On July 12, 2019, the US Court of Appeals for the Third Circuit affirmed a district court decision that enjoined the 2017 HHS final rules providing exemptions for the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.
However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our October 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The government went on to issue final versions of the rules (as outlined in our November 13, 2018, article here).
Following the publication of the interim final rules, a number of states filed lawsuits challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents and run afoul of the ACA. Federal district courts in Pennsylvania and California both issued injunctions blocking enforcement of the interim and final rules.
The Third Circuit took up the case that came out of the Pennsylvania District Court on appeal, and they agreed with the lower court that the states included in the suit against the federal government had standing to sue. They also agreed that the states are entitled to an injunction of the law because they are likely to succeed in showing that the adoption of the final rules violated the APA.
Additionally, they argued that a nationwide injunction was necessary to avoid harm to individuals throughout the country. Specifically, they reasoned that employees working for employers in the states that filed the lawsuit might actually live in other states and that students covered by these plans might also go to school out of state.
We expect the government to continue to appeal this decision. We’ve also seen a conflicting opinion come out of the federal district court in the northern district of Texas (which invalidated the entire contraceptive mandate for certain employers).
Ultimately this means that the future of these exemptions remains uncertain. For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to claim any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with doing so.
Source: NFP BenefitsPartners