Opinion

The Judicial Branch and The Affordable Care Act Implementation Process

By Julius W. Hobson
July 8, 2014 at 5:00 am ET

Two years ago, the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act (ACA).  While the Court settled the constitutionality of the ACA, the legal and political fight over implementation has been ongoing.  This is evidenced by the recent Court opinion in the Hobby Lobby case, as well as the over 50 different court challenges making their way through the judicial process.

First, the Patient Protection and Affordable Care Act (ACA) requires specified employer-sponsored group health plans to provide preventive care and screenings for women without any cost sharing requirements.  However, Congress delegated to the Executive Branch the responsibility for promulgating regulations implementing this provision of the ACA.  The case arose after the Department of Health and Human Services, through the Health Resources and Services Administration (HRSA), proposed regulations which exempted religious organizations but not for-profit businesses.  Hobby Lobby, organized under Oklahoma state law, and Conestoga Wood Specialties, organized under Pennsylvania state law, are for-profit corporations.  The owners alleged that the regulations violated their religious beliefs.

In a 5-4 decision, the United States Supreme Court ruled HHS cannot, through regulations, require closely held corporations to provide contraceptive services against their religious beliefs.  A majority of the Court said the regulations violate the “Religious Freedom Restoration Act of 1993” (RFRA).

RFRA states the “Government shall not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability.”  It provided an exception if two conditions are both met.  The government may substantially burden a person’s exercise of religion only if it demonstrates that the application of the burden to the person—“(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.”  The Court ruled the Federal government failed to meet this test.

It is important to note the decision did not affect the ACA statute.  Rather it was directed at the regulations issued by HHS, concluding they violate the RFRA.  The RFRA was enacted to prevent laws that substantially burden a person’s free exercise of his/her religion.  It was introduced in 1993, by Representatives Howard McKeon [R-CA] and Dean Gallo [R-NJ].  It passed the U.S. House of Representatives by voice vote and the Senate by a vote of 97-3.  The legislation was signed into law by then President Bill Clinton on November 16, 1993.

The decision is narrowly written to apply only to closely held corporations.  What is a closely held corporation?  According to the Internal Revenue Service, a closely held corporation is one that:

  • Has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year; and
  • Is not a personal service corporation.
  • The definitions for the terms “directly or indirectly” and “individual” are in IRS Publication 542, Corporations.  A closely held corporation is subject to additional limitations in the tax treatment of items such as passive activity losses, at-risk rules, and compensation paid to corporate officers.

Justice Alito delivered the opinion for the Court with Chief Justice Roberts, and Justices Scalia, Kennedy, and Thomas concurring.  Justice Kennedy filed a concurring opinion.  Justice Ginsburg filed a dissenting opinion, in which she was joined by Justices Sotomayor, Beyer and Kagan.  Justices Beyer and Kagan filed a dissenting opinion.

Just a few days after issuing the Hobby Lobby opinion, a majority of the Court, in an unsigned opinion, granted an injunction requested by Wheaton College.  The college objected to a two-page form which was the means by which nonprofit entities could opt out of providing contraceptive coverage.  Wheaton objected saying the form, itself, violated its religious beliefs.  The Court granted an injunction temporarily absolving the college from completing the form.  Justice Sotomayor, joined by Justices Ginsburg and Kagan, wrote a biting dissenting opinion.

Another case to watch is Halbig v. Sebelius.  This case involves a challenge to the ability of Federally-sponsored health exchanges to provide subsidies to individuals who purchase health insurance policies.  Plaintiffs lost in the U.S. District Court for the District of Columbia.  The case was argued before the U.S. Court of Appeals for the District of Columbia in March and an opinion is expected shortly.  Two of the three judges hearing the case are Republican appointees and some believe they will rule against the Federal government.

There are several points which require mentioning.  First, Hobby Lobby continues a trend by the Roberts Court in delineating the rights of corporations.  In Citizens United v. Federal Election Commission, the Court, overturned the Federal Election Campaign Act prohibition on corporations using general treasury funds for political advertisements saying corporations have First Amendment rights (speech).  While the Hobby Lobby decision is not directly based on the First Amendment, it is clearly falls within the same area.  In the political arena, both Democrats and Republicans immediately made fundraising pitches based on their respective opinions as to the outcome of the case.  Democrats emphasized the “negative” impact on women emphasizing the dissenting opinions of the female justices.  Meanwhile, Republicans stressed “religious freedom” aspects of the decision.  Only the November 2014 and 2016 elections will determine which party will ultimately prevail.

Second, as noted Hobby Lobby is certainly not the end of legal challenges to ACA implementation.  The Halbig and other cases are slowly making their way through the judicial system.  Ultimately, the U.S. Supreme Court will make the final judgments concerning ACA implementation.

 

Julius W. Hobson, Jr. is Senior Policy Advisor at Polsinelli P.C. and Adjunct Professor of Political Management, Graduate School of Political Management, George Washington University, where he teaches courses on Lobbying, Electoral and Legislative Processes, and Legislative Writing and Research.

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