A large, family-owned corporation [i.e., Hobby Lobby] is deciding whether its company-sponsored health insurance should cover morning-after contraception.  This form of contraception violates the religious beliefs of the corporation’s owners and a majority of its senior officers, because they believe it is tantamount to abortion.  Some employees do not share the same religious beliefs and therefore feel that they are entitled to the same coverage as offered in other employer-sponsored plans.  The cost of covering morning-after drugs is negligible, but failure to cover them could adversely affect public and employee relations.  Is it ethical to eliminate this coverage?

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About John Hooker

T. Jerome Holleran Professor of Business Ethics and Social Responsibility Tepper School of Business Carnegie Mellon University

One response »

  1. John Hooker says:

    This is obviously inspired by the recent landmark U.S. Supreme Court case Burwell v. Hobby Lobby, which ruled that Hobby Lobby has the legal right not to offer morning-after coverage in its health plan, despite what might be mandated by the U.S. Affordable Care Act. However, the dilemma as presented is not the public policy issue of whether this kind of contraceptive coverage should be required by law, or whether the Supreme Court made the right decision. It is whether a particular company should offer the coverage, assuming of course that it is legal not to offer it. This is the issue I will look at.

    Generally, a company’s medical coverage is part of the employment package, along with salary and other benefits. So the question is whether there are any limitations on what kind of package a company can ethically offer. There are probably few limitations on the salary offer, subject to minimum wage laws, if employees have the option of working elsewhere. Some would argue that companies should offer a living wage, but this still leaves a great deal of latitude.

    However, there may be an ethical obligation to offer reasonable medical insurance, although the arguments are complicated and hard to extend to particular provisions in the insurance. One might argue on a utilitarian basis that Hobby Lobby should cover low-probability/high-cost risks like accidents, hospitalization, and serious illness, at least when employees can’t easily obtain this kind of coverage on their own. If the government doesn’t provide health care (as in the U.S.), everyone is better off on balance if employers provide health insurance.

    However, employees can cover relatively low-cost items (like the morning-after drugs to which Hobby Lobby objects) out of their salary. So in effect, Hobby Lobby is providing a slightly lower salary than employers who offer full contraceptive coverage. There is nothing unethical about this, as long as everyone knows what is going on. There could be an element of deception if health insurance in the retail industry normally covers all forms of contraception, but Hobby Lobby could avoid deception by stating prominently in its benefits literature that it does not cover morning-after contraception.

    So the company can ethically eliminate morning-after coverage, for religious reasons or any reasons. One might argue that this is bad for the business and therefore violates fiduciary duty to stockholders, but there are no stockholders, because it is a family-owned business. In any case, the prior issue is whether the owners (whether they be stockholders or family) can ethically eliminate the coverage, and they can.

    Ironically, Hobby Lobby’s insurance package covered full contraceptive benefits before the Obamacare era. Only after being approached by the Becket Fund for Religious Liberty about possible legal action did Hobby Lobby raise objections to this kind of coverage.

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