Supreme Court Endorses Broad Government View Of ERISA ‘Church Plan’ Definition

On June 5, 2017, the Supreme Court released Advocate Health Care Network v. Stapleton, unanimously (with Justice Gorsuch not yet participating) accepting the federal government’s interpretation of the Employee Retirement Income Security Act’s (ERISA) definition of “church plan.” The Court rejected a challenge brought by employees covered by defined-benefit pension plans offered by entities that qualified as “church plans” under the government’s interpretation.

Separately, on the same day, the Department of Justice filed a brief in Texas v. United States in support of the federal government’s motion for summary judgment. Six states filed the lawsuit claiming that the assessment of the Affordable Care Act’s section 9010 insurance provider fee against Medicaid managed care organizations, which then must be reimbursed by the states for the amount of the fee, is illegal and unconstitutional.

The Advocate Health Care Case

ERISA generally governs employee benefit plans, including pension and group health pans, and protects certain employee rights under those plans. From its enactment in 1974, ERISA has specifically exempted church plans from its requirements. Originally, “church plan” was defined to include plans established and maintained “by a church or by a convention or association of churches.” In 1980 the definition was broadened, in the federal government’s view, to include plans maintained by what the Court described as “principal purpose,” church-affiliated organizations, like the hospitals that were appellants in the Supreme Court case.

The question addressed by the Court was whether the 1980 amendment to the definition in fact included plans that were not established by churches but rather church-affiliated entities like the appellant hospitals. The definition was not clear on this point, and although the federal agencies have interpreted the 1980 amendment to cover organizations that were established by church-affiliated organizations instead of churches, several lawsuits were brought by employees who claimed that the plans offered by their employer church-affiliated organizations were not church plans within the meaning of ERISA.

These employees succeeded in the lower courts, but the Supreme Court reversed. In a decision written by Justice Kagan, the Court unanimously upheld the governments’ broad definition, holding that plans established by church-affiliated organizations like the hospitals before it could be church plans.

The group health plan requirements of the Affordable Care Act apply to church plans, as the ACA incorporates ERISA’s definition of group health plan but not its exceptions. The government has consistently taken the position, however, that, because church plans are exempt from ERISA, it has no means of compelling the third party administrators of self-insured church plans to comply with the ACA, or at least its preventive services requirement. In the preamble to the leaked contraceptive coverage rule, the Trump Department of Health and Human Services repeatedly refers to this exception as undermining the argument of the Obama administration that it had a compelling interest in ensuring the availability of contraceptive coverage to women covered by group health plans of entities that object to the contraceptive requirement for religious (or moral) reasons but do not have self-insured church plans.

Justice Sotomayor joined in Justice Kagan’s decision as to the interpretation of the definition, but expressed concern that organizations like the appellants, despite their relationships to churches, had billions of dollars in revenue and thousands of employees and “compete in the secular market with companies that must bear the cost of complying with ERISA.” They bear little resemblance to the entities Congress chose to exempt from ERISA in 1980.

The leaked contraceptive rule would effectively extend the exceptions that have excused self-insured church plans—and churches—from complying with the contraceptive requirement to all entities (and individuals) that object to contraceptive coverage for religious or moral reasons. If the rule that emerges from HHS is significantly narrower than the leaked version, more entities might rely on the Advocate Health Care ruling to claim the protection of the church plan exemption. If the final version of the contraceptive rule resembles the leaked version, there will be no need to do so (although there might be reasons to do so to avoid other ERISA requirements).

Trump Justice Department Defends ACA Tax With Same Arguments DoJ Used Under Obama

On June 5, 2017, the Department of Justice filed a brief in Texas v. United States in support of the federal government’s motion for summary judgment and in opposition to a motion for summary judgment filed by the six states that are plaintiffs in the litigation. The states filed the lawsuit claiming that the assessment of the Affordable Care Act’s section 9010 insurance provider fee against Medicaid managed care organizations, which then must be reimbursed by the states for the amount of the fee, is illegal and unconstitutional.

In August of 2016, federal district court judge Reed O’Connor rejected the federal government’s motion to dismiss, ruling for the states on virtually every issue. At the summary judgment stage in the litigation, the federal government presses again its arguments on every issue raised in the motion to dismiss, claiming that the plaintiffs have not established their right to a judgment. The federal government argues that:

• the court has no jurisdiction because the states lack standing to sue and the lawsuit violates the tax injunction act,
• the tax is a valid exercise of the power to tax of Congress,
• the tax does not violate any intergovernmental tax immunity doctrine that might exist,
• the delegation of authority to the Actuarial Standards Board to establish standards as to state payments necessary to preserve the actuarial soundness of the managed care organizations does not violate the delegation doctrine, and
• the plaintiffs’ Administrative Procedure Act challenge is time-barred and lacks merit.

The brief repeats many of the arguments made by the previous administration on the motion to dismiss and may not enjoy any more success in this round of briefing. What is most interesting about the brief, however, is that the Trump administration is making exactly the same arguments the Obama administration made in defending an ACA tax that would be repealed under the AHCA. The arguments are not controversial—they are arguments that any Department of Justice lawyer should make to defend a congressional enactment under the circumstances. But the fact that the arguments are being made by the Trump administration to defend an ACA tax is noteworthy.

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