A major legal challenge to Obamacare making its way to the Supreme Court could allow for-profit corporations to opt out of a key piece of the law by asserting freedom of religion.

Hobby Lobby, a “biblically founded” crafts store chain based in Oklahoma, is one of 39 for-profit companies suing the federal government over the law’s contraceptive mandate. The company argues that the federal government cannot infringe upon its religious rights by forcing it to provide contraceptive coverage in its health plan.

The case asks whether Hobby Lobby can refuse to comply with Obamacare’s contraceptive mandate on the grounds that allowing its 13,000 employees access to birth control — specifically the morning-after pill and intrauterine devices, or IUDs — would violate the company’s freedom of religion.

The case is novel because religious freedom typically has been thought to apply to individuals, churches and other religious nonprofits, not corporations. Lower courts have split on the issue, and it’s all but inevitable the Supreme Court will decide to wade into the matter, possibly as early as December.



A decision in favor of Hobby Lobby could dramatically expand the rights of companies to dispute federal laws governing how they treat their employees based on religious grounds.





“I think it’s very likely the Supreme Court will hear the case,” said Timothy Jost, a law professor and health care reform expert at Washington & Lee University.

Hobby Lobby’s founder and CEO, David Green, and his family — all Christian evangelicals — argue that they and their company’s freedom of religious exercise is substantially burdened by having to provide its employees insurance that covers the morning-after pills and IUDs. The Greens believe these contraceptives prevent fertilized eggs from implanting in the uterus, which they consider to be tantamount to abortion and thus against their religion. (Neither type of contraceptive has any effect on existing pregnancies and do not cause abortions.)

Story continues

Their case rests on the 1993 Religious Freedom Restoration Act (RFRA), which says people can seek to opt out of laws if they substantially burden their free exercise of religion. The government is allowed to burden a person’s religious freedom if it can prove that it has a compelling reason to and that the law is narrowly tailored to achieve its goal.

So far, the 3rd and 6th U.S. Circuit Court of Appeals have ruled that RFRA does not protect for-profit companies hoping to opt out of providing contraceptive coverage to employees. “We simply cannot understand how a for-profit, secular corporation — apart from its owners — can exercise religion,” 3rd U.S. Circuit Judge Robert Cowen wrote for the majority.



But in the Hobby Lobby case, the 10th U.S. Circuit Court of Appeals ruled in favor of the Greens, saying the company was protected under RFRA. The judges cited Citizens United, the 2010 Supreme Court decision that found corporations cannot be restricted in how they spend their money for political reasons because it infringed on their right to free speech.





“We see no reason the Supreme Court would recognize constitutional protection for a corporation’s political expression but not its religious expression,” the 10th circuit judges wrote in their decision.

The five Supreme Court justices who decided the Citizens United case could be swayed by the reference to the controversial campaign finance case. “Certainly the orientation of the Supreme Court toward protecting corporate interests will probably play an important role in the case,” Jost said.

But there is more legal precedent in the area of corporate freedom of speech than in corporate religious exercise, which has traditionally been seen more as a personal right. The government has argued that federal law holds that for-profit companies are not religious organizations. “No court has ever found a for-profit company to be a religious organization for purposes of federal law,” the Justice Department wrote in its brief to the 10th circuit last spring, arguing against Hobby Lobby.

The government also argues that Hobby Lobby is a distinct legal entity separate from its owners and shareholders, and can’t hold religious beliefs.

“It’s really a broader question about who is able to exercise religion,” said Lori Windham, senior counsel at the Becket Fund, which is representing Hobby Lobby. “Do business owners give up their rights to religious freedom when they operate a business?”

If the court does decide that corporations can hold religious beliefs or is protected by RFRA, Hobby Lobby would still have to prove that the government had no compelling reason to ask insurers to cover contraceptives. The government says providing contraceptives without co-pays significantly limits unintended pregnancies and keeps down medical costs.



Hobby Lobby’s lawyers say if the contraception is such a compelling government interest, the government would not have carved out exemptions for nonprofit religious organizations.





The slippery slope argument against Hobby Lobby’s case is that the controlling shareholder of any major corporation could object, line by line, to a whole host of federal laws that affect how the company must treat its employees if it violates his or her religious beliefs. But if the government can prove it has a compelling interest to infringe upon the company's religious beliefs, then RFRA would not apply.