Hobby Lobby wins Supreme Court Case Challenging ACA Mandate

The Supreme Court announced this morning that Hobby Lobby has won its case challenging the Affordable Care Act's mandate that requires companies to provide free contraceptives as part of their healthcare plan. The case was decided by a 5-4 majority with a decision authored by conservative Justice Samuel Alito.

In the opinion, the court granted "closely held companies" the right to the same accommodations that the government gives nonprofit organizations with religious objections to contraceptives. The narrowly-written opinion specified that it only applied to the contraceptive mandate and should not be construed to allow the withholding of coverage for other medical services or to allow discrimination on religious grounds.

The court indicated that the government should take on the responsibility of providing the coverage for the contraceptives that are objected to so that there is no coverage gap for employees.

How did Hobby Lobby end up suing the government?

It's not often that a crafts industry company not only makes national news, but makes national law. How did we get to this day?

Hobby Lobby is a family-owned chain of craft stores founded by the Green family in Oklahoma City, Oklahoma. The company's first store was opened in 1972, and the chain now includes 569 stores employing approximately 13,000 people. The company is very interwoven with the religious beliefs of its owners, who have devoted a significant portion of their wealth to accumulating the world's largest collection of biblical artifacts and creating a museum in Washington DC to display them. Hobby Lobby stores are not open on Sunday, citing the Greens' religious philosophy as the reason.

Sebelius v. Hobby Lobby (now known as Burwell v. Hobby Lobby because of the new HHS secretary) was filed in September 2012 after a non-profit right wing law firm called the Becket Fund for Religious Liberty approached Hobby Lobby about challenging the ACA contraception mandate. Founder & CEO David Green told the Wall Street Journal in March that he was shocked after receiving that phone call to discover that the company's healthcare plan was covering some of the emergency contraceptives that the Becket Fund wished to challenge the ACA coverage mandate for requiring. The Greens, the Becket Fund, and many conservatives believe that Plan B and IUD's cause abortions because they can sometimes work by preventing the implantation of a fertilized egg.  (The American College of Obstetricians & Gynecologists disagrees with this characterization, defining pregnancy scientifically as only beginning after a fertilized egg is implanted in the uterus.) Green told the Journal that he "called for the insurer to revoke that coverage" and Hobby Lobby agreed to become party to the Becket Fund's proposed lawsuit challenging the ACA mandate for coverage for those items.

The case was eventually argued before the U.S. Supreme Court on March 25th, 2014, after Hobby Lobby won several victories in lower courts that were appealed by Federal government lawyers defending the ACA. The Supreme Court agreed to hear the case because similar challenges to the ACA contraceptive mandate were denied in other jurisdictions. A Supreme Court decision is required to sort out the discrepancy, and Hobby Lobby (in conjunction with a case filed by Conestoga Wood Specialties Corp., also a Becket Fund case) was the first case to make it to the high court.

So what does this mean for Hobby Lobby?

In the short term, the decision means the company is no longer facing the threat of huge government fines. They are also no longer faced with having to make decisions about whether to terminate their health plan benefits for employees, which might possibly affect their ability to recruit and retain employees (although their well above market wages would likely have still made them an attractive employer).

But fines aren't the only possible consequences for the company of this issue. There is a reason that most companies stay far, far away from political issues like the ACA mandate: controversy can be bad for business. By its very nature, wading into a controversy means that you are putting your company in a situation where it is impossible to make everyone happy. Thus it is inevitable you will alienate at least part of your possible customer base.

Polls from multiple sources this week revealed that over half of Americans - even two thirds of female voters in one poll -  oppose allowing companies to opt out of contraceptive coverage based on the owners' beliefs. While some customers do support Hobby Lobby (and their Facebook page is evidence of this), the lawsuit challenging the ACA on religious freedom grounds has made the Greens' religious activities controversial for the company. It has certainly polarized the company's customer base and resulted in boycotts by those opposed to the company's legal actions.

This is not the only recent issue where religion has been a public stumbling block for the company. The company was involved in a controversy in Fall 2013 after a customer complained that they were treated offensively when inquiring about the availability of Hannukah merchandise, which the stores didn't carry. Hobby Lobby eventually apologized and began carrying Hannukah products in certain markets.

There is a flip side to controversy's effects, though. While the company will lose some customers who disagree with its stance on the ACA mandate, it will certainly also earn the loyalty of some customers who will make Hobby Lobby their preferred store because of their new awareness of the company's values brought about by the publicity surrounding the Supreme Court case. Whether the inflow of customers will be greater than the outflow is the question.

Despite the controversies, for now, the company has continued to expand and appear to prosper. David Green told the Wall Street Journal in his March Wall Street Journal interview that the company reached $3.3 billion in sales last year. (Being a private company, Hobby Lobby is not required to file SEC reports.) New Hobby Lobby stores have also continued to open in 2014 as the chain executes its growth plans. Stores opened in Petoskey, Mi and Hiram, GA on June 23rd, and three more stores are slated to have their grand openings on July 7th in New Jersey.