Section 1557, State Courts and Loper

In recent legal developments, courts in Mississippi and Texas have issued rulings with significant implications for the Affordable Care Act (ACA) Section 1557. In the 2 weeks since Loper overturned Chevron, we have seen a few shifts in the employee benefits landscape.

The Legal Challenges and Latest Injunctions Referencing Loper

Implications for Group Health Plans in Tennessee v. Becerra and Texas v. Becerra

• The rulings in Tennessee v. Becerra and Texas v. Becerra have created a complex legal landscape for entities covered under ACA Section 1557. The nationwide injunction from the Mississippi court and the stay of all provisions in Texas and Montana pose possible compliance challenges for multi-state employers and employers located within those states to know what is applicable and what is not to their benefit plans.
• Due to the dynamic legal environment, group health plans must remain vigilant and stay informed about ongoing legal developments. It is crucial to consult legal counsel to understand the specific implications of these rulings and ensure compliance with applicable regulations.

Background on ACA Section 1557 Regulations

In May 2024, the Department of Health and Human Services (HHS) issued new regulations under ACA Section 1557.  Refer to our blog “How New Section 1557 Rules Affect Health Plans and Insurers”. These regulations expanded the definition of “discrimination on the basis of sex” to include sexual orientation, gender identity, sex characteristics, pregnancy, and sex stereotypes, referencing evolving Title IX rules. The regulations were set to become effective on July 5, 2024.

However, several states challenged these regulations, arguing that the redefinition of sex discrimination was unlawful under the Administrative Procedure Act (APA). They argued that HHS exceeded its statutory authority by incorporating interpretations from the U.S. Supreme Court’s decision in Bostock v. Clayton County that held that employment discrimination based on sexual orientation and gender identity violated Title VII.

Tennessee v. Becerra (Mississippi Court Ruling)

In Tennessee v. Becerra, a court in Mississippi issued a nationwide injunction and stay on portions of the ACA Section 1557 regulations. The court ruled that HHS likely exceeded its statutory authority by applying the Bostock holding to interpret “on the basis of sex” in Title IX. Consequently, the court stayed the effective date of the regulations nationwide concerning provisions extending sex discrimination to include gender identity. HHS was also enjoined from implementing or enforcing these provisions.

Texas v. Becerra (Texas Court Ruling)

In a separate case, Texas v. Becerra, a court in Texas stayed all provisions of the regulations in Texas and Montana. The court found that HHS had not provided guidance on how to excise the offending provisions, leading to a stay on the entire set of regulations for Section 1557 covered entities in Texas and Montana.

Chevron Doctrine Overturned in Loper and Judicial Deference

The Chevron doctrine, stemming from the Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. decision, holds that courts should defer to agency interpretations of ambiguous statutes if the interpretation is reasonable. For more information refer to our blog “Chevron Defense Overturned”.

Both the Mississippi and Texas courts declined to defer to HHS’s interpretation of sex discrimination under Title IX. They invoked the U.S. Supreme Court’s Loper decision, emphasizing the need for clear statutory authority and signaling a potential erosion of the Chevron doctrine.

Conclusion

The recent court decisions on ACA Section 1557 that reference Loper highlight the evolving nature of administrative law and judicial deference. These rulings underscore the importance of clear statutory authority in agency rulemaking and the potential limitations of the Chevron doctrine.