Ninth Circuit Halts Interim Rules on ACA Contraception Exemptions, but Only as to Plaintiff States

The Ninth Circuit upheld a lower court's preliminary injunction barring the government from enforcing its interim final rules allowing employers and organizations more freely to exempt themselves from the Affordable Care Act's contraception requirement. But at the same time, the court narrowed the nationwide injunction to just the plaintiff states.

The ruling is a significant victory for the plaintiffs. But it may be short-lived, as the government moves to implement final rules (the same as the interim rules, published in November) in January.

The case, California v. Azar, involves several states' (California, Delaware, Virginia, Maryland, and New York) challenge to the government's 2017 interim final rules substantially loosening the exemption standard for organizations and persons to get out from under the Affordable Care Act's contraception requirement. (Recall that the Supreme Court declined to rule on the government's prior exemption in Zubik v. Burwell.) The two IFRs categorically exempted certain religious employers and essentially made the requirement optional for anyone else who has a "sincerely held moral conviction" to contraception.

The plaintiffs argued that the IFRs violated the Administrative Procedure Act (because the agencies didn't use APA notice-and-comment procedures in implementing the IFRs), equal protection, and the Establishment Clause. The Northern District of California held that they were likely to succeed on their APA claim, and issued a nationwide injunction.

The Ninth Circuit affirmed, but limited the injunction to the plaintiff states.

The court first held that the case wasn't moot. The court said that while the agencies published final rules in November, those rules won't go into effect until January 14, 2019. In the meantime, the IFRs are in effect. And because the plaintiffs challenge the IFRs, their case isn't moot.

The court next held that the plaintiffs had standing, based on their increased costs for their already-existing contraception programs. "The states show, with reasonable probability, that the IFRs will first lead to women losing employer-sponsored contraceptive coverage, which will then result in economic harm to the states" because the states will have to fill the coverage loss through their existing free or subsidized contraceptive programs. 

As to the APA, the court ruled that the plaintiffs were likely to succeed--that HHS violated notice-and-comment rulemaking under the APA. The court held that the government's interests in eliminating regulatory uncertainty, eliminating RFRA violations, and reducing the cost of health insurance were insufficient to bypass notice-and-comment procedures. As to regulatory uncertainty, the court said it "is not by itself good cause" to bypass APA procedures. As to RFRA, the court said that "the agencies' reliance on this justification was not a reasoned decision based on findings in the record." And as to reducing health insurance costs, the court said that "[t]his is speculation unsupported by the administrative record and is not sufficient to constitute good cause." The court also said that the agencies lacked statutory authority to bypass notice-and-comment procedures. 

But the court narrowed the district court's nationwide preliminary injunction, and applied it only to the plaintiff states.

Judge Kleinfeld dissented, arguing that the plaintiffs lacked standing, because "their injury is what the Supreme Court calls 'self-inflicted,' because it arises solely from their legislative decisions to pay" for contraception-access programs.