Obama Administration Proposes New ACA Rules in Light of Hobby Lobby Decision

The Obama Administration recently proposed new rules that strive to keep the Affordable Care Act’s (ACA) birth control mandate in place while seeking to comply with the rationale of the Supreme Court’s recent decision in Burwell v. Hobby Lobby Stores, Inc.

The ACA requires employers with more than 50 employees to provide health insurance coverage for the 20 contraceptive methods approved by the Food and Drug Administration, which include four that prevent an already fertilized egg from developing further by inhibiting attachment to the uterus. Under existing regulations, accommodations are available for certain eligible organizations, including religious non-profit organizations.

In its controversial Hobby Lobby decision, the Supreme Court held that the failure to provide a similar exemption for “closely-held corporations” owned by a few shareholders whose religious beliefs were aligned and who object to providing contraception coverage on religious grounds violated the Religious Freedom Restoration Act of 1993 (RFRA). The question flowing from the decision is: how do you define a “closely held” corporation? The Department of Health and Human Services’ proposed rules attempt to answer that question.

As highlighted in a government fact sheet on the Centers for Medicare & Medicaid Services website, the proposed rules offer two alternative approaches for defining a closely-held corporation for the purposes of the ACA. In either case the business entity cannot be publicly traded. The difference in the approaches is that, under one, the ownership of the entity would be limited to a certain number of owners; while under the other, a minimum percentage of ownership would be concentrated among a certain number of owners. The proposal seeks input from the public on the specific thresholds that should be established under either approach.

Under the proposed rules, qualifying closely-held corporations could formalize their religious objections to the mandate via a valid corporate action taken in accordance with the entity’s governing structure, as well as state law, that memorializes its owners’ religious objection. Once the federal government is placed on notice, it would begin the process of providing the contraception services to impacted workers.

The federal government is accepting comments on the proposed rules until October 21, 2014. We will be closely tracking their status and will provide updates as they become available.

If you are a New Jersey resident you may be interested in finding out how the Hobby Lobby may be affecting your health care system. Check out my previous post How Will Hobby Lobby Decision Impact New Jersey Businesses?