Kagan and Sotomayor Shrug Off Obamacare's Tax on Employers: ‘Not Prohibitive’

By Susan Jones | March 26, 2014 | 11:08 AM EDT


Supreme Court Justice Elena Kagan.

(CNSNews.com) – Hobby Lobby, a company owned by a Christian family, “could choose not to provide health insurance at all,” Justice Elena Kagan said Tuesday during oral arguments at the Supreme Court.


The penalty for doing that would be $2,000 for each of its approximately 13,000 employees, or $26 million a year.

Kagan said the $26 million in penalties for dropping health insurance altogether is probably less than Hobby Lobby pays now to provide health insurance for its employees. “So there is a choice here,” she said.

“There are employers all over the United States that are doing this voluntarily (paying the $2,000) because they think it’s less (than paying for health insurance).”

Justice Sonia Sotomayor also said that paying the $2,000 per employee would cost Hobby Lobby "a lot less" than paying the cost of health insurance. She suggested that Hobby Lobby could "just pay a greater salary and let the employees go on the exchange."

Kagan picked up on Sotomayor’s salary suggestion: “Let’s say that they have to increase the wages a little bit. I mean, still we are talking about pretty equivalent numbers (paying the tax vs. paying for insurance). Maybe it’s a little bit less, maybe it’s a little bit more. But this is not the kind of thing that’s going to drive a person out of business. It’s not prohibitive,” Kagan said.

Attorney Paul Clement, arguing the case for Hobby Lobby, noted that in this case, “you have a government law that specifically says you must do something that violates your religion – and it’s enforced with a penalty, and with all due respect, I think $2,000 per employee is a penalty.”

“But Mr. Clement, it’s not saying you must do something that violates your religion,” Kagan said. “It’s giving you a choice. You can do this thing – or if this thing violates your religion, you can do another thing. And that other thing is approximately the same price as the thing that you don’t want to do.”

“I don’t think it would be the same price at the end of the day,” Clement said.

"Well, of course it wouldn't be the same price at the end of the day," Justice Antonin Scalia interjected. "If they deny health insurance, they're going to have to raise wages if they are going to get employees.”

“But why is that a problem?” asked Justice Anthony Kennedy, who is said to be the swing vote in this critical case. “Let’s assume the cost of providing insurance is roughly equivalent to the $2,000 penalty. How is the employer hurt? He can just raise wages.”

Justice Sotomayor chimed in: “May I just put a footnote on this? I thought the average price of providing insurance for a single person is $4,000, and it’s $12,000 for a family. So the $2,000 tax – that’s what it’s called – is to help the government provide subsidies to people on the exchange that don’t have employer insurance. So it’s a tax because it’s – it is to do exactly what your client wants, to get the government to supply the contraceptives, not the insurance companies.”

But if Hobby Lobby eliminates health coverage for its employees, it will have to increase wages to make up for it -- plus pay the $26 million penalty on top of that,” Clement said.

“Plus they’re going to have to violate their own interest, which is, we actually – we believe it’s important to provide our employees with qualified health care.”

"Okay, the last (point) is important," Justice Kennedy conceded.

Justice Ginsburg asked Clement if providing health insurance to employees is a "religious tenet" of Hobby Lobby's.

“[I]t actually is,” Clement responded. But he also told the court, “This case hasn’t been litigated on this particular theory, so I think – I’d love to have the opportunity to show how by not providing health insurance, it would have a huge burden on my client and their ability to attract workers, and that in fact would cost them much more out of pocket. But that’s not been the nature of the government’s theory."

Clement said he mentioned Hobby Lobby's religious obligation to provide health insurance to make the point that the health care law is a "substantial burden" on the company:

“What I’m pointing out, though, is for purposes of the substantial burden analysis, it is perfectly appropriate to take into account that the $2,000 --- the $26 million in fines they would pay would not be the only thing they that they would lose...

“They would also lose out all the additional wages they would have to pay, and they would be in this position of not offering health care, which is something they believe is important for their religion as well,” Clement told the court.