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SCOTUS Upholds Employer Exemptions from Contraceptive Coverage

July 9, 2020

On Wednesday, the Supreme Court upheld two Trump administration rules that grant religious and moral exemptions to the Affordable Care Act’s (ACA) requirement that employers include contraceptive coverage in their health care plans. Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania, No. 19-431, 2020 WL 3808424 (U.S. July 8, 2020), consolidated with Trump v. Pennsylvania. This is the third trip to the high court for the ACA’s contraceptive coverage requirement, and deals with a more extensive exemption from coverage than the 2014 Hobby Lobby case, which ruled only that “closely held for-profit businesses” could not be required to provide contraceptive coverage over their religious objections. In Little Sisters of the Poor, the Supreme Court upheld two rules issued by the Departments of Health and Human Services, Department of Labor and the Department of the Treasury (the “Departments”), which separately exempt employers from establishing, maintaining, providing, offering or arranging for coverage or payments for some or all contraceptive services due to sincerely held religious beliefs on the one hand, and to providing some or all forms of contraceptive coverage due to sincerely held moral objections on the other.

In its 7-2 decision, authored by Justice Thomas, the Supreme Court held that the Departments had the authority under the ACA to promulgate these religious and moral exemption rules. The Court supports this holding by stating that the ACA grants sweeping authority to the Health Resources and Services Administration (HRSA) to define what is included in the “preventive care and screening” required to be provided to women under the ACA, and that such authority “empowers [HRSA] to identify and create exemptions...” Justice Thomas also found concerns that these exemptions frustrate Congress’ and the ACA’s intent by making it significantly harder for women to obtain access to contraception without cost-sharing unavailing, stating that even if such concerns are legitimate, they “cannot justify supplanting the text’s plain meaning,” which grants HRSA this authority. The Court also held that because the ACA provides a basis for these exemptions, it did not need to reach the arguments as to whether the Religious Freedom Restoration Act (RFRA) also compelled the Departments’ issuance of such exemptions. In a concurrence joined by Justice Gorsuch, however, Justice Alito said he would find that the Departments “were required by RFRA to create the religious exemption (or something very close to it).”

The Little Sisters of the Poor decision finds that the Departments’ rules promulgating the religious and moral exemptions are “free from procedural defects,” which was the issue that proved fatal to earlier iterations of these rules when they were first implemented in 2017 without waiting for public comments. Those rules were quickly enjoined by federal judges in multiple jurisdictions, causing the Departments to engage in notice-and-comment rulemaking reissuing the regulation in 2018. Thus began the “legal odyssey,” in the words of Justice Alito, of Little Sisters of the Poor, wherein the rules were first subject to two separate injunctions (one covering 14 states and one nationwide) at the District Court level, followed by the Third Circuit subsequently upholding the nationwide injunction last July. Now, the Third Circuit’s decision has been reversed and the case remanded to the lower courts. Whether these regulations withstand challenge under the Administrative Procedure Act is yet to be seen.

Under these rules, there is no process for requesting an exemption; rather, eligible employers with religious or moral objections are simply exempt and not required to cover all FDA-approved contraceptives, and their female employees, and their dependents, are not entitled to coverage for those contraceptives. If the employer’s plan previously included contraceptive coverage, then notice to employees of the employer’s decision to cease providing that coverage is required. The rules do, however, preserve and expand an accommodation process that previously existed, whereby employers with religious objections are accommodated through cost-shifting to their insurer or third-party administrator (TPA) of their health plan. The rules at issue in Little Sisters of the Poor expand that accommodation to employers with moral objections to contraceptive coverage. Under the accommodation process, which now includes a moral objective to contraceptives, employers notify HHS, their insurer or TPA of a religious or moral objection to contraception, which then relieves the employer of its obligation to pay for contraceptive coverage and obligates the employer’s insurer or TPA to do so. Those employers who do not seek complete exemption on religious or moral grounds can still use the accommodation process to shift the obligation to pay for contraceptives to their insurer or TPA, but whether employers will continue to utilize the accommodation process with complete exemptions from the requirements now available to them is another open question.

Ultimately, the federal government has estimated that up to 126,000 women could lose contraception coverage through their employer-provided health insurance under the Departments’ regulations, which grants closely held for-profits, nonprofits, and private colleges or universities an exemption based on religious or moral objections, and grants publicly traded for-profit companies an exemption based on religious objections.

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