District Court Rejects Massachusetts’ Challenge to Newly Expanded Contraceptive Coverage Exemption

On March 12, 2018, the U.S. District Court for the District of Massachusetts, in Massachusetts v. U.S. Dept. of Health and Human Services (HHS), 2018 WL 1257762 (D. Mass. 2018), held that Massachusetts lacks standing to challenge two interim final HHS rules relating to the contraceptive coverage exemption for employers with religious and moral objections. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. 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. Then, 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.

In Massachusetts v. HHS, the state of Massachusetts argued that HHS hadn’t complied with the Administrative Procedure Act (APA) when it failed to provide an applicable notice and comment period before issuing the two interim final rules, and that the rules will cause significant harm to Massachusetts women who lose contraceptive coverage as a result of the rules’ enforcement. Massachusetts estimated that between 666 and 2,520 Massachusetts women who are currently using contraception would lose their employer-sponsored coverage and would, therefore, experience increased out-of-pocket costs, as a result of the two rules. Based on those arguments, the state requested a nationwide permanent injunction (prohibition) on enforcement of the two rules.

The court denied the injunction, concluding that Massachusetts hadn’t established that anyone had actually been harmed by the new rules or that employers would actually use the expanded exemptions. The court reasoned that because Massachusetts already has a law on its books that prohibits certain employer-sponsored group health plans from imposing cost-sharing for contraceptives, the estimates were inaccurate and inappropriately based on unsupported assumptions.

Interestingly, courts in California (CA) and Pennsylvania (PA) have previously imposed nationwide preliminary injunctions that block enforcement of the two interim final rules. The Massachusetts court, however, distinguished itself by concluding that employers in CA and PA are likely to use the expanded exemptions (since those states don’t have similar laws prohibiting it). According to the MA court, to be able to show harm (fiscal injury or suffering some type of adverse effect on the health of state residents), the state must show that employers intend to actually use the expanded exemptions. The MA court’s ruling means the case may continue; we’ll have to wait and see how the court rules on the merits of the case itself.

For employers, the court decision doesn’t bring new compliance obligations, but the issue is still quite unsettled. Thus, employers wishing to rely upon any expanded religious exemptions should work with outside counsel to better understand whether they qualify for such exemptions.

Massachusetts v. HHS »