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Commonwealth of Pennsylvania v. President United States of America

United States Court of Appeals, Third Circuit

July 12, 2019

COMMONWEALTH OF PENNSYLVANIA; STATE OF NEW JERSEY
v.
PRESIDENT UNITED STATES OF AMERICA; SECRETARY UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; SECRETARY UNITED STATES DEPARTMENT OF TREASURY; UNITED STATES DEPARTMENT OF TREASURY; SECRETARY UNITED STATES DEPARTMENT OF LABOR; UNITED STATES DEPARTMENT OF LABOR; UNITED STATES OF AMERICA Little Sisters of the Poor Saints Peter and Paul Home (Intervenor in D.C.), Appellant in 17-3752, 19-1129 President United States of America, Secretary United States of Department of Health and Human Services, United States Department of Health and Human Services, Secretary United States Department of Treasury, United States Department of Treasury, Secretary United States Department of Labor, United States Department of Labor, Appellants in 18-1253, 19-1189 (Except President United States of America)

          Argued May 21, 2019

          ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (E.D. Pa. No. 2:17-cv-04540) District Judge: Hon. Wendy Beetlestone

          Michael J. Fischer [ARGUED] Aimee D. Thompson Office of Attorney General of Pennsylvania, Glenn J. Moramarco Office of Attorney General of New Jersey Department of Law & Public Safety, Division of Law Richard J. Hughes Justice Complex, Counsel for Appellees Commonwealth of Pennsylvania and State of New Jersey.

          Lowell V. Sturgill, Jr. United States Department of Justice, Civil Division, Hashim M. Moopan [ARGUED] United States Department of Justice, Karen Schoen United States Department of Justice Civil Division, Appellate Section, Counsel for Appellants President United States of America, Secretary United States Department of Health & Human Services, United States Department of Health & Human Services, United States Department of Treasury, Secretary United States Department of Treasury, United States Department of Labor, Secretary United States Department of Labor, and United States of America.

          Mark L. Rienzi [ARGUED] Lori H. Windham Becket Fund for Religious Liberty, Nicholas M. Centrella Conrad O'Brien, Counsel for Appellee-Intervenor Little Sisters of the Poor Saints Peter and Paul Home.

          Jason R. LaFond Office of Attorney General of Texas, Counsel for Amici Curiae in Support of Appellants States of Texas, Alabama, Arkansas, Georgia, Idaho, Louisiana, Missouri, Nebraska, Oklahoma, South Carolina, and West Virginia.

          Elizabeth N. Dewar Office of Attorney General of Massachusetts, Counsel for Amici Curiae States of Massachusetts, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington and the District of Columbia.

          Dariely Rodriguez Lawyers' Committee for Civil Rights Under Law, Counsel for Amici Curiae Center for Reproductive Rights, Lawyers Committee for Civil Rights Under Law, California Womens Law Center, GLBTQ Legal Advocates and Defenders, LatinoJustice PRLDEF, Lawyers for Civil Rights, Legal Momentum, Legal Voice, Mississippi Center for Justice, National Center for Lesbian Rights, and Women's Law Project.

          Sara J. Rose American Civil Liberties Union Counsel for Amici Curiae American Civil Liberties Union, Anti Defamation League, Leadership Conference on Civil and Human Rights, and National Urban League.

          Thomas W. Hazlett Stephen J. Kastenberg Counsel for Amici Curiae Public Interest Law Center of Philadelphia, Washington Lawyers Committee for Civil Rights and Urban Affairs, Chicago Lawyers Committee for Civil Rights, Lawyers Committee for Civil Rights of the San Francisco Bay Area, and Public Counsel.

          Jeffrey Blumenfeld Lowenstein Sandler, Counsel for Amici Curiae National Womens Law Center, National Latina Institute for Reproductive Health, Sisterlove Inc., and National Asian Pacific American Women Forum.

          Robert Dunn Gibson Dunn & Crutcher, Counsel for Amicus Curiae Religious Sisters of Mercy.

          Miles Coleman Nelson Mullins Riley & Scarborough, Counsel for Amici Curiae Ronald J. Colombo, Richard Epstein, Carl H. Esbeck, David F. Forte, Richard W. Garnett, Esq., Professor Robert P. George, Mary Ann Glendon, Michael P. Moreland, Stacy Scaldo, and Michael Uhlmann.

          Bruce H. Schneider Stroock Stroock & Lavan, Counsel for Amici Curiae American Nurses Association, American College of Obstetricians and Gynecologists, American Academy of Nursing, American Academy of Pediatrics, and Physicians for Reproductive Choice and Health.

          Allan J. Arffa Melina M. Meneguin-Layerenza Sierra Robart Paul Weiss Rifkind Wharton & Garrison, Counsel for Amici Curiae Planned Parenthood Federation of America, National Health Law Program, and National Family Planning & Reproductive Health Association.

          Priscilla J. Smith Yale Law School RRJP Clinic, Counsel for Amicus Curiae Program for the Study of Reproductive Justice.

          Leah Bruno Dentons US, Jeffrey S. Feldman The Feldman Firm, Counsel for Amici Curiae United States Women's Chamber of Commerce and National Association for Female Executives.

          Joshua A. Matz Kaplan Hecker & Fink, Counsel for Amicus Curiae Church State Scholars.

          Rhiannon N. Batchelder Jamie A. Levitt, Counsel for Amici Curiae American Association of University Women and Service Employees International Union.

          Richard B. Katskee Americans United for Separation of Church & State, Counsel for Amicus Curiae Americans United for Separation of Church and State

          Before: McKEE, SHWARTZ, and FUENTES, Circuit Judges.

          OPINION

          SHWARTZ, CIRCUIT JUDGE

         The Women's Health Amendment to the Affordable Care Act ("ACA") mandated that women's health insurance include coverage for preventive health care. Through the Amendment, Congress directed the Health Resources and Services Administration ("HRSA"), a component of the Department of Health and Human Services ("HHS"), to issue guidelines setting forth the preventive health care services that women should be provided. Among the services HRSA identified was contraceptive care. Nowhere in the enabling statute did Congress grant the agency the authority to exempt entities from providing insurance coverage for such services nor did Congress allow federal agencies to issue regulations concerning this coverage without complying with the Administrative Procedure Act.

         Notwithstanding Congress's directives, in 2017, HHS and the Departments of Labor and Treasury (collectively, "the Agencies") promulgated regulations that expanded the entities that could invoke an exemption to the requirement that group health insurance plans cover contraceptive services as a form of women's preventive health care. Because the state plaintiffs are likely to succeed in proving that the Agencies did not follow the APA and that the regulations are not authorized under the ACA or required by the Religious Freedom Restoration Act ("RFRA"), we will affirm the District Court's order preliminarily enjoining the rules' enforcement nationwide.

         I

         A

         Enacted as a part of the ACA, Pub. L. No. 111-148, 124 Stat. 119 (2010), the Women's Health Amendment mandates that "[a] group health plan[1] and a health insurance issuer offering group or individual health insurance coverage shall, at a minimum provide coverage for and shall not impose any cost sharing requirements for . . . preventive care and screenings [for women] . . . as provided for in comprehensive guidelines supported by the [HRSA]."[2] 42 U.S.C. § 300gg-13(a), (a)(4). HRSA commissioned an expert panel from the Institute of Medicine to recommend covered services. In 2011, HRSA adopted the Institute's recommendations and issued guidelines defining preventive care to include all "Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity," "as prescribed" by a woman's health care provider. HRSA, Women's Preventive Services Guidelines, https://www.hrsa.gov/womens- guidelines/index.html (last visited May 8, 2019). This statutory and regulatory scheme was deemed the "Contraceptive Mandate." Several regulations and litigation followed.

         1

         The same day that the Guidelines were issued, the Agencies promulgated an interim final rule ("IFR"), followed by a final rule in 2013, to exempt certain religious employers- namely, churches and similar entities-from the Contraceptive Mandate. Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection Affordable Care Act, 77 Fed. Reg. 8, 725 (Feb. 15, 2012) (the "Church Exemption"); Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act, 76 Fed. Reg. 46, 621 (Aug. 3, 2011).[3] As the Agencies later explained, the "exemption for churches and houses of worship is consistent with their special status under longstanding tradition in our society and under federal law." Coverage of Certain Preventive Services Under the Affordable Care Act, 80 Fed. Reg. 41, 318, 41, 325 (July 14, 2015).

         The 2013 final rule also separately provided that a nonprofit religious employer who "(1) [o]pposes providing coverage for some or all of the contraceptive services required to be covered . . . on account of religious objections; (2) is organized and operates as a nonprofit entity; (3) holds itself out as a religious organization; and (4) self-certifies that it satisfies the first three criteria," 78 Fed. Reg. at 39, 874, is entitled to an accommodation to avoid "contracting, arranging, paying, or referring for contraceptive coverage," id. at 39, 875. This accommodation process (the "Accommodation") permits an employer to send a self-certification form to its insurance issuer, which then excludes contraceptive coverage, either in full or in part, from the group health plan and in turn "provide[s] payments for contraceptive services for plan participants and beneficiaries, separate from the group health plan, without the imposition of cost sharing, premium, fee, or other charge on plan participants or beneficiaries or on the eligible organization or its plan." Id. at 39, 876. A third party administrator ("TPA") may also be used as a claims or plan administrator "solely for the purpose of providing payments for contraceptive services for participants and beneficiaries in a self-insured plan of an eligible organization at no cost to plan participants or beneficiaries or to the eligible organization." Id. at 39, 879. By invoking the Accommodation, the employer was no longer responsible for providing coverage for contraceptive care.

         2

         Various legal challenges followed. First, in Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014), the Supreme Court held that the Accommodation must be extended to closely-held for-profit corporations with sincere religious objections to the provision of contraceptive coverage so that their religious beliefs were not substantially burdened under RFRA, 42 U.S.C. § 2000bb-1. Id. at 724-26. The Court observed that use of the Accommodation process was a less restrictive means to ensure access to cost-free contraceptives. Id. at 730-31. Days later, in Wheaton College v. Burwell, 573 U.S. 958 (2014), the Court concluded that Wheaton College, who also lodged a religious objection to providing insurance for services covered by the Contraceptive Mandate, did not have to use the Accommodation self-certification form, known as the ESBA Form 700, but could instead rely on its notification to HHS to satisfy the Accommodation's prerequisites. Id. at 959.

         To ensure compliance with these rulings, the Agencies promulgated another IFR and final rule.[4] Coverage of Certain Preventive Services Under the Affordable Care Act, 80 Fed. Reg. 41, 318 (July 14, 2015). The rule "extend[ed] the [A]ccommodation to a for-profit entity that is not publicly traded, is majority-owned by a relatively small number of individuals, and objects to providing contraceptive coverage based on its owners' religious beliefs." Id. at 41, 324. The rule also "allow[ed] eligible organizations to choose between using [the] ESBA Form 700 or the alternative process [of notifying HHS in writing of a religious objection to covering contraceptive services] consistent with the Wheaton interim order." Id. at 41, 323.

         In Zubik v. Burwell, 136 S.Ct. 1557 (2016) (per curiam), the Supreme Court addressed the petitioners' assertions that "submitting [the Accommodation] notice substantially burden[ed] the exercise of their religion, in violation of [RFRA]." Id. at 1559. The Court did not reach the merits of this claim but rather remanded to afford the parties "an opportunity to arrive at an approach going forward that accommodates petitioners' religious exercise while at the same time ensuring that women covered by petitioners' health plans receive full . . . contraceptive coverage." Id. at 1560 (internal quotation marks and citation omitted).

         In response to the Court's direction in Zubik, the Agencies solicited comments regarding the current procedure and possible alternatives to the Accommodation. Coverage for Contraceptive Services, 81 Fed. Reg. 47, 741 (July 22, 2016). The Agencies reviewed the comments and found that "no feasible approach has been identified at this time that would resolve the concerns of religious objectors while still ensuring that the affected women receive full and equal health coverage, including contraceptive coverage." Dep't of Labor, FAQs About Affordable Care Act Implementation Part 36, at 4 (Jan. 9, 2017), available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our- activities/resource-center/faqs/aca-part-36.pdf. As a result, the Accommodation remained unchanged.

         3

         In May 2017, President Donald Trump issued an executive order directing the Agencies to "consider issuing amended regulations, consistent with applicable law, to address conscience-based objections to the preventive-care mandate promulgated under [42 U.S.C. § 300gg-13(a)(4)]." Exec. Order No. 13, 798 § 3, 82 Fed. Reg. 21, 675 (May 9, 2017). In response, and without issuing a notice of proposed rulemaking or soliciting public comment, the Agencies issued two new IFRs: the Religious IFR and the Moral IFR. These IFRs expanded the existing exemption and Accommodation framework, made the Accommodation process voluntary, and offered similar protections to organizations with moral objections to contraceptives. See Religious Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act, 82 Fed. Reg. 47, 792 (Oct. 13, 2017); Moral Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act, 82 Fed. Reg. 47, 838 (Oct. 13, 2017). This litigation followed.

         B

         1

         The Commonwealth of Pennsylvania filed suit against various governmental entities[5] and sought to enjoin the enforcement of the IFRs. Little Sisters of the Poor Saints Peter and Paul Home ("Little Sisters") intervened.[6] The District Court granted Pennsylvania's request to preliminarily enjoin the IFRs. See generally Pennsylvania v. Trump, 281 F.Supp.3d 553 (E.D. Pa. 2017). The Court held that Pennsylvania was likely to succeed on its procedural and substantive challenges under the APA. Id. at 576, 581. The Government appealed, and the District Court granted a stay pending appeal.

         While the appeal of the order preliminarily enjoining the IFRs was pending, the Agencies promulgated two Final Rules, which are virtually identical to the Religious and Moral IFRs. See Religious Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act, 83 Fed. Reg. 57, 536 (Nov. 15, 2018); 45 C.F.R. § 147.132 ("Religious Rule" or "Religious Exemption"); Moral Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act, 83 Fed. Reg. 57, 592 (Nov. 15, 2018); 45 C.F.R. § 147.133 ("Moral Rule" or "Moral Exemption") (collectively, "the Rules" or "the Exemptions"). Like the Religious IFR, the Final Rule creating the Religious Exemption expanded the categories of employers who are permitted to invoke the exemption from the Contraceptive Mandate to include all nonprofit, for-profit, and publicly-held companies. The Religious Exemption also made participation in the

         Accommodation process completely voluntarily, relieving employers from the need to "file notices or certifications of their exemption."[7] 83 Fed. Reg. at 57, 558; see also id. at 57, 537, 57, 562. The Final Rule creating the Moral Exemption offered the same exemption and voluntary accommodation process to nonprofit organizations and non-publicly traded organizations "with sincerely held moral convictions opposed to coverage of some or all contraceptive or sterilization methods." Id. at 57, 593.

         At Pennsylvania's request, the District Court lifted the stay, and Pennsylvania filed an amended complaint, joined New Jersey as a plaintiff, [8] added challenges to the Final Rules and moved to enjoin them.[9]

         2

         The District Court held hearings and received evidence regarding the Rules. Specifically, the States submitted evidence from health care professionals and state insurance regulators about the Rules' impact. The evidence addressed the relationship between costs and contraceptive use and the impact the Rules would have on state-funded healthcare services.

         Cost is a significant barrier to contraceptive use and access. The most effective forms of contraceptives are the most expensive. After the ACA removed cost barriers, women switched to the more effective and expensive methods of contraception.[10] Because the Rules allow employers to opt out of providing coverage for contraceptive services, some women may no longer have insurance to help offset the cost for these and other contraceptives.

         Pennsylvania and New Jersey have state-funded programs that provide family planning and contraceptive services for eligible individuals. For example, Pennsylvania

         Medicaid and New Jersey's FamilyCare[11] cover all health care for childless adults, pregnant women, and parents with incomes up to 138% and up to 215% of the federal poverty level, respectively. Pennsylvania's Family Planning Services Program also covers all family planning-related services, including contraceptives, for individuals with incomes up to 215% of the federal poverty level even if they have private insurance, and New Jersey's Plan First program offers the same for individuals with incomes up to 205% of the federal poverty level.

         Women who lack contraceptive coverage and who meet certain income levels may also turn to Title X family planning clinics which "provide access to contraceptive services, supplies, and information to all who want and need them" with priority to low-income persons. Office of Population Affairs, Funding History, HHS, https://www.hhs.gov/opa/title-x-family-planning/about-title-x-grants/funding-history/index.html (last visited May 12, 2019). State and federal governments fund Title X clinics, but recently, federal funding has decreased.

         The States expect that when women lose contraceptive insurance coverage from their employers, they will seek out these state-funded programs and services. The States further assert that women who do not seek or qualify for state-funded contraceptives may have unintended pregnancies. Public funds are used to cover the costs of many unintended pregnancies.[12] Accordingly, the States expect to spend more money due to the Rules.

         In addition to this evidence, the Agencies presented spread sheets that listed the organizations and companies that were previously involved in ACA Contraceptive Mandate litigation. The Agencies offered this evidence to demonstrate the likely universe of employers whom they contend may seek to invoke the Rules and opt out of covering contraceptive care.

         3

         The day the Final Rules were set to go into effect, January 14, 2019, the District Court issued a nationwide injunction enjoining their enforcement. Pennsylvania v. Trump, 351 F.Supp.3d 791 (E.D. Pa. 2019). The Court found that the States had standing to challenge the Final Rules and established a likelihood of success on the merits of their APA claims. First, the Court held that the States are likely to succeed on their procedural APA claims because the Agencies failed to comply with the notice-and-comment requirement and this defect tainted the Final Rules. Id. at 813. Second, the Court held that the States were likely to succeed on their substantive APA challenges because neither the ACA nor RFRA authorized the Agencies to create exemptions. Specifically, the unambiguous language of the ACA's Women's Health Amendment only authorized the Agencies to decide what services would be covered, not who provides them, id. at 821, and RFRA did not require or authorize such broad exemptions, particularly given RFRA's remedial function that places the responsibility for adjudicating religious burdens ...


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