Hobby Lobby case may spur shift away from employer coverage

The Supreme Court may have laid the groundwork for a shift away from employer-sponsored health plans by exempting closely held corporations from a federal regulation requiring insurance coverage for contraceptives, some experts say.

In a 5-4 decision this week in Burwell v. Hobby Lobby Stores, the high court ruled that the HHS could not force closely held for-profit companies to pay large fines for refusing to provide employees with types of birth-control coverage to which company owners have religious objections. The decision asserted corporations have religious freedoms that cannot be trampled, unless it's the least-restrictive means of furthering a legitimate government goal, which the HHS' “contraception mandate” was not.

The decision angered physicians, nurses and liberal activists who said it allows employers to make decisions for women in their provider's exam room by limiting their insurance options, and complicating the process of acquiring the goods and services that HHS has deemed essential to women's health.

“When one's insurance now has limitations placed on it because of personal belief systems, that starts to create barriers to care,” said Dr. Reid Blackwelder, president of the American Academy of Family Physicians, which criticized the Hobby Lobby ruling.

Clinicians say that especially true for lower-income women, since the need to pay more for care or prescriptions, or find alternate coverage may lead to unintended pregnancies, put them at risk for preeclampsia, or remove treatment options for endometriosis, among other consequences.

Observers say mixing religion and women's personal health issues could begin to undermine support among middle-class Americans for the employer-based insurance system, which is supported by the pre-tax paychecks of 149 million Americans annually.

“My argument is that, since it's not really the employers' money anyhow, why should they be able to dictate what you get and what you don't get?” said Princeton economics professor Uwe Reinhardt. “If they give you a defined contribution, you can pick what you get and what you don't get.”

Critics' fears extend beyond those who oppose contraception options. Evangelical Christians could oppose pediatric benefits for same-sex couples. Jehovah's Witnesses could oppose blood transfusions. Various religions could oppose vaccinations or medications derived from animals, they speculate.

Paul Keckley, managing director in Navigant's healthcare practice, asks: “Why are the companies in the middle of this to begin with? At what point does the employee sue the company for exercising its rights? My goodness, it's messy.” He predicted the decision will push more employers to abandon providing coverage, and instead, provide tools for workers to get their own insurance.

However, other experts contend there remain numerous barriers to a wholesale employer flight from providing coverage in the wake of the Hobby Lobby decision. “The tendency of the press is to overreact to everything,” said Massachusetts Institute of Technology health-economics professor Jonathan Gruber, one of the chief architects of the Patient Protection and Affordable Care Act.

Those barriers include the pervasive economic reality of employer-based health insurance and the language of the opinion itself. About 57% of all companies offered health benefits to their employees in 2013, according to the most recent data from the Kaiser Family Foundation.

For family coverage, employers paid about $11,800 of the average $16,400 annual cost for a plan. Those corporate expenses, and often a portion of employees' expenses, are tax-free. For individuals, employers covered $4,900 of the average $5,900 plan. If a company gave workers a raise to pay for coverage and then axed its insurance program, the income would be taxed. Such arrangements would forfeit the federal tax-write off for workers and trigger corporate penalties under the Affordable Care Act.

One alternative is for more employers to move toward private exchanges, where their workers could use tax-advantaged company funds to select among a dozen or more insurance plans. The private exchanges, most operated by major benefits-consulting firms, are similar in structure to the public exchanges that operate for the non-group market.

“Many people predict that the private exchanges will eventually become larger than the public exchanges,” said Joel Ario, a managing director with Manatt Health Solutions. “If that decision is given to most people, and the exchanges actually work for most people … I don't know too many people who would prefer their employer to buy their coverage.”

However, there's also the matter of the Hobby Lobby decision itself. Justice Samuel Alito, writing for the majority, wrote explicitly that the decision was limited to the facts in this particular case, which involved objections to four of the 20 forms of birth control mandated for coverage under the reform law. “Our decision should not be understood to hold that an insurance coverage mandate must necessarily fall if it conflicts with an employer's religious beliefs,” he wrote on behalf of the five-member majority.

That statement didn't convince all observers. The court is well aware that more than 80 other private and not-for-profit organizations are still suing to block aspects of the contraception mandate, and virtually no one speculated that last week's decision would close the door on the high court considering other challenges to the law.

“I think it opens the door,” Blackwelder said. “This creates a precedent to other challenges and lawsuits. Once you start down a path, there are intended and unintended consequences.”

Follow Joe Carlson on Twitter: @MHJCarlson