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Persico v. Sebelius

United States District Court, W.D. Pennsylvania

January 22, 2013

Most Reverend Lawrence T. PERSICO, Bishop of the Roman Catholic Diocese of Erie, as Trustee for the Roman Catholic Diocese of Erie, A Charitable Trust, et al., Plaintiff,
Kathleen SEBELIUS, in her official capacity as Secretary of the U.S. Department of Health and Human Services, et al., Defendants.

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John D. Goetz, Leon F. DeJulius, Paul M. Pohl, Alison M. Kilmartin, Ira M. Karoll, Laura E. Ellsworth, Mary Pat Stahler, Jones Day, Pittsburgh, PA, for Plaintiff.

Bradley P. Humphreys, U.S. Department of Justice, Civil Division, Federal Programs, Washington, DC, for Defendants.


SEAN J. McLAUGHLIN, District Judge.

Following the enactment of the Affordable Care Act (or " ACA" ) in March of 2010, group health plans and health insurance issuers not otherwise grandfathered under the Act are required to provide coverage for certain preventive health services— including FDA approved " contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity" — without cost sharing. Plaintiffs in this lawsuit— the Roman Catholic Diocese of Erie (the " Diocese" ), the Most Reverend Lawrence T. Persico (as Bishop and Trustee of the Diocese), the St. Martin Center, Inc., and the Prince of Peace Center, Inc.— have sought to invalidate and enjoin this regulation (hereinafter referred to as the " Mandate" ) on the grounds that it violates the Plaintiffs' rights under the First Amendment, the Religious Freedom and Restoration Act, and the Administrative Procedures Act. Named as Defendants are the Secretaries of the U.S. Departments of Health and Human Services, Labor, and Treasury as well as the Departments themselves. This Court has jurisdiction over the matter pursuant to 28 U.S.C. §§ 1331, 1343(a)(4), and 1346(a)(2).

Presently pending before the Court is the Defendants' motion to dismiss this action for lack of standing and/or ripeness. Plaintiffs have filed a memorandum in opposition to this motion, which is supported by various exhibits.[1] The matter has been fully briefed and argued and is ripe for disposition.


Defendants' motion to dismiss for lack of jurisdiction, filed pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, concerns the Court's " very power to hear the case." Petruska v. Gannon Univ., 462 F.3d 294, 302 (3d Cir.2006) (citation omitted). Our Court of Appeals has explained that " there are two types of Rule 12(b)(1) motions: those that attack the complaint on its face and those that attack subject matter jurisdiction as a matter of fact. When considering a facial attack, ‘ the Court must consider the allegations of the complaint as true,’ and in that respect such a Rule 12(b)(1) motion is similar to a Rule 12(b)(6) motion." Id., at 302 n. 3 (citation omitted). A factual attack, on the other hand,

differs greatly for here the trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction ... there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to

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hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist.

Id. at 302 n. 3 (citation omitted) (ellipsis in the original).

Here, the parties are in agreement that the Defendants' jurisdictional challenge should be treated as a factual challenge, albeit one in which Plaintiffs' factual averments stand largely unrebutted. Both sides further agree that Plaintiffs bear the burden of establishing this Court's jurisdiction and, therefore, standing and ripeness. We proceed accordingly.


The provision being challenged in this lawsuit is, as one court has stated, " the result of a complex history of Congressional legislation and agency rulemaking involving the Departments of Labor (‘ DoL’ ), the Department of the Treasury (‘ DoT’ ), and the Department of Health and Human Services (‘ HHS') (collectively, the ‘ Departments')." The Roman Catholic Archdiocese of New York v. Sebelius, 907 F.Supp.2d 310, 313, 2012 WL 6042864 at *1 (E.D.N.Y. Dec. 4, 2012). Because the U.S. District Court for the Eastern District of New York has aptly summarized the relevant legal history of the so-called " mandate provision" as it pertains to the issues in this case, we quote liberally from the Court's decision in Roman Catholic Archdiocese of New York v. Sebelius:

In March 2010, Congress enacted the ACA as well as the Health Care and Education Reconciliation Act. These acts established a number of requirements relating to " group health plans," a term which encompasses employer plans that provide health care coverage to employees, regardless of whether the plans are insured or self-insured. See 42 U.S.C. § 300gg-91(a)(1); Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventative Services Under the Patient Protection and Affordable Care Act, 75 Fed.Reg. 41,726, 41,727 (July 19, 2010) (" Interim Final Rules" ). As is relevant here, the ACA requires that group health plans provide coverage for a number of preventative medical services at no charge to the patient. § 300gg-13. Specially, the ACA provides that a group health plan must " at a minimum provide coverage for and shall not impose any cost sharing requirements for [,]" among other things, women's " preventative care and screenings ... as provided for in comprehensive guidelines supported by the Health Resources and Services Administration[.]" § 300gg-13(a)(4).[2]
The ACA's preventative services coverage requirement does not, however, apply to group health plans that are grandfathered. See 42 U.S.C. § 18011(a)(2). A group health plan is grandfathered when at least one person was enrolled in the plan on March 23, 2010 and the plan has continually covered at least one individual since that date. See 26 C.F.R. § 54.9815-1251T(a)(1)(i)(DoT); 29 C.F.R. § 2590.715-1251(a)(1)(i)(DoL); 45 C.F.R. § 147.140(a)(1)(i)(HHS). A plan may lose its grandfathered status, however, if, when compared to the terms of the plan as of March 23, 2010, it eliminates benefits, increases a percentage cost-sharing requirement, significantly increases a fixed-amount cost-sharing

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requirement, significantly decreases an employer's contribution rate, or imposes or lowers an annual limit on the dollar value of benefits. See 26 C.F.R. § 54.9815-1251T(g)(1)(DoT); 29 C.F.R. § 2590.715-1251(g)(1)(DoL); 45 C.F.R. § 147.140(g)(1)(HHS).
The Departments began issuing regulations implementing the ACA in phases. On July 19, 2010, they announced that HHS was developing the HRSA guidelines and expected to issue them by August 1, 2011. See Interim Final Rules, 75 Fed.Reg. at 41,728. Since there were no existing HRSA guidelines concerning preventative care and screenings for women at the time of the Interim Final Rules, HHS commissioned the Institute of Medicine (" IOM" ), a Congressionally-funded body, with " review[ing] what preventative services are necessary for women's health and well-being" and recommending comprehensive guidelines, as called for by the ACA. On July 19, 2011, IOM published a report recommending the inclusion of certain preventative medical services in HRSA's guidelines. Among other things, IOM recommended that group health plans be required to cover " the full range of Food and Drug Administration [" FDA" ]-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity." FDA-approved contraceptive methods encompass oral contraceptive pills, diaphragms, intrauterine devices, and emergency contraceptives, which, according to plaintiffs, can cause abortions.
HRSA adopted IOM's recommendations on August 1, 2011. Two days later, the Interim Final Rules were amended to " provide HRSA additional discretion to exempt certain religious employers from the [HRSA] Guidelines where contraceptive services are concerned." 76 Fed.Reg. 46,263 (Aug. 3, 2011). See also 45 C.F.R. § 147.130(a)(1)(iv)(A). In order to qualify for the religious employer exemption, an organization must meet all of the following criteria:
(1) The inculcation of religious values is the purpose of the organization.
(2) The organization primarily employs persons who share the religious ten [e]ts of the organization.
(3) The organization serves primarily persons who share the religious tenets of the organization.
(4) The organization is a nonprofit organization as described in section 6033(a)(1) and section 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code of 1986, as amended.[3]
The Departments received over 200,000 responses to their request for comments on the amended Interim Final Rules. Many of the comments were submitted by religiously-affiliated institutions and asserted that the religious employer exemption was too narrow and that the limited scope of the exemption

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raised religious liberty concerns. Id. at 8,727. On February 15, 2012, the Departments finalized the amended Interim Final Rules without making any changes to the criteria used to determine whether an organization qualified for the religious employer exemption. Id. These finalized amended rules are the operative regulations at issue in this suit and, together with the HRSA guidelines, constitute the Coverage Mandate. See 29 C.F.R. § 2590.715-2713(a)(1)(iv)(DoL); 45 C.F.R. § 147.130(a)(1)(iv)(HHS).
At the same time that they finalized the Interim Final Rules, however, the Departments announced a " temporary enforcement safe harbor" period during which they planned " to develop and propose changes to these final regulations that would meet two goals— providing contraceptive coverage without cost-sharing to individuals who want it and accommodating nonexempted, non-profit organizations' religious objections to covering contraceptive services [.]" 77 Fed.Reg. at 8,727. Without the safe harbor, non-grandfathered plans would be required to comply with the Coverage Mandate for plan years beginning on or after August 1, 2012. The safe harbor extended this date, by a year, to plan years beginning on or after August 1, 2013, during which time the Departments agreed not to take any enforcement action against an employer or group health plan that complies with the conditions of the safe harbor. See HHS, Guidance on Temporary Enforcement Safe Harbor, at 3 (Aug. 15, 2012), available at http:// cciio. cms. gov/ resources/ files/ prev- services- guidance- 08152012. pdf (last visited Dec. 3, 2012). In order to comply with the terms of the safe harbor, the organization must (1) be organized and operate as a non-profit entity, (2) have " consistently not provided all or the same subset of contraceptive coverage otherwise required at any point" from February 10, 2012 onward because of the organization's religious beliefs, (3) provide notice to participants that some or all contraceptive services will not be covered for the first plan year beginning on or after August 1, 2012, and (4) provide a certification that it satisfies these criteria.
Consistent with their announced plan " to develop and propose changes" to the Interim Final Rules, on March 21, 2012, the Departments filed an advance notice of proposed rulemaking (" ANPRM" ) in the Federal Register concerning possible means of accommodating religious organizations' objections to the Coverage Mandate. See Certain Preventative Services under the Affordable Care Act, 77 Fed.Reg. 16,501 (Mar. 21, 2012). Specifically, the ANPRM " presents questions and ideas" and provides an " opportunity for any interested stakeholders to provide advice and input into the policy development relating to the accommodation to be made with respect to non-exempted, non-profit religious organizations with religious objections to contraceptive coverage." Id. at 16,503. One possible accommodation that the Departments " intend to propose" is to require health insurance issuers to provide health insurance coverage that excludes contraceptive services to objecting religious organizations while, at the same time, offering contraceptive coverage directly to plan participants without charging either the participants or the organization. Id. at 16,505.
Roman Catholic Archdiocese of New York v. Sebelius,

As the foregoing discussion explains, the Departments, in their March 21, 2012 ANPRM, lay out a possible accommodation

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whereby health insurance companies would be required to offer group health insurance coverage, minus contraceptive coverage, to religious organizations while simultaneously providing contraceptive coverage directly to plan participants and beneficiaries. See Certain Preventive Services Under the Affordable Care Act, 77 Fed.Reg. 16501, 16503 (Mar. 21, 2012). Under this proposed accommodation, the health insurance company would not be permitted to impose any cost-sharing on the part of the plan participants and beneficiaries and would be further precluded from imposing any premium charge to the religious organization relative to this separate contraceptive coverage. Id. For religious organizations like the Plaintiffs which are self-insured, the ANPRM states Defendants' intent to propose " that a third-party administrator of the group health plan or some other independent entity assume this responsibility." Id. According to the ANPRM, the Defendants " suggest multiple options for how contraceptive coverage in this circumstance could be arranged and financed in recognition of the variation in how such self-insured plans are structured and different religious organizations' perspectives on what constitutes objectionable cooperation with the provision of contraceptive coverage." Id.


A. The Parties

1. Plaintiffs Persico and the Diocese

Plaintiff, the Most Reverend Lawrence T. Persico, is Bishop and Trustee of Plaintiff the Roman Catholic Diocese of Erie (the " Diocese" ). (Complaint ¶ 2.) [3] The Diocese is a nonprofit Pennsylvania Charitable Trust with a principal place of administration in Erie, Pennsylvania. ( Id. at ¶ 28.) It is organized exclusively for charitable, religious, and educational purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code. ( Id. ) The Diocese consists of 117 parishes serving a thirteen-county region, including approximately 222,000 individuals of Catholic faith. ( Id. at ¶ 42.)

The Diocese serves both Catholic and non-Catholic residents of Northwestern Pennsylvania in three main ways: by educating children within the Diocese's school system, by promoting spiritual growth, and by service to the community. (Complaint ¶¶ 2, 6, 40.) The Diocese carries out this work both on its own and through its support of the Catholic Charities of the Diocese of Erie, whose charitable programs include those operated by Plaintiffs St. Martin Center, Inc. (" SMC" ) and Prince of Peace Center, Inc. (" PPC" ). ( Id. )

Through its numerous elementary, middle and secondary schools, the Diocese educates over 7,500 students of all faiths. It also offers tuition assistance for students based solely on financial need. (Complaint ¶ 41.)

In addition to serving the spiritual needs of its Catholic residents and educating Catholic and non-Catholic students,

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the Diocese serves thousands of Northwest Pennsylvanians through its social services arms. (Complaint ¶ 44.) For example, many non-Catholics are served by the Diocese's post-abortion ministry, prison ministry, family ministry, disability ministry, international Diocesan missions, various respect life organizations, and the numerous religious and non-religious charities that receive the Diocese's financial support, including the following: (a) St. Elizabeth Center, which operates a food pantry, thrift store, and clothing shop for lower-income individuals; (b) The Good Samaritan Center, a shelter for homeless men and provider of an emergency one-family apartment and other assistance; (c) Better Homes for Erie, a provider of affordable housing to low-income families; and (d) Catholic Charities Counseling and Adoption Services, a provider of professional counseling, adoption counseling, pregnancy counseling, and refugee resettlement services. ( Id. at ¶ 45.)

These social service programs, through support from the Diocese, provide aid to over 50,000 individuals each year without regard to the individuals' religion, race, or financial condition. ( Id. at ¶ 46.) The Diocese would not be able to provide all of the foregoing social services without the financial contributions of its donors and the work of its numerous volunteers. ( Id. at ¶ 48.)

The Diocese employs approximately 70 full-time equivalent employees. (Affidavit of David J. Murphy [24-3], Ex. 2 to Pls.' Mem. In Opp. to Defs.' Mot. to Dismiss, at p. 3, ¶ 5.) However, the Diocese does not know how many of its employees are Catholic. (Complaint ¶ 49.) The Diocese educates and assists tens of thousands of individuals but it is unknown how many of those educated or served by the Diocese are Catholic. It is therefore unclear to the Diocese whether it would qualify for the exemption from the challenged mandate afforded to " religious employers." ( Id. )

The Diocese operates a self-insured health plan.[4] (Complaint ¶ 52.) Diocesan health plans are administered by Third Party Administrators (" TPAs" ), which are paid a flat administrative fee for each individual covered by the plan. ( Id. at ¶ 53.) The TPAs do not pay for any services received by the Diocese's covered employees. ( Id. )

Through its health plan, the Diocese provides health insurance coverage to approximately 803 employees, including those employed directly by the Diocese as well as those employed by the various parishes, schools, and charitable agencies of the Diocese. The Diocese also covers the dependents of these employees, resulting in a total of approximately 994 insured individuals. (Murphy Affid. at ¶ 5.)

The Diocesan health care plan does not meet the ACA's definition of a " grandfathered" plan. Accordingly, the Diocese did not include a statement describing its grandfathered status in plan materials, as required by 26 C.F.R. § 54.9815-1251T(a)(2)(ii).[5] (Complaint ¶ 54.) Under

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the Diocesan health plan, each new plan year commences annually on July ...

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