01.04.13

Hobby Lobby Risks Fines to Defy Obamacare

After being denied a legal reprieve, the evangelical-owned craft chain is defying Affordable Care Act regulations on emergency-contraception coverage, risking millions in fines.

Arts-and-crafts retailer Hobby Lobby became the largest corporation to defy new Affordable Care Act regulations, after the Oklahoma-based chain announced this week that it would refuse to comply with requirements to provide employees with insurance coverage for emergency contraception.

On Dec. 26, Supreme Court Justice Sonia Sotomayor, who hears emergency appeals for the U.S. 10th Circuit, refused to block the new regulations, ruling (PDF) that Hobby Lobby must comply while it awaits a decision in federal court. But the company, whose evangelical Christian owners say they object to the mandate on religious grounds, said it would refuse, meaning it could be fined as much as $1.3 million per day by the IRS. (According to the Affordable Care Act, refusal to comply can result in fines of $100 per day per employee.)

Hobby Lobby is one of several for-profit companies to file lawsuits against the regulations on religious grounds, and is one of the few not to be granted a temporary injunction. In addition to many nonprofit religious groups, 12 for-profit plaintiffs have filed suit, and nine have been granted injunctions, including the evangelical publisher Tyndale and a Mennonite cabinet manufacturer. Hobby Lobby, on the other hand, was denied an injunction by the 10th Circuit Court of Appeals, which agreed (PDF) with a district court that the harm the regulation would cause Hobby Lobby’s owners was too vague and indirect to merit judicial intervention—meaning the possibility that their employees might purchase emergency birth control does not directly affect the conscience of the company’s owners.

The Hobby Lobby case has been closely watched by religious groups because it is likely to set the course for how Obamacare regulations will be applied to non-religious businesses with religious owners who claim that the law violates their conscience. Unlike many organizations fighting the mandate in court, Hobby Lobby’s business is not explicitly religious, though, like other evangelical-owned companies, it claims to base its practices on “biblical principles.” With 500 stores and 13,000 employees, Hobby Lobby is by far the largest of the private companies protesting the law. Along with several other plaintiffs, it is represented by the Becket Fund, a nonprofit that provides legal assistance in religious-liberty cases.

It has also quickly become a cause célèbre for conservative evangelicals, from rank-and-file consumers to Mike Huckabee, who on Thursday compared Hobby Lobby’s plight to that of the biblical Daniel, who was thrown into the lion’s den for refusing to eat meat sacrificed to idols. On Dec. 28, Southern Baptist Professor Denny Burke published a blog post headlined, “Does Anyone Care What Happens to Hobby Lobby?”, which by Wednesday had been shared 96,000 times on Facebook. Social media also spread the word of a demonstration on Jan. 5, when evangelical consumers plan to support Hobby Lobby the way they supported Chick-fil-A in August, helping the fast-food chain bring in record sales while it was under fire for its owner’s opposition to same-sex marriage. The escalation of awareness of the Hobby Lobby case in evangelical circles and an alleged lack of coverage in the mainstream press quickly led to complaints of a media blackout.

Hobby Lobby officials have remained tight-lipped about the case, outsourcing its media relations to the Becket Fund, which would not comment on the case except to say that Hobby Lobby would continue its appeal pending in the 10th Circuit. Becket general counsel Kyle Duncan revealed this week that the company would defy the mandate while its appeal is in the works. Echoing the beliefs of Hobby Lobby’s founders and of other plaintiffs protesting the regulations, Duncan referred to emergency contraception as “abortion-inducing drugs,” a politically charged description that distorts the biological function of “morning after” contraception. While the company’s boldness in defying Obamacare has earned it praise from supporters, it remains unclear whether the IRS will act on its authority to levy the steep penalties.

While the company’s boldness in defying Obamacare has earned it praise from supporters, it remains unclear whether the IRS will act on its authority to levy the steep penalties.

In a letter published online as Hobby Lobby filed its first suit in early December, CEO David Green said his company’s insurance policies do not cover emergency contraception because they “don’t pay for drugs that might cause abortions.” He urged sympathetic readers to pass on the letter because they would not “see this covered in the liberal media.”

The outcome of the case remains unclear, though it seems likely that one or more religious challenges to Obamacare could make it to the Supreme Court. In late November, the high court ruled that a challenge by Liberty University could proceed, opening the possibility of the Affordable Care Act to make a second appearance before the justices.