July 09, 2024

In the days leading up to and including July 1, 2024, the Supreme Court of the United States (SCOTUS) issued its final decisions from its 2023 term. Among the highly anticipated opinions impacting many facets of American life were at least two that have the potential to directly impact the regulation, enforcement, and compliance-focused actions of employer health plans and other health care stakeholders. First, on June 28, in a consolidated opinion under Loper Bright Enterprises v. Raimondo, the Court overturned its long-standing “Chevron doctrine” – precedent in administrative law that fundamentally shaped the relationship between federal agencies and the judiciary. Second, on July 1, SCOTUS issued Corner Post, Inc. v. Board of Governors of the Federal Reserve System, which effectively keeps open (or reopens) opportunities for challenges to regulations under the Administrative Procedures Act (APA) for certain parties whose grievance with the regulation would have otherwise been foreclosed by a general statute of limitations.

Each of these cases separately could present challenges and opportunities for opening/reopening questions for many otherwise settled regulatory provisions; applied together, they may provide nearly unlimited “bites-at-the-apple” for would-be regulatory challengers. For employer ERISA plan sponsors, these cases represent potentially desirable options for challenging agency overreach as well as uncertainty when other health care stakeholders take aim at regulations upon which ERISA plans rely.

Overruling Chevron and expanding opportunities to challenge rules in court is also expected to heavily shift decisions and the associated workload to the federal judiciary. This will put federal judges in the position to make decisions about ERISA plans and health care with which they may not have much practical or legal experience. It may also increase caseloads and further delay federal judicial decisions broadly.

Summary Background: “Chevron doctrine” & Loper Bright; Corner Post

The Chevron doctrine is named after the 1984 SCOTUS case that established it, Chevron v. Natural Resources Defense Council. The Court established the precedent that, when a statute is ambiguous, courts ought to defer to the interpretation of the federal agency responsible for administering that statute – so long as the interpretation is “reasonable.” In practical terms, this meant that when a federal agency issued rules to implement a statute, those rules did not necessarily need to be the only or the most appropriate or one of several ways to implement and comply with the statute, but rather merely a “reasonable” interpretation to then be given binding effect. As a result, it has been common practice for federal courts to defer to agency interpretations, with the Chevron doctrine serving as the legal justification for upholding countless regulations in the face of would-be challenges over the last 40 years.

In the consolidated Loper Bright decision, the plaintiffs were herring fishing operations that were/would have been assessed a fee for federal observer inspections when the statute that required the observer to be present was silent on who paid for the cost of the observer – the fishermen or the agency. The agency interpreted the statute’s silence to apply the cost to the fishermen, which they in turn challenged in federal court. The lower courts relied on Chevron deference to find in favor of the agency that its interpretation applying the cost was “reasonable,” but SCOTUS overruled saying that reliance on Chevron usurped the responsibility of the court to interpret the law on its own. Ultimately federal courts will be able to consider agency interpretation but will afford it less, if any, deference – instead interpreting statutory language under the court’s own authority and judgment.

In Corner Post, SCOTUS backed up a step further in the process of asserting a challenge against a regulation effectively expanding the time to bring a claim. Here SCOTUS looked at the APA’s six-year statute of limitations on challenging regulations and found that the six-year clock only starts to run once a potential plaintiff has (as alleged) suffered harm from a rule – even if it’s a long-standing rule. In this case, a rule impacting certain debit card fees was finalized in 2011, which the agency asserted meant that any APA challenges needed to be brought within six years – by 2017. The plaintiffs, though, were not open for business as “Corner Post, Inc.” until 2018 and did not join a lawsuit challenging the regulation until 2021, so in the agency’s view they would have no opportunity to challenge the regulation. In its opinion, however, SCOTUS establishes that a claim under the APA “accrues”, and the six-year clock starts when the potential litigant themselves is “injured.” In the case of Corner Post, Inc. that would have been in 2018 when it first had to pay the debit card fees. This means that Corner Post, Inc. would have had until 2024 to file its lawsuit challenging the regulation. More broadly, future regulatory challengers will look individually to the timing of the alleged harm against them specifically for their six-year period (even if the company didn’t exist previously or the regulation did not otherwise apply to them previously), rather than using a general period of six years when a would-be harmed party could have brought a lawsuit following a regulation’s impact/effective date.

The SCOTUS Take-Away:

• Corner Post – effectively and greatly expands the time period within which litigants may challenge a regulation under the APA.
• Loper Bright – tells the lower courts (and sets new precedent for the Supreme Court) to review and interpret federal statutes themselves and not give as much, if any, deference to the interpretation/rationale of the federal agency that is issuing regulations or guidance.

What Does this Mean for Employer-Sponsored ERISA Health Plans and Other Programs?

ERISA health plans are heavily regulated by, reliant upon, and sometimes challenged by the federal agencies that interpret and apply a myriad of federal statutory requirements. The following are examples of statutes with varying degrees of specificity that have routinely been interpreted and built upon with rules for employer plans by the Department of Labor (DOL)/Employee Benefits Security Administration (EBSA), Department of the Treasury/Internal Revenue Service (Treasury/IRS), and Department of Health and Human Services (HHS). In many instances, the regulators issued rules they asserted to be “reasonable” interpretations of the applicable statute and such regulations were then binding and reliable for employer plans to follow for compliance purposes.

• ERISA itself and hundreds of pages of long-standing regulatory guidance, (e.g., plan disclosures, claims and appeal processes, plan asset rules, and other requirements).
• Affordable Care Act’s (ACA) implementing regulations, including but not limited to at least some aspects of preventive care and contraceptive coverage requirements, and the ACA mandate rules under Section 6055/6056, and Form 1094/95-C reporting requirements.
• Mental Health Parity and Addiction Equity Act (MHPAEA) – e.g., the non-quantitative treatment limitations (NQTLs) were a creation of 2013 rules asserted as a “reasonable” interpretation of the statute. NQTLs have since been somewhat ratified by Congress in the Consolidated Appropriations Act, 2021 (CAA, 21) but the agencies have since gone further with burdensome requirements in proposed NQTL rules – which are expected to be finalized yet this summer. (See: Business Group’s Comments to the Proposed Regulations)
• The Consolidated Omnibus Budget Reconciliation Act (COBRA) – with long-standing regulatory guidance.
• The No Surprises Act (from the CAA, 21) – which heavily relies on implementing regulatory interpretations for the dispute resolution process and the calculation of various payment amounts.

These well-known examples alone provide dozens of interpretive decisions and requirements that may be called into question. Historically, the agencies would have defended their rulemaking by turning to a statute of limitations under the APA and/or Chevron deference to cut off a potential challenge either because it was past the six-year period or because they were entitled to deference for a “reasonable” interpretation. Now, there may be new or reopened time to bring challenges, and federal courts will give the agency’s interpretation less, if any, deference over the court’s own interpretation of the statutory language.

For employer plans – to put it plainly – this will be both good and bad; good in the sense that employer plan sponsors will have longer time and more leverage to challenge unworkable, unfair or overreaching agency action in the interests of the plan, but bad in the sense that challenges to the rules may arise from outside of the plan sponsor community (e.g., plaintiff’s firms and provider payment challenges, and long-standing rules that employers have relied on defensively to show compliance may be called into question and given less weight by federal judges).

Beyond Employer Health Plans

Many of the regulations underlying labor and employment requirements determining employment status, wage and overtime, safety, ADA/EEOC discrimination, and leave issues may be targets for challenges based on these SCOTUS decisions. Changes to a number of these could have indirect impacts on employer provided health plans, including eligibility, affordability, and potentially plan design.

A recent regulation that may be more directly challenged, and of which those supporting employee benefit and leave programs may be aware, is EEOC rulemaking related to implementation of the Pregnant Workers Fairness Act (PWFA). The PWFA generally requires covered employers with 15 or more employees to provide reasonable accommodations to an employee’s known limitation related to pregnancy, childbirth, or related medical conditions – unless the accommodation will cause an undue hardship to the employer. Since the PWFA only uses the ambiguous term “reasonable accommodations” and “related medical conditions,” the law allows regulators to interpret what services will be included under such a definition; in April, the EEOC issued a final rule that included abortion services as a “related medical condition.”

Seventeen states have filed suit against the Biden administration for the EEOC’s inclusion of abortion within the definition. With the Chevron doctrine overruled, judges would now be expected to independently interpret the law without deferring to the EEOC’s interpretation. This could result in fundamentally different outcomes, potentially limiting or nullifying the EEOC’s interpretation if courts find it exceeded the agency’s authority or misinterpreted the statute.

When Will We See These Challenges and Changes? (Spoiler: They Are Already Happening)

We have seen Loper Bright’s revocation of the Chevron doctrine already cited or speculated about in a variety of lawsuits raising challenges across the regulatory spectrum. For employer plans, it has so far at least been invoked in Tennessee v. Becerra, a case brought by a number of states challenging the recently finalized Section 1557 final rule. (See the Business Group summary) Section 1557 of the ACA prohibits discrimination based on race, color, national origin, sex, age, or disability in certain health programs or activities.

The Mississippi Southern District Court decision issued July 3 cites the Supreme Court's recent overturning of Chevron deference and affords little to no deference to the agency’s interpretations for its 1557 rulemaking. This new review led the judge to state “[T]he Court finds that Plaintiffs have demonstrated that there is a substantial likelihood of success on the merits of their claims,” and granted a national preliminary injunction against parts of the May 2024 Section 1557 rule while the case continues and is assessed on the merits.

Whether the recent 1557 rule survives in the judge’s final decision in Tennessee v. Becerra remains to be seen, but the reduction or absence of deference to the agencies will be a factor. It may be even more pronounced in preliminary proceedings and requests for injunctions like this one, where the court identifies that it must independently review the statutory language (so an injunction to maintain the “status quo” or to otherwise delay the rule while the case proceeds is appropriate).

What's Next?

As employers assess the breadth and nature of regulations that apply to their operations, workforce, and plans and programs, there could be legal challenges raised against any number of existing and new rules using these new SCOTUS decisions. Some employers themselves may wish to consider raising challenges to regulations that they thought were foreclosed by time limits or otherwise would have faced more significant legal headwinds because of Chevron deference. For employer plans, the wide and well-documented misgivings about the expected finalization of NQTL guidance will almost certainly be an area for litigation post-Chevron. But it will not be the only challenge, and not all challenges will be in the best interests of employer plans. We will continue to monitor developments stemming from these SCOTUS decisions and provide updates and insights to members as they arise. In the meantime, please feel free to reach out to the Business Group’s Policy & Advocacy team for any questions or to discuss further.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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