On July 8, 2020, the US Supreme Court upheld final regulations that significantly expanded the employer exemptions from the Affordable Care Act's (ACA's) contraceptives mandate (Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania, (2020); see Practice Note, Contraceptives Coverage Under the ACA). The final regulations were jointly issued by the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (Departments) in November 2018 under the Trump administration. The Supreme Court's ruling reverses a Third Circuit decision from a year ago that affirmed a nationwide injunction blocking implementation of the Trump administration's final regulations (see Legal Update, Third Circuit Upholds Nationwide Injunction Blocking Trump Administration's ACA Contraceptives Final Rules). The November 2018 final regulations include exemptions from the ACA's contraceptives rules for entities and individuals with objections based on sincerely held religious beliefs or moral convictions (see Practice Note, ACA Contraceptives: Religious Beliefs/Moral Convictions Exemption and Accommodation).

As background, the ACA requires group health plans and health insurers to cover preventive care and screenings without cost-sharing for women "as provided for in comprehensive guidelines supported by [the Health Resources and Services Administration (HRSA)]" (a division of HHS). (The contraceptives mandate is part of the ACA's preventive health services requirements; see Practice Note, Preventive Health Services Under the ACA, Other Than Contraceptives.) In early guidance implementing the ACA, this provision was interpreted to include coverage of contraceptive methods and sterilization procedures approved by the Food and Drug Administration (FDA), but subject to an exemption for religious employers and an accommodation process for other entities (see Practice Note, Contraceptives Coverage Under the ACA: Accommodation for Nonprofit and Certain For-Profit Entities).

The Departments' November 2018 final regulations:

In January 2019, 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). In the latter case, Pennsylvania and New Jersey challenged the final regulations on:

The federal government appealed this ruling, joined by the Little Sisters of the Poor, a religious nonprofit operated by a congregation of Roman Catholic women.

The Third Circuit affirmed the district court's injunction in July 2019, concluding that:

As to the procedural challenge, the Third Circuit concluded that:

Regarding the substantive challenge to the final regulations, the Supreme Court held that the ACA – through the statutory language "as provided for" – gave HRSA broad authority to:

The Court rejected the states' argument that HRSA could not exempt entities from covering identified services, observing that the ACA did not include such a limitation. Rather, the Court concluded that the ACA granted HRSA:

The Court observed that Congress could have restricted HRSA's discretion in numerous ways but chose not to do so. As a result, the Court concluded that the ACA's plain language permitted the Departments to create the religious and moral exemptions under the November 2018 final regulations.

The Court also rejected the states' arguments that the November 2018 final regulations were procedurally invalid. Under the APA, the states asserted, the rules should have been initially issued (in October 2017) as proposed regulations rather than as interim final regulations (see Legal Update, Trump Administration Adds Moral Convictions Exemption in Revised Contraceptives Rules). Disagreeing, the Court concluded that although the rules were initially issued in interim final form, they included all the elements of proposed regulations as required under the APA. These APA elements include:

(5 U.S.C. § 553(b).)

In the Court's view, the interim final version of the regulations provided fair notice, as required under the APA.

The Court also rejected the states' argument that the Departments did not maintain an open mind in developing the rules – as purportedly reflected by the fact that there were only minor differences between the interim final and final versions of the regulations. Dismissing this open-mindedness test, the Court concluded that the Departments fully complied with the APA's objective statutory criteria in developing the regulations.

Reversing the Third Circuit's judgment, the Supreme Court remanded the cases for further proceedings consistent with its opinion.

Under the November 2018 final regulations, the Departments' religious beliefs exemption is available to:

Although the Court's ruling would seem to clear the way for an expanded set of employers to invoke the exemptions, concurring opinions in the ruling underscore that this may not be the case. Concurring in the majority opinion, Justice Alito wrote separately to observe that the states are now "all but certain" to argue that the final regulations violate the APA on a different ground – namely, that they are arbitrary and capricious. He would have also ruled that RFRA required the religious exemption granted under the final regulations, meaning that the Departments did not act in an arbitrary and capricious manner in granting it. Taking it a step further, Justice Kagan (also concurring in the judgment) suggested that the final regulations may come up short under arbitrary and capricious review. In what she characterized as a mismatch between the religious exemption's scope and the problem the Departments sought to remedy, Justice Kagan notes that the regulations exempt all employers with objections to the contraceptives mandate – even employers for whom the Obama administration accommodation process met their religious needs.

So, despite a decade of litigation, it appears likely that this latest Supreme Court ruling on the ACA's contraceptives mandate will not be the final word on the matter. Relatedly, the ruling also may have implications for litigation in the Fifth Circuit involving a nationwide injunction blocking enforcement of the contraceptives mandate (see Legal Update, After a Sweeping Decision on ACA Contraceptives, Focus Turns to the Fifth Circuit and Practice Note, Contraceptives Coverage Under the ACA: Injunction Barring Enforcement of Contraceptives Mandate (June 2019).