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Zubik v. Burwell: The HSA/HRA alternative

Last Tuesday, the US Supreme Court issued an unusual order in Zubik v. Burwell. In Zubik, religious employers, including the Little Sisters of the Poor, East Texas Baptist University and Southern Nazarene University, object to the federal regulations governing birth control coverage for their employees. These regulations permit these religious employers to elect against providing such coverage. However, the employers argue that the election form they must file unacceptably implicates them in the provision of the birth control to which they object.

The federal government will use information from those election forms to require the religious employers’ medical insurance companies to furnish the contraceptive coverage the employers oppose. This, the employers contend, violates their legal rights of religious freedom by involving them in birth control services of which they disapprove.

After oral argument in Zubik, the Supreme Court ordered the parties to submit additional briefs. Such additional briefing is not unprecedented. What is usual is the Court’s detailed elaboration of the issues it wants the parties to address in these supplemental briefs.

In its order, the Court asked the parties to “address whether and how contraceptive coverage may be obtained by the petitioners’ employees through petitioners’ insurance companies, but in a way that does not require any involvement of petitioners beyond their own decision to provide health insurance without contraceptive coverage to their employees.”

The conventional wisdom is that this order reflects a determination by some (perhaps all) justices to avoid another 4-4 decision in the wake of Justice Scalia’s death. The Court appears to be seeking a method by which religious employers can themselves not finance or be implicated in the provision of birth control while, at the same time, such contraception is provided through the insurance companies the employers engage to furnish health care coverage to their employees.

As I recently observed in the Rutgers Law Record, there is such an approach: Any religious employer objecting to contraception should have the right to instead fund an independently-administered health savings account (HSA) or health reimbursement arrangement (HRA) for each of its employees.

Employees can use their employer-provided HSA or HRA funds to purchase any medical service or device they want – just as such employees can use their cash wages as they please. An employer has no control over an employee’s decisions to spend his wages as he chooses. Similarly, an employer has no control over an employee’s expenditures of his independently-administered HSA or HRA funds. HSA/HRA funds are wages controlled by the employees except that HSA/HRA funds are not included in employees’ gross incomes and must be spent on medical outlays.

Under this approach, an employee of a religious employer who desires extra prescription eyeglasses could use her HRA or HSA for that purpose – while her co-worker could use that account to obtain birth control. In neither case would the religious employer participate in the employee’s decision how to expend her health care account dollars.

Many Americans are today troubled by the debased quality of our national discourse. In this often shrill environment, the Supreme Court is thoughtfully searching for a solution to an important conundrum. The HSA/HRA alternative is such a solution. The religious employer who puts money into an HSA or HRA thereby pays wages which the employee spends on the medical care he chooses without the employer participating in those choices.

Featured image: Contemplation of Justice. CC0 via Pixabay.

Recent Comments

  1. BenefitJack

    Thanks for the post. However, HHS/IRS/DOL have said offering a HSA would NOT be compliant. So, perhaps they would listen to you (as they won’t listen to people with employee benefits experience). I ask you to go to HHS and get them to agree (in writing please) that the employer can comply with PPACA by offering at least one HSA-qualifying HDHP. If you can get them to agree, that would be great – and we avoid more litigation.

    As a benefits expert, I can confirm that your solution only works with a HSA – because the HRA and FSA require employer sponsorship as part of an employer-sponsored benefit plan (under IRC 105 for the HRA, and under IRC 105/IRC 125 for the FSA). The IRS recently confirmed, for example, that employers cannot offer a stand-alone HRA, and a stand-alone FSA would not comply with the excepted benefit provisions.

    Whereas, individuals can open up their own HSA – and all monies are 100% vested and placed in a trust.

    Similarly, to avoid employer sponsorship, there would be no employer contribution to the HSA. And, there would be no pre-tax contributions to the HSA per an employer-sponsored IRC 125 cafeteria plan.

    Finally, make sure that HHS agrees that if the employer offers one complying option, that all other options offered by the employer need not include contraception coverage.

  2. […] Atlantic surveys the “strange career of free exercise” of religion; and Edward Zelinsky, who at OUPblog argues that “[a]ny religious employer objecting to contraception should have the right to instead […]

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