Labor & Employment Law Daily Wrap Up, PROCEDURE—E.D. Pa.: Court vacates ACA’s religious and moral rules, (Aug 20, 2025)

By Sherri M. Schroeder, J.D.

The agencies did not give a satisfactory explanation for their actions, considered improper factors in promulgating the rules, and did not consider any alternatives, among other things.

A district court in Pennsylvania has ruled that two regulations under the Women’s Health Amendment to the Patient Protection and Affordable Care Act (ACA)—the Religious Exemptions and Accommodations for Coverage of Certain Preventive Services under the Affordable Care Act (Religious Rule) and the Moral Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act (Moral Rule) (together, the Rules)—are arbitrary and capricious and must be vacated. Under the contraceptive mandate of the ACA, most employers had historically been required to provide coverage for contraception and contraception-related counseling. However, the challenged Rules greatly expanded the exemption and accommodation framework under the contraceptive mandate that had evolved for a narrow class of non-profit religious organizations and others who sincerely objected to providing contraception on religious grounds. Pennsylvania and New Jersey had sued the United States, the President, HHS, the Treasury and Labor Departments, and their secretaries (the agencies) in their official capacities challenging the Rules under the Administrative Procedure Act (APA) as arbitrary and capricious. The court agreed with the states, finding that the agencies failed to give a satisfactory explanation for their actions in promulgating the Rules, among other things. The court, therefore, vacated both Rules (Commonwealth of Pennsylvania v. Trump, No. 17-4540 (E.D. Pa. Aug. 13, 2025)).

Lack of satisfactory explanation. The court found that the agencies’ actions in promulgating the Religious Rule were arbitrary and capricious because they failed to give a satisfactory explanation for their actions. The court noted that the Religious Rule did not reasonably address the problem it purported to resolve because the Rule went far beyond the agencies’ justification of the Rule being necessary to resolve potential conflicts between the Religious Freedom Restoration Act (RFRA) and the contraceptive mandate. According to the court, the Religious Rule does not extend exemptions just to those maintaining sincerely held, complicity-based accommodation, but also extends exemptions even to entities without such objections. Furthermore, it extends exemptions to organization that are unlikely to ever be capable of maintaining a religious objection. For the court, this raised further doubts as to the rational connection between the Religious Rule and remedying its potential conflicts with RFRA.

RFRA did not compel Rule. The court then took exception to the agencies’ argument that RFRA compelled the Religious Rule. In the agencies’ view, accommodation still conflicted with RFRA because some employers believed that even notifying HHS of their objection to providing contraceptive coverage made them complicit in providing that coverage. “But,” reasoned the court, “according to binding Third Circuit precedent, the Accommodation did not substantially burden religious exercise, so Defendants cannot invoke the statute here as forcing their hand.” According to the court, when an agency decision is based on an erroneous interpretation of the law, such as whether RFRA compels the Religious Rule, that decision is an abuse of discretion and a violation of 5 U.S.C. § 706(2)(A). Therefore, the action must be set aside.

Improper factors. The court also noted that the agencies considered improper factors that Congress had not intended they consider in promulgating the Moral Rule, which also makes the Moral Rule unsustainable. “Nothing in the Affordable Care Act provides that the Agencies may consider moral objections in exercising their authority to create exemptions to the Contraceptive Mandate,” writes the court. Although the agencies argued that because Congress had allowed for moral objections to regulatory frameworks in other areas, it must have done so here as well, the court did not agree. According to the court, “[T]hat Congress included such objections elsewhere (such as in the abortion context), but not within the Women’s Health Amendment, must be taken to mean that Congress did not intend for an entity’s moral scruples to be considered in providing preventative services to women.”

Course change. Additionally, the court noted that both the Religious and Moral Rules must be vacated because the agencies did not provide a satisfactory explanation for their change in course regarding contraception safety and efficacy. Before 2017, the agencies considered contraceptive methods and counseling services to be safe, effective, and beneficial; however, when explaining their position for promulgating the final Rules, the agencies “purported to recognize new-found doubts as to those conclusions,” per the court. The states argued that this change in position makes the Rules arbitrary and capricious; the agencies argued that they had supplied the required detailed justification for their position change. The court disagreed with the agencies. According to the court, the studies the agencies cited to justify their position were published either before or during the years the agencies concluded that contraception was safe and effective, and the agencies failed to explain why these studies now compelled a different conclusion. The court also noted that the agencies switched their position regarding contraception’s effectiveness, but failed to cite anything supporting their conclusion that contraception is ineffective in reducing teen pregnancies.

Alternatives. The court also noted that the agencies failed to consider regulatory alternatives, which the states argued made the agencies’ actions arbitrary and capricious. Here, the court focused on the states’ “most salient” alternative—the option of providing an avenue for individuals to still get contraceptive coverage even if they are a member of an exempt plan, i.e., the “Individual Contraceptive Arrangement” proposed by the agencies in 2023. Yet, when the agencies promulgated the final Rules, they failed to consider such an alternative or provide a reasonable explanation for rejecting it.

Conclusion. Therefore, the court determined both the Religious and Moral Rule to be arbitrary and capricious. Finding vacatur to be authorized by the APA, remand without vacatur to be inappropriate, and severance to be appropriate when provisions of a regulation operate entirely independently of one another, which is not the case here, the court vacated the Rules in their entirety.

The case is No. 17-4540.

Judge: Beetlestone, W.

Attorneys: Lisa Emily Eisenberg, Office of Attorney General, for Commonwealth of Pennsylvania. Daniel Riess, U.S. Department of Justice, for Donald J. Trump.

Cases: PensionBenefitPlans Procedure PennsylvaniaNews