Health Reform Court Challenge Update

from Spencer’s Benefits Reports: Although the Supreme Court ruled that the Patient Protection and Affordable Care Act’s (ACA) individual mandate is constitutional, the law still faces challenges in court. Recently, the Supreme Court remanded the Liberty University case back to the Fourth Circuit. In addition, several district courts have recently released conflicting opinions on the implementation of the contraceptive coverage requirement in the ACA.

Liberty University Case

The U.S. Supreme Court has remanded the case of Liberty University v. Geithner (No. 11-438) to the Fourth Circuit U.S. Court of Appeals for further consideration in light of the High Court’s ruling in National Federation of Independent Business (NFIB) v. Sebelius (No. 11-393). On June 28, 2012, in NFIB, the Supreme Court held that the individual insurance mandate provision of the ACA is constitutional based on Congress’s power under the Taxing Clause.

Supreme Court denied review. On June 29, 2012, the Supreme Court denied Liberty University’s request for review of the Fourth Circuit’s ruling issued on Sept. 8, 2011. The Fourth Circuit did not rule on the merits of the ACA itself, but instead ruled that the plaintiffs did not have standing to sue. The court found that the Anti-Injunction Act (AIA) prohibits lawsuits seeking to bar the collection of a tax (i.e., the penalty for failing to purchase insurance).

Liberty filed petition for rehearing. In July 2012, Liberty University filed a petition for rehearing asserting that the High Court’s June 28 ruling in the health reform cases found the individual insurance mandate was a tax for constitutional purposes, but not for AIA purposes and, accordingly, that the AIA did not bar pre-enforcement challenges.

Liberty University argued that because this aspect of the Court’s ruling abrogated the Fourth Circuit’s conclusion that the AIA deprived it of subject matter jurisdiction, the university’s still-viable challenges to the individual and employer mandates should be subject to adjudication by the lower courts.

DOJ responded. The Department of Justice (DOJ) did not oppose Liberty University’s petition for rehearing, according to a brief filed in response to the petition in October 2012. The DOJ also did not oppose further proceedings in the appellate court to resolve Liberty University’s religious freedom and equal protection challenges to the mandates. The Supreme Court, in NFIB, did not rule on challenges to the mandates on these grounds; its ruling was limited to challenges to the individual mandate based on Congress’s enumerated powers under Article I of the Constitution.

Case returned to Fourth Circuit. In an order issued on Nov. 26, 2012, the Supreme Court vacated its previous denial of Liberty’s request for review. The order also vacated the Fourth Circuit’s earlier ruling and remanded the case to that court for further consideration.

Contraceptive Coverage Requirement Cases

The ACA requires that health insurance plans provide contraceptive coverage to health plan participants at no cost. This provision went into effect beginning on Aug. 1, 2012, for most health plans. However, the law provides a one-year safe harbor for non-exempted religious employers, until Aug. 1, 2013. Several religious companies have challenged this provision in court, and three district courts have recently handed down rulings.

The U.S. District Court for the District of Columbia has provided a preliminary injunction temporarily preventing the U.S. government from requiring a Christian publishing company to provide contraceptive coverage to employees in Tyndale House Publishers, Inc., v. Sebelius. The U.S. District Court for the Eastern District of Michigan, Southern District also provided an outdoor power equipment supply company with a temporary injunction in Legatus v. Kathleen Sebelius (No. 12-12061). However, the U.S. District Court Western District of Oklahoma did not grant retailer Hobby Lobby a preliminary injunction in Hobby Lobby Stores v. Sebelius.

Tyndale Case. A Christian publishing company with a self-insured health plan is entitled to a preliminary injunction temporarily preventing the U.S. government from enforcing the contraceptive coverage provision of the ACA, the U.S. District Court for the District of Columbia has ruled in Tyndale House Publishers, Inc., v. Sebelius, (No. 12-1635 (RBW)). The provision substantially burdens the religious exercise rights of the company’s owners, according to the court.

Tyndale House Publishers, Inc. is a publishing company that publishes a wide array of Christian books. It employs 260 full-time employees and provides them with health insurance through a self-insured health plan. Although the plan includes some contraceptive coverage, it does not cover abortions or drugs that “can cause the demise of an already conceived/fertilized human embryo.” The omission of such coverage is due to the religious beliefs of Tyndale’s owners and its president and chief executive officer, Mark D. Taylor.

RFRA claim. The court then found that the contraceptive coverage provision substantially burdened Tyndale’s religious exercise rights because the company had to choose either to violate its religious beliefs by providing the contraceptive coverage or subject the business to the risk of penalties for noncompliance. “Such a threat to the very continued existence of the plaintiffs’ business necessarily places substantial pressure on the plaintiffs to violate their beliefs,” the court wrote.

The court also found that the government failed to show that the application of the contraceptive coverage requirement to Tyndale and Taylor furthered the government’s compelling interests of promoting public health and ensuring that women have equal access to health care. The government relied on findings from the Institute of Medicine’s report, “Clinical Preventive Services for Women: Closing the Gaps” (Institute Report), which indicated that a lack of contraceptive use has proven to have negative health consequences for both women and a developing fetus and also discussed the health risks associated with unintended pregnancy.

The court pointed out that the Institute Report did not contain any proof that mandatory insurance coverage for the specific contraceptives at issue furthers the government’s compelling interests. The court noted that Tyndale does provide coverage of some contraceptives through their health plan; it only objects to providing a very specific subset of contraceptive drugs and devices. As such, the government did not show how its interests in promoting health care and equalizing access to health care are furthered by requiring the provision of the contraceptives at issue.

Injunction factors. Based on its RFRA analysis, the court concluded that Tyndale had a strong likelihood of success on the merits of its claim. It also determined the company would suffer irreparable harm absent the issuance of the injunction and found that the other factors for granting an injunction (the balance of equities and public interest) weighed in the company’s favor.

Legatus Case. An outdoor power equipment supply company employing over 170 employees is entitled to a preliminary injunction barring the U.S. government from enforcing the provisions of the ACA that require all nongrandfathered group health plans to provide a full range of FDA-approved contraceptive methods without cost sharing, according to a ruling by the U.S. District Court for the Eastern District of Michigan, Southern District in Legatus v. Kathleen Sebelius (No. 12-12061). The company’s president also was entitled to an injunction, but the nonprofit religious organization to which he belonged was not, the court held.

Daniel Weingartz is the president of Weingartz Supply Company, and a member of Legatus, which is a non-profit Catholic organization of over 4,000 members whose purpose is to abide by and spread Catholicism. Both Weingartz and Legatus engineered health insurance plans for their employees to exclude contraception, in accordance with their faith. Weingartz and Legatus filed suit in district court under the Religious Freedom Restoration Act (RFRA), arguing that the contraceptive requirement burdened their free exercise of religion, and will force them to choose between providing health insurance with contraceptive coverage or incurring a financial penalty beginning in 2014. They then sought a preliminary injunction to prohibit enforcement of the contraceptive requirement against the supply company and against them.

Irreparable harm. In order to determine whether or not to issue an injunction, the court decided that, because their First Amendment rights were at risk, Weingartz and the supply company would suffer irreparable harm without an injunction, that it was not probable that granting the injunction would case substantial harm to others, and, finally, that issuance of the injunction would advance the public interest, since the public has an interest in the protection of First Amendment liberties.

Finally, the court pointed out that a ruling on the merits of the case was unlikely to occur before compliance is required. That would, the court said, effectively grant the government a default success on the merits, even if Weingartz and the supply company eventually succeeded at trial. The movants would suffer substantial harm, in the form of either financial penalties or the loss of their First Amendment freedoms. The government, on the other hand, said the court, would suffer minimal harm if the injunction were granted. Taking all of the pertinent factors into account, the court held that both Weingartz and the supply company were entitled to a preliminary injunction, and Legatus was not.

Hobby Lobby case. Retailer Hobby Lobby was not granted a preliminary injunction under the RFRA against the enforcement of the preventative care coverage regulation requirement of the ACA by the U.S. District Court Western District of Oklahoma in Hobby Lobby Stores Inc. v Sebelius (CIV-12-1000-HE). The court only determined whether or not the preventative services coverage provision passed muster under the Constitution and whether it violated the RFRA. Hobby Lobby did not show that they were likely to succeed on the merits of their First Amendment claims because they are secular, for-profit corporations and do not have free exercise rights, nor did they show they were likely to succeed on their RFRA claims because Hobby Lobby is not a “person” and did not show it would be substantially burdened by complying with the regulation.

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