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Tenth Circuit Permits Injunction in Contraceptives Coverage Challenge
Practical Law Legal Update 8-544-6921 (Approx. 5 pages)
Tenth Circuit Permits Injunction in Contraceptives Coverage Challenge
by Practical Law Employee Benefits & Executive Compensation
| Published on 08 Oct 2013 • USA (National/Federal) |
In Newland v. Sebelius, the US Court of Appeals for the Tenth Circuit upheld a federal district court's order enjoining the Department of Health and Human Services (HHS) from enforcing the Affordable Care Act's (ACA's) contraceptives mandate. The Tenth Circuit held that the district court did not abuse its discretion in granting the preliminary injunction to the for-profit corporate plaintiff under the Religious Freedom Restoration Act (RFRA).
On October 3, 2013, the US Court of Appeals for the Tenth Circuit issued a decision in Newland v. Sebelius, affirming a district court's preliminary injunction barring enforcement of the Affordable Care Act's (ACA's) contraceptives coverage mandate (part of the law's preventive services rules) against a for-profit, secular corporation and its owners. The Tenth Circuit held that, in light of its recent decision in Hobby Lobby Stores, Inc. v. Sebelius, which involves similar issues, the district court did not abuse its discretion in granting the injunction. The Tenth Circuit remanded the case to the district court with instructions to suspend further proceedings until the Supreme Court completes its consideration of the Hobby Lobby case.
Background
Under the ACA's preventive services rules, non-grandfathered group health plans and insurers must provide first-dollar coverage of contraceptives for women, subject to:
- An exemption for certain religious employers.
- A temporary enforcement safe harbor for certain nonprofit entities with religious objections to covering contraceptives (see Practice Note, Coverage of Preventive Services under the ACA: Contraceptive Coverage).
The exemption and safe harbor do not apply to group health plans established or maintained by for-profit employers. Employers that do not comply with the contraceptives mandate are subject to potentially substantial penalties.
In Newland, a secular, for-profit corporation and five of its controlling shareholders and officers sought an exemption from the contraceptives mandate, arguing that it conflicts with their religious beliefs. The district court granted the plaintiffs a preliminary injunction barring HHS from enforcing the mandate. HHS appealed the district court's order to the Tenth Circuit.
Hobby Lobby Decision
After both parties filed their appellate briefs in Newland, the Tenth Circuit issued an en banc decision in Hobby Lobby. In that case, two for-profit corporations and their individual owners challenged the contraceptives mandate on Religious Freedom Restoration Act (RFRA) grounds. The district court denied the plaintiffs a preliminary injunction, but the Tenth Circuit reversed, holding that:
- Corporations are persons under the RFRA.
- Compliance with the contraceptives mandate would substantially burden the corporations' religious exercise.
- The mandate was not narrowly tailored to achieve a compelling interest.
The Tenth Circuit determined that the Hobby Lobby plaintiffs had met two of the four factors required for obtaining a preliminary injunction, namely, that they:
- Were substantially likely to succeed on the merits of their RFRA claim.
- Would suffer irreparable injury without the injunction.
The Tenth Circuit remanded the remaining two preliminary injunction factors to the district court for consideration. These factors are whether:
- The likely harm to the plaintiffs caused by the mandate outweighed the likely harm to HHS caused by the injunction.
- The injunction was adverse to the public interest.
HHS filed a petition for certiorari with the Supreme Court, seeking review of the Tenth Circuit's decision in Hobby Lobby. As of October 3, that petition was pending.
Outcome
Reviewing Newland for an abuse of discretion by the district court, and relying on its Hobby Lobby decision, the Tenth Circuit affirmed the district court's decision to grant a preliminary injunction. The Tenth Circuit analyzed the district court's conclusions regarding each of the four preliminary injunction factors.
Likelihood of Success on the Merits
Under this factor, the corporation was required to show that:
- It is a "person" protected under the RFRA.
- Complying with the contraceptives coverage regulations would substantially burden its religion.
- HHS could not demonstrate that its regulations were the least restrictive means of satisfying a compelling government interest.
Applying Hobby Lobby, the Tenth Circuit in Newland concluded that the corporation was a person within the meaning of the RFRA, the contraceptives coverage regulations substantially burdened the corporation's religious exercise and HHS' contraceptives coverage regulations did not satisfy a strict scrutiny standard.
Irreparable Harm
Like the Tenth Circuit in Hobby Lobby, the district court in Newland concluded that the harm to the corporation's religious freedoms from being required to comply with the contraceptives coverage mandate was irreparable, and therefore satisfied the second preliminary injunction factor. As a result, the Tenth Circuit stated that the district court in Newland did not abuse its discretion regarding this factor.
Balance of Harms
The district court in Newland held that the injury threatening the corporation (possible infringement of constitutional and statutory rights) outweighed the harm that HHS would suffer under the injunction (the inability to enforce regulations for the public interest). The Tenth Circuit held that the district court's conclusion on the balance of harms factor was not an abuse of discretion, even though the district court failed to address the federal government's interests in:
- Protecting the public health and statutory rights of affected employees.
- Ensuring uniform enforcement of health and employment regulations.
Public Interest
The district court concluded that the preliminary injunction was supported by the public interest in the free exercise of religion. Also, the district court reasoned that Congress' interest in improving women's health and equalizing preventive service coverages between men and women was diluted by regulations that exempted certain employers, including small businesses, from the contraceptives mandate. The Tenth Circuit held that the district court did not abuse its discretion regarding this factor.
Having reviewed the four preliminary injunction factors, the Tenth Circuit remanded the case to the district court with instructions to suspend further proceedings until the Supreme Court completes its consideration of the Hobby Lobby decision.
Practical Impact
The Tenth Circuit's Hobby Lobby decision conflicts with a Third Circuit decision (Conestoga Wagon) from earlier this year holding that a for-profit, secular corporation lacked free exercise rights and could not engage in religion for purposes of the RFRA (see Legal Update, Third Circuit Turns Back For-profit Corporation's Religious Challenge to Contraceptives Mandate). Given this split in the circuits, the Supreme Court may grant HHS's petition to hear Hobby Lobby, which could result in another high-profile decision under the ACA.