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Supreme Court Zubik v. Burwell: Industry implications


The court will consider whether an “accommodation” allowing nonprofit religiously-affiliated organizations to opt out of the ACA requirement that insurance plans include contraception coverage is consistent with the Religious Freedom Restoration Act (RFRA).

For the fourth time since it was enacted in 2010, the U.S. Supreme Court has agreed to hear a challenge to an aspect of the Affordable Care Act (ACA).  Insurers and Third Party Administrators (TPAs) while not parties to the litigation, will be impacted by the court’s action.  The passing of Justice Antonin Scalia, may also affect on the outcome and the timing of a decision. 

In a group of cases titled, Zubik v. Burwell, the court will consider whether an “accommodation” process allowing nonprofit religiously-affiliated organizations (nonprofits) to opt out of the ACA requirement that insurance plans include contraception coverage is consistent with the Religious Freedom Restoration Act (RFRA).

RFRA is a federal law that prohibits the government from imposing a substantial burden on the exercise of a person’s religion unless it furthers a compelling interest and uses the least restrictive means for advancing that interest.

Under ACA and its regulations, health insurers and employer sponsored group health plans are required to cover certain preventive health services, including contraceptive services, without cost-sharing such as deductibles or copays. 

The nonprofits object to covering certain types of contraception on religious grounds.  In response to their concerns, the government adopted an accommodation process allowing nonprofits to opt out of the coverage requirement and requiring their insurers or TPAs to provide the coverage instead.

To opt out, a nonprofit must give notice of its objection by sending a form to the plan’s health insurer or, in the case of a self-insured plan, to its TPA.  Alternatively, a nonprofit can opt out by notifying the Secretary of HHS of its objection. 

The nonprofits disagree with the process because their notice will result in the coverage being provided.  The nonprofits assert they do not disagree with contraceptives being provided by others; they disagree with being compelled to take action to facilitate the coverage.  They have suggested that the government can use other means to provide contraceptives, such as through a new program; however, the government has responded that such alternatives are not feasible, would unfairly burden women and are not required by RFRA.

Next: Industry implications



Industry implications

The nonprofits filed lawsuits in various federal courts challenging the accommodation process.  To date, cases from seven federal Court of Appeals (the DC, 3rd, 5th, 8th and 10th Circuits) have been decided.  In six of the cases, the accommodation was upheld and in one case, from the 8th Circuit, the accommodation was struck down.  Last fall, the court agreed to hear the cases in which the accommodation was upheld (at that time the case from the 8th circuit had not yet been decided) and a decision was expected by the end of the court’s current term.

The government contends that providing women with contraceptive coverage serves a compelling interest.  In the Burwell v. Hobby Lobby Stores, Inc. case decided in 2014, involving for-profit corporations, a majority of the court accepted the government’s view. In Hobby Lobby, the court pointed out that, due to the accommodation, women would still be covered through insurers and TPAs.  Under that reasoning, unless the Court grants nonprofits the broader exemption recognized for churches and religious orders, coverage for contraceptive services will somehow have to be provided by insurers and TPAs.      

That obligation presents a challenge to insurers and TPAs in that they are required to provide coverage for contraceptives their religious nonprofit customers do not want to cover.  Meanwhile, the religious nonprofits do not want to participate in the process that gives insurers and TPAs notice that they have to take on that responsibility.

If the accommodation is struck down, the mechanism by which insurers and TPAs are informed of their coverage obligations under the accommodation would be eliminated and some alternate process would be needed in its place.  That is the present situation in the 8th Circuit states (Arkansas, Iowa, Minnesota, Missouri, Nebraska and North and South Dakota), where enforcement of the accommodation process has been enjoined.

Next: Possible outcomes to consider



Possible outcomes to consider

While speculating about court decisions is simply that, some possible outcomes are foreseeable.  The Hobby Lobby case was decided by a 5-4 vote.  Prior to Justice Scalia’s passing, some commentators had speculated that the breakdown in Zubik could be the same. 

Without the late Justice Scalia’s vote, the court would be deadlocked at 4-4.  However, Justice Kennedy’s concurring opinion in Hobby Lobby, in which he wrote favorably of the accommodation, indicates it might have survived under the former court and may therefore be upheld by the current eight-member Court.  If a majority of the justices agree on an outcome, a decision is expected by the end of the Court’s term in June. 

If Justice Kennedy does not vote to uphold the accommodation process, in the event of a 4-4 split, the court could take one of several actions.  It could issue a per curium opinion, meaning that the lower court rulings upholding the accommodation process would stand without establishing a legal precedent that other federal courts would have to follow.  The contrary decision of the 8th Circuit would also stand, so the law in the 8th Circuit would be different than the law in the states covered by the other circuits.  A second result could be that the court would hold the case over until a replacement for Justice Scalia has been seated.  Finally, the court could dismiss the cases, in effect reversing its decision to hear the cases in the first place.

Insurers and TPAs should follow the progress of these and related cases as well as regulatory activity by the government to ensure they are in compliance with their coverage obligations.

Deborah Dorman-Rodriguez is a Partner at Freeborn & Peters LLP, and serves as leader of the Firm’s Healthcare Practice Group

David Kaufman is a Partner at Freeborn & Peters LLP, and serves as a key member of the Firm's Healthcare Practice Group

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