Though closely divided, the U.S. Supreme Court's 5-4 decision in Burwell v. Hobby Lobby Stores, Inc . has settled the question of whether certain for-profit corporations must be exempt from the requirement, unless Congress chooses to amend the statute providing those corporations legal protection. Imputing the beliefs of owners of closely held corporations to the corporations themselves, the Court found that the ACA could not require such companies to provide contraceptive coverage in group health plans offered to their employees. It based its decision on the Religious Freedom Restoration Act (RFRA), which provides heightened protection for burdens on religious exercise. This report analyzes the Court's opinions in Hobby Lobby , examining the rights of closely held corporations under the Religious Freedom Restoration Act. It also addresses the implications for the contraceptive coverage mandate under ACA and discusses potential legislative responses to the Court's decision. Traditionally it had been interpreted to require that the government show a compelling interest for any government action that interfered with a person's exercise of religious beliefs. In effect, the decision therefore is limited to "closely held corporations, each owned and controlled by members of a single family." If the owners were to refuse to comply with the demand, the companies would face penalties under the ACA that the Court characterized as "surely substantial." It is important to remember that the Court's decision was based on the statutory protections in RFRA, not in constitutional protections of the First Amendment. Because this provision may interfere with religious employers' religious practices (e.g., hiring employees of the same faith of the organization), Congress included an exemption for religious entities, stating that the prohibition against religious discrimination does not apply to "a religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion.... " This provision explicitly applies only to religious organizations, and courts generally have interpreted the scope of the provision to take into account (1) the purpose or mission of the organization; (2) the ownership, affiliation, or financial support of the organization; (3) requirements placed upon staff and members of the organization; and (4) the extent of religious practices in or the religious nature of the products and services offered by the organization and whether it operates for a profit. Unlike the previous potential legislative response, this approach would mean that Congress considers RFRA's applicability to each present and future law on a case-by-case basis. Effect on Contraceptive Coverage Requirements

Generally speaking, the Hobby Lobby decision clarified the scope to which persons may be eligible for protection under RFRA, but in the practical context of the contraceptive coverage requirement, it essentially addressed the question of whether the requirement's implementing regulations sufficiently addressed the range of entities with religious objections. Additionally, though the majority in Hobby Lobby noted the possibility that the accommodation could be a "less restrictive" means to achieve the government's interest in the contraceptive coverage mandate, it did not determine it to be the least restrictive means. Thus, the decision to expand protection under RFRA to closely held corporations affects only federal law. A number of states have enacted separate contraceptive coverage requirements, predating ACA.
A 5-4 decision, issued over a highly critical dissent, Burwell v. Hobby Lobby Stores, Inc. resolved one of the many challenges raised in response to the contraceptive coverage requirement of the Affordable Care Act (ACA). Imputing the beliefs of owners of closely held corporations to such corporations, the U.S. Supreme Court found that closely held corporations that hold religious objections to certain contraceptive services cannot be required to provide coverage of those services in employee health plans. The Court's decision was based on the protections offered under the federal Religious Freedom Restoration Act (RFRA), a statute prohibiting the government from imposing a substantial burden on a person's religious exercise unless it can show a compelling interest achieved by the least restrictive means. The Court declined to address the constitutional challenge, holding that the companies were protected under RFRA.
In the absence of a definition under RFRA, the majority interpreted the term "person" to include closely held corporations, even if they operated for-profit, and determined that the penalties that such companies would face if they failed to comply with the contraceptive coverage requirement would impose a substantial burden. Though the Court assumed that the government had a compelling interest to require contraceptive coverage under ACA, it found that less restrictive means (e.g., expanding the regulatory accommodation available to nonprofit employers with similar objections) could achieve that interest without requiring companies with religious objections to be subject to the requirement.
Although Hobby Lobby resolved the question regarding the applicability of RFRA to closely held corporations—defined by the Court as "each owned and controlled by members of a single family"—the decision leaves open a number of questions about the scope of RFRA's protections and future enforcement of the contraceptive coverage requirement. One such question, now awaiting review by the Court, is whether RFRA may provide protection for nonprofit religious entities already eligible for the accommodation, but which nonetheless object to the process of qualification for eligibility. Because the Court's decision was based on statutory grounds, Congress remains free to define which entities may be governed by ACA or other federal laws generally.
This report analyzes the Court's decision in Hobby Lobby, including arguments made between the majority and dissent, to clarify the scope of the decision and potential impacts for future interpretation of RFRA's applicability. It also examines potential legislative responses, should Congress consider addressing the current applicability of RFRA. Finally, the report addresses the decision's effect on requirements that employers offer contraceptive coverage in group health plans under federal or state law.