Argument Preview: Little Sisters v. Pennsylvania, Trump v. Pennsylvania

Steven D. Schwinn, UIC John Marshall Law School

The Supreme Court will hear oral arguments in these consolidated cases tomorrow, testing whether the Trump Administration had authority to grant a categorical exemption from the ACA's contraception guarantee for organizations with a religious or moral objection to contraception. Here's my Preivew, from the ABA Preview of United States Supreme Court Cases, with permission:

FACTS

In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA) in order “to increase the number of Americans covered by health insurance and decrease the cost of health care.” To those ends, the ACA requires employers, with some exceptions (those with 50 or fewer employees, and those with grandfathered insurance plans), to offer their employees health insurance with certain “minimal essential coverage.” As relevant here, the ACA requires employers to offer insurance to female employees that includes “preventive care and screenings” without cost to the employees. The ACA delegates authority to determine the particular “preventive care and screenings” to the Health Resources and Services Administration (HRSA), an office within the Department of Health and Human Services (HHS).

Pursuant to this authority, the HRSA and other implementing agencies (the Department of Labor and the Department of the Treasury) issued Interim Final Rules (IFRs) that required employers to provide insurance coverage for items in HRSA’s preventive-care guidelines. Those guidelines included all female contraceptives approved by the Food and Drug Administration (FDA). The HRSA and other implementing agencies exempted certain religious employers (like churches), however, out of recognition that some individuals and organizations have faith-based objections to providing coverage for contraception.

The agencies then issued their final rule. The final rule maintained the exemption for certain religious employers (again, like churches), and added an accommodation for certain other religious non-profit employers that objected to the contraceptive guarantee. Under the accommodation, an employer would communicate its objection to its insurer or the third-party administrator (TPA) of its health plan. At that point, the federal government required or encouraged the insurer or TPA to provide contraceptive coverage directly to the employee, separate from the employer’s health-insurance plan, thus bypassing the objecting employer.

Numerous non-profit and for-profit religious organizations (including the Little Sisters) sued to halt the accommodation provision under the Religious Freedom Restoration Act (RFRA). They argued that the provision didn’t really accommodate their faith-based objections to providing contraceptive coverage to employees. Instead, they claimed that the requirement that they communicate their objections to their insurer or TPA triggered their insurer or TPA to provide contraceptive coverage. By this reckoning, the accommodation actually made them complicit in providing contraception to their employees.

Eight of nine circuit courts ruled against the plaintiffs in these cases. The Court stepped in to grant emergency relief in two of them, one brought by the Little Sisters, the other brought by Wheaton College, but the Court did not address the merits. Around the same time, in June 2014, in Burwell v. Hobby Lobby, 573 U.S. 682 (2014), the Court ruled that the contraceptive guarantee violated the RFRA as to closely-held for-profit businesses. (The final rule did not include an accommodation for for-profits.) The Court held that the guarantee substantially burdened those businesses’ exercise of religion, and that there were other ways that the government could  provide contraceptive coverage to female employees. As an example, the Court pointed to the accommodation for religious non-profits in the final rule; but it also specifically declined to say whether the accommodation itself violated the RFRA.

In response to the Court’s emergency relief in the non-profit cases and its ruling in Hobby Lobby, the implementing agencies modified the accommodation in two ways. First, they allowed objecting non-profits to notify HHS of their objections, instead of their insurers or TPAs. Next, they extended the accommodation to closely-held for-profits.

In 2016, in Zubick v. Burwell, 136 S. Ct. 1557, the Court finally took up the cases brought by religious non-profits. But rather than ruling on the merits, the Court vacated the lower courts’ rulings and ordered the parties to work out a solution. (The Court only had eight justices at the time. Justice Antonin Scalia had deceased, and the Senate refused to consider President Barak Obama’s nominee to replace him. As a result, the Court was probably evenly divided on the merits, and this solution allowed the Court avoid a four-four ruling on this important question.)

The parties could not work out a solution by the end of the Obama Administration. As a result, the implementing agencies retained the existing accommodation.

Then, in October 2017, the agencies issued IFRs that expanded the exemption for religious organizations. In particular, the IFRs categorically exempted for-profits and non-profits with a religious or moral objection from the contraceptive guarantee. (The agencies added organizations with a “moral” objection.) The agencies acknowledged that the rules would leave between 31,700 and 120,000 women without contraceptive coverage in one year.

Pennsylvania sued to halt these latest IFRs, arguing that the agencies violated the APA. The district court granted a nationwide preliminary injunction barring implementation of the IFRs. (Several other similar cases were also pending at the time, and at least one other court issued an injunction. California v. HHS, 281 F. Supp. 3d (N.D. Cal. 2017).) The court also declined to allow the Little Sisters to intervene in the case, although the Third Circuit later permitted the organization to defend “the portions of the [2017 religious rule] that applied to religious nonprofit entities.”

As the case was pending, the agencies adopted final rules nearly identical to the latest IFRs. In particular, the Final Rules exempted all private entities, including publicly-traded corporations, from the contraceptive guarantee (or allowed them to self-exempt) based on religious objections; exempted all but publicly-traded corporations based on moral objections; and made the accommodation option. The agencies acknowledged that the Final Rules would mean that between 70,500 and 126,400 women would lose access to contraception in one year.

Pennsylvania, now joined by New Jersey, filed an amended complaint. The district court granted another nationwide preliminary injunction. The Third Circuit affirmed, and this appeal followed.

CASE ANALYSIS

The parties raise four different issues. Let’s take a look, one at a time.

Standing

The Little Sisters argue that they have appellate standing, because they have a direct stake in the outcome of this case. They claim that the Third Circuit was wrong when it held that they lacked standing based on the theory that a Colorado injunction in a similar case, also involving the Little Sisters, mooted the Little Sisters’ interests in this case. The organization says that the Colorado injunction is more limited than what the Little Sisters seek in this case, and so they continue to have an independent interest in this case. The Little Sisters contend that their standing is even stronger now that the case is at the Court. After all, they assert, the Court’s ruling will affect all similar cases.

Pennsylvania counters that the Little Sisters lack appellate standing. The state says that the agencies are now enjoined from enforcing the contraceptive guarantee against the organization, and that the district court expressly excluded the organization from the injunction now on appeal. Because the Little Sisters lack a direct stake in this injunction, Pennsylvania claims that the organization lacks appellate standing in this case.

Substantive Statutory Authority

The respondents argue that the agencies had statutory authority to issue the final rules. They claim that the plain text of the ACA delegates sufficiently broad authority to the HRSA to grant categorical exemptions from the preventive-services guarantee, and that the agencies, in issuing the final rules, merely drew on that broad authority. They point out that the agencies provided for a categorical exemption from the beginning (for religious organizations like churches), and claim that this only underscores their position that the ACA delegates authority to grant this categorical exemption.

The respondents argue next that the RFRA requires, or at least permits, the broader exemptions in the final rules. They point to the Court’s ruling in Hobby Lobby that the contraceptive guarantee, without an accommodation, violates the RFRA. And they contend that the accommodation doesn’t really change that calculus. That’s because at least some religious non-profits see the accommodation itself as triggering the contraceptive guarantee, in violation of their religious beliefs. In other words, for some, the accommodation itself violates the RFRA. As a result, the respondents contend that the RFRA required the agencies to adopt the categorical exemptions in the final rules. (The respondents say that even if the RFRA did not require the agencies to adopt the final rules, it at least permitted the agencies to adopt them. They contend that an agency can be more protective of religious rights than the RFRA requires, if it so chooses.)

On the other side, Pennsylvania argues that the ACA does not authorize the agencies to adopt the final rules. The state says that the ACA only delegates authority “to identify which preventive services for women must be covered,” and not to “grant non-health related exemptions to a sub-agency with narrow expertise in health care.” Pennsylvania contends that the original exemption for religious organizations is different, because it was “independently authorized by the well-established church autonomy doctrine,” and not the ACA itself.

Pennsylvania argues next that the RFRA does not authorize the final rules. The state says that the accommodation is consistent with the RFRA, because it does not substantially burden religious exercise. (The state claims that the accommodation simply requires a religious non-profit to report its objection. At that point, federal law, not the religious non-profit, is responsible for guaranteeing contraceptive coverage.) Because the accommodation doesn’t violate the RFRA, the state contends that the RFRA provides no basis for issuing a broader, categorical exemption. Moreover, Pennsylvania asserts that the RFRA doesn’t affirmatively grant federal agencies any rulemaking power, except to the extent that an agency regulates to resolve a RFRA violation in a program the agency administers. But the state says that this is not the case here.

Procedural Compliance with the APA

The respondents argue that the final rules comport with APA requirements. They contend that the final rules—the only rules at issue here—complied with APA notice-and-comment requirements. And they say that the earlier IFRs complied with the APA requirements for interim final rules. They point out that all of the agencies’ rules on the contraceptive guarantee started as interim final rules, and that the latest IFRs are no different.

Pennsylvania replies that the final rules violate the APA. The state contends that the 2017 IFRs violated the APA, because they failed to meet the APA standard for interim final rules, in particular, that they were not so urgent as to allow the agencies to bypass normal notice-and-comment procedures. The state contends that the 2018 final rules violate the APA, too, because the agencies did not allow for pre-publication notice and comment. (Instead, the agencies took comments on the 2017 IFRs, not the proposed 2018 final rules.) Pennsylvania argues that the APA does not permit the agencies to sidestep notice-and-comment requirements this way.

Nationwide Injunction

Finally, the respondents argue that the Court should reverse the district court’s nationwide injunction. They claim that the nationwide injunction grants relief far beyond the interests of the states, and thus exceeds the power of the district court. They claim that a nationwide injunction in this case is particularly inappropriate, because it could conflict with rulings in the many other similar cases pending around the country.

Pennsylvania argues in response that the nationwide injunction is consistent with the APA, which requires courts to set aside unlawful rules without limitation and grants courts authority to enter preliminary orders “to postpone the effective date of an agency action or to preserve status or rights.” The state also says that a nationwide injunction fully redresses its injuries, because the final rules would exempt out-of-state entities whose employees, students, or children might come to Pennsylvania and burden the state with the cost of their contraceptive coverage.

SIGNIFICANCE

This case is the latest chapter, and probably the last one, in the long-running saga over the contraceptive guarantee. This regulatory provision has been under sustained attack from the beginning. While opponents of guaranteed contraception have lost overwhelmingly in the circuit courts, the Supreme Court has been a much friendlier venue. As mentioned above, the Court ruled in Hobby Lobby that the guarantee (without an accommodation) violated the RFRA as to closely-held corporations. Moreover, it granted interim relief in a pair of cases challenging the accommodation for religious non-profits. And while it dodged the underlying issue in Zubick, there’s reason to think that it ruled this way to avoid a four-four split on the eight-justice Court—in other words, that four of the eight justices would have struck the accommodation.

If that’s right, then we might expect that there are now five justices that would rule that the accommodation violates the RFRA. (Since Zubick, Justice Neil Gorsuch replaced Justice Scalia, and Justice Brett Kavanaugh replaced Justice Anthony Kennedy. If the Court would have split four-four on the merits in Zubick, Justice Gorsuch’s addition probably means that there are now five votes for striking the accommodation.)

But that doesn’t necessarily answer the questions in this case. In particular, even if the accommodation violates the RFRA, that alone doesn’t mean that the agencies had authority to issue the Final Rules, or that they issued them consistently with the APA. Remember that the Final Rules categorically exempt a much broader set of organizations than were covered by the accommodation. (Keep an eye on the categorical exemption for organizations with a moral objection to contraception. This opens a potentially gaping hole in the contraceptive guarantee.) Moreover, the government itself estimates that the Final Rules will result in lost contraceptive coverage for tens of thousands of women in one year—seemingly undermining the very purpose of the ACA to provide “minimal essential coverage.” The broad sweep of the Final Rules, and their procedural irregularities, could mean that the agencies lacked authority to adopt them, even if a majority on the Court might agree that the accommodation violated the RFRA.

On a different note entirely: This case raises a critically important question about the authority of district courts to issue nationwide injunctions. This practice is increasingly common, and increasingly controversial, as plaintiffs have sought more and more to halt administration policies across the board. The government invites the Court to address this issue, even if it doesn’t rule in favor of the government on the merits.

This question may seem like it has partisan overtones. But it doesn’t. If the Court rules that district courts lack authority to issue nationwide injunctions, that will take away a key tool that advocates can use—and have used—to challenge government policies in any administration.