Supreme Court upholds ERISA exemption for faith-based hospitals
- In an 8-0 vote, the U.S. Supreme Court ruled that religious-affiliated hospitals can claim exemption from federal pension requirements. Newly confirmed Justice Neil Gorsuch did not participate in the case.
- Monday’s decision in Advocate Health Care Network v. Stapleton allows faith-based hospitals to avoid pension regulations under the Employee Retirement Income Security Act’s “church plan” exemption, allowing them to avoid paying premiums to the Pension Benefit Guaranty Corp. and otherwise satisfy ERISA.
- The case stemmed from a trio of lawsuits against Advocate, Dignity Health and St. Peter’s Healthcare system in which former employees claimed the health systems weren't’t eligible for the church plan exemption.
The case revolves around what types of employers are considered religious under Internal Revenue Service pension rules. For 30 years, hospitals with religious ties — which comprise a large number of hospitals in the country — have been considered exempt under the church plan exemption. The plaintiffs argued that the hospitals didn’t meet the exemption criteria because their pension plan wasn’t actually created by their affiliated church.
“Two phrases of the statute are relevant,” writes Ronald Mann in SCOTUSblog. “First, ERISA does not apply to any plan ‘established and maintained for its employees by a church.’ Second, a 1980 amendment provides that a ‘plan established and maintained for its employees … by a church … includes a plan maintained by an organization … controlled by or associated with a church.’”
The justices concluded that plans deemed exempt for 30 years should continue to be so.
The high court’s ruling comes as many nonprofit community hospitals are struggling to stay afloat. Alan Macdonald, president and CEO of Hallmark Health, told Healthcare Dive recently that the Massachusetts health system has been operating at a loss for four years. Feeding the problem is an increase in patients on government programs, which reimburse at lower rates than private payers.
Other faith-based hospitals have also financially stressed. In November, Catholic Health Initiatives reported a $483 million operating loss in its merger plans with Dignity Health. The 103-hospital system saw revenues rise to $15.9 billion last year, but expenses also rose 10.2% to $16.1 billion.
Community Health Systems has also been struggling to bring down $15 billion in debt tied to its 2014 acquisition of Health Management Associates. In November, CEO Wayne Smith announced the sale of 17 hospitals valued at about $1.2 billion. The divestitures are part of a string of sales over the past year that could reach up to 30 hospitals.
- Modern Healthcare Supreme Court backs faith-based hospitals’ ERISA exemptions
- U.S. Supreme Court Advocate Health Care Network v. Stapleton
- SCOTUSblog Argument analysis: Justices hesitant about extending ERISA to church-affiliated pension plans