Two Supreme Court Decisions Inject Uncertainty Into Benefit Plan Regulations

A pair of consequential Supreme Court decisions have complicated America's regulatory landscape. Here's what benefit plan sponsors need to know.

Two recent United States Supreme Court decisions may increase employer confusion on the regulations that apply to their employee benefit plans. The decisions, Loper Bright Enterprises v. Raimondo and Corner Post, Inc., v. Board of Governors of the Federal Reserve System, did not deal with employee benefit plans directly. However, both decisions open the door to increased litigation over all federal regulations, including those that impact employer group health and retirement plans.

The Loper Bright Decision

In Loper Bright, the Court heard a case brought by fishermen from New Jersey and Rhode Island in which the fishermen challenged the legality of mandatory fee payments to the National Marine Fisheries Service. The Court sided with the plaintiffs and overturned what is commonly known as the Chevron doctrine. The Chevron doctrine helped courts determine whether a federal agency’s regulation was enforceable based on the scope of authority that Congress delegated to that agency. If the federal law behind a regulation was unclear, the Chevron doctrine required federal judges to uphold the administrative agency’s interpretation of the statute, if it was reasonable.

Now, federal judges must rely on their own interpretation of ambiguous laws and not give any deference to the opinions of agency policy experts. In its decision, the Court stated that this new standard would only apply to future cases and not impact preexisting cases that relied on Chevron. However, as we will see in Corner Post, that portion of the ruling was short-lived.

The Corner Post Decision

In Corner Post, the Court determined that the clock on the six-year statute of limitations to challenge a regulation does not start ticking until a plaintiff has been “adversely affected or aggrieved by agency action” under the Administrative Procedure Act. In Corner Post, the plaintiff company did not exist at the time the federal agency finalized its rule, therefore they could not be “adversely affected” when the regulation was finalized. Therefore, this plaintiff had six years to challenge the regulation from the date that they were personally impacted.

In practice, Corner Post puts nearly every federal regulation at risk of constant challenge. It expands the window for prospective claimants to challenge longstanding agency regulations, as long as they file suit within six years of his or her particular injury.

Impact on Employee Benefits

So how could these decisions impact health insurance and policy in the years ahead? Since health insurance and healthcare are highly regulated industries, federal requirements impact all aspects of our industry.  For example, COBRA requirements, HIPAA/HITECH standards, ACA rules, Medicare rates, Transparency in Coverage rule standards, Mental Health Parity, and so on. It was always possible to challenge a federal rule in court, but with the Chevron deference in place, the authority of federal judges was limited. Now, we can expect many more legal challenges to federal healthcare rules, with potentially far-reaching results.  Because of Corner Post, these legal challenges do not have to be limited to new regulations. New companies, now “adversely affected,” can potentially challenge any benefit regulation.

In practice, these decisions put nearly every federal regulation at risk of constant legal challenge.

Both decisions are still too new to know the actual impact. For benefits specifically, these decisions have no impact today. However, employers will have to pay increased attention to legal challenges in the future. From filing a lawsuit to final decision on appeal, the process can take years, leaving employers wondering what regulations apply to their benefit plans. OneDigital's Compliance Consulting practice is dedicated to staying abreast on these legal developments and actively working with our clients to ensure that their plans remain in compliance.

For additional information on these cases and other recent compliance news, tune into our quarterly compliance recap webinar for employers.