Ninth Circuit Narrows Application of Injunction on Contraceptive Mandate Exemptions

On Dec. 13, 2018, the U.S. Court of Appeals for the Ninth Circuit issued a preliminary opinion in the case of California v. Azar. This case, which was brought by the states of California, Delaware, Virginia, Maryland and New York, challenges the Trump administration’s exemptions for the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.

However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our Oct. 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The interim final rules also provided an exemption for insurers with sincerely held moral objections to contraceptive coverage.

The states filed this lawsuit in early 2018, challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents. The federal district court in which the case was filed agreed and imposed a nationwide preliminary injunction on the interim final rules. A federal court in Pennsylvania did the same.

The government appealed this case, arguing (among other things) that the states didn’t have standing to sue. The Ninth Circuit disagreed with that argument, holding that the states do have standing to sue on this issue and that the government likely violated the APA’s requirements. However, the court found the district court’s nationwide injunction to be overbroad and so they limited the injunction to the states of California, Delaware, Virginia, Maryland, and New York (which are the states that filed the lawsuit).

Ultimately, the future of these exemptions remains uncertain. As we recently discussed in Compliance Corner (see our Nov. 13, 2018, article here), the government released the final versions of these exemptions. They are scheduled to become effective later this month. Additionally, the nationwide injunction imposed by the federal district court in Pennsylvania is still intact.

For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to rely upon any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with claiming an exemption.

California v. Azar »