Paul F. deLespinasse: Supreme Court's Hobby Lobby decision was based on economic confusion
The Affordable Care Act requires most U.S. corporations to cover contraception as part of the insurance provided to their employees. Several corporations challenged this requirement, claiming it violated their rights to the free exercise of religion protected either by the First Amendment or by the Religious Freedom Restoration Act of 1993.
In 2014 the Supreme Court held that privately held corporations (i.e. with just a few owners) must be exempted from this requirement if their owners had religious objections to birth control. Burwell v. Hobby Lobby Stores Inc. (573 U.S. 682 (2014)
Mercifully, the Supreme Court avoided deciding the ridiculous question whether a private corporation, as distinguished from a human individual, can even have religious rights. Instead, it based its decision on the Religious Freedom Restoration Act of 1993 and spoke only of the religious rights of the small number of people who owned the closely held corporations.
Obamacare supporters had feared that the court would use the precedent set by the Citizens United decision — which found that corporations are entitled to freedom of speech under the First Amendment — to hold that corporations are also protected by the Free Exercise clause of that same Amendment. Critics of Obamacare hoped that the court would do exactly that.
There was no need, however, for the Supreme Court to even consider this question, since the challenges to the contraception requirement were based on fundamentally incorrect economic assumptions. The challenges assumed that a corporation which writes a check paying for insurance covering its employees is spending its own money and therefore has an interest in the purposes for which that money is spent.
A corporation’s interest obviously does not extend to the purposes for which its employees spend their own paychecks. But the money an employer remits for a worker’s health care is just another part of the compensation paid for that worker’s work. It is simply income in kind rather than in cash for that worker, and the purposes for which that income is spent are therefore no business of the employer.
The situation is confused by the widespread impression that employers are bearing the costs of the insurance. In fact, employers are only writing the check for the insurance and this money has been subtracted from the fund from which cash wages are paid to the worker. The money the corporation is spending is part of its costs of labor, not a cost of insurance.
This important point is worth reiterating: Although the corporation writes the check, the expense is actually born by the workers, in the form of lower cash wages.
As Paul Starr, a leading expert on medical economics has noted, when it comes to medical insurance “Economists generally agree that employees … bear all or nearly all of the company’s share as well as their own.”
That Starr is correct here was born out by the special problems Obamacare posed for restaurants and other employers of many low-wage workers. Employers can simply subtract their remissions for insurance from what they have available to pay higher-wage workers, but it is illegal to do this if the resulting hourly cash wages will fall below the floor set by minimum wage legislation.
Many employers of large numbers of low-paid workers therefore protected themselves from the Affordable Health Care Act's insurance requirement by making many of their workers part-time, since the ACA only required them to provide insurance for those it defined as full time.
Since insurance is not a cost born by employers, they have no dog in the game and no standing to sue in the first place. The Supreme Court should have thrown these litigants out on their ears and not gotten itself into the ridiculous position where it might have had to decide whether corporations have a right to the free exercise of religion.
— Paul F. deLespinasse is professor emeritus of political science and computer science at Adrian College. He can be reached at pdeles@proaxis.com.
This article originally appeared on The Daily Telegram: Paul deLespinasse: Hobby Lobby decision based on economic confusion
