In Abortifacient Litigation, Court Issues Permanent Injunction and Bars ACA Employer Mandate Penalties | Practical Law

In Abortifacient Litigation, Court Issues Permanent Injunction and Bars ACA Employer Mandate Penalties | Practical Law

In litigation involving the Affordable Care Act's (ACA's) contraceptives mandate, the US District Court for the District of North Dakota granted a permanent injunction prohibiting the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (collectively, the Departments) from enforcing the contraceptives mandate against an alliance of Christian employers. The court declared that the plaintiffs may comply with the ACA by offering health plans that exclude coverage for abortion-causing drugs, devices, and procedures (and related education and counseling) but that are otherwise compliant. The court also barred the Departments from imposing penalties against the plaintiffs under the ACA's employer mandate and numerous other group health plan compliance requirements regarding coverage of abortifacients.

In Abortifacient Litigation, Court Issues Permanent Injunction and Bars ACA Employer Mandate Penalties

by Practical Law Employee Benefits & Executive Compensation
Published on 21 May 2019 • USA (National/Federal)
In litigation involving the Affordable Care Act's (ACA's) contraceptives mandate, the US District Court for the District of North Dakota granted a permanent injunction prohibiting the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (collectively, the Departments) from enforcing the contraceptives mandate against an alliance of Christian employers. The court declared that the plaintiffs may comply with the ACA by offering health plans that exclude coverage for abortion-causing drugs, devices, and procedures (and related education and counseling) but that are otherwise compliant. The court also barred the Departments from imposing penalties against the plaintiffs under the ACA's employer mandate and numerous other group health plan compliance requirements regarding coverage of abortifacients.
In litigation involving the Affordable Care Act's (ACA's) contraceptives mandate, a district court granted a permanent injunction prohibiting the DOL, HHS, and Treasury (Departments) from enforcing the ACA's contraceptives mandate against an alliance of Christian employers and other plaintiffs (Christian Emp'rs Alliance v. Azar, (D.N.D. May 15, 2019)). The court declared that the plaintiffs may comply with the ACA by offering plans that exclude coverage for abortion-causing drugs, devices, and procedures and related education and counseling (that is, abortifacients) but that are otherwise compliant. The district court's order also permanently enjoins the Departments from imposing penalties for noncompliance with the ACA's employer mandate and other group health plan mandates against the plaintiffs for not covering abortifacients.

Christian Employers Objected to Covering Abortifacients

Under the ACA, non-grandfathered group health plans and insurers must provide coverage for certain preventive health services without cost-sharing. As implemented, the ACA contraceptives mandate requires coverage for all FDA-approved contraceptive methods (see Practice Note, Contraceptives Coverage Under the ACA), and the mandate is enforced against employers through potentially significant penalties under the Internal Revenue Code (Code) (26 U.S.C. § 4980D(b)(1); see Group Health Plans Toolkit). Objecting employers that decide to avoid providing contraceptives by dropping their health plans altogether also face penalties under the ACA's employer mandate (26 U.S.C. § 4980H; see Practice Note, Employer Mandate Under the ACA: Penalties and Enforcement and Employer Mandate Toolkit).
The plaintiffs in this case sued the Departments alleging that the ACA's contraceptives mandate violates the Religious Freedom Restoration Act (RFRA) (42 U.S.C. § 2000bb-1(b)). The plaintiffs objected to providing coverage for abortion-causing drugs, though not to covering non-abortion causing contraceptive drugs and devices. Following a change in administration and issuance of final regulations expanding the availability of accommodations to the contraceptives mandate, the Departments concluded that requiring employers with sincerely held religious beliefs to comply with the contraceptives mandate would violate the RFRA (see Article, Trump Administration Religious Beliefs and Moral Convictions Exemptions to the ACA's Contraceptives Mandate: Overview of the ACA's Contraceptives Coverage Mandate).
The Departments did not oppose permanent injunctive and declaratory relief for the plaintiffs in general. However, the Departments did object to:
  • An order that would prohibit the IRS from collecting employer mandate penalties from the plaintiffs.
  • Any injunction that applied to future members of the objecting employers' alliance.

District Court Grants Permanent Injunction in Plaintiffs' Favor

Ruling in the plaintiffs' favor, the district court issued an eight-part order:
  • Holding that the contraceptives mandate violates the RFRA.
  • Permanently enjoining the Departments from:
    • enforcing the abortifacient-related requirements of the contraceptives mandate against the plaintiffs; and
    • assessing any penalties related to noncompliance with the abortifacient requirements.
The district court declared that the plaintiffs could comply with the ACA's contraceptives mandate by offering health plans that exclude coverage for abortion-causing drugs, devices, and procedures (and related education and counseling) but that are otherwise compliant.

Permanent Injunction

In granting the plaintiffs' request for a permanent injunction, the court rejected the Departments' arguments that:
  • The Anti-Injunction Act (AIA) deprived the court of jurisdiction to prohibit the IRS from collecting the Code Section 4980H "assessable payments" from an employer that fails to provide health insurance (26 U.S.C. § 4980H).
  • The injunction should not apply to future members of the employers' alliance.

Anti-Injunction Act Did Not Apply

The court first addressed the jurisdictional question under the AIA, which turned on whether assessable payments under Section 4980H are a tax. Several circuit courts of appeal have ruled on this issue. The Fourth and Seventh Circuits concluded that the assessable payments are not a tax for AIA purposes (see Liberty Univ., Inc. v. Lew, 733 F.3d 72 (4th Cir. 2013) and Korte v. Sebelius, 735 F.3d 654 (7th Cir. 2013)), in light of the payments' statutory label and purpose. However, the Fifth Circuit held that the assessable payment is a tax, reasoning that it functions and is collected like a tax (see Hotze v. Burwell, 784 F.3d 984 (5th Cir. 2015)). Agreeing with the Fourth and Seventh Circuits' analysis, the district court concluded that Section 4980H assessable payments are a penalty, rather than a tax, and therefore the AIA did not apply.

Injunction Covers Future Members of Employer Alliance

The court also rejected the Departments' argument that the permanent injunction should not include future members of the employers' alliance. In the court's view, limiting the injunction to current members would result in further litigation – as new members join the alliance – and would waste judicial resources.

Declaration Regarding the Plaintiffs' ACA Compliance

The plaintiffs also sought a declaration that they could comply with the ACA by offering health plans that exclude coverage for abortion or abortion-related services but that are otherwise compliant. The court agreed that this language was needed to protect the members from potential claims by beneficiaries.

Practical Impact

Consistent with its position under the Trump Administration's contraceptives regulations, the government admitted that the contraceptives mandate violated the RFRA as applied to the plaintiffs in this litigation. More interesting, perhaps, is that the Departments also lost on two issues they did not concede – whether the IRS should be allowed to collect employer mandate penalties from the plaintiffs, and whether the requested injunction extends to future members. On the penalties question, the district court issued a broadly worded injunction that permanently enjoins the Departments from enforcing the objected-to abortifacient rules through penalties or enforcement actions based on provisions that include:
In addition to the plaintiffs, their health plans, and future members of the employers' alliance, the injunction also applies to the plaintiffs' insurers and third-party administrators regarding abortifacients.