Legal Alert: Indiana Company Wins ObamaCare Challenge

The Federal Appeals Court in Chicago upheld a suit brought by two for-profit companies against the Affordable Care Act’s (ACA) requirement that employers must provide, as part of their health plan for their employees, coverage for birth control expenses. On November 8, a split Seventh Circuit Court panel issued a temporary injunction blocking the enforcement of the birth-control mandate in the new health care reform bill, often referred to as ObamaCare. The decision is unique in that an injunction was issued. For a court to take such an action, it must find the Plaintiffs are likely to prevail on their claim.

The Seventh Circuit decision involved two separate challenges that came up through the lower courts, one by a Madison, Indiana company that makes vehicle safety systems, Grote Industries, Inc., and the six Grote family members who together own the company and its parent corporation, and a second challenge by a construction company in Highland, Illinois, Korte & Luitjohan Contractors Inc., and its two owners. Their challenges were brought under the federal Religious Freedom Restoration Act (RFRA). In its majority opinion the 7th Circuit stated: “We hold that the plaintiffs — the business owners and their companies — may challenge the mandate. We further hold that compelling them to cover those services substantially burdens their religious-exercise rights. Under RFRA the government must justify the burden under the standard of strict scrutiny. So far it has not done so, and we doubt that it can.” The majority ruling found protection for both the religious preferences of corporations and their individual owners, when the companies are closely held.

Five federal circuit courts have now issued rulings on the constitutional challenges, at least in preliminary decisions on the enforcement issue: the Third, Sixth, Seventh, Tenth, and D.C. Circuits. The Third and Sixth rejected the challenges. The split among these courts practically assures that the Supreme Court will agree to take on the issue, both as to corporations and to their owners.