SCOTUS Case Could Weaken the Impact of Regulation on Key Patient and Consumer Protections

The U.S. Supreme Court is considering jointly two cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, that could affect the impact of federal regulations in implementing laws passed by Congress. Although these cases are focused on regulations pertaining to the fishing industry, the court’s decision could have significant implications for numerous other policy areas, including for regulations related to patient and consumer protections in health care. This brief discusses the longstanding legal doctrine being challenged, called Chevron deference, and includes examples of what could be at stake for health care consumers should federal courts no longer use this doctrine to address litigation related to federal health regulations. The focus here is on patient and consumer protection regulation, but overturning the Chevron deference would have implications in all areas of health care.

What is Chevron deference?

Chevron deference is a legal framework, or test, derived from the 1984 U.S. Supreme Court case Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. that found that when an aspect of a federal law is determined to be ambiguous as written, and a federal agency issues a final regulation (typically after public notice and comment) that addresses the ambiguity, courts should defer to this agency regulation. Only where a court thinks the regulation is a not a “reasonable interpretation” of the law can it change or overrule it. Essentially, when federal agency regulations are challenged in federal court as an improper interpretation of a statute, courts have traditionally deferred to the agency interpretation unless they find that the interpretation is arbitrary or not consistent with the statute.

In applying this “deference” to agency regulations, courts usually have two decisions to make: whether the language in a law is actually ambiguous (Step 1), and, if the court agrees that the language is ambiguous, whether the regulation is a reasonable interpretation of the law (Step 2).

Although the U.S. Supreme Court in recent years rarely relies on the Chevron doctrine and has not done so since 2016, it is applied frequently by lower courts, including in the Loper and Relentless cases.

What is the case currently before the U.S. Supreme Court and when will it be decided?

The plaintiffs in the cases currently before the Supreme Court argue that federal agencies overstepped their authority in issuing a rule that the plaintiffs claim would negatively affect their businesses. The case does not deal with health care, but rather with a federal rule that requires commercial fishing vessels to pay for professional observers to monitor certain activities. Nevertheless, the Supreme Court is now poised to decide whether to end the use of Chevron deference in reviewing regulations, or significantly narrow its application. Oral argument took place on January 17, 2024, and the Court should issue a decision by the end of the term (usually in June).

Proponents of maintaining the Chevron framework argue that federal agencies are tasked with administrative interpretation and implementation of laws because of their subject matter expertise, use of data to inform decision making, and understanding of the relevant policy nuances. For example, the Federal Food, Drug, and Cosmetic Act authorizes the U.S. Food and Drug Administration (FDA) to regulate prescription and non-prescription drugs and ensure that they are safe and effective. Without Chevron, they argue, agencies would be hindered from carrying out their responsibilities, and policies that should be based on facts and science may end up being determined by courts and Congress, who lack the requisite subject matter expertise. Furthermore, some academics assert that federal agencies are more politically accountable for their actions than the federal judiciary and that legal doctrine such as Chevron reduce partisan judicial decision-making.

Opponents of Chevron deference argue that policies should not be made by government bureaucrats, who are not elected and not accountable to the public in the same way that members of Congress are, and that delegation of regulatory authority to federal agencies undermines legislative powers. They also argue that administrations can change as frequently as every four years and so can the regulations they issue, which can create confusion for industries and the public; allowing courts more leeway to interpret laws could result in more regulatory stability. Opponents point to the Environmental Protection Agency’s (EPA) changing and reversing of regulations related to power plant carbon emissions as an example of regulatory instability and its impact on these industries. Additionally, opponents assert that application of Chevron deference undermines the constitutional separation of powers.

What is the significance of the case to health policy?

A decision to roll back Chevron deference could impact regulations for policy areas as broad as the environment, workplace conditions, finance, and technology. When it comes to health policy, regulations govern everything from Medicaid and Medicare payment rates for hospitals and other providers, to drug price negotiations, pandemic response, pharmaceutical regulation, and insurance coverage of mental health services.

The ability of federal regulators to interpret unclear aspects of a statute through formal agency regulations has been a key tool to implement legislation passed by Congress and give effect to federal consumer protections. Regulators are required to provide informed and expert rationale for any agency interpretation. Health care and health care financing arrangements are highly specialized and rely on study and expertise to address these issues. In addition, the notice and comment rulemaking process means regulators have to consider financial and scientific impacts from a range of stakeholders. Furthermore, as facts and circumstances change, new discoveries are made, or emergencies (like COVID) arise, agencies have the ability to update regulations in order to effectively implement legislation previously passed by Congress.

Without Chevron deference, agencies will still be able to issue these interpreting regulations, but courts won’t have to accept agency expertise when deciding whether an agency interpretation is consistent with the law. Courts can instead decide for themselves the best approach, shifting more policy decisions to the courts.

What are the potential implications of overturning Chevron?

Overturning Chevron deference could have cascading effects starting with the likelihood that more agency regulations will be overturned by courts. Court decisions to overturn regulations will provide increasing incentive by litigants to challenge any and all regulations in court. The ultimate result is a chilling effect on the issuance of federal regulations needed to implement key federal consumer protections. Below we discuss these implications with examples of how they may affect patients.

More agency regulations could be overturned. First, eliminating Chevron would increase the chance of an agency rule being vacated, which could have a significant impact on consumer protections, including existing Affordable Care Act (ACA) rules that have been in effect for some time, as well as federal rules to implement health plan and provider transparency and out-of-network billing protections.

Over the past fourteen years, the U.S. Department of Health and Human Services (HHS) and other agencies have issued a long list of regulations to stand up the health insurance Marketplaces, and design and fix the process and rules for receiving premium tax credits. Annually, HHS issues its Notice of Benefit and Payment Parameters that includes updates to requirements and interpretations of items not clear or not specifically addressed in the ACA statute. For example, the annual notice specifies the out-of-pocket maximum in insurance plans for the coming year and often includes technical updates to risk adjustment and network adequacy standards. If Chevron deference is eliminated, courts won’t have to give any weight to these interpretations, possibly disrupting consumer expectations about access to Marketplace coverage and financial assistance.

Eliminating Chevron deference could also impact final regulations in such areas as the ACA’s requirement that all non-grandfathered health plans cover a range of clinically-recommended preventive health services, without patient cost sharing. These coverage requirements have been the subject of multiple legal challenges, including the pending Fifth Circuit case Braidwood Management v. Becerra. Should this provision of the ACA survive this constitutional challenge, it could still be the subject of a legal challenge alleging that decisions about what services should be included as preventive care go beyond what Congress intended. If successful, the challenge could strike down preventive service coverage requirements including medications to prevent HIV (PrEP) and breast cancer, statins to prevent heart disease, and lung cancer screening. Loss of these coverage requirements would make such coverage voluntary, leaving potentially millions of people vulnerable to costs for these services. Particularly if Chevron is overturned, it could hamstring agency efforts to implement new or updated clinical guidance from the expert bodies it relies upon in determining the most up-to-date standards of clinically appropriate preventive health care.

Another example of an agency regulation that could be overturned is the limitation on the duration and renewability of short-term, limited duration health plans (STLDs). Designed for people who experience a temporary gap in health insurance coverage, STLDs typically offer fewer covered benefits and consumer protections compared to plans that meet Affordable Care Act (ACA) standards. For these reasons, STLDs have lower premiums than ACA-compliant plans but expose enrollees to more financial risk should they get sick or injured. For more information on STLD plans, see Understanding Short-Term Limited Duration Health Insurance.

An agency regulation issued in 2018 during the Trump administration expanded the permitted coverage duration to up to 12 months with renewability for up to an additional 24 months. The Chevron framework was invoked by a District Court judge presiding over a legal challenge to these changes, concluding with a ruling in favor of the federal agency. Another agency regulation issued in 2024 during the Biden administration rolls back that expansion and limits STLD coverage to three months plus a one-month extension. Should the new agency regulation be challenged in court without Chevron deference, it could be left to the judge to interpret the definition of an STLD plan from the Public Health Service Act, which excludes STLD plans from the definition of individual health insurance coverage but does not define them. The result in this case could be a ruling against the agency, unlike in the previous challenge.

Overturning regulations could provide more incentive for litigants to challenge agency regulations, resulting in more federal litigation crowding court dockets. The judicial landscape that governs the health care industry—already crowded with Affordable Care Act and now Inflation Reduction Act litigation related to new authority to negotiate drug prices in Medicare—could become even more chaotic, potentially resulting in unresolved legal issues and judicial backlog. This reduces access to these courts for everyone, including patients seeking redress for any number of federal protections.

Some argue that the power of federal rulemaking is already being diminished in favor of litigation and judicial interpretation. Even if Chevron is not overturned, there are other legal frameworks such as the major questions doctrine, the nondelegation doctrine, and others that courts currently use to assess agency rulemaking. Nevertheless, Chevron still affects decisions in significant ways in the lower federal courts, and its absence could make agency regulation less meaningful. Most health-related cases do not make their way to the U.S. Supreme Court, including many cases involving the Employee Retirement Income Security Act (ERISA), the law that governs health care coverage access for most Americans with employer-sponsored benefits.

This could lead to a chilling effect on the issuance of agency regulations. In instances where agencies are not specifically required by statute to issue regulations, agencies may decline to issue any regulation. This could create a vacuum, leaving ambiguities in federal policy. Expertise in science, technology, economics, and other fields, as well as the work of regulators to evaluate and create needed data to monitor business and technological advances would be undermined. For health care, emerging issues in artificial intelligence (AI) and the availability of blockbuster drugs and gene therapies create new public policy issues that Congress never anticipated. From clinical appropriateness to medical necessity, to consumer protections in alternative reimbursement arrangements, there are wide-ranging issues that call for rigorous and objective analysis that agencies may be best positioned to do.

One instructive example involves how AI can be used in the administration of health insurance claims. As the use of automated systems to improve speed and efficiency in the exchange of data to make coverage decisions increases, using AI and other automated processes to make final clinical and coverage decisions will raise issues going forward. Recent litigation challenging the use of AI and other automated processes in claims review points to an issue ripe for agency oversight and review. In the case of employer-sponsored insurance, for example, AI could not have been anticipated when Congress wrote ERISA requirements in 1974 to require that employer-sponsored plans provide a “full and fair review by the appropriate named fiduciary” of a claim denial, and that plans act “solely, exclusively, and prudently in the interests of plan participants.” If agencies decline to fill in the gaps to interpret these terms for the 21st century, all stakeholders will be left without a roadmap for how to comply with these requirements. The Centers for Medicare & Medicaid Services (CMS), in its oversight of Medicare Advantage, has recently weighed in informally on the use of AI in coverage decisions, indicating the salience of this issue (see CMS’s FAQ question 2).

Agency reticence to issue regulations also eliminates the opportunity for public comment on proposed agency rules that could inform agencies about industry, consumer, provider, and other stakeholder concerns, including the development of safe harbors for insurers and employer-sponsored health plans which have been a common feature of federal regulation, particularly in ERISA and tax regulations that affect health benefits. Without regulations, agencies would be left to focus on enforcement of statutes as written, often with a lack of clarity for what is considered a violation.

If Chevron deference is eliminated, Congress and the courts, rather than subject matter experts, would be left to outline the intricacies of laws for which they may not have expertise, perhaps reducing the role of facts and science in policymaking. As concerns mount about the proliferation of misinformation in health care, the impact of the coming court decision on agency rulemaking will be important to monitor. In an era of declining confidence in facts and expertise, approximately two-thirds of U.S. adults still have at least a fair amount of trust that federal agencies including the Centers for Disease Control and Prevention (CDC) (67%) and the FDA (65%) make the right recommendations when it comes to health issues.