Wheaton College v. Burwell

Citations: 50 F. Supp. 3d 939; 2014 U.S. Dist. LEXIS 85194; 2014 WL 2826336Docket: Case No. 1:13-cv-08910

Court: District Court, N.D. Illinois; June 23, 2014; Federal District Court

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Wheaton College, a Christian liberal arts institution, provides health insurance but opposes abortion and certain contraceptives due to its religious beliefs. The college claims that the ACA's contraceptive Mandate, which requires insurance plans to cover all FDA-approved contraceptive methods, imposes an impermissible burden on its religious practices. Although Wheaton is eligible for an accommodation that would exempt it from direct compliance with the Mandate, it argues that obtaining this accommodation would still make it morally complicit in actions it opposes. The college contends that the Mandate violates the First Amendment and the RFRA, and was enacted improperly under the APA. It seeks a permanent injunction against the enforcement of the Mandate, which could take effect on July 1, 2014. The Government has moved to dismiss the complaint or for summary judgment, while Wheaton has filed a cross-motion for summary judgment and requested additional discovery should its motion be denied. In light of pending Supreme Court cases that may impact the issues raised, Wheaton has also requested a preliminary injunction on its cross-motion. The court has denied the motions for a preliminary injunction but allows for reconsideration based on future developments or motions. A telephonic status conference is scheduled for June 30, 2014. Wheaton emphasizes its Evangelical Protestant beliefs and its opposition to contraceptives that may terminate human life, while providing health insurance that covers some contraceptives but excludes those contrary to its convictions. The insurance plans are set to renew on July 1, 2014.

The Seventh Circuit's decision in University of Notre Dame v. Sebelius outlines the Affordable Care Act (ACA) requirements for employers with 50 or more full-time employees to either provide health insurance or face tax penalties. Specifically, the ACA mandates that non-exempt group health plans cover certain preventive services without cost-sharing, including FDA-approved contraceptive methods and related healthcare for women. Employers failing to comply may incur a daily tax of $100 per individual affected, or a $2,000 annual tax per full-time employee if they do not provide any insurance. The plaintiff estimates potential penalties of up to $34.8 million annually.

Following the ACA's enactment, the government introduced an exemption for "religious employers," defined as non-profit entities meeting specific IRS criteria. In response to feedback from religious organizations outside this exemption, the government established new regulations allowing non-exempt religious organizations to seek an accommodation for the contraceptive mandate. To qualify for this accommodation, an organization must meet four criteria: it must oppose providing contraceptive coverage for religious reasons, operate as a nonprofit, identify as a religious organization, and self-certify its compliance with these standards. This certification must be made available at the start of the relevant plan year. The plaintiff argues that these regulations were created in violation of the Administrative Procedure Act (APA).

Self-certification must be completed by an authorized individual representing an organization and maintained according to the record retention standards of the Employee Retirement Income Security Act of 1974. The plaintiff meets certain regulatory requirements but objects specifically to the self-certification mandated by 45 C.F.R. § 147.131(b)(4). Employers seeking accommodations are required to fill out the self-certification form and provide it to their health insurance issuers or third-party administrators (TPAs), who cannot demand documentation beyond this form. Issuers must exclude contraceptive coverage from the group's health plan and arrange for separate payments for required contraceptive services for enrolled participants and beneficiaries. They cannot impose any cost-sharing on the eligible organization, the health plan, or the participants regarding these services and must keep premium revenue from the organization separate from funds used for contraceptive payments. 

The regulations prohibit accommodated entities from interfering with or influencing the TPA's arrangements for contraceptive payments. While an eligible organization can express its opposition to contraceptives, the plaintiff argues that completing the self-certification would implicate it in actions against its moral beliefs regarding life. The plaintiff fears that signing the certification would grant the TPA authority to provide contraceptives at no cost to employees, which conflicts with its role as plan administrator. Furthermore, the plaintiff contends that regulations preventing interference with the TPA's actions restrict its ability to communicate its objections to certain contraceptives. Non-compliance with the Mandate and failure to submit the self-certification could result in significant tax penalties. Consequently, the plaintiff seeks preliminary injunctive relief based on the Religious Freedom and Restoration Act, First Amendment rights, and the Administrative Procedure Act.

To obtain a preliminary injunction, a party must demonstrate two key factors: (1) the absence of an adequate legal remedy, resulting in irreparable harm if the injunction is not granted, and (2) a likelihood of success on the merits of the case. The threshold for establishing this likelihood is low, requiring the party to present a plausible claim. If the initial showing is made, the court evaluates the competing harms to both parties and considers the public interest, using a sliding-scale analysis; a greater likelihood of success may offset the balance of harms. In First Amendment cases, the likelihood of success is often the decisive factor, as infringement of these freedoms constitutes irreparable injury and injunctions in such cases are deemed to serve the public interest.

Under the Religious Freedom Restoration Act (RFRA), the government can only impose a substantial burden on an individual's exercise of religion if it demonstrates that the burden serves a compelling governmental interest and is the least restrictive means of achieving that interest. A plaintiff establishes a prima facie case under RFRA by showing that governmental actions significantly hinder their sincere religious practice. If successful, the burden then shifts to the government to justify its actions. In this instance, the Plaintiff argues that requiring it to complete the EBSA Form 700 substantially burdens its religious exercise by making it morally complicit in facilitating access to emergency contraceptives, which contradicts its beliefs. The Plaintiff asserts that the government cannot meet its burden to prove that enforcing the Mandate is the least restrictive means of advancing its compelling interest.

Plaintiff's sincere religious beliefs do not establish a likelihood of success in proving a substantial burden on its religious exercise, according to the current legal standards in relevant circuits. The Seventh Circuit's decision in Notre Dame rejected the argument that completing a form to trigger contraception coverage makes a religious organization complicit in providing contraception, clarifying that federal law mandates insurance coverage, not the organization's actions. Similarly, the Sixth Circuit's ruling in Michigan Catholic Conference affirmed this view. Without significant changes from the Supreme Court's decisions in Hobby Lobby or Conestoga, Plaintiff's chances of proving a substantial burden are insufficient to justify a preliminary injunction. Although Plaintiff has not signed the EBSA Form 700, this distinction is deemed minor, as the legal obligation for coverage stems from federal law rather than the form itself. Plaintiff argues that its insurance contracts would be materially affected by submitting the self-certification, but this argument has limited support, as highlighted by the Seventh Circuit's stance on fiduciary responsibilities. The court finds that the distinction made by the Seventh Circuit regarding the role of third-party administrators is persuasive, emphasizing that parties cannot bypass statutory obligations through contracts. Consequently, Plaintiff has not demonstrated a likelihood of success on its RFRA claim at this time.

The Plaintiff argues that the Mandate infringes upon the First Amendment's Religion Clauses by discriminating among religious institutions with similar objections. Certain 'religious employers' are exempt from the Mandate and the requirement to complete EBSA Form 700, while others, like Wheaton, must comply or face significant penalties. The Plaintiff claims the Government's approach creates unfair distinctions between religious organizations, violating both the Free Exercise and Establishment Clauses. The Seventh Circuit, in the Notre Dame case, rejected similar arguments, affirming that exemptions for certain religious organizations do not constitute a violation of the Establishment Clause, as tax advantages historically enjoyed by religious employers do not equate to unconstitutional favoritism. The Sixth Circuit echoed this sentiment in Michigan Catholic Conference, clarifying that distinctions in eligibility for exemptions are based on organizational form rather than religious denomination. The Court emphasizes that the prohibition of denominational preferences relates closely to the Free Exercise Clause. The Plaintiff's claim that the Mandate is not neutral or generally applicable is countered by the Sixth Circuit's findings. Additionally, the Plaintiff asserts that the Government violated its First Amendment rights by not expanding the exemption despite evidence that its faculty and administrators share the institution's faith. However, the Seventh Circuit previously determined that such evidence did not strengthen Notre Dame’s Religious Freedom Restoration Act (RFRA) arguments, a conclusion the Court feels bound to follow. 

Regarding the Administrative Procedure Act (APA), the Plaintiff contends that the Mandate, exemption, and accommodation framework should be invalidated as they were arbitrary and capricious. The Plaintiff claims the Government ignored crucial aspects of the issue, misinterpreted facts and laws, and erroneously assumed the religious beliefs of employees at Evangelical Protestant institutions like Wheaton, particularly after being informed that the faculty and administrators adhere to the institution's religious views.

Plaintiff's argument under the Administrative Procedure Act (APA) lacks persuasiveness for two key reasons. First, it closely parallels the previously discussed religion clauses argument, both challenging the Government's distinction between exemption and accommodation. However, the Plaintiff does not assert that the Mandate violates the APA on constitutional grounds, making it unlikely to succeed given the Seventh Circuit's rejection of that constitutional argument. The APA standard of review is more deferential to the Government. Second, the Plaintiff's distinct APA argument, which claims that the Government failed to consider specific evidence during regulation drafting, conflates individual evidence with the overall body of evidence. The Government is only required to provide a concise general statement regarding the rule's basis and purpose, rather than addressing every piece of evidence in detail.

Additionally, regarding the First Amendment Free Speech Clause, the Plaintiff argues that the Mandate forces it to speak against its beliefs through the self-certification form, which the Plaintiff contends triggers payments for abortifacient drugs. However, this 'trigger' theory has been rejected by the Seventh Circuit, which ruled that the self-certification form does not compel speech in a way that would violate free speech rights. The Plaintiff also argues that a 'gag rule' prevents it from instructing third-party administrators (TPAs) not to provide certain services, a point acknowledged by the Seventh Circuit. Overall, the Plaintiff has not demonstrated a likelihood of success on its APA claim or the First Amendment free speech argument.

The Seventh Circuit refrained from providing guidance due to a lack of clarity from the parties involved, noting Notre Dame's ambiguous position regarding its desire to limit contraceptive coverage, which the court likened to civil disobedience. The Sixth Circuit echoed similar difficulties in addressing the merits of the case. The Plaintiff has articulated concerns about the 'gag rule,' which the Government claims is intended to prevent self-certifying organizations from leveraging economic power to evade legal obligations regarding contraceptive coverage. The Court observed that the Plaintiff has shown a likelihood of success on the merits of its claim related to the 'gag rule,' but the nature of the requested relief—an injunction against the Mandate and the EBSA Form 700—raises questions about the efficacy of such an injunction if the form still needs to be completed.

The Court plans to discuss at the next status hearing whether the Plaintiff will pursue preliminary injunctive relief concerning the 'gag rule' or await a summary judgment ruling. The Court may also require supplemental briefing to clarify the terms of any potential injunction. Despite the Plaintiff's demonstrated likelihood of success, the majority opinion in Notre Dame complicates their ability to obtain preliminary relief, resulting in a denial of the motion for a preliminary injunction.

However, the Court examined other factors relevant to granting a preliminary injunction. The Plaintiff has established that there is no adequate legal remedy and that they would suffer irreparable harm without the injunction, as the infringement of First Amendment rights constitutes irreparable injury. The balance of harms favors the Plaintiff, who faces significant risks, including financial penalties, if Hobby Lobby and Conestoga do not alter the legal context. In contrast, the Government's potential financial burdens are minimal in the interim.

The Government's potential short-term loss of the ability to collect tax penalties from the Plaintiff is insignificant, particularly as it already lacks this ability for many similar entities whose insurance plan years start later. However, this factor is irrelevant since the Plaintiff has not demonstrated a likelihood of success on the merits of its claims. Consequently, the Court denies the Plaintiff's motions for preliminary injunction. Any party may seek reconsideration of this order if Hobby Lobby and Conestoga challenge key aspects of the Seventh Circuit's decision in University of Notre Dame v. Sebelius. The Court is also open to reconsideration on its own initiative. A telephonic status conference is scheduled for June 30, 2014. Briefing delays occurred pending the Seventh Circuit's ruling in the Notre Dame case, which was finalized by May 19. During a June 9 conference call, parties agreed to expedite the brief filing process in light of pending Supreme Court rulings on Hobby Lobby and Conestoga. The Plaintiff's PPO plan is classified as 'grandfathered' under the ACA, exempting it from the Mandate. Notably, the Notre Dame decision included a dissent advocating for a preliminary injunction against government penalties, but the majority opinion prevails in this circuit, which the Court must follow. Additionally, a statement from the Council for Christian Colleges and Universities did not address whether lower-level employees or students share the institutions' religious beliefs.