ONE in six American hospitals is affiliated to the Catholic church; many more are sponsored by Lutheran, Methodist, Jewish and other religious organizations. The combination of faith and medicine sometimes leads to struggles over access to women’s reproductive care. Advocate Health Care Network (AHCN) v Stapleton, a case the Supreme Court heard on March 27th, shows that the synthesis may pose another problem: shaky retirement security for millions of employees.
Pensions are not what they used to be. In the 1970s, more than half of American workers could expect to collect monthly cheques upon retirement. Today, defined-benefit pensions are mainly the preserve of public-sector workers; most companies instead offer defined-contribution plans where the employer and employee set aside funds to incubate a retirement nest egg, with no promise of the income it will generate. But both types of private-sector plan are offered some protection by the Employee Retirement Income Security Act (ERISA), a 1974 law. It sets standards for vesting, requires employers to invest sufficiently to cover future pension liabilities and, through the Pension Benefit Guaranty Corporation, offers insurance for retirement monies.
From the law’s inception, churches were exempt from ERISA to guard against excessive entanglement between the state and religion—a relationship that might offend the religious liberty commitments of the First Amendment. But since the law was amended in 1980, the exemption has been read to apply to religiously affiliated hospitals as well, leaving untold numbers of nurses, doctors, custodians and other employees with no federal protection for their pension and health benefits. Without the shelter of ERISA’s regulatory demands, many workers’ defined-benefit “church plans” fared badly. Several years ago, some employees sued after enduring losses of up to 50%. In three separate class-action lawsuits, the Third, Seventh and Ninth Circuit Courts of Appeals all upheld district-court judgments in favour of the employees.
The appellate court rulings were based on the view that two Catholic and one Lutheran health network violated their fiduciary duties to their employees. The benefits they provided to workers did not qualify as “church plans”, the courts ruled, because ERISA only exempts plans “established and maintained for its employees by a church”. The 1980 amendment did expand the exemption to include plans “maintained by an organisation…controlled by or associated with a church” but it kept its original language requiring that plans be both “established and maintained…by a church”. The employees prevailed on their reading of the law limiting the exemption to plans duly established by a church; ERISA does not free a hospital from its burdens, the lower courts ruled, when it sets up the plan itself.
The oral argument on March 27th was a puzzling exercise in interpretative hair-splitting. Lisa Blatt, arguing for the hospitals, opened by citing ERISA: “the text does not require a church to establish benefit plans for someone else’s employees”, she said. This reading, countered James Feldman, “creates anomalies that are impossible to explain”. Mr Feldman’s brief cited one of those oddities: “attributing to Congress an inexplicable intent to trust agencies like petitioner hospitals to establish church plans—but then to forbid them to maintain the plans themselves”. Some of the justices seemed flummoxed. Elena Kagan characterised the language in ERISA as “very odd”. Sonia Sotomayor told Mr Feldman before he even uttered a word, “I’m torn”. The law “could be read either way in my mind”. What, she asked, could help her “break the tie”?
Justice Stephen Breyer was preoccupied with the empirical effects of a widened ERISA exemption. “I would like to get a rough idea of what…we’re talking about”, he told Mr Feldman, in terms of “how many employees are…exempt that wouldn’t have otherwise been”. An amicus brief from the American Civil Liberties Union (ACLU) and Americans United for Separation of Church and State (AU) claims the results could be devastating. “Judicially expanding the church-plan exemption to cover religiously affiliated entities”, the brief reads, “would affect an enormous number of employees…many of whom do not share their employers’ religious beliefs—and most of whom perform purely secular jobs”.
In the oral argument, the justices only hinted at the church-state problem the ACLU/AU brief raises. Yet the claim is powerful: “Allowing hospitals and other religiously affiliated organisations that are not houses of worship to arrogate to themselves the legal status of a church…would be impermissible religious favouritism”. Permitting religious hospitals to hang their employees out to dry while demanding that secular hospitals honour ERISA’s expensive and administratively burdensome rules gives the former a “leg up in the competitive marketplace based solely on religion”. It would serve to “oppress and impose massive harm on working people that ERISA was enacted to prevent”.
Similar claims about religious exemptions going too far have come from religion-state scholars in recent cases involving the contraceptive mandate of the Affordable Care Act , also known as Obamacare. In 2014, Nelson Tebbe, a professor at Brooklyn Law School, urged the justices not to give religiously-held companies a bye from providing female employees access to free birth control as part of their health plans. The argument says that when accommodating religion puts significant burdens on third parties—in Hobby Lobby, on women; in AHCN, on men and women alike—it risks violating the First Amendment rule against establishing religion.
This view did not carry the day in Hobby Lobby or in Zubik, a follow-up case involving exemptions for religious non-profits. Despite its strength, it is unlikely to sway the justices in AHCN as they consider how to read ERISA. A decision is expected by the summer.
Source: The Economist