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First Businesses Go Before Federal Appeals Panel in Contraceptive Coverage Lawsuit

First Businesses Go Before Federal Appeals Panel in Contraceptive Coverage Lawsuit

May 23, 2013 — A three-judge panel of the 7th U.S. Circuit Court of Appeals on Wednesday heard arguments from two for-profit companies seeking permanent injunctions against the federal contraceptive coverage rules for religious reasons, the Washington Post reports (Barnes, Washington Post, 5/22).

Three other courts of appeal will hear similar cases in the next three weeks. According to the Wall Street Journal, federal courts have been divided in rulings to date, suggesting that the issue likely will reach the Supreme Court (Kesling/Radnofsky, Wall Street Journal, 5/22).

The contraceptive coverage rules, which are being implemented under the Affordable Care Act (PL 111-148), require that most health plans cover contraceptive services without copayments or other added costs. Religious entities such as churches and other houses of worship are exempt from the requirements.

In February, the Obama administration proposed an accommodation for other religiously affiliated employers that would ensure they do not have to pay for contraceptive coverage, but their health plans must provide it directly to beneficiaries at no cost. However, the accommodation was not extended to for-profit businesses (Women's Health Policy Report, 5/13).

Plaintiffs' Arguments

As with other contraceptive coverage suits by for-profit business, the plaintiffs in the current cases contend that corporations have a First Amendment right to the free exercise of religion and are protected under the 1993 Religious Freedom Restoration Act, which prohibits the federal government from imposing a "substantial burden" on the exercise of religion unless there is a "compelling governmental interest" (Washington Post, 5/22).

Edward White -- who represents the owners of Korte & Luitjohan Contractors -- argued that the "company is an extension of [the owners' Catholic] beliefs as the two people who control the company" (Brachear, Chicago Tribune, 5/22). He added that the rules would "destroy the business," noting that the owners would either have to submit to actions that "implicate their moral beliefs" or pay more than $700,000 in annual fines (Washington Post, 5/22).

The judges repeatedly pressed White on whether for-profit companies in a nonreligious endeavor can profess a religious belief in the same way that their owners can. "It's not that far-fetched that corporations can have a conscience," White said in one response (Wall Street Journal, 5/22).

Attorney Matthew Bowman -- who represents the owners of Grote Industries -- made similar arguments, holding that a distinction between a company and its owners exists for "some purposes, but not moral purposes" (Chicago Tribune, 5/22).

Judge Ilana Diamond Rovner questioned how the owners would be harmed if they offered contraceptive coverage, given that they would not be forced to use contraceptives themselves. She also asked how the situation differed from an employee using a paycheck for something his or her employer might oppose (Washington Post, 5/22).

Government's Arguments

Department of Justice attorney Alisa Klein said allowing the companies to disregard the contraceptive coverage rules would violate the First Amendment by allowing them to impose a religious framework on a diverse workforce. "At bottom, the concern is about establishing religion," she said (Chicago Tribune, 5/22).

Klein argued that the distinction between a corporation and its shareholders is a "bedrock principle of American corporate law." Therefore, the protections given to the companies' owners' religious freedom are not extended to corporations, she said.

Judge Diane Sykes responded that companies "had a corporate mission here to operate within Catholic doctrine." It is not logical that corporations are denied First Amendment rights if they are allowed rights to political speech, Sykes added.

Klein said Congress would have specifically included corporations in RFRA if it had intended to afford corporations such protections (Washington Post, 5/22). In this case, "[a]n exemption for an employer comes at the cost of the employees," she argued (Wall Street Journal, 5/22).

Judges' Inclinations

The three-judge panel that heard the case on Wednesday is the same panel that previously overturned decisions by lower courts and granted both companies temporary injunctions against the contraceptive coverage rules.

According to the Washington Post, there was "no indication that the intervening months had changed the minds" of the judges. Sykes and Judge Joel Flaum seemed to lean toward the side of the businesses, while Rovner seemed receptive of the government's argument (Washington Post, 5/22).