in a child getting medical treatment? Mr. Clement responded that the first test was whether there was a substantial burden (which Justice Breyer responded that his hypotheticals assumed), but that further, in this case the government has already assumed that churches should be free from the requirement, and that it could not then draw the line to exclude religious institutions.

Line Drawing Debates

Can the government draw lines between houses of worship and other religious institutions?

Mr. Clement then sat down and Mr. Francisco took over. He focused on the compelling interest issue, arguing that the government had drawn a purely arbitrary and indefensible line between churches, which need neither provide contraceptive coverage nor notify the government of their objection to doing so, and religious institutions such as universities or charities, which must do one or the other. Both types of institutions get tax exemptions, so how can they be distinguished?

Justices Ginsburg and Kennedy pressed him on this, with Kennedy asking how to write an opinion stating that religious universities must always be treated just like churches.

Do exceptions to the contraceptive coverage mandate vitiate the government’s compelling interest argument?

At this point, Mr. Fancicso broadened his argument, asserting that not just churches, but also grandfathered plans, the unemployed, the self-employed, and employees of small businesses were free from the requirement. (This assertion, though not fully explored at until later in the argument is not correct. Grandfathered plans are not subject to the preventive services mandate, but small business that offer insurance are, and individual self-employed or unemployed individuals can only purchase coverage, which they must generally due under the individual responsibility requirement, that covers contraceptives).

Justice Ginsburg noted that transitional grandfathering provisions and the exclusion of small businesses from certain regulations was customary and surely could not mean that any regulations with such exceptions were not supported by compelling governmental interests.

Justice Alito asked if the government could not simply survey employees of churches and religious organizations to see if employees had religious objections to contraceptives, but Justice Sotomayor responded that if employees had such objections they would not use contraceptives. Mr. Francisco responded that there was no evidence supporting the government’s position.

He then pressed further at length with his argument that the government simply could not assert a compelling interest with respect to the petitioners here because so many women are excluded from the protection of the mandate under all of the exceptions to the requirement. Moreover, the government has in fact a less restrictive alternative since many of the women who are not in employer plans subject to the requirement still get coverage.

Justices Kagan, Ginsburg, and Breyer pushed back against these assertions at length, rejecting the notion that just because a requirement contains exceptions for small businesses, churches, or grandfathering provisions for a transitional period (and there was some argument as to whether the ACA’s grandfathering provisions are in fact transitional), it must also contain an exception for religious objectors.

Would Any Method Of Contraceptive Coverage Using Religious Organizations’ Health Plans In Any Way Be Permissible?

Justice Kagan eventually changed the subject, asking if there was any accommodation that the petitioners would find acceptable that would result in the petitioners’ employees or students getting contraceptive coverage seamlessly through their health plans. Mr. Francisco said his clients would not object if their employees got coverage in the same way that all other employees who do not get coverage through their employer-based plans got coverage. Upon further questioning from Justices Kennedy and Ginsburg, he essentially admitted that if his clients’ health plans were in any way used by the government to provide contraceptive coverage, his clients would likely object.

Noting that he had run out of time and could not cover the least restrictive alternative part of his argument, Mr. Francisco sat down.

The Government’s Case

Solicitor General Verrilli then rose. He began by arguing that the regulation struck a sensible balance between the religious liberty of the petitioners and their employees’ interest in contraceptive coverage, but was immediately interrupted by Justice Kennedy who asked whether he then agreed that the petitioners’ beliefs were substantially burdened and only wanted to argue whether the accommodation was the least restrictive alternative.

A Government Concession On A Key Argument?

Under further questioning from Justice Kennedy, General Verrilli admitted that he did not question the sincerity of the petitioners’ beliefs nor their belief that to comply with the accommodation would make them complicit in moral wrong.

Justice Kennedy at this point asked if General Verrilli was conceding the substantial burden issue and focusing only on the least restrictive burden issue. While not explicitly conceding the substantial burden issue (stating that he was “happy to discuss the substantial burden further”), General Verrilli said that he thought the critical question was how RFRA scrutiny applied. He thus effectively conceded what many of the lower courts thought was the government’s most persuasive argument—that causation of the actions of third parties was not a question of religious belief but of law.

The Goal Of The Preventive Services Mandate: Not Just Coverage But Seamless Coverage

General Verrilli proceeded to focus the Court’s attention on another very important issue, however: the point of the preventive services requirement is not simply to provide for coverage of preventive services, but also to require that they be seamlessly provided as part of enrollees’ regular care from their regular doctor. None of the alternatives posed by the petitioners would accomplish this. In response to a clarifying question from the Chief Justice. he reiterated that every alternative the petitioners suggested would not only require Congress to amend the law, but would also require “setting up a one-off jerry-rigged separate channel to get contraceptive coverage.”

The Chief Justice pressed further, noting that the petitioners did not object to their employees getting contraceptive coverage, but rather to the government “hijacking” their insurance plans to provide it, and questioning whether there was a compelling interest in providing the coverage through the plans.

Here, General Verrilli backtracked, trying to rescue the substantial burden issue. He contended that even if the petitioners believed that the regulation made them complicit in providing the coverage they objected to, there were objective limits to what RFRA recognizes as cognizable burdens. But Justice Kennedy would have none of it, returning to the less restrictive alternative issue.

Justice Alito then asked this: Could not coverage simply be provided for those who do not have it through their employer plans free of charge on one of the exchanges (unless this solution was not acceptable because “these exchanges are so unworkable”)? The individual would simply have two insurance cards, as many now do for medical and pharmaceutical coverage. General Verrilli noted that the ACA explicitly prohibits supplemental coverage being sold on the exchanges, but also said this would defeat the purpose of the law, which was again to ensure that women got health care from their regular doctor as part of their regular health care.

Many women, he noted, need contraceptives for medical reasons, and the solution the petitioners urged would prohibit their doctors not just from writing the prescription but also from providing counseling or education. A woman would have to go out and buy a separate plan, and then quite possibly find a separate doctor willing to take that separate plan, if there were insurers willing to sell such a plan.

(Another points that could have been made but was not is that contraceptive coverage is believed to cost insurers little because it spares them from higher costs of deliveries and sterilizations, but that selling it independently would presumably mean that only women who planned to use contraceptives would buy coverage, ensuring that they would effectively bear the full cost of coverage.)

Justice Alito returned to the question of why the ACA did not require grandfathered plans to cover preventive services, as they were required to cover adult children to age 25. This launched another extended debate over the transitional nature of grandfathering provisions, although General Verrilli also noted that 86 percent of all plans cover contraceptives, so most women in grandfathered plans already had coverage, although perhaps not free coverage.

Sotomayor Proposes A Substantial Burden Test

Here Justice Sotomayor finally attempted to return to the substantial burden question. She suggested,

If what your religious belief is asking the government to do is to change … its regulatory behavior with respect to others, then it can’t be a substantial burden, because we live in a pluralistic society in which government has to function.

In other words, the petitioners should not be able to use the government to impose a burden on women who do not share their religious beliefs. General Verrilli started to accept Justice Sotomayor’s test, but was cut off by the Chief Justice, who again said the case was not about the government regulating third parties, but rather about it “hijacking” the petitioners’ insurers and TPAs to work its will.

General Verrilli responded that although the accommodation did use the petitioners’ insurers or TPAs, it did not require them to pay for the coverage, which was provided through segregated funds separately by the insurers and TPAs. The Chief Justice continued:

It seems to me that the balance is pretty clear. You want the coverage for contraceptive services to be provided . . . seamlessly. You want it to be one insurance package. . . . That is the compelling governmental interest. And on the other side, the question is whether or not people who have sincere religious objections to being complicit in that through the hiring of the insurance company, the third-party administrator on terms where they provided, whether the government’s compelling interest outweighs those sincere religious objections. Is that a fair understanding of the case?

General Verrilli conceded that it was, and indeed said, “We would be content if the Court . . . could assume a substantial burden” but that the government had satisfied the compelling interest and least restrictive alternative tests.

This led a no doubt shocked Justice Ginsburg to exclaim, “Now, you aren’t giving up on the substantial burden?” General Verrilli asserted he was not, but he did think it was a hard question, launching another soliloquy by Justice Breyer on the burdens that religious people assume by living in society.

Justice Alito next asked General Verrilli to address Mr. Clement’s hypothetical of the government setting up a Title X clinic in a Little Sisters facility. General Verrilli distinguished this situation because the challenged regulation acts on insurers and TPAs, which are in fact third parties, not on the religious organizations themselves.

Here Justice Alito picked up on the earlier argument that for TPAs, the statement of objection was in fact a plan document. General Verrilli attempted to straighten out the confusion earlier created in his view by Mr. Clement. Although the initial accommodation would have arguably required the petitioners to authorize their TPAs to provide contraceptives under ERISA, under the amended accommodation the petitioners merely need inform the government of their objection, and the government requires the provision of contraceptives.

Returning To Debates Over Line Drawing And The Value Of Seamless Contraceptive Coverage

Chief Justice Roberts then raised the issue of the church exemption again. General Verrilli admitted that no line drawing was perfect, but the line drawn by the regulation generally separates entities with an exclusively religious mission and those for whom the connection to a religious mission is more attenuated. The government is unusually careful in regulating houses of worship.

Pressed by the Chief Justice, General Verrilli then returned to the other exceptions to the preventive services requirement. Grandfathered plans had already been discussed at length. Small employers were not in fact exempted: If they provide coverage, it must include preventive services; if they do not, their employees can get coverage through the exchanges or Medicaid, which must cover contraceptives. But employees of religious organizations could not, unlike the employees of small business, get coverage through a single plan if the petitioners prevail.

Justice Kennedy pressed General Verrilli harder on why employees of religious organizations could not simply get their coverage through individual plans, but General Verrilli again argued that the requirement was to ensure that individuals could get contraceptive coverage without having to sign up for another plan and find another doctor. The Chief Justice said this is just a question of who does the paperwork, the petitioners or their employees.

Chief Justice Roberts asserted that contraceptive coverage was available on the exchanges, prompting a sharp response from Justice Sotomayor, “That’s a falsehood. The Exchanges require full-service health insurance plans,” an assertion with which General Verrilli agreed. The Chief Justice asked, however—showing remarkable knowledge of the ACA—about pediatric dental plans. General Verrilli admitted the pediatric dental exception, but noted that it is an explicit statutory exemption to an otherwise complete bar on non-comprehensive coverage. Chief Justice Roberts then stated “Well, the way constitutional objections work is you might have to change current law,” apparently forgetting this is not a constitutional case.

General Verrilli again attempted to refocus the argument on the question of eliminating barriers to coverage, but Chief Justice Roberts again shot back again that it was simply a question of who does the paperwork. As General Verrilli tried to focus on the barriers to care that Congress tried to eliminate with the preventive services requirement, Justice Kennedy again interjected “That’s why it is necessary to hijack the plans.” Justice Breyer tried to help out at this point, observing that the regulation was designed to protect the “inertia bound” who might not otherwise take the initiative to get coverage.

‘Hijacking’ Insurers And Third-Party Administrators Or Regulating Them?

Justice Breyer then made an important point: The case is not about “hijacking” the petitioners’ insurer or TPA, but rather about regulating insurers and TPAs. The Court seemed oblivious to the fact that the federal government has imposed requirements on insurers and TPAs for at least forty years through ERISA, HIPAA, and numerous other laws and the states have regulated them much longer. These laws have not generally been thought of as hijacking employer coverage, and it is not clear why this one regulation should be singled out for that description.

Justice Alito at this point raised an interesting question: Could not the executive simply say as a matter of enforcement discretion that we are not going to take any action against insurers that illegally offer contraceptive-only coverage on the exchanges, and in fact we will subsidize them? He noted, in a dig at the administration, that this would be in accordance with the administration’s “understanding of executive power.” General Verrilli responded that he did not think the government could do that, but that Justice Alito was missing the seamless coverage point.

Justice Ginsburg observed that there is a difference between an employer filling out a form to identify its insurer and a woman denied this coverage having to go out affirmatively and find it, but the Chief Justice noted that the interest of the petitioners was not simply avoiding paperwork but avoiding complicity in sin.

General Verrilli tried once again tried to refocus the court on the access to seamless care interest of the women involved. He also, in an extended colloquy with Justice Sotomayor, explained how the accommodation works, relieving responsibility from the petitioners for the contraceptive coverage provided by their insurers to their employees while not requiring the employees to get separate coverage with separate providers.

Two Competing Approaches To Resolving The Case

In conclusion, General Verrilli argued that the case was about two alternatives: the government’s serious attempt to accommodate the religious beliefs of the petitioners by creating a system that allows them to exempt themselves from providing contraceptives while protecting their employees, versus an approach that would extinguish the rights of the petitioners’ employees who do not share their religious beliefs until Congress set up a separate program—which would still not provide the seamless coverage the ACA envisioned. He reminded the Court that eight appellate courts had come down on the side of the government.

Petitioners’ Rebuttal: Conscientious Objector Or Conscientious Collaborator?

Mr. Clement rose in rebuttal and focused immediately on the question of Justice Kennedy, clearly the decisive justice, on whether Congress needed to exempt universities just because it exempted churches. Acknowledging the need to draw lines, he attempted, in response to challenges from Justices Ginsburg and Sotomayor to explain why the lines drawn by the accommodation did not make sense and were not defensible.

He concluded by stating, “My clients would love to be a conscientious objector, but the government insists that they be a conscientious collaborator. There is no such thing.”

What Happens Now?

The case now goes to the Court, from whom we will not hear again for some time. It is pretty clear that Justices Ginsburg, Sotomayor, Kagan, and Breyer are prepared to uphold the lower courts. The Chief Justice and Justices Alito, and presumably Justice Thomas who was silent as usual, seem inclined to rule for the petitioners. Justice Kennedy asked hard questions of both sides, although on balance he seemed to lean toward the petitioners. In Hobby Lobby, he seemed to accept that the government had established a compelling interest in providing contraceptives to women, but still sided with the plaintiffs in finding that they had not provided for-profit companies with a least restrictive accommodation.

If Justice Kennedy sides with the government, the government will win. If he sides with the petitioners, the appellate decisions before the court will be affirmed four to four without a precedential Supreme Court decision. The accommodation will be in force in the eight circuits in which it has been upheld. It will presumably not be in force in the eighth circuit—Arkansas, Minnesota, Iowa, Missouri, and Nebraska. Moreover, RFRA law generally will remain unclear.

The Court also has the option of setting the case for rehearing when there is a full complement of justices, but this may not be the case until late in the next term. Enforcement of at least a couple of the appellate court decisions has been stayed pending the Supreme Court decision, and may remain in effect if the Court simply puts the decision off. We will, it is hoped, know more by June.