Benefits and Compensation

Supreme Court Upholds Broad Exemption to ACA Contraceptive Mandate

The U.S. Supreme Court upheld the Trump administration’s broad exemptions for employers with religious or moral objections to covering contraception, as normally required by the Affordable Care Act’s (ACA) preventive care rules.

ACA

By a 7-2 vote, the high court ruled that the 2018 exemption regulations fell within the U.S. Department of Health and Human Services’ (HHS) wide discretion under the ACA to define the covered preventive care services and create exemptions (Little Sisters of the Poor v. Pennsylvania, Nos. 19-431, 19-454 (Sup. Ct., July 8, 2020).

Background

The ACA added Section 2713 to the Public Health Service Act, requiring group health plans to cover certain preventive care services on a first-dollar basis. These are to include preventive care relating to women’s health “as provided for in comprehensive guidelines” from HHS’ Health Resources and Services Administration (HRSA) (42 U.S.C. §300gg-13(a)(4)).

When the HRSA released its guidelines listing the covered preventive services, which included contraception, HHS and the U.S. Departments of Labor (DOL) and the Treasury (Treasury) crafted a narrow exemption for religious employers. Later, the exemption was expanded from houses of worship to include religiously affiliated nonprofit organizations.

In response to ongoing litigation by religious employers, the three agencies issued final rules in 2015 that added to the administrative options for obtaining an exemption and opened the “accommodation” process to certain for-profit businesses as well as nonprofits. Eligible organizations were required to submit a DOL “Form 700” to their insurer or notify HHS in writing of their religious objections to covering contraceptives, in which case the insurer or third-party administrator would provide the contraceptive coverage separately.

However, certain employers once again challenged the rules, arguing that the accommodation process still made them complicit in practices to which they objected. In November 2018 the DOL, HHS, and Treasury issued final rules to expand the exemption still further—to any private employer (except publicly traded companies) with a sincerely held religious or moral objection.

In turn, these new regulations were challenged by the states of New Jersey and Pennsylvania, which argued that the exemptions exceeded the agencies’ authority under the ACA and the Religious Freedom Restoration Act (RFRA). On July 12, 2019, the 3rd U.S. Circuit Court of Appeals—which covers Delaware, New Jersey, and Pennsylvania—upheld a federal district court’s nationwide injunction blocking them from taking effect.

Majority Opinion

Writing for five of the nine justices, Justice Clarence Thomas focused on the generality of the wording in the underlying ACA provision. “On its face … the provision grants sweeping authority to HRSA to craft a set of standards defining the preventive care that applicable health plans must cover,” he wrote. “But the stat­ute is completely silent as to what those ‘comprehensive guidelines’ must contain, or how HRSA must go about cre­ating them.”

This “capacious grant of authority” to HRSA to decide what constitutes preventive care “leaves its discretion equally unchecked in other areas, including the ability to identify and create exemptions from its own Guidelines,” Thomas continued. As the DOL, HHS, and Treasury have maintained since 2011, the phrase “as provided for” allows HRSA both to identify what preventive care and screenings must be covered and to exempt or accommodate certain employers’ religious objections, he wrote.

Because the majority found that both the religious and moral exemptions were permitted by the ACA’s text, it did not decide the Trump administration’s additional argument that its religious exemption rule was compelled, or at least authorized, by RFRA. This law prohibits burdening someone’s exercise of religion unless it is the least restrictive means of furthering a compelling governmental interest.

However, the majority rejected the plaintiff states’ contention that the agencies were wrong to consider RFRA in formulating the exemption rules. “It is clear from the face of the statute that the contracep­tive mandate is capable of violating RFRA,” and the Supreme Court’s previous decisions “all but instructed the Depart­ments to consider RFRA going forward,” Thomas wrote.

The majority also found the rules to be procedurally valid, rejecting the states’ arguments that the DOL, HHS, and Treasury should have first issued a formal proposal rather than an “interim final rule” (IFR), and that they failed to consider comments submitted on the IFR with an “open mind.” The agencies’ promulgation process satisfied the Administrative Procedure Act’s (APA) “objective criteria,” Thomas concluded.

Therefore, the Court reversed the 3rd Circuit’s judgment and remanded the case for further proceedings consistent with the majority opinion.

Concurring Opinions

Two concurring opinions were filed. Justices Samuel Alito and Neil Gorsuch, who joined in the majority opinion, added their view that the agencies’ religious exemption rule “or something very close to it” is in fact compelled by RFRA. “The solution they devised cures the problem, and it is not clear that any narrower exemption would have been suffi­cient with respect to parties with religious objections to the accommodation,” Alito wrote.

If Congress considered cost-free contraceptive coverage to be of “paramount” concern, it could simply create a program to provide that coverage directly, as it has done for certain low-income women, without implicating employers at all, Alito added.

Justices Elena Kagan and Stephen Breyer concurred only in the judgment, finding the ACA was unclear whether the authority granted to HRSA to designate preventive care services also included the power to carve out exemptions. Supreme Court precedent “instructs that a court facing statutory ambiguity should accede to a reasonable interpre­tation by the implementing agency,” Kagan wrote, and the agencies’ position that they may decide the “who” as well as the “what” of preventive care coverage is “longstanding and reasonable.”

However, Kagan noted that once the case is remanded, the 3rd Circuit could still find the exemption rules to be “arbitrary and capricious” under the APA. The exemption seems much broader than necessary to meet religious objections to the prior rule’s accommodation process, she wrote, especially since the agencies did not alter HRSA’s original finding that the contraceptive mandate was “necessary for women’s health and well-being.”

Dissenting Opinion

Writing in dissent for herself and Justice Sonia Sotomayor, Justice Ruth Bader Ginsburg took issue with the majority’s reading of HRSA’s exemption authority.

The relevant ACA provision authorized HRSA to issue guidelines on the type of women’s health services to be covered, but not to undermine Congress’ directive regarding who must cover these services, Ginsburg wrote. “Where Congress wanted to exempt certain employers from the ACA’s re­quirements, it said so expressly.”

Moreover, HRSA has no expertise on delineating religious and moral exemptions, so one would not expect Congress to delegate to HRSA the task of crafting such exemptions,” she added—and indeed it was DOL, HHS, and Treasury, rather than HRSA, that did so.

While federal agencies may craft exemptions to comply with RFRA, the Supreme Court “has repeatedly assumed that any religious accommodation to the contraceptive-coverage re­quirement would preserve women’s continued access to seamless, no-cost contraceptive coverage,” Ginsburg continued. And while the government may accommodate religion beyond what the First Amendment requires, “it may not benefit religious adherents at the expense of the rights of third parties.”

Employer Take-Aways

With the exemption rule having been upheld, any employer with sincerely held religious beliefs or moral objections may be exempted from offering contraceptive coverage (except that publicly traded companies are not eligible for the moral exemption). The accommodation process developed by the Obama administration is still available but voluntary.

However, because the lower courts still must consider the APA-based objections to the rules, “employers can expect the final status of the rules to remain in question at least for the foreseeable future,” attorney Lorie Maring of Fisher Phillips observed in a blog post.

David Slaughter David A. Slaughter, JD, is a Senior Legal Content Specialist. He focuses on providing, editing, and updating content related to employee benefits and privacy compliance, including the Thompson HR benefits products. Before coming to BLR, he was an employee benefits compliance editor with Thompson Information Services. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.

Questions? Comments? Contact David at dslaughter@blr.com for more information on this topic.