Two District Courts Block Trump Administration's Final ACA Contraceptives Rules

Practical Law Legal Update w-018-5036 (Approx. 8 pages)

Two District Courts Block Trump Administration's Final ACA Contraceptives Rules

by Practical Law Employee Benefits & Executive Compensation

Litigation Background

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:

Expanded an existing exemption under the ACA's contraceptives mandate to make it available to additional employers, insurers, and other entities and individuals that object to contraceptives coverage based on sincerely held religious beliefs.
Added a moral convictions exemption for certain entities and individuals with sincerely held moral objections to contraceptives coverage.

In December 2017, district court judges in California and Pennsylvania (the same judges who issued the new January 2019 rulings) granted nationwide preliminary injunctions blocking enforcement of the IFRs. The December 2017 rulings concluded that the Departments violated the Administrative Procedure Act (APA) in issuing the IFRs without advance notice-and-comment rulemaking (see Legal Update, Two District Courts Block Enforcement of the Trump Administration's October 2017 Contraceptives Rules). In November 2018, while appeals of those preliminary injunctions were pending, the Departments finalized the October 2017 IFRs (see Legal Update, Final Contraceptives Rules Include Religious and Moral Convictions Exemptions).

The government appealed the California district court's injunction, and in December 2018 the Ninth Circuit upheld the injunction but concluded that its geographic scope was overbroad (see Ninth Circuit Limits Geographic Scope of California District Court Injunction).

In December 2018, the plaintiff-states in the California litigation (joined by additional states) filed an amended complaint alleging that the IFRs and the final regulations violated the APA.

Ninth Circuit Limits Geographic Scope of California Injunction

On appeal, the Ninth Circuit affirmed in part, vacated in part, and remanded to the Northern District of California (911 F.3d 558 (9th Cir. 2018)). The Ninth Circuit held that:

Venue was proper in the Northern District of California.
The plaintiff-states had standing to sue for violation of the APA.
The preliminary injunction was warranted.
The district court abused its discretion by issuing a nationwide preliminary injunction, rather than an injunction limited to the plaintiff-states.

As a matter of first impression, the Ninth Circuit held that, for venue purposes, a state resides in every district located within the state. As a result, venue was proper in the Northern District of California.

The Ninth Circuit agreed with the district court that the plaintiff-states established standing to bring their APA claim. The states had argued that the IFRs would result in women losing employer-sponsored contraceptives coverage and turning to state-run or state-reimbursed programs for contraceptives coverage. In the court's view, the states demonstrated that the IFRs likely would cause them economic harm. In reaching this conclusion, the majority rejected the dissent's claim that any economic harm would be "self-inflicted."

Regarding the nationwide preliminary injunction, the Ninth Circuit affirmed with respect to the plaintiff-states but vacated as to the non-plaintiff-states. According to the court, the injunction was overly broad because:

A limited injunction would completely redress the plaintiff-states' harm.
The record did not contain evidence concerning economic harm to the non-plaintiff-states.

Northern District of California: Partial Preliminary Injunction

The Northern District of California ruling, issued on January 13, 2019, granted a partial preliminary injunction in the states' favor.

Threshold Issues

Citing the Ninth Circuit's analysis, the district court rejected the defendants' argument that venue in the Northern District of California was not proper because the State of California, for venue purposes, resides only in the Eastern District – where Sacramento is located. The court also concluded that the plaintiffs had Article III and statutory standing to sue. Regarding Article III standing, the court accepted the plaintiffs' assertion that women who lose employer-sponsored health coverage under the final regulations may be forced to rely on state-operated Title X family planning clinics as a backstop. This reliance on Title X and other state-funded programs to obtain no-cost contraceptives, the court observed, would result in significant cost to the states.

Plaintiffs Are Entitled to a Preliminary Injunction

The district court concluded that the plaintiffs were entitled to a preliminary injunction concerning the final regulations because they demonstrated that they will likely:

Succeed on the merits on their APA challenges to the final regulations (or, at a minimum, they raised serious questions regarding the merits).
Suffer irreparable harm due to the APA violations.

(See Practice Note, Preliminary Injunctive Relief: Initial Considerations (Federal).)

The court also found that the balance of hardships and public interest favored granting an injunction.

Addressing the plaintiffs' likelihood of success on the merits, the court rejected the defendants' arguments that:

The contraceptives mandate is not a mandate at all, but a policy determination that is entirely subject to the Departments' discretion.
The changes under the Departments' religious exemption were required by the Religious Freedom Restoration Act of 1993 (RFRA) (42 U.S.C. § 2000bb-1(a) and (b)) (and, even if the changes were not required, the Departments had discretion to make the changes).

The court disagreed with the defendants that the ACA's language requiring coverage for contraceptives "as provided" in regulations gave the Departments unfettered discretion to make any exemptions to the mandate that they saw fit. The court reasoned that Congress, through the ACA statute, gave HHS's Health Resources and Services Administration (HRSA) discretion to develop women's preventive services guidelines (see Practice Note, Preventive Health Services Under the ACA, Other Than Contraceptives).

The court also found that the Departments' religious exemption under the final regulations likely was not required by the RFRA. The defendants had argued that even requiring objectors to inform the government that they were opting out of the contraceptives mandate (as required under an existing accommodation) made them complicit in providing contraceptives in violation of their religious beliefs. This opt-out, the defendants maintained, substantially burdening their exercise of religion in violation of the RFRA. According to the district court, however, eight out of nine circuit courts agreed that the accommodation was not a substantial burden on objectors' exercise of religion.

The court also found that the final regulations' moral exemption, which was implemented by the Departments rather than Congress, is inconsistent with the ACA's language and purpose. As a result, the court found that the plaintiffs are likely to prevail on their claim that the moral exemption violated the APA.

Irreparable Harm and Balance of Equities Analyses

The district court found that the plaintiffs were likely to suffer irreparable harm unless the final regulations were enjoined to preserve the status quo pending resolution of the case's merits. This included fiscal harm because state dollars would need to be diverted to pay for contraceptives coverage.

The court also concluded that the balance of equities favored the plaintiffs, noting that they faced "potentially dire" public health and budget consequences from the final regulations' implementation – for example, a higher rate of unintended pregnancies. By contrast, maintaining the status quo that preceded the IFRs and the final regulations would not raise an equivalent harm for the defendants.

Injunction Limited to Plaintiff-States and District of Columbia

Citing the Ninth Circuit's analysis, the district court limited its preliminary injunction prohibiting implementation of the final regulations to the plaintiff-states (and the District of Columbia) (see Ninth Circuit Limits Geographic Scope of California District Court Injunction)

Eastern District of Pennsylvania: Nationwide Preliminary Injunction

The Eastern District of Pennsylvania ruling, issued on January 14, 2019, included a nationwide preliminary injunction blocking enforcement of the final regulations. Like the Northern District of California, the Pennsylvania district court concluded that venue was proper and the plaintiff-states had standing to challenge the final regulations in federal court.

Regarding the merits of the states' preliminary injunction motion, the court considered, in turn, whether:

The states were likely to succeed on the merits.
The states would suffer irreparable harm without a preliminary injunction.
The balance of equities tipped in their favor.
An injunction was in the public interest.

Likelihood of Success on the Merits

The district court concluded that the states had demonstrated an adequate likelihood of success on the merits to warrant preliminary relief. This analysis included procedural and substantive arguments under the APA.

Procedural APA Claim

Regarding the states' procedural APA claims, the court concluded that the states were not likely to succeed on their argument that the Departments failed to satisfy the APA's requirements for notice-and-comment rulemaking in issuing the final regulations. The states asserted that the Departments' explanations in response to public comments were inadequate to satisfy the APA. The court concluded, however, that although the Departments' explanations were not perfect, they were sufficient to meet the APA's relatively low standards in this regard.

However, the court concluded that the states were likely to succeed on a related claim that the Departments' procedural failures in issuing the IFRs "fatally tainted" the final regulations, resulting in an APA violation. (Regarding the APA procedural failures with the IFRs, see Legal Update, Two District Courts Block Enforcement of the Trump Administration's October 2017 Contraceptives Rules: APA Requirements for Administrative Rulemaking.) According to the district court, the procedurally invalid IFRs altered the issue to be presented in the final regulations. Specifically, instead of framing the issue as whether significant expansions to the existing exemption and accommodation should be made at all, the Departments sought comments "on whether those changes should be finalized." The district court reasoned that Third Circuit decisions have expressed skepticism concerning whether notice-and-comment procedural violations can be cured later in the rulemaking process.

Substantive APA Claim

The district court also concluded that the final regulations (as with the IFRs) exceeded the scope of the Departments' authority under the ACA and could not be justified under the RFRA. As a result, the court concluded – in the context of its preliminary injunction analysis – that the final regulations needed to be set aside.

At issue in the substantive APA claim was whether the ACA allowed the Departments to develop the exemptions in its November 2018 final regulations. The court rejected the Departments' argument that the ACA authorized them to carve out categories of entities that were not required to provide preventive care coverage. According to the court, however, the ACA (under a determination made by Congress):

Required that specified health plans and insurers cover preventive care.
Did not delegate authority to create exemptions to the Departments.

The court also concluded that the RFRA did not confer authority on the Departments to issue the religious exemption under the final regulations.

Remaining Preliminary Injunction Requirements

The district court concluded that the remaining elements of the preliminary injunction standard also cut in the plaintiffs' favor. For example, the states were likely to suffer irreparable harm resulting from the final regulations' impact on:

The states' fiscal integrity (that is, the final regulations would lead to a greater burden on state-funded programs that provide contraceptives).
Citizens' well-being (because without no-cost coverage under the ACA women may forgo contraceptive services or look for less effective contraceptive services).

The balance of equities also weighed in the states' favor, given their interest in limiting women's costs for contraceptives services. In addition, a preliminary injunction was in the public interest because it maintained the status quo subject to the litigation's outcome.

Practical Impact

Although the two district court injunctions put a hold on the Trump Administration's final regulations for the time being, they will not be the final word on the exemptions. Both orders have already been appealed – to the Ninth and Third Circuits, respectively – so entities that were planning to take advantage of the expanded exemptions must wait and see how the litigation plays out in the courts.

In issuing its nationwide injunction, the Pennsylvania district court concluded that the Departments exceeded their statutory authority in issuing the final regulations' expanded exemption – and thereby violated the APA. In the district court's view, although the Departments were authorized (through the HRSA) to define what constitutes preventive care under the contraceptives mandate, they were not authorized to define who must provide the coverage. In a footnote, though, the court recognizes that this reasoning could also call into question a 2011 rule that exempted religious employers from the ACA's contraceptives mandate.

Two District Courts Block Trump Administration's Final ACA Contraceptives Rules | Practical Law