By Pension and Benefits Editorial Staff
The U.S. Supreme Court held that government departments had the authority to provide exemptions from the regulatory contraceptive coverage requirements stemming from the Patient Protection and Affordable Care Act (ACA) for employers with religious and conscientious objections. In a 7-2 decision, the High Court found that the Departments of Health and Human Services (HHS), Labor, and the Treasury (Departments)—the Departments that jointly administer the relevant ACA provision—had the authority to exempt certain employers who have religious and conscientious objections from the "agency-created mandate." The High Court reversed and remanded the Third Circuit U.S. Court of Appeal’s ruling, with instructions to dissolve the nationwide preliminary injunction.
Background on contraception coverage, regulations. The ACA’s contraception coverage mandate initially allowed for exemptions on religious grounds for 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. Lawsuits and regulations followed. In 2017, the Departments promulgated two interim final rules (finalized in 2018) that expanded the religious exemptions authorizing employers with religious or moral objections to limit employees’ access to health insurance coverage for contraception, and lawsuits followed.
Third Circuit decision, appeal. In 2019, the Third Circuit court held that Pennsylvania and New Jersey were likely to succeed in proving that the government departments did not follow the Administrative Procedure Act (APA) and that the regulations allowing for the exemptions are not authorized under the ACA or required by the Religious Freedom Restoration Act (RFRA). The Third Circuit also affirmed the district court’s order preliminarily enjoining the rules’ enforcement nationwide. On October 1, 2019, the Little Sisters of the Poor Saints Peter and Paul Home filed a petition for writ of certiorari that was granted on January 17, 2019. On October 7, 2019, the Trump Administration also filed a petition for writ of certiorari with the U.S. Supreme Court that was granted on January 21, 2020. The two were consolidated.
Supreme Court’s findings. The Court analyzed whether the final rules providing religious and moral exemptions to the contraceptive mandate were both substantively and procedurally invalid.
- Statutory authority. First, the court reviewed if the Departments lacked statutory authority to promulgate the rules. The respondents argued that the ACA permits the Health Resources and Services Administration (HRSA), an agency of HHS, to only list the preventive care and screenings that health plans “shall . . . provide,” not to exempt entities from covering identified services. The court disagreed, stating, “Because that asserted limitation is found nowhere in the statute, we agree with the Departments.” The court also noted that Congress could have limited HRSA’s discretion in many ways, but it did not. The court added, “Under a plain reading of the statute, then, we conclude that the ACA gives HRSA broad discretion to define preventive care and screenings and to create the religious and moral exemptions.”
- Religious Freedom Restoration Act (RFRA). The court also found that the respondent’s argument that the Departments erred by looking to RFRA as a guide when framing the religious exemption was without merit. The court stated that if the Departments did not look to RFRA’s requirements or discuss RFRA at all when formulating their solution, they would be susceptible to claims, “that the rules were arbitrary and capricious for failing to consider an important aspect of the problem.”
- Procedures. The court was not persuaded by arguments of invalid procedures, either. Respondents showed that the 2018 final rules were preceded by a document entitled “Interim Final Rules with Request for Comments,” not a document entitled “General Notice of Proposed Rulemaking.” However, the Court found that the rules “contained all of the elements of a notice of proposed rulemaking as required by the APA.” The Court also declined to evaluate the final rules under the “open-mindedness” test. The Third Circuit had applied an “open-mindedness” test in its ruling, concluding that because the final rules were “virtually identical” to the IFRs, the Departments lacked the requisite “flexible and open-minded attitude” when they promulgated the final rules.
The court summarized its findings in its conclusion, stating “…the Departments had the statutory authority to craft that exemption, as well as the contemporaneously issued moral exemption. We further hold that the rules promulgating these exemptions are free from procedural defects.”
However, in a concurring opinion, Justice Kagan noted, “… I question whether the exemptions can survive administrative law’s demand for reasoned decision- making. That issue remains open for the lower courts to address.”
SOURCE: Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania (U.S. Sup. Ct.), No. 19-431, July 8, 2020.
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