How to use this Page

By Edward Zelinsky

Few recent decisions of the US Supreme Court have engendered as much controversy as Burwell v. Hobby Lobby Stores, Inc. In that case, the Court decided that a closely-held corporation’s employer-sponsored medical plan need not provide contraception if the shareholders of such corporation object to contraception on religious grounds.

Responding to the resulting controversy, Senator Patty Murray, along with many of her Democratic colleagues, has proposed legislation to overturn Hobby Lobby. Senators Kelly Ayotte and Deb Fischer, along with many of their Republican colleagues, have introduced legislation confirming Hobby Lobby. In the current political environment, there is little chance of either bill becoming law any time soon.

However, there is a response to Hobby Lobby which would address the concerns of both contraception advocates and of religious objectors to contraception. In particular, any employer which objects to providing birth control should instead be required to fund for its employees independently-administered health savings accounts (HSAs) or health reimbursement arrangements (HRAs). An HSA or HRA permits the covered employee to spend employer-provided, pre-tax health care dollars on any medical service the employee chooses, from birth control to an MRI, without implicating the employer in the employee’s spending decision.

The HSA/HRA alternative respects the religious rights of sponsoring employers. With conventional insurance or self-insured health plans, the sponsoring employer’s plan provides a menu of choices which frames the employees’ decisions. In contrast, the HSA/HRA approach permits employees to spend health care dollars on whatever medical services employees select including services to which the employer objects – without the employer’s plan framing the employees’ choices. HSAs and HRAs are thus like cash wages which, when spent by the employee, do not entail participation by the employer.

Justice Alito’s Hobby Lobby opinion identifies two other possible ways to provide contraception services without violating the rights of objecting employers. First, HHS might extend to closely-held for-profit firms the regulatory accommodation now limited to religious nonprofit entities other than churches. Under this accommodation, insurers or third-party administrators provide employees with contraception at no cost to the religious employer. Alternatively, the federal government might itself make birth control available to women who lack contraception coverage from their employer-sponsored health plans.

Commentators have expressed reservations about both these approaches. Some women’s health groups argue that a federal program will stigmatize the women who receive their contraception from such a program. Moreover, the problems of the Department of Veterans Affairs suggest the need for skepticism about the federal government as a provider of medical services. A number of religious groups contend that the current regulatory accommodation for religious employers does not go far enough and still makes employers participate in the provision of birth control to which they object.

In light of these concerns, HSAs and HRAs are compelling alternatives. HSAs and HRAs are analogous to cash wages which the employee spends as he chooses. Such accounts can assure women of the ability to obtain contraception which they seek with employer-provided, pre-tax health care dollars without burdening the religious beliefs of employers who object to involvement with contraception.

Suppose, for example, that Hobby Lobby is required to establish for each of its employees an HSA or HRA administered by the company’s bank. A Hobby Lobby employee could submit receipts to the bank for any type of medical care the employee selects. The employee would subsequently receive from the bank a reimbursement check for this care from his or her HSA/HRA account. Alternatively, HSA/HRA debit cards have become popular devices. These cards allow a covered employee to swipe when receiving health care services with the card.

These accounts could be used by each employee to defray any medical expense the employee elects including, but not limited to, the kinds of contraception to which the employer objects. However, the employer would not be complicit in the employee’s medical choices just as the employee does not participate in an employee’s decision to spend her wages on something with which the employer disagrees.

The HSA/HRA approach potentially has political legs. HHS (along with the Departments of the Treasury and Labor) could adopt regulations implementing this approach. Conservatives like HSAs and HRAs since these accounts implement a consumer-driven approach to health care. Liberals want to assure employees of contraception even if employers object to contraception. The HSA/HRA response to Hobby Lobby thus has bi-partisan appeal and is a compelling compromise as a matter of law and public policy.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. His monthly column appears on the OUPblog.

Subscribe to the OUPblog via email or RSS.
Subscribe to only law articles on the OUPblog via email or RSS.
Image credit: Doctor With Piggy Bank. Photo by prosot-photography, iStockphoto.

The post The HSA/HRA response to Hobby Lobby appeared first on OUPblog.

        

Related Stories

• Hobby Lobby and the First Amendment
• Five myths about the “surge” of Central American immigrant minors
• Casey Kasem and end-of-life planning

 

By Edward Zelinsky

Among the bitter but unnecessary controversies of this election year was the dispute about the federal government’s mandate that employers provide contraception as part of their health care coverage for their employees. Employers religiously opposed to contraception believe this mandate infringes their right of Free Exercise of religion under the First Amendment. Advocates of the contraception mandate characterize it as vital to women’s health and choice.

This acerbic controversy is totally unnecessary. This dispute can be diffused by health savings accounts (HSAs) or similar employer-funded medical accounts under the employee’s control. Such a solution should be appealing to political leaders committed to civil discourse and mutual respect for opposing views. Unfortunately, such leaders appear to be in short supply.

Substantively, the most recent event in this controversy is the decision of US District Judge Reggie B. Walton. Judge Walton recently held that the contraception mandate violated the rights of Tyndale House Publishers, Inc., a Christian publishing company opposed on religious grounds to certain of the mandated forms of contraception. Judge Walton held that the contraception mandate violates the Religious Freedom Restoration Act.

Earlier in the year, Missouri’s legislature, overriding the veto of Governor Jay Nixon, declared that Missouri employers religiously opposed to contraception need not provide contraception as part of their employees’ medical coverage. This Missouri law directly defies the contrary federal mandate adopted as part of President Obama’s health reform package.

On this issue, serious and sincere people come to different conclusions. These differences can be accommodated by requiring employers with ethical or religious qualms about any particular type of medical care to fund HSAs or similar accounts under employees’ control. Such accounts enable the employees to make their own decisions about the medical services such employees obtain with their employer-funded health care dollars.

HSA supporters tout such accounts to control medical costs and to increase consumer autonomy. But HSAs can also diffuse religious and ethical controversy by shifting contentious choices from employers to employees.

If employers have religious or ethical scruples about providing contraception or other medical services, they should instead pay into independently-administered HSAs for their employees. Employees who want these services could then purchase such services with the pre-tax funds in these accounts – just as such employees can today purchase these services with their post-tax salary dollars.

Like all compromises, this proposal is imperfect. A religious employer might object that it knows that its payments to independently-administered HSAs are underwriting services to which the employer objects. But the employee can use his or her salary dollars in ways to which the employer objects. At some point, the religiously sincere employer must acknowledge that control of compensation has shifted from the employer to the employer’s employees. And health care dollars are part of the employee’s compensation package.

The proponents of birth control and other similar medical services can object that employees purchasing such services through HSAs or similar accounts will pay more than employers who can purchase such services more cheaply because of economies of scale. That is an argument for improving the operation of the market for medical services through better information about the prices of such services and for the proponents of such services to themselves harness economies of scale by aggregating purchasers.

Many details must be decided before implementing this proposal. Most obviously, we must decide how much the religious employer must contribute to each employees’ HSA for the employer to be released from the mandate he considers religiously objectionable. This concern, like others, can be resolved by those committed to civil management of our differences.

While the public discussion has to date been stimulated by employers religiously opposed to providing contraception and abortion services, there may be other employers whose religious convictions preclude them from providing other kinds of health care services. Some employers who are Christian Scientists, for example, might object to some or all of the package of medical services being mandated by the federal government. If so, these employers should also be given the alternative of funding HSAs or other similar accounts which shift control of health care dollars to the employees.

A genuinely diverse society must be tolerant of genuine diversity. In this spirit, employers with religious objections to particular medical practices and services should be given the alternative of funding employees’ HSAs instead.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. His monthly column appears on the OUPblog.

Subscribe to the OUPblog via email or RSS.
Subscribe to only business and economics articles on OUPblog via email or RSS.
View more about this book on the

Image credit: Doctor With Piggy Bank. Photo by prosot-photography, iStockphoto.

By Rosemary Wright

Greenwich pensioner by Whistler 1859. Source: Library of Congress.

In 2011, the oldest Baby Boom workers reached the age of 65 — an age that more than 60 million Baby Boomers will reach by 2030. The issue of retirement weighs particularly on women, who are likely to outlive men and therefore have a longer period of retirement to finance.

In the study “Paying for Retirement: Sex Differences in Inclusion in Employer-Provided Retirement Plans,” I turned to the Baby Boomers to determine whether this new generation of women were well-prepared with retirement benefits. Is the retirement gap between Baby Boom men and women narrower than for older retirees? Are women still dependent on a husband’s retirement income for security in old age? To look at these differences, I examined a large sample obtained from the 2009 Current Population Survey for the differences between Baby Boom men and women’s inclusion in retirement plans, as well as predictors of inclusion in these plans.

The results of the new study showed a significantly higher percentage of women than men (68.4% vs. 65.2%) worked for an employer who offered retirement benefits. A slightly higher percentage of men than women (92.4% vs. 91.1%) were included in their employers’ retirement programs. Overall, significant positive predictors of working for an employer with a retirement plan were sex (women more likely than men), employment in a core industry or in a primary occupational sector, educational attainment, and government worker status (government workers more likely than non-government workers). On the other hand, significant negative predictors were minority status (minorities less likely than non-minorities), age (older workers less likely than younger workers), having children younger than age 18 (those with children under the age of 18 less likely than those with no children under 18), and immigrant status (immigrants less likely than non-immigrants).

Minority status and educational level were the only two predictors for which there was a significant sex difference. Minority women were less likely than minority men to work for an employer with retirement benefits. As educational attainment increased, men were more likely than women to work for an employer providing retirement benefits.

Significant positive predictors of a worker actually being included in an employer’s retirement program were age (older workers more likely to be included than younger workers), employment in a core industry or in a primary occupational sector, educational attainment, marriage (married workers more likely than non-married workers), and government worker status. Minority status was the only significant negative predictor of inclusion (minority workers less likely than non-minority workers to be included).

There was only one variable with a significant difference between men and women: government employment. Female public employees were more likely than male public employees to be included in their employers’ retirement programs.

Two major good-news stories emerge from this study. First, a much larger group of workers is included in an employer’s retirement plan in this study than received pension benefits in earlier studies. This reflects the expansion of the types and availability of retirement benefits available to workers today, and is a good sign for retirement security as Baby Boom workers begin to retire. Second, there was only one predictor for which the likelihood of being included in a retirement

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Professor Zelinsky criticizes New York’s “convenience of the employer” doctrine for double taxing telecommuters at a time when public policy should be encouraging, rather than hindering, telecommuting. He calls on Congress to pass the Telecommuter Tax Fairness Act to stop such double taxation. Read his past OUPblog posts here.

A gallon of gas today costs $4.00 or more in most parts of the country. The public is concerned, as perhaps never before, about the impact of human activity on the global environment. In this setting, telecommuting has emerged as an environmentally sensitive and economically sensible lifestyle.
By permitting individuals to work at home for part (often much) of the work week, telecommuting removes telecommuters’ cars from the roads, thereby reducing traffic congestion, gas consumption, and automotive pollution. Telecommuting from home also opens job opportunities for persons for whom a conventional, daily trip to the work place is difficult or undesirable – parents’ of small children, disabled individuals, persons who live far from major employment centers. Telecommuting allows employers to hire these individuals who might otherwise withdraw from the labor force.

For all of these reasons, public policy should encourage, or at least not hinder, the growth of telecommuting. Unfortunately, the tax policies of the State of New York discourage telecommuting by double taxing out-of-state individuals who telecommute for New York employers from their out-of-state homes. In particular, New York’s so-called “convenience of the employer” rule imposes nonresident New York income taxes on out-of-state telecommuters on the days they work at home, often hundreds – if not thousands – of miles from New York.

Consider, for example, the recent case of Mr. R. Michael Holt, a human resources compensation consultant who lives in Naples, Florida. In 1999, Mr. Holt worked at his home in Florida for the New York offices of KPMG, LLP and William M. Mercer, Inc. Under the employer convenience rule, New York imposed nonresident income taxes upon Mr. Holt for the income he earned working at home in the Sunshine State, thousands of miles from New York.

When the state in which a telecommuter lives also imposes an income tax, the result of New York’s tax policy is double taxation as the out-of-state telecommuter who works at home must pay tax both to New York and to the state in which she lives. The result is an unfair and inefficient tax penalty for telecommuting, namely, the double taxation of the income earned by the telecommuter on the days she works at her out-of-state home.

New York’s policy is bad, not only for out-of-state persons who telecommute to the Empire State, but potentially for telecommuters throughout the nation and for the employers who employ such telecommuters. If New York can get away with double taxing out-of-state telecommuters, other states will be tempted to emulate New York and likewise tax nonresident telecommuters who work at their out-of-state homes. The upshot will thus be double taxation of telecommuters nationwide when public policy should instead be supporting telecommuting.

Unfortunately, New York’s courts have refused to stop New York’s double taxation of nonresident telecommuters on the days such telecommuters work at their out-of-state homes. In Huckaby v. Tax Appeals Tribunal, New York’s highest court, by a narrow but decisive margin of 4-3, upheld New York’s income taxation of Thomas Huckaby on the days Mr. Huckaby worked at his home in Nashville, Tennessee.

Pending in Congress is legislation which would prevent New York and other states from using the “convenience of the employer” doctrine or any similar artifice to double tax nonresident telecommuters on the days they work at their out-of-state homes. The Telecommuter Tax Fairness Act has attracted bi-partisan support from members of Congress who recognize the importance of telecommuting-friendly public policy.

It is unreasonable for New York to punish telecommuting by double taxing workers who telecommute for New York employers from their out-of-state homes, particularly at a time when sound public policy should encourage telecommuting. There is, however, no sign that New York will alter its irrational “convenience of the employer” rule. Congress should accordingly adopt the Telecommuter Tax Fairness Act to eliminate the ability of New York and other states to double tax nonresident telecommuters on the days they work at their out-of-state homes.

ShareThis

By Kirsty OUP-UK

A very Happy New Year to you all from OUP-UK. My maiden post for 2008 is the latest in the Very Short Introductions column. This month Joseph Dan, author of Kabbalah: A Very Short Introduction, has kindly answered some questions for me. Joseph Dan is a renowned expert on Kabbalah, and is the Gershom Scholem Professor of Kabbalah in the Department of Jewish Thought at the Hebrew University of Jerusalem. His many books include The Heart and the Fountain: Jewish Mystical Experiences, The Early Kabbalah, and The Teachings of Hasidism. He resides in Jerusalem and in Cambridge, Massachusetts, where he is a visiting professor at the Harvard Divinity School.

(more…)

Share This