A federal district court has barred enforcement of the 2024 regulations concerning Section 1557 of the Affordable Care Act (ACA) as to members of a Catholic employer association. The Court found that the 2024 regulations, which contain a ban on discrimination based on gender identity, violate the sincerely held religious beliefs of association members under the Religious Freedom Restoration Act (RFRA). The case is Catholic Benefits Ass'n v. Kennedy, No. 3:23-cv-203 (D.N.D. June 5, 2025).
The Catholic Benefits Association ("the Association") filed suit challenging the 2024 regulations construing Section 1557 as violative of the RFRA because they require Catholic entities to cover or provide gender-transition procedures, which they believe to be immoral. The Association had successfully challenged previous versions of the Section 1557 regulations, which interpreted sex discrimination to include gender identity discrimination because of the RFRA. However, an appellate court later overturned that ruling, finding that the Association had no standing to file the suit. In the most recent lawsuit, the Association corrected the standing issue and sought an injunction preventing enforcement of the 2024 regulations against its members.
The Court adopted the Association's argument that the 2024 regulations' prohibition against gender identity discrimination violated their sincerely held religious beliefs under the RFRA. Furthermore, the Court ruled that the new case-by-case procedures for exemptions from the regulations substantially burdened the Association members' exercise of religion. More specifically, the Court held that the procedures did not allow members of the Association to assess their legal risks definitively and were not the "least restrictive means available." As a result, the Court issued a permanent injunction barring enforcement of the 2024 regulations against the Association's members. The injunction prevents the U.S. Department of Health and Human Services (HHS) and the U.S. Equal Employment Opportunity Commission (EEOC) from enforcing the obligation of the Association's members to cover or perform gender-transition procedures.
This court decision applies only to members of the Association. However, a Mississippi federal court has issued a nationwide injunction and stay on all portions of the 2024 regulations that interpret Section 1557 as inclusive of discrimination based on gender identity. As courts continue to navigate the scope of Section 1557 and other nondiscrimination laws, plan sponsors, third-party administrators, and insurers should carefully review plan provisions to avoid incurring undue legal risks that could result in significant costs.
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