The Third Circuit has upheld a district court's preliminary nationwide injunction blocking implementation of Trump Administration final regulations under the Affordable Care Act's (ACA's) contraceptives mandate (Pennsylvania v. President US, (3d Cir. July 12, 2019)). The final regulations, which were jointly issued by the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (collectively, the Departments):

In January 2019, however, federal district courts in California and Pennsylvania issued preliminary injunctions (in separate cases) prohibiting implementation of the final regulations (see Legal Update, Two District Courts Block Trump Administration's Final ACA Contraceptives Rules). The latter of these two rulings, which is at issue in the Third Circuit's decision, granted a nationwide injunction barring enforcement of the final regulations.

This ACA contraceptives litigation involves Trump Administration interim final regulations (IFRs) issued in October 2017 and finalized without significant change in November 2018 (final regulations) (see Practice Note, ACA Contraceptives: Religious Beliefs/Moral Convictions Exemption and Accommodation and Article, Trump Administration Religious Beliefs and Moral Convictions Exemptions to the ACA's Contraceptives Mandate). The regulations:

In December 2017, district court judges in California and Pennsylvania granted nationwide preliminary injunctions blocking enforcement of the IFRs. In the December 2017 rulings, the courts concluded that the Departments violated the Administrative Procedure Act (APA) in issuing the IFRs without advance notice-and-comment rulemaking. In November 2018, while appeals of those preliminary injunctions were pending, the Departments finalized the October 2017 IFRs with final regulations that were substantially similar to the IFRs (see Legal Update, Final Contraceptives Rules Include Religious and Moral Convictions Exemptions). In January 2019, the same California and Pennsylvania district court judges that issued the December 2017 rulings issued injunctions blocking enforcement of the final regulations. The Pennsylvania district court ruling, which included a nationwide preliminary injunction, was appealed to the Third Circuit.

(For additional background regarding the ACA's contraceptives coverage mandate, see Practice Notes, Preventive Health Services Under the ACA, Other Than Contraceptives and Contraceptives Coverage Under the ACA.)

On appeal, the Third Circuit affirmed the district court's order granting a nationwide preliminary injunction. The Third Circuit held that the states have standing to bring this lawsuit. The court concluded that the states established that they will suffer a concrete and particularized injury (that is, financial injury) because:

Addressing another element of standing, the court reasoned that harm to the states consisting of greater expenditure of funds is imminent. This imminent injury to the states, according to the Third Circuit, is causally connected to the final regulations' exemptions. The Third Circuit also agreed with the district court that an injunction would avoid financial harm to the states while the final regulations' legality is litigated.

The Third Circuit also affirmed the district court's ruling that the states were entitled to a preliminary injunction because, among other reasons, they were reasonably likely to show that the final regulations violated the APA.

The Third Circuit also addressed whether the Pennsylvania district court abused its discretion in enjoining the final regulations nationwide. The Third Circuit concluded that a nationwide injunction was:

In reaching this conclusion, the court cited APA case law indicating that courts, as a matter of course at the merits stage, may invalidate unlawful administrative regulations (leaving predecessor regulations in place until an administrative agency can take further action). The Third Circuit reasoned that blocking enforcement of regulations that the states have shown are likely to be proven unlawful ensures that the regulations are not effective until their validity is finally adjudicated on the merits.

Moreover, the court reasoned that an injunction that is geographically limited to only the specific states that challenged the regulations alone would not protect those states from financial harm. This is because those states have residents who work out-of-state and who will lose coverage provided by employers in non-enjoined states that would otherwise use the final regulations' exemptions. Finally, the Third Circuit observed that out-of-state college attendance also contributes to the states' injury. Because most out-of-state students remain on their parents' employer-sponsored plans, without a nationwide injunction these students also would lose contraceptives' coverage under their parents' out-of-state plans – leaving the states where they attend school to pick up the bill (see Practice Note, Coverage for Adult Children to Age 26 Under the ACA).

For the time being, the Third Circuit's decision puts a hold on the expanded exemptions under the Trump Administration's November 2018 final regulations, until the states' APA-based challenge can be heard on the merits. The Third Circuit stopped short of vacating the regulations altogether – though that was the ultimate remedy sought by the states. Entities that could have used the final regulations' expanded exemptions will not be able to do so.

In Northern California, meanwhile, an appeal of the related district court injunction blocking the Trump Administration's final regulations awaits review by the Ninth Circuit. However, that injunction was narrower in scope than the nationwide preliminary injunction issued by the Pennsylvania district court.