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From Health Law Daily, March 7, 2013

Secular corporation may challenge contraceptive coverage mandate

By Michelle L. Oxman, JD, LLM

Seneca Hardwood Lumber Co., Inc. (SHLC), a closely held corporation, was permitted to assert the rights of its Catholic owners under the Religious Freedom Restoration Act (RFRA) (42 USC sec. 2000bb et seq.) in a challenge to the regulations implementing the requirement that employer-sponsored health insurance policies cover contraceptive services (the mandate) under section 1001 of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) (Geneva College v Sebelius, March 6, 2013, Conti, J). The claims of SHLC and the individual owners alleging violations of the RFRA, the Free Exercise Clause of the First Amendment to the United States Constitution, and the notice and comment requirements of the Administrative Procedure Act (APA) will be allowed to proceed. The challenge by Geneva College, which is affiliated with the Reformed Presbyterian Church of North America, was dismissed without prejudice because the college was unlikely ever to be required to cover the contraceptive drugs that it believes are abortifacients.

Objections to the mandate. SHLC’s owners, the Hepler family, alleged that the mandate required them to violate the tenets of their Catholic faith by forcing them either to provide coverage for contraceptives, sterilization, and related patient education and counseling or by discontinuing health insurance coverage entirely. They claimed that their religious objection extended to the coverage of contraceptives as well as their use. Geneva College did not object to coverage of contraceptives generally, but specifically objected to coverage of intrauterine devices (IUDs) and emergency contraceptives on the ground that they cause abortions.

Corporate exercise of religion. The government argued that SHLC had no rights under the RFRA because it was a for-profit corporation formed for commercial purposes, which could not “exercise religion.” The SHLC and the Heplers contended that: (1) SHLC could not be separated from its owners, all of whom were members of the same family and adhered to the same religious principles; and (2) under the Supreme Court decision in Citizens United v Federal Election Commission, corporations had First Amendment rights, and there was no basis for a distinction between First Amendment freedoms of speech and exercise of religion. The court found that it was not necessary to decide whether commercial entities had the right to religious freedom because SHLC could assert the rights of its owners.

Violation of the RFRA and Free Exercise Clause. The government contended that the Heplers’ rights were not violated because the mandate did not apply to them as individuals. However, because the court allowed SHLC to assert the owners’ rights, it found no need to consider the interests of the owners and the corporation separately. The court found that SHLC and the Heplers stated claims for relief under the RFRA and the Free Exercise clause of the First Amendment. First, the mandate placed a substantial burden on the exercise of their religion by forcing them to violate their religious beliefs. The Heplers argued that their religious beliefs required them to provide health coverage, so that they were faced with the “Hobson’s choice” of which principle to violate.

The court agreed. It then considered whether the government’s interests were sufficiently compelling to justify the burden. The government asserted that its interests in protecting the public health and promoting gender equality both were compelling. The court found that the government had not treated its interests as compelling because of the large number of employers, including small employers and sponsors of grandfathered plans, who were exempt from the requirement.

Dismissal of Geneva’s claims. The Court ruled that standing is determined as of the date the complaint was filed. On that date, Geneva College (Geneva) was not a religious organization as then defined in the regulation, and it was not eligible for any safe harbor because it had provided coverage for contraceptives. However, since the suit was filed, the government had extended the safe harbor for a second year and published an advance notice of proposed rulemaking that would exempt Geneva from the requirement to cover the “objected to services.” The court found that the government’s actions were sufficient to destroy the adversity of interests necessary for ripeness. Therefore, it dismissed Geneva’s claims without prejudice, so that if the final rule would put it at risk of violating the mandate, it could return to court.

The case number is 2:12-cv-00207.

Attorneys: Bradley S. Tupi (Tucker Arensberg) for Geneva College. Matthew S. Bowman (Alliance Defending Freedom) for The Seneca Hardwood Lumber Company, Inc., a Pennsylvania Corporation; WLH Enterprises, a Pennsylvania Sole Proprietorship of Wayne L. Hepler. Bradley P. Humphreys, United States Department of Justice, for Kathleen Sebelius, Hilda Solis, Timothy Geithner, and the United States Departments of Health and Human Services, Labor, and the Treasury.

Companies: Geneva College; The Seneca Hardwood Lumber Company, Inc., a Pennsylvania Corporation; WLH Enterprises, a Pennsylvania Sole Proprietorship of Wayne L. Hepler

MainStory: TopStory HealthReformNews PennsylvaniaNews

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