The U.S. Supreme Court has handed the behavioral health industry a bag of uncertainty with the elimination of the decade’s old Chevron doctrine.
The removal of the Chevron doctrine, a high-profile legal decision, makes it easier for behavioral health providers to poke holes in state and federal rules that rely on regulatory agencies’ interpretations of statute. But now that judges don’t have to rely on agency interpretation, there is going to be significant turmoil and regional variability in the rules and regulations that implement statutes until time allows the new norm to find some semblance of equilibrium.
“It’s a sea change,” Alicia Macklin, a partner with and co-chair of the behavioral health practice group for Hooper, Lundy & Bookman, P.C., told Behavioral Health Business. “For different parties that had a lack of success previously, where are they going to find places to challenge agencies?”
“It is — we could call it — an uncertainty era,” Macklin added.
On June 28, the Supreme Court effectively ended a judicial practice that stemmed from a 40-year-old decision the high court made involving Environmental Protection Agency (EPA) pollution regulations. In short, that case established the practice of courts deferring to agencies’ interpretation of statutes when they are ambiguous or silent on a matter.
This allowed agencies to fill in the white spaces of laws passed by Congress. So long as the regulations were reasonable, courts would uphold the statute “even if there’s no foundational statement of that in the statute of what Congress put out,” Tani Weiner, co-chair of behavioral health law group Polsinelli, explained.
“Now that that deference is taken away, statutes are much more influential than regulations,” Weiner added. “There’s going to be a tug-of-war in the legal challenges of agencies enforcing regulations rather than statutes.”
The health care industry generally is heavily regulated. Significant portions of the industry are defined or dictated by regulations promulgated by executive agencies.
The U.S. Department of Health and Human Services and its entities accounted for 21% of all regulations reviewed by the White House’s Office of Management and Budget (OMB) from 2019 to 2023, the most of any agency by a long way, based on a BHB review of public data.
“Regulatory certainty, even when it’s rules that you don’t necessarily like, is helpful because it tells you the rules of the game going into it, as opposed to figuring it out through enforcement action or some type of judicial proceeding where you’re left holding the bag,” Matthew Wolfe, an attorney and managing shareholder for Baker Donelson, told BHB.
The need for a stronger behavioral health lobby
It remains to be seen how Congress will change its approach to legislation in the face of the demise of the Chevron doctrine.
Several sources told BHB that Congress will have to limit its long-standing practice of leaving the specifics of regulation to federal agencies. Similarly, Congress will have to be more explicit in the provisions of a statute that allow agencies to make their own decisions when it comes to developing regulations.
However, many legal experts are doubtful that Congress will suddenly become a bastion of highly specialized subject matter experts.
“Congress isn’t staffed for this; they don’t have the right aides for this sort of stuff,” Bragg Hemme, a shareholder and health care regulatory attorney with Polsinelli, told BHB. “They’re used to deferring to agencies, and that’s some of their thinking in doing that, in that statutory deference.”
The needed subject matter expertise falls even more specifically to lobbyists and advocacy groups. This requires these organizations to elevate their proverbial game and be able to produce the über-specific health care regulations that impact the behavioral health industry. This may need to include stronger coordination of shared objectives between organizations and investments in additional expert staff such as legislative drafters, Hemme said.
These experts already work in Congress. But they may not have the bandwidth to anticipate and articulate increasingly specific statutes to ensure lawmakers’ will can withstand legal challenges.
“We’ve got a Congress writing the statutes that doesn’t have any experience in health care; we’ve got now judges without experience in health care, interpreting the statutes,” Hemme said. “And, now agencies that are very experienced in health care may have their legs cut out from underneath them.”
More uncertainty but more opportunities
The highly regulated nature of the health care industry for decades has conditioned it to favor certainty. The elimination of an arcane, but foundational, element of administrative law now allows for more and more swift changes to regulations. This comes as federal agencies, such as the Centers for Medicare & Medicaid Services’ funding dictation, continue to come into effect at a regular clip.
“I will continue to argue that the safest course will be to continue to follow the [new] rule,” Hemme said. “That said, if a rule has a significant adverse impact on a behavioral health care provider, this opens up a new avenue to push back. There could be any litigation against implementation of that rulemaking, depending on what the specific statute says with respect to the rule.”
This may lead to a chilling effect on agencies, Wolfe suggested, meaning that the fear of legal challenge to the agency’s objectives given that lack of statute as a foundation may lead them to not promulgate rules in the first place. It may also increase the number of sub-regulatory actions by agencies. These include handbooks, manuals and memos that spell out the agency’s interpretation of the statute but don’t have the binding power of a rule.
There is also an additional opportunity to hold sway over agencies and their regulations. The federal rulemaking process includes a comment period that agencies are at least ostensibly supposed to account for before publishing a final rule. Now, if a rule doesn’t go the industry’s way, there is a greater chance of successfully challenging that rule in court.
But that comes with significant trade-offs.
Different courts will likely make different judgments on federal regulations, creating a patchwork of regulations based on the jurisdiction of the courts, “unless and until you have Congress legislating more clearly and filing a standardized approach,” Macklin said.
“That’s going to be really hard to navigate, particularly in such a compliance-oriented industry,” Hemme said.
The new role of courts over regulations will also add significant time costs to the regulatory environment. The rulemaking process typically spans months. Legal fights can last a span of years.
However, there may be some reason for optimism for this to work out well for the behavioral health industry.
“It seems to me, at a high level, that behavioral health is one area where Congress and regulators are often on the same page,” Macklin said. “This is an area where Congress has been acting a lot, specifically in the mental health parity area, expanding coverage with Medicare.”
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