Have the Little Sisters's Plan Been "Hijacked"?

This issue turns on the arcana of ERISA.

Today the Supreme Court heard oral arguments in Little Sisters of the Poor v. Pennsylvania. Chief Justice Roberts seemed to express some skepticism about the Little Sisters's standing. He asked SG Francisco.

CHIEF JUSTICE ROBERTS: –before you get to that, I'd like to ask you a question on your RFRA point. I wonder why it doesn't sweep too broadly. It is designed to address the concerns about self-certification and what the Little Sisters call the hijacking of their plan.

Roberts returned to this theme when he questioned Paul Clement, who represents the Sisters:

CHIEF JUSTICE ROBERTS: So, if you have a situation where the certification was not necessary, in other words, the government –the government finds out that the employees do not have contraceptive coverage through some other means, and you do not have the hijacking problem that you referred to because the insurance coverer would not provide the services through the Little Sisters' plan but could provide them directly to the employees, why isn't that sort of accommodation sufficient? I –I didn't understand the problem at the time of Zubik, and I'm not sure I understand it now.

This point, alas is complicated, and requires a careful study of ERISA. In short, the Little Sisters, who used a "church plan," would not have faced any penalties. I discussed this issue in Unraveled: Obamacare, Religious Liberty, and Executive Power (pp. 531-532).

The Little Sisters of the Poor utilize a church plan. Ironically enough, of the dozens of plaintiffs challenging the accommodation, the Little Sisters had the least to fear. Toward the tail end of oral arguments, Justice Alito interrupted the solicitor general. "Before you sit down, General Verrilli," he asked, "could I just ask you this informational question about this particular situation of the Little Sisters?"

The Little Sisters hired the Christian Brothers Employee Benefit Trust as their third-party administrator. Because Christian Brothers also objected to the contraceptive mandate, Alito noted, they "will not provide the coverage." As a result, he asked, is there any way for the government to provide "contraceptive coverage for their employees" so long as the Little Sisters contract with Christian Brothers? In other words, "would the Little Sisters still be subject to fines for failing to comply?" Verrilli answered, "No, we don't think so."

In five words, the solicitor general admitted that the Little Sisters would not be subject to any fines if they refused to provide the notification to the government, or if their third-party administrator declined to offer payments. In her dissent in Wheaton College v. Burwell, Justice Sotomayor explained that the Little Sister's "third-party administrator was [under] a 'church plan' that had no legal obligation or intention to provide contraceptive coverage."

Because the Little Sisters' "church plan" contracts with Christian Brothers, the government was never able to penalize the nuns for failing to comply. The Court's Zubik order in no way impacted religious organizations with church plans.

Roberts asked Clement the same question Alito asked Verrilli in Zubik.

Later, Counsel for Pennsylvania conceded this point:

MR. FISCHER: I just want to make one specific point, which is that –Your Honor mentioned the Little Sisters –their –their insurance carrier stated that it will not provide contraception no matter what. Or their –their health plan. And because it's a church plan exempt from ERISA, the government cannot enforce it. So even if they didn't have their injunction, their employees would not receive contraception. We're not trying to challenge that at all. We're not trying require

He explained that the Zubik plaintiffs are protected:

And to be clear, we brought this suit against the federal government. We have not challenged the Little Sisters. We have not challenged their Colorado injunction. They and all the other parties to Zubik are protected by injunctions and do not have to comply with the contraceptive mandate no matter what happens in this case.

Other plaintiffs, however, could face penalties. I explained in Unraveled:

Going forward, church plans will remain exempt from fines, but the lower courts will have to figure out what to do with insured plans and self-insured plans. The unanimous per curiam decision solved little. The parties are no closer on these issues than they were before the case was argued.

The Little Sisters were safe from penalties. But Clement did explain that the government needed the Sisters to sign the form for other purposes:

But the government has insisted throughout this whole process that we not just be able to have an opt-out form, an objection form, but that that same form serve as a permission slip to allow the government to track down PPAs and others to provide services through our plans. And that's always been the gravamen of our objection. It's never been an objection to objecting itself.

Ultimately, I don't think this issue will affect the outcome of the case. The Sisters seek to intervene. The real parties in interest are the federal government and Pennsylvania.