SCOTUS to Decide Whether Hospitals Affiliated with Religions Exempt from ERISA
The federal law that governs employee benefits – the Employee Retirement Income Security Act (“ERISA” for short) does not apply to employers that are religions. So, are benefits offered by Christian-affiliated hospitals offered to their administrative and medical staff covered? Using the terminology of ERISA: are hospitals that are affiliated with religions “church plans?” That is a question the U.S. Supreme Court will consider this term.
Court rulings hold hospital systems affiliated with religions are not exempt from ERISA
A series of lower court rulings have permitted ERISA lawsuit against some Christian-affiliated hospital systems, holding that the religious exemption does not apply. New Jersey-based St. Peter’s Healthcare System, Illinois-based Advocate Health System and California-based Dignity Health are appealing federal appeals courts rulings from around the country that permitted the lawsuits under ERISA. These hospital systems are looking to the Supreme Court for a ruling that they are not covered by ERISA.
The hospitals are not churches themselves, but are affiliated with churches
The three hospital systems are tied to different churches. St. Peters is affiliated with the Roman Catholic Church. Dignity was previously affiliated with the Roman Catholic Church, and still operates many Catholic hospitals. Advocate is affiliated with two religious groups, the Evangelical Lutheran Church in America and United Church of Christ.
Why does it matter if ERISA applies?
Avoiding ERISA coverage will prevent employees from getting the benefit of protections afforded to pension and 401k plans, including minimum funding and mandatory reporting requirements. ERISA coverage would also extend to insurance benefits such as disability, health, and life insurance offered by the employers.
The lawsuits claim that the pension plans are underfunded by millions of dollars. The hospital systems also claim that subjecting them to ERISA’s requirements would cost money that would take away from their ability to deliver medical services.
Three appellate courts have ruled against the hospitals, and none have ruled for them
Although trial courts have issued rulings on both sides of the issue all over the U.S., the federal appeals courts to address it have all ruled against the hospital systems. The Courts of Appeals for the Third Circuit, Seventh Circuit, and Ninth Circuit ruled against St. Peter’s, Advocate and Dignity, respectively. The ruling would allow employees ERISA lawsuits to move forward. No federal appeals court has ruled against employees on this issue.
The appellate decisions all limit the scope of ERISA’s “church plan” to actual religious groups and the plans they sponsor for their employees, excluding separate companies that operate for a different purpose (i.e. as a hospital, not a church).
Watch the Supreme Court’s decisions this term to see how SCOTUS rules. If the appeals court decisions are upheld by the Supreme Court, employees will benefit from enhanced regulation of the hospital systems pension plan. It is a double-edged sword though, because the employees will lose some of their rights related to insurance plans offered by the hospitals. If SCOTUS rules in favor of the hospital systems, the employees will lose the added protection of ERISA as it applies to their pension plans, but retain some of their rights against the hospitals insurance plans.