Health insurers likely to feel impact of SCOTUS Chevron ruling

Perhaps no federal agency or regulated business will be impacted by the recent landmark Supreme Court ruling on the Chevron deference doctrine as much as health insurers and the broader health care industry.

The ruling, which fundamentally alters the judicial approach to interpreting ambiguous statutes, will significantly stress an already expensive, complicated, and time consuming health care system, adding costs and delaying service at every turn, according to experts.

Under the 40-year-old Chevron doctrine courts deferred to federal agencies' interpretations of ambiguous laws, provided those interpretations were reasonable. With the doctrine now dismantled, courts are required to use their own judgment in interpreting these statutes, without giving weight to agency expertise.

Surge in legal challenges expected

The immediate consequence of this ruling is likely to be a surge in legal challenges against regulations issued by health agencies such as the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). Previously, these agencies enjoyed a degree of judicial deference that shielded their regulatory interpretations from extensive court scrutiny. Now, without Chevron deference, these interpretations are more vulnerable, potentially leading to increased litigation and greater regulatory uncertainty for health insurance companies and other stakeholders.

“The cost of the litigation it probably the biggest downside here, other than just confusion,” said Bradley Ellis, senior director of North American Insurance for Fitch Ratings. “Both defending against suits and filing their own lawsuits.”

Increased litigation will slow the regulatory process to ensure that any new rules can withstand judicial review. This could delay implementation of policies affecting Medicare and Medicaid coverage and reimbursement rules, creating more uncertainty in the health care sector.

Providers and their industry groups may be more inclined to challenge government agency rules and regulations including reimbursement rates, which sometimes relied on the Chevron Doctrine in its work. A lawsuit has already been filed by one health system related to disproportionate share hospital payments.

Affordable Care Act likely to be challenged

“For health insurers, the decision will provide wide ranging opportunities to mount more effective challenges to parts of the Affordable Care Act, such as the requirement for health plans to cover certain preventive care without cost-sharing,” Fitch said in a report. “There is also the potential for new challenges to the No Surprises Act should plaintiffs argue HHS’ implementation relied on interpretation of ambiguous text.”

This new broad judicial authority could have profound implications across all sectors of the healthcare industry, including providers, pharmaceutical manufacturers, medical device companies and payers, Fitch said. The Federal Trade Commission’s focus on competition in healthcare and its strategies to object to mergers and acquisitions may face new litigation strategies from industry opponents.

The report said, however, that the most adverse effects on health insurers will be short-lived, as premiums will be adjusted accordingly to cover any additional cost. In other words, health care costs will continue to rise for companies and individuals.

But Ellis noted there is likely to be varying and inconsistent court interpretations of health care statutes across different jurisdictions following the Chevron decision, complicating compliance nationwide.

'Patchwork' across the US is likely

“You're just going to have a lot of patchwork across the United States in an already extremely complex healthcare system,” he said. “Depending on where you live, you could have different regulations.”

Disputes over what constitutes covered services and items under Medicare and Medicaid are expected to rise. Historically, courts have deferred to CMS’s interpretations of coverage-related statutes. With Chevron deference removed, insurers and providers may find it easier to challenge agency decisions, potentially leading to more favorable rulings for those disputing CMS’s determinations.

Recent and forthcoming regulations are also likely to face immediate legal scrutiny. This includes rules related to Medicare drug price negotiations, FDA regulations on laboratory-developed tests, and minimum staffing standards for long-term care facilities.

“Additionally, if the FDA becomes more focused on defending its decisions rather than being adaptive, then approval processes for innovative technologies, such as AI-based products, could slow down,” Fitch said. “This could hinder innovation and have an adverse long-term impact on companies heavily invested in emerging technologies.”

For the moment, Ellis believes there will have to be some clarification of what the Supreme Court intended in its Chevron doctrine ruling as there are varying opinions in the legal and legislative arenas,

“There are so many different interpretations of the SCOTUS decision itself,” he said. “It seems some people think that you can actually go back and challenge regulations already implemented by agencies, but my understanding of the law is that those will be left in place.”

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].