What policies could be affected by the Chevron ruling

Lawsuits are expected from all corners of the healthcare industry after the Supreme Court overturned decades of deference to federal agencies, adding uncertainty into the regulatory landscape.

The high court’s ruling in Loper Bright Enterprises v. Raimondo weakened the executive branch’s authority to interpret laws and enhanced the judiciary’s power to resolve disputes about congressional intent. A Thursday analysis from Fitch Ratings said the ruling, which overturned 40 years of precedent under Chevron v. Natural Resources Defense Council, will likely have profound implications across all aspects of healthcare.

Congress also may need to be more specific when crafting legislation, and House Republicans are gathering feedback from agencies on what regulations will be affected by the court’s decision.

Here are some of the areas where the Supreme Court's ruling could lead to big changes.

Medicare Advantage audits and risk adjustment

Insurers disadvantaged by the Centers for Medicare and Medicaid Services’ changes to Medicare Advantage audits and the risk-adjustment program may use the new legal standard to challenge unpopular regulations.

Medicare Advantage carriers opposed CMS’ update to how they measure members’ health risk and after the end of the Chevron deference, are considering potential lawsuits to reverse those changes, said Chris Meekins, managing director at Raymond James investment bank.

Companies may hesitate to challenge the new methodology because CMS compromised in the final regulation by enacting a phased approach rather than updating the system in a single year, said Zach Baron, an adjunct professor at Georgetown Law and director of the health policy and law initiative at Georgetown’s O’Neill Institute.

CMS’ updated overpayment calculations also could face scrutiny. Regulators updated the Risk Adjustment Data Validation, or RADV program and Humana sued CMS over the changes in Texas federal court.

Regulators have some legal authority on their side even without the deference the Chevron ruling provided, said Jesse Witten, a partner at law firm Faegre Drinker. Humana in its lawsuit alleged the new methodology violated a requirement that Medicare Advantage plans equate to the fee-for-service program, and a court ruled in 2021 that no such actuarial mandate exists.

D-SNP requirements

CMS’ broad regulation for Dual Eligible Special Needs plans tightens insurers' contracting requirements, limits the number of carriers in a specific region, expands marketing opportunities for some insurers and creates a new special enrollment period for low-income members. People who are eligible for both Medicare and Medicaid enroll in the products. The rule heightens competition in the fast-growing market, said Sean Creighton, a managing director at Avalere.

“As duals integration accelerates there are going to be winners and losers in every state and it is not unlikely that some entity will go to court to protect their financial interests,” said Creighton.

If insurers successfully challenge CMS’ authority to enact a single provision of the four-part regulation, they could invalidate the entire rule, said Mike Cheek, president and CEO of the Special Needs Plan Alliance trade group. Insurers and others may argue federal lawmakers lack the authority to tell states how to run their Medicaid programs, he said.

Critical access hospitals' eligibility

More rural hospitals may become eligible for the critical access hospital program, healthcare lawyers said.

The program offers cost-based reimbursement for Medicare services as long as the hospital has 25 or fewer beds, is located 35 miles from another hospital — or 15 miles from another hospital in an area with mountainous terrain or only secondary roads — keeps acute patients’ length of stay below 96 hours on average and provides around-the-clock emergency services.

Rural hospitals may file a lawsuit questioning whether CMS appropriately took into account hospitals' views when setting up the program, said Emily Cook, an attorney at law firm McDermott Will & Emery. Specifically, hospitals may challenge CMS’ interpretation of mountainous terrain and what constitutes a bed, and Cook said those provisions likely wouldn't stay up to an analysis under Loper Bright.

A successful legal challenge could allow more facilities to convert to critical access and bolster their finances.

The agency could also be open to litigation involving other Medicare supplemental payment programs that rural hospitals rely on, such as the disproportionate share hospital program and the wage index, attorneys said.

Nursing home staffing mandate

Nursing homes could have a stronger case for the industry’s lawsuit in federal court over CMS' staffing mandate, said Matthew Murer, who chairs the national health law practice at law firm Polsinelli.

The American Home Care Association and LeadingAge allege the agency overstepped by requiring skilled nursing facilities to have a registered nurse present 24 hours a day, seven days a week when Congress only requires a nurse to be present eight hours a day.

Murer said that after the high court's decision, “it would be foolish to allow CMS to substitute its judgment for the judgment of Congress.”

At-home care reimbursement and wages

The Loper Bright decision could also give the home health industry more power to push back on Medicare rate cuts stemming from a 2020 pay model. A federal judge tossed out the National Association for Home Care and Hospice's previous lawsuit, but association President William Dombi said the trade group will refile the lawsuit and he believes it has a better chance of winning.

Home care trade groups have not sued CMS over the Ensuring Access to Medicaid Services rule, but the Chevron decision could easily pave the way for a lawsuit, according to Kelly Cleary, a healthcare and life sciences partner at law firm Akin Gump. The rule requires states to ensure that home care companies spend 80% of Medicaid reimbursements on worker wages. Cleary said Congress didn't give CMS the authority to dictate how much providers pay staff.

340B drug pricing program

More drugmakers could pounce on conflicting guidance from regulators and courts to challenge how pharmacies fit into a $54 billion federal discount drug program.

Two federal judges have separately ruled that drugmakers can restrict discounted drug deliveries to contract pharmacies, rejecting the Health and Human Services Department's interpretation of the 340B drug pricing program. A similar case Eli Lilly and Company filed against HHS is pending.

Several states have enacted laws that mirror federal guidance that says pharmaceutical manufacturers must work with an unlimited number of contract pharmacies. The incongruity between federal guidance and state laws could lead to lawsuits.

“Absent any legislation clarifying what the contract pharmacy’s role is here, I do wonder if this makes its way to the Supreme Court, given that there have been some split rulings,” said Duane Wright, a senior research analyst at Bloomberg Intelligence.

Fixed indemnity insurance disclosure rules

Federal regulators’ recent fixed indemnity insurance disclosure requirement could be vulnerable, Georgetown’s Baron said.

CMS in April finalized a rule that carriers marketing such plans include a notice stating, “This is a fixed indemnity policy, NOT health insurance.” The next month, an insurance company and agent sued regulators in Texas federal court alleging officials lack the power to enforce the requirement because fixed indemnity coverage is an excepted benefit under the Affordable Care Act. The case is pending.

“The agency could have said, ‘This is not comprehensive health insurance,’ but by saying ‘This is not health insurance,’ it may be going beyond the text of the statute and could be vacated,” Baron said.

Short-term, limited-duration health plans

Organizations opposed to HHS’ interpretation of short-term, limited-duration health plans could have better luck challenging the administration, said healthcare academics and consultants.

Short-term plans are designed for individuals facing a temporary lapse in coverage, and are not subject to ACA-mandated consumer protections. The Biden and Trump administrations have taken different approaches to determining how long this coverage can last — and the Trump administration defended its interpretation in court using now-defunct deference to agency judgment.

But if the Biden administration's interpretation is challenged, the judge would determine how to define “short-term,” putting the administration's interpretation in jeopardy.

Children's insurance eligibility

States may feel empowered to file lawsuits over CMS' requirements on children's Medicaid and Children's Health Insurance Program eligibility, according to healthcare experts.

Last year, CMS issued guidance regarding its 12-month continuous eligibility requirement that restricted states from disenrolling children when their families fail to pay CHIP premiums. That led to lawsuits against CMS and the agency could be at greater risk after the Loper Bright decision.

Florida sued CMS over the CHIP eligibility requirements, but the judge dismissed the case. Florida appealed the decision this month.

Hold-harmless agreements

The ruling could lead more states to challenge CMS’ recent attempts to regulate their hold-harmless agreements in Medicaid contracts with hospitals or managed care companies.

A hold-harmless agreement ensures that a provider will get back the amount it pays a state in Medicaid taxes.

CMS said earlier this year it will not allow hold-harmless arrangements involving the redistribution of Medicaid payments between providers or in state-directed programs starting in 2028. The Medicaid departments in Florida and Texas are challenging that level of agency oversight in two lawsuits.

Quality data reporting requirements

The Loper Bright decision gives health systems an opportunity to push back on patient safety structural measures and conditions of participation where before they may have favored compliance to avoid jeopardizing their Medicare reimbursement, said Karen Feinstein, president and CEO of the Jewish Healthcare Foundation and the Pittsburgh Regional Health Initiative.

Leah Binder, president and CEO of the Leapfrog Group, said the patient safety organization is worried CMS will be timid in holding hospitals accountable for performance on safety measures due to the threat of lawsuits.

"When there's new publicly reported measures on patient safety, I can see CMS pulling back from continued efforts to update those measures," Binder said.

ACA gender nondiscrimination rule

Policies around access to reproductive and gender affirming care services are likely to be major targets for legal challenges, given their contentious and polarizing nature in recent years, said Ben Anderson, deputy senior director for health policy at Families USA, a nonprofit patient advocacy organization.

Anderson said advocates are worried the Supreme Court's decision gives lower courts a green light to veer into federal policy and rulemaking — especially when interpretations shift between administrations as they have with Section 1557 of the Affordable Care Act, which prohibits treatment and coverage discrimination on the basis of race, ethnicity, age, disability or sex. The Biden administration's regulation is on hold after a federal court in Mississippi earlier this month put in place a nationwide preliminary injunction.

It is also likely that different circuit court decisions on how to implement federal abortion, contraceptive services and transgender patient care policies could lead to conflicting, patchwork regulation across the country, said Kaye Pestaina, director of the KFF Program on Patient and Consumer Protection.

Digital health reimbursement

The pace of innovation at digital health companies could slow and reimbursement of certain tools could be threatened. The degree of regulatory certainty could erode, which would have ripple effects throughout the sector and healthcare at-large, according to legal experts.

Dale Van Demark, a partner and co-chair of law firm McDermott Will & Emery's digital health practice, said companies are operating in areas that lack statutes and clear answers. That means industry guardrails come through regulations and guidance for areas like telehealth, said Jeremy Sherer, a healthcare partner at law firm Orrick.

Sherer said if CMS is more vulnerable to challenges, the agency could become less willing to use those paths to spur innovation.

This story was reported by Lauren Berryman, Mari Devereaux, Diane Eastabrook, Caroline Hudson, Alex Kacik, Nona Tepper and Brock E.W. Turner