On June 28, 2024, the U.S. Supreme Court issued their decision in Loper Bright Enterprises v. Raimondo, which overturned the landmark ruling in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. While the Loper case did not pertain to health and welfare benefit plans, we do anticipate future impact to health and welfare benefit regulations, discussed below.
Background
Chevron previously required a court to uphold an agency’s interpretation of a regulation, so long as it was reasonable and within the agency’s authority, when the federal law was ambiguous or silent. In the Chevron decision, the Supreme Court expressed the view that subject matter experts of the federal agencies were best situated to make such interpretations and to create policy when a regulation was unclear. This is often referred to as “Chevron deference”. With Chevron overturned, courts are now able to exercise their own independent judgment when interpreting statutes that are ambiguous or silent on an issue (instead of prioritizing the relevant federal agency’s interpretation through regulations and other guidance). That said, because the health and welfare benefits industry has become so highly regulated, we expect to see future court challenges to existing federal agency regulations. In addition, Chevron being overturned will likely result in decentralized or varied interpretations of statutes across the country due to increased judicial power to interpret statutes that would previously have been interpreted through federal agency regulation and rulemaking.
Impact to Health & Welfare Benefits
The practical impact of this recent decision remains to be seen. Overruling Chevron will not result in challenges to all health and welfare regulations; however, there likely will be an increase in challenges through the court system, especially to regulations coming out of the Department of Health and Human Services’ (HHS). For example, most recently we’ve seen three district courts (Texas, Florida, and Mississippi) that have stayed and enjoined (i.e., prohibited) HHS from enforcing certain provisions of the Section 1557 final regulations that involve HHS’s interpretation that Section 1557’s prohibition on sex discrimination includes discrimination on the basis of gender identity. See our blog HHS Final Rule Impacts Section 1557 Nondiscrimination Protections for additional information on this topic.
While we anticipate additional forthcoming challenges to federal agency regulations, we also expect these agencies to exercise more cautious rulemaking going forward. Sequoia will continue to monitor this topic and will communicate further impact to health and welfare benefits.
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
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