In March 2016, the Supreme Court heard arguments in the consolidated case of Zubik v. Burwell to determine whether the accommodation violated the Religious Freedom Restoration Act. The resolution of this case would be, well, unprecedented.
Three days after arguments, the justices assigned some unexpected homework:
“The parties are directed to file supplemental briefs that address whether and how contraceptive coverage may be obtained by petitioners’ employees through petitioners’ 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.”
In English, the court asked the parties to discuss whether there was some other way for the nonprofit’s insurer to pay for their employees’ contraceptives without the nonprofit formally objecting. Critically, the court suggested, “such coverage is not paid for by petitioners and is not provided through petitioners’ health plan.” But the court was not committed to this approach. “The parties may address other proposals along similar lines,” the order stated, “avoiding repetition of discussion in prior briefing.”
Requests for additional briefing by the Supreme Court are extremely rare. Over the past three decades, the court has ordered supplemental briefing in only 28 cases: Eight cases were rescheduled for argument the following term; in nine cases, additional briefing was requested before the case was argued; and in 11 cases, additional briefing was requested after the case was argued. The 354-word order in Zubik, however, was unprecedented. Rather than responding to changed facts, or questions that arose from the party’s initial briefs or arguments, the Zubik order was a product of the justices’ own agitation. The parties filed supplemental briefs but were still quite far apart.
On May 16, 2016, this unpredictable case took another unpredictable turn. The chief justice, who had announced the court’s decisions in NFIB v. Sebelius and King v. Burwell, read from a short, per curiam decision. “Following oral argument,” Chief Justice John Roberts began, “the Court requested supplemental briefing from the parties addressing ‘whether contraceptive coverage could be provided to petitioners’ employees, through petitioners’ insurance companies, without any such notice from petitioners.’” Both parties “now confirm that such an option is feasible.” The nonprofits, Roberts relayed, “have clarified that their religious exercise is not infringed where they ‘need to do nothing more than contract for a plan that does not include coverage for some or all forms of contraception,’ even if their employees receive cost-free contraceptive coverage from the same insurance company.” Additionally, the United States “has confirmed that the challenged procedures ‘for employers with insured plans could be modified to operate in the manner posited in the Court’s order while still ensuring that the affected women receive contraceptive coverage seamlessly, together with the rest of their health coverage.’”
By all accounts, the chief justice suggested both the plaintiffs and the government agreed that a compromise could be worked out. The chief justice noted, “We anticipate that the Courts of Appeals will allow the parties sufficient time to resolve any outstanding issues between them.” If only it were so easy.
The court’s punt saddled the lower courts with an intractable task. Contrary to the breezy order, a compromise is not at hand. The final chapter of “Unraveled” explains how the intricacies of ERISA, and not the tough-line drawing issues of RFRA, will resolve the fate of the accommodation. In Zubik, the various religious nonprofits utilized three different types of insurance plans that are treated differently for purposes of ERISA: (1) insured plans, (2) self-insured plans, and (3) church plans. The differences between these plans are extremely important, and essential to understanding how the court purported to mediate this conflict and what will happen going forward.
Several of the plaintiffs use insured plans. With an insured plan, the employer purchases a group plan from a health insurer, such as Aetna. Aetna then manages all aspects of the group plan. The Affordable Care Act and its implementing regulations require Aetna to make payments for contraception coverage. If a religious employer notifies the government that it objects to the mandate and wants the accommodation, Aetna must provide contraceptive payments separately from the employer’s insured plan.
In their order, the justices proposed that employers with insured plans would no longer need to object in the manner specified by the regulations. Instead, they might simply “inform their insurance company that they do not want their health plan to include contraceptive coverage of the type to which they object on religious grounds.” Once the insurance company is “aware that petitioners are not providing certain contraceptive coverage on religious grounds,” the same insurer can provide contraceptive payments directly to the employees.
How would this work in practice? A religious university with an insured plan tells its insurer that it would like to contract for a group plan that excludes contraceptives. The insurance company can put two and two together and realize that this request is premised on a faith-based objection. As a result, the insurer would then provide the contraceptive payments without any involvement whatsoever by the employer. Critically, female employees or students could still use their same insurance plan, with their regular doctors, without having to apply for any additional plans.
In his supplemental brief, the solicitor general wrote that this modified accommodation would work “for employers with insured plans … while still ensuring that the affected women receive contraceptive coverage seamlessly, together with the rest of their health coverage.” (It will not work for self-insured plans; we will get there shortly). A senior Justice Department attorney told me that the administration concluded that the court’s proposed solution would “probably work” for insured plans. It “will not be perfect,” and there would probably be “leakage” where some women would not receive contraceptive coverage. But it was feasible.
The challengers mostly agreed that with respect to insured plans, their religious exercise is not infringed where they “need to do nothing more than contract for a plan that does not include coverage for some or all forms of contraception.” But there was a critical distinction. This approach would only be acceptable for the nonprofits so long as contraceptive payments were made pursuant to a totally “separate plan,” and only if the women were required to opt in to such a new insurance policy before seeking any reimbursements. Noel Francisco, who represented Zubik, told me that the court’s order was a “fairly general statement,” and what the challengers offered in their supplemental brief was a “specific alternative that was consistent with what the court suggested, and was also consistent with his client’s religious beliefs.” There is a significant gap between the parties about whether the same or separate plan is necessary. The Supreme Court’s order entirely glossed over that critical difference. On remand, the lower courts will have to decide in the first instance whether providing the payments without a “separate plan” violates RFRA. More pressingly, the justices’ Zubik decision only discussed insured plans.
Rather than purchasing a policy from an insurer, employers can choose to self-insure. Through a self-insured plan, the employer acts as its own insurer and assumes financial responsibility for its employees’ health-care claims. To reduce the administrative burdens, these employers will contract with a third-party administrator, who will manage the administration of the plan.
Under the Obama administration’s accommodation, when a self-insured employer notifies the government that it objects to the mandate, the government then requires the third-party administrator to pay for the contraceptive coverage. The employer would not have any involvement with the payments. However, because of the technicalities of ERISA, the third-party administrator would still be offering the coverage under the auspices of the religious nonprofit’s plan. This prompted the “hijacking” metaphor that was discussed during oral arguments. If the nonprofit does not provide this notification, the third-party administrator would still work for the nonprofit. As the government conceded in its supplemental brief, the court’s alternative approach “would not work” for a self-insured plan, because ERISA does not authorize the government to require the third-party administrator to provide payments independent of the employer’s plan.
A senior Justice Department official told me that though the government was able to work out a solution for insured plans, they “could not really think of anything they could do differently for self-insured plans.” Under ERISA, he said, “the only way to create the obligation for the insurer is to make them a plan administrator.” In order for that to happen, the religious employer has to be “un-designated as the administrator.” Without this initial notification from the self-insured plan, it will not work. The government “tried to brainstorm like crazy to see if there was some way to get around this,” and they simply could not make it work. The solicitor general suggested a workaround: Self-insured employers “could avoid any objectionable features of the regulations applicable to such plans by switching to insured plans.”
An attorney for the challengers said it would be extremely problematic for a religious nonprofit to switch from a self-insured plan to an insured plan. For example, California requires insured plans to cover surgical abortions, but self-insured plans are exempted. (I discuss the details of the state-law mandates in my forthcoming piece in the Harvard Law Review). Switching is a huge burden. “It’s not even close,” he told me. The challengers offered their own workaround: Exempt self-insured plans from the mandate altogether.
The Supreme Court’s decision to remand all of the cases means that the lower courts will now have to grapple with whether the accommodation violates RFRA with respect to self-insured plans. Further, many of the religiously organized for-profit corporations use self-insured plans — as a means to avoid state law mandates — so this issue will linger even after the religious nonprofit cases are sorted out.
Certain nonprofit employers who are affiliated with a house of worship can use a church plan for their employees’ insurance. (Earlier this week, the court granted a stay in a decision that would challenge many of these group’s qualifications for having a church plan). These special plans, also managed by third-party administrators, are exempted from ERISA altogether. As a result, the government cannot require the third-party administrators for church plans to provide contraceptive payments. Instead, the government can only offer to voluntarily compensate the third-party administrator to provide this coverage — which, in this case (as with insured plans), would be entirely outside the auspices of the nonprofits’ plan. As the solicitor general noted in his brief, an employer with a church plan is “relieved of its obligations,” regardless of what the third-party administrator does.
The Little Sisters of the Poor — perhaps the most famous plaintiff in the case — utilize a church plan. Ironically enough, of the dozens of plaintiffs challenging the accommodation, the Little Sisters had the least to fear. Toward the tail end of oral arguments, Justice Samuel Alito interrupted the solicitor general. “Before you sit down, General Verrilli,” he asked, “could I just ask you this informational question about this particular situation of the Little Sisters?” The Little Sisters hired the Christian Brothers Employee Benefit Trust as their third-party administrator. Because Christian Brothers also objected to the contraceptive mandate, Alito noted, they “will not provide the coverage.” As a result, he asked, is there any way for the government to provide “contraceptive coverage for their employees” so long as the Little Sisters contract with Christian Brothers? In other words, “would the Little Sisters still be subject to fines for failing to comply?”
Verrilli answered, “No, we don’t think so.” In five words, the solicitor general admitted that the Little Sisters would not be subject to any fines if they refused to provide the notification to the government, or if their third-party administrator declined to offer payments. In her dissent in Wheaton College v. Burwell, Justice Sonia Sotomayor explained that the Little Sisters’ “third-party administrator was [under] a ‘church plan’ that had no legal obligation or intention to provide contraceptive coverage.” Because the Little Sisters’ “church plan” contracts with Christian Brothers, the government was never able to penalize the nuns for failing to comply. The court’s Zubik order in no way impacted religious organizations with church plans.
Going forward, church plans will remain exempt from fines, but the lower courts will have to figure out what to do with insured plans and self-insured plans. The unanimous per curiam decision solved little. The parties are no closer on these issues than they were before the case was argued.
Of course, as I argued earlier this week, the accommodation itself is ultra vires, so this entire regulatory rigmarole is beyond the competencies and authority of the executive branch.
My sincere thanks to Eugene for letting me blog this week. I hope you’ve enjoyed my posts and enjoy reading “Unraveled.”