By Rebecca Mayo, J.D.
The U.S. District Court for the Eastern District of Pennsylvania granted a preliminary injunction enjoining the government from enforcing two new interim Final rules, referred to as the Moral Exemption Rule (82 FR 47792) and the Religious Exemption Rule (82 FR 47838), modifying the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The court held that the Commonwealth of Pennsylvania had standing to challenge a regulatory action that affected its interest in protecting its women residents. The court further held that the Commonwealth showed a likelihood of success in its claims that the rules were were issued in violation of the Administrative Procedure Act (APA) and that they are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law (Commonwealth of Pennsylvania v. Trump, December 15, 2017, Beetlestone, W.).
Background. On October 13, 2017, the Trump Administration expanded the scope of the ACA’s contraception coverage exemption through the use of two interim Final rules. Previously, exemption on religious grounds was only available to houses of worship, while religiously affiliated nonprofits (and eventually, closely-held for-profits) were able to use an accommodation allowing them to opt out of providing and paying for contraception coverage as generally required by the ACA. The new rules greatly expand the exemptions, nullifying the need for an accommodation. The new regulations allow nonprofits, closely-held for-profits, and private colleges to cease offering contraception coverage to employees and students based on moral objections. Under the interim Final rules, all companies, including publicly traded companies, may cease offering contraception to employees and students on religious grounds (see Contraception coverage exemptions extended for objecting employers on religious, moral grounds, October 11, 2017).
The Commonwealth filed suit seeking to enjoin enforcement of the new rules. On December 8, 2017, the court denied a nonprofit religious organization’s motion to intervene in the case (see Little Sisters may not intervene in lawsuit challenging contraception coverage exemptions, December 13, 2017).
Standing. A state is entitled to special solicitude in the standing analysis if it has (1) a procedural right that authorizes it to challenge the conduct at issue, and (2) a stake in protecting its quasi-sovereign interests. The Commonwealth challenged regulatory action that affects its legally cognizable interest in safeguarding the health and wellbeing of its women residents. Additionally, the new rules will force the Commonwealth to increase its expenditures for state and local programs providing contraceptive services once the estimated 31,700 women who will lose coverage under the new rules will turn to state and local programs to assist them with the cost of contraceptives. The Commonwealth has shown that it has standing to pursue injunctive relief through its APA claims based on fiscal injury.
Administrative Procedure Act. The agencies did not comply with the notice and comment provisions of the APA. The agencies argued that the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (P.L 104-191) states that a "secretary may promulgate any interim Final rules as the secretary determines appropriate to carry out this chapter" which should be read to include the ACA. However, the court held that HIPAA does not provide express authorization to bypass the notice and comment requirements of the APA in this case. Further, the use of the term "may" is permissive rather than mandatory.
The APA provides that notice and comment may be waived "when the agency for good cause finds that notice and public procedure there on are impracticable, unnecessary, or contrary to the public interest." The court found that the three proffered factors to dispense with notice and comment offered no support for a good cause argument. There was no deadline, much less an urgent one, to implement new rules. The new rules did not resolve an uncertainty or prevented ongoing litigations. And, finally, the blizzard of prior comments that the agencies received in past round of notice and comment rulemaking actually demonstrated that further comments are necessary given the public interest in this matter. Therefore, the court found that the Commonwealth will likely succeed on its claim that the agencies did not follow proper APA procedures in issuing the new IFRs.
Substantive Provision. Under the APA, an administrative rule has no legal effect if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." Here, the new rules interpret the ACA in a manner that is inconsistent with its text. The new rules permit various entities, on the basis of sincerely held religious beliefs or moral convictions, to opt of out of providing coverage that is mandated by the ACA. Further, the Moral Exemption Rule allows closely held corporations to deny contraceptive coverage for any moral reason that they can articulate.
The ACA contains one single exemption from the contraceptive mandate, and that is for grandfathered health plans. Further, the language states that health plans "shall cover" which indicates no exemptions. Thus, since the text of the statute is clear that non-statutory exemptions are not permitted and the Religious Freedom Restoration Act (RFRA) (42 U.S.C. § 2000bb-1) provides no support for it, the Moral Exemption Rule is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" under the APA.
The agencies rely on the "substantial burden on the exercise of religion" that the accommodations process imposes as a reason why the rules were issued. However, courts have repeatedly decided that the accommodation process does not impose a substantial burden under the RFRA. Therefore, the new rules are not required under the RFRA because the courts have foreclosed the legal conclusion that the accommodation process imposes a substantial burden. For these reasons, the Commonwealth has shown a likelihood of success on the merits of its claims.
Harm. If women of Pennsylvania lose contraceptive coverage through their health insurance plans and turn to state programs, the Commonwealth with bear the added financial burden of the increase in women who need contraceptive coverage. Because a party may not seek monetary damages from the federal government, if the new rules are ultimately struck down, the Commonwealth will be unable to recoup the money it extends on contraceptive care in the interim. Though the Commonwealth has not identified any individual who has lost coverage already, there is no need to wait for the axe to fall before an injunction is appropriate. On balance, if the new rules were ultimately to prevail, then a preliminary injunction will have merely delayed their preferred regulatory outcome and there will be no harm or prejudice to them.
Attorneys: Jonathan Scott Goldman, Office of Attorney General, for the Commonwealth of Pennsylvania. Elizabeth L. Kade, U.S. Department of Justice, for Donald J. Trump.
The case is No. 2:17-cv-04540-WB.
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