Recently, the Seventh Circuit Court of Appeals reversed an order by an Indiana federal district court exempting religious non-profit organizations from complying with the Affordable Care Act’s provision allowing their employees (and, in some cases, students) to get health insurance coverage for contraceptive services despite the organizations’ religious objections.

The Patient Protection and Affordable Care Act (“ACA”) requires employers to provide health insurance to their employees, including contraceptive services for women. An exemption from the contraception coverage requirement was included for religious employers, as defined in the Internal Revenue Code. That exemption, however, did not extend to religiously-affiliated non-profit organizations, such as schools and hospitals. As a result, additional regulations were adopted so that these organizations, if they met certain eligibility criteria, would not be required to provide contraception coverage to health plan participants. The regulations required that these organizations provide certification to the federal government and their insurers, which had to provide coverage for contraceptive methods for participants without any cost sharing or other charges to the organizations. Employers and organizations not in compliance with the ACA face a fine of $2000 per year per full time employee.

The plaintiffs, which include Indiana non-profit organizations such as a retirement community and Catholic Charities of the Diocese of Fort Wayne, the Franciscan Alliance, Inc., and religiously-affiliated universities and schools, argued that the ACA’s regulatory scheme forces them to participate in a system that contravenes their religious beliefs and places a substantial burden on their free exercise of religion in violation of the Religious Freedom Restoration Act of 1993 (“RFRA”). The RFRA is a federal law that prevents the government from substantially burdening a person’s exercise of religion without a compelling reason and in the least restrictive means of doing so.

The Indiana federal district court issued a preliminary injunction preventing the federal government from enforcing the ACA against the plaintiffs. The district court found that the regulations created a substantial burden on the organizations because although they are not required to pay for the contraception coverage to which they object, they are still forced to contract with insurers who provide the coverage, thus, making them complicit in an activity that violates their religious beliefs. In addition, the alternative is to pay a large financial penalty. The district court assumed the government has a compelling interest in providing contraception coverage to women in group health insurance plans, but found the regulatory scheme was not the least restrictive means of accomplishing that goal.

The appellate court reversed the district court’s decision. The Court found that the ACA, as modified by the regulations, does not impose a substantial burden on religiously-affiliated non-profit organizations under the RFRA because it does not require them to pay for, or even arrange for, contraceptive coverage. The court’s decision was consistent with two of its earlier decisions (separately brought by the University of Notre Dame and Wheaton College, which also objected to requirements under the ACA to provide contraceptive coverage for employees and students) and decisions by six other federal appeals courts that have addressed this same issue.