First Amendment Challenges to Contraception Insurance Mandate Have Mixed Results

August 17, 2012

1. Plaintiffs Dismissed

In Nebraska v. U.S. Dep’t of Health and Human Servs., Case No. 4:12CV3035, 2012 WL 2913402 (D. Neb. July 17, 2012), the court ruled that various religious institutions, individuals and states lack standing to challenge under the First Amendment and Religious Freedom Restoration Act (RFRA) the final rules issued by the U.S. Department of Health and Human Services in order to implement the new federal healthcare law, the Patient Protection and Affordable Care Act. The plaintiffs allege the final rules will coerce them to directly subsidize contraception, abortifacients, sterilization and related services in contravention of their religious beliefs. But the regulations exempt "grandfathered plans." The court ruled that plaintiffs Catholic Social Services, Pius X parochial school, and a nun and Catholic missionary made a "naked assertion" without sufficient facts to show their health plans are not grandfathered and dismissed them for this reason. Plaintiff Catholic Mutual, an insurance company, admitted its plan is grandfathered. The court rejected as insufficient Catholic Mutual’s speculation that the company is "trapped" in its current plan.

The court also found that the individual plaintiffs failed to allege facts indicating that their employers do not qualify for the rule’s religious employers exemption. That exemption applies to a religious employer that: (1) has the inculcation of religious values as its purpose; (2) primarily employs persons who share its religious tenets; (3) primarily serves persons who share its religious tenets; and (4) is a church, its integrated auxiliaries, and conventions or associations of churches, as well as the exclusively religious activities of any religious order. Nebraska, Florida, South Carolina, Texas, Ohio and Oklahoma argued that the rule would threaten their budgetary stability when religious organization employers drop coverage for their employees pushing them into Medicaid. The court ruled that this was mere speculation, that the states failed to allege "direct injuries" resulting from the defendants’ challenged conduct, and that the states do not fall within the zone of interests protected by the First Amendment or RFRA.

In addition, the court ruled that the plaintiffs’ claims were not ripe. The defendant announced a "temporary enforcement safe harbor" applicable to "group health plans sponsored by non-profit organizations that, on and after February 10, 2012, do not provide some or all of the contraceptive coverage otherwise required ... because of the religious beliefs of the organization....." Furthermore, on March 12, 2012, the defendant published an advance notice of proposed rulemaking to consider broadening the religious exemption. The plaintiffs argued that they have to prepare now for rule implementation, but the court disagreed, observing, "The plaintiffs face no direct and immediate harm, and one can only speculate whether the plaintiffs will ever feel any effects from the Rule when the temporary enforcement safe harbor terminates."

2. Plaintiffs Granted an Injunction

In Newland v. Sebelius, Case No. 1:12-cv-1123-JLK, 2012 WL 3069154 (D. Colo. July 27, 2012), the court enjoined application of the rules against Hercules Industries, Inc., a for-profit Colorado S-corporation engaged in the manufacture and distribution of heating, ventilation and air conditioning. The owners, also plaintiffs, are Catholic and seek to run their business in a manner consistent with their sincerely held religious beliefs. Because the Catholic Church condemns the use of contraception, the company’s self-insured health plan does not cover abortifacient drugs, contraception or sterilization. Hercules sued to challenge the rules as a violation of RFRA, the First Amendment, the Fifth Amendment and the Administrative Procedure Act.

The court ruled that Hercules’ plan does not qualify for grandfathering or the religious employers exemption. Although the rules are not effective until November 1, 2012, the court also ruled that: (1) the plaintiffs will suffer imminent irreparable harm from the implementation of the rules due to the planning they must undertake to comply with the proximate implementation date; (2) the balance of the harms weighed against the defendant because the infringement of the plaintiffs’ constitutional and statutory rights is a greater harm than the harm from not enforcing the rules against them; (3) entry of the injunction is not contrary to the public interest inasmuch as the Act already incorporates multiple exemptions exempting 190 million health plan participants; and (4) the plaintiffs are likely to prevail on their RFRA claim because the government has no compelling interest in uniform enforcement of the Act against them while it exempts millions of others, and because the Act is not the least restrictive means of applying the preventive care coverage mandate.

The plaintiffs proposed alternatives that the court ruled the government did not adequately refute to include creation of a contraception insurance plan with free enrollment, direct compensation of contraception and sterilization providers, creation of a tax credit or deduction for contraceptive purchases, or imposition of a mandate on the contraception manufacturing industry to give its items away for free. The government argued that the plaintiffs’ proposals were not feasible, but the court observed the government already provides free contraception to women. The court did not decide whether an S-corporation may "exercise religion."


Source: Holland & Knight, Religious Institutions, August 2012 Update, August 16, 2012

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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