The U.S. Supreme Court (the Court) has ended its 2024 term after issuing several decisions with wide-ranging effects on employee benefits and health plan sponsors. The following is a recap of those rulings.
Executive Summary
First, while no action is necessary on the part of employers, health plan sponsors may need to become comfortable with the uncertainty surrounding legal interpretations of federal agencies after the Court overruled a longstanding rule that generally required courts to defer to regulators’ interpretations of ambiguous statutes.
Second, a nationwide stay has been issued on certain provisions in the recently released Section 1557 nondiscrimination regulations of the Affordable Care Act that relate to gender transition services. However, two appellate courts also ruled this year that not covering gender dysphoria benefits were in violation of Title VII equal protections.
Third, employers who have plan participants and beneficiaries in or traveling to Idaho may consider reviewing reproductive and emergency care benefit offerings after the Supreme Court’s June decision temporarily allowing EMTALA to preempt an Idaho state abortion prohibition. The ruling did not address the merits of the case, but reinstated a lower court order blocking enforcement of the Idaho ban while legal proceedings continue in federal court.
Finally, the Court declined to address the merits of another reproductive care case and instead ruled on procedural grounds that groups challenging the FDA’s approval of expanded access to Mifepristone (a common abortion pill) did not have standing to bring the suit. The decision leaves open, for now, the expanded access avenues to the medications nationwide, including pharmacy dispensing, telehealth consultation and mail-order access.
Here are more details of several significant rulings and potential impacts for employees to consider. NOTE: although these decisions could impact employee benefit plans, none require immediate action by employers at this time.
Courts no longer to rely on agency interpretation in ambiguous laws
In a landmark decision released at the eleventh hour of its term, the Court overruled the “Chevron doctrine,” a long-standing requirement dating back to 1984 that courts must defer to federal agencies’ reasonable interpretations of ambiguous statutes. See Loper Bright Enterprises v. Raimondo (opens a new window). In so doing, the Court says that lower courts must independently examine statutes to determine what is the best interpretation of statutory language. While regulatory agencies’ interpretations should be afforded respect, especially as to questions of fact, courts have the obligation and sole power to determine questions of law.
Lockton comment: The decision, as one can tell from the background below, does not directly address any laws related to employee benefits. It is, nevertheless, incredibly important, because it establishes a new framework for courts to use when evaluating any regulation issued by any regulatory agency (e.g., Department of Labor, IRS, and Health and Human Services).
Background
In Loper Bright, a group of fisheries from New England challenged a regulation issued by the National Marine Fisheries Service (NMFS) that required them to cover the cost of observers stationed on their fishing vessels to ensure the vessels complied with certain fishing regulations. The statute that was the basis for the NMFS regulation did not specifically require the fisheries to cover the cost of the observers, so the question for the court was whether the NMFS regulation was consistent with the statute. The lower courts, largely relying on the Chevron doctrine, upheld the NMFS regulation.
What Happened
The Court overruled Chevron, which essentially put a finger on the scale in favor of the agency’s interpretation of the statute. It instead instructed the lower courts to independently evaluate the statutory text to determine if the requirement that the fisheries pay the cost of observers was consistent with the best interpretation of the statute. The Court stopped short of saying the interpretation of the NMFS didn’t matter. Instead, it made clear that a regulatory agency’s interpretation of a statute should be given respect, especially to the extent that it was established contemporaneously to the passage of the statute and if that interpretation had been applied consistently over time.
Lockton comment: Many regulations have been upheld using the deferential framework of Chevron. The Court made clear that those decisions remain in effect but did open the door for them to be re-examined in light of Loper Bright.
What it Means for Health Benefits
Health and welfare benefit plans are subject to a wide range of federal laws and even more regulations, and we expect more of these regulations to be challenged in courts. At times, courts will attempt to say their decision applies across the country, but it could also make it more likely plan sponsors will have to navigate a patchwork of different statutory interpretations depending on a particular court’s jurisdiction.
Example: The Eight Circuit Court of Appeals might decide an agency’s interpretation to be invalid and unenforceable, but the 9th Circuit Court of Appeals could uphold the agency’s interpretation. That could mean different rules apply to employees in Iowa (a state in the 8th Circuit) compared to employees in California (a state in the 9th Circuit).
Loper Bright has already been used to challenge recently issued regulations (opens a new window) under Section 1557 of the Affordable Care Act. Citing to Loper Bright, three district courts have stayed application of the Section 1557 regulations so far. Significantly, a federal judge in Mississippi issued a nationwide stay in State of Tennessee et al. v. Becerra (opens a new window), enjoining the Department of Health and Human Services (HHS) from enforcing, relying on, or otherwise acting pursuant to the rule’s conclusion that the statutory prohibition on discrimination based on sex included a prohibition on discrimination based on gender identity. See also State of Texas v. Becerra and State of Florida et al. v. Department of Health and Human Services et al.
Lockton comment: As a reminder, two appellate courts also ruled this year that not covering gender dysphoria benefits violated Title VII equal protections. Lockton will continue to monitor developments in these areas and recommends that any plan exclusions or limitations on gender transition services be discussed with legal counsel.
Loper Bright also means plan sponsors will want to consider being more actively involved in the legislative and regulatory process. The decision puts a greater burden on Congress to be more precise in statutory language, which means plan sponsors will have more at stake as statutory text gets hammered out. Additionally, the Court’s analysis that the regulatory record and contemporaneous interpretations of the statute inform how much respect to afford the regulatory interpretation means plan sponsors might have a greater ability to shape the final regulation if it provides formal written comments to proposed rules.
Emergency abortions: Must state abortion bans include an exception for serious health complications?
The Court in late June delayed for another day whether to settle a dispute between Idaho and the federal government, where Idaho argued its state statute banning certain emergency abortions superseded a federal law (Emergency Medical Treatment and Labor Act, or EMTALA), which allows for those abortions. See Moyle v. United States (opens a new window).
Background
Significant in Idaho’s abortion ban is a limited exception that permits abortion to prevent the death of a pregnant patient, but it does not extend the exception to protect the patient’s health. The U.S. Department of Justice (DOJ) sued the state of Idaho in 2022, alleging that the state law violated EMTALA, which requires that hospitals receiving Medicare funds stabilize all patients in need of emergency treatment regardless of their insurance coverage or ability to pay. The DOJ argued that Idaho’s status was at odds with EMTALA, which requires stabilization of patients in emergencies that jeopardize their life or health, including serious impairment to bodily functions or serious dysfunction of any bodily organ or part. In other words, the DOJ argued that Idaho hospitals and their providers subject to EMTALA (which is nearly every hospital) could not be penalized for providing abortion services in order to prevent serious health harms, even though the Idaho statute said otherwise.
What Happened
The Court decided that it should not have agreed to hear the case and determined that the lower courts should continue their review. Importantly, the Court reinstated a previous lower court order blocking enforcement of the Idaho ban in medical emergencies. The effect of the ruling is that physicians are permitted to provide abortions to stabilize patients with emergency conditions, including those threatening the health of the pregnant patient, on a temporary basis while litigation on the case continues in federal court.
Lockton comment: While in its current form the case only involves Idaho law, a larger decision by the Court on the merits would resolve the debate of whether EMTALA trumps the most restrictive state law bans on abortion. Lockton will continue to monitor this case and its potential broad application across the nation.
What it Means for Health Benefits
The Court’s decision does not resolve the central question – i.e., whether federal law protects access to abortion in medical emergencies involving the life and health of the patient – but the practical effect of the ruling is that Idaho providers may continue to perform emergency abortions in cases where a patient’s health is in jeopardy under current EMTALA rules. Several other states, including Texas, Mississippi, and South Dakota, continue to prohibit emergency abortions except to prevent death, while other states provide exceptions for health as well. The continued confusion over what emergency care may be provided under state restrictions has led both pregnant patients to seek out-of-state care and the hospitals providing their care to transfer patients out-of-state where prohibitions are less restrictive.
Lockton comment: Lockton maintains a State-by-State Guide to Abortion Laws across the nation to assist clients with understanding the intricate landscape of relevant state abortion-related laws. Lockton’s guide will continue to be updated periodically with further decisions issued in this case as well as other relevant state law changes.
Employers who cover abortions and abortion-related services in their plan offerings may want to consider reviewing access to care (e.g., telehealth, early contraception, and mail-order pharmacy), ensuring medical travel benefits and paid time off for patients who may need to travel out-of-state for emergency care, and updating employee communications to clearly identify what reproductive benefits and resources are available, particularly for employees in states with restrictive prohibitions.
Medication abortions: Expanded Mifepristone access remains in place
The Court, in a unanimous decision, issued another ruling in June that similarly declined to address the merits of a case challenging the Food and Drug Administration’s (FDA) approval of expanded access to Mifepristone (a commonly used abortion pill). See FDA v. Alliance for Hippocratic Medicine (opens a new window).
Background
The Alliance for Hippocratic Medicine (AHM) filed the lawsuit in 2022 alleging that the FDA’s approval process for expanded access to Mifepristone was inadequate because the FDA did not sufficiently review scientific evidence, it failed to follow its own rules and procedures in its approval, and it ignored safety risks associated with the drug.
What Happened
The Court unanimously held that AHM did not have the right to file the suit because they were not directly harmed by the FDA’s decision (a legal requirement known as “standing”). In particular, the Court noted that despite its acknowledgment of the coalition’s sincere moral and policy objections to elective abortion and the FDA’s relaxed regulation of Mifepristone, federal laws in place already protect doctors from having to perform abortions (or any other treatment) that goes against their beliefs, and that the suit could not identify any instances where a doctor was required to perform an abortion or any other abortion-related treatment in violation of their conscience since Mifepristone’s 2000 approval.
What it Means for Health Benefits
While the decision does not address the larger question of whether the FDA’s approval process was adequate and lawful, it does preserve access to Mifepristone through those expanded avenues, which include allowing certified retail pharmacies to dispense the medication in states where abortion is legal, as well as the permanent removal of an in-person dispensing requirement, which expands the availability of the medication through telehealth consultation and mail-order access. A notable byproduct of the Court’s ruling is that it avoided the potential fallout of restricting access to Mifepristone even in states where abortion is permitted without restriction.
Lockton comment: Because the ruling merely dismissed the suit based on lack of standing, the question remains open as to whether challenges to abortion medication access may persist through other legal avenues (e.g., see discussion of the Comstock Act, below).
What to watch in the Court’s next term
As the Court has adjourned its 2023-2024 session, we won’t be seeing any new decisions this year; however, several cases are already on the docket for next term (October 2024 – June 2025).
The Supreme Court will review several additional cases that are likely to continue the evolution of the benefits landscape, including a challenge to state gender transition care prohibitions, as well as whether retirees can sue former employers for post-employment discrimination under the ADA.
Here are a few cases Lockton will be tracking that may continue to impact employee benefits in the coming years.
U.S. Supreme Court agrees to review state limits on gender transition services
The Court announced that during its next term it will review a lawsuit stemming from Tennessee and Kentucky cases and their challenges to the states' prohibitions against gender transition services for minors. See United States v. Skrmetti (opens a new window).
Background
The state laws in question ban various gender transition surgeries, hormone therapy, and puberty blockers for minors, and have been challenged by a group of families and physicians as unconstitutional under Title VII protections from discrimination on the basis of sex. The 6th Circuit Court of Appeals issued a decision on the cases last July that sided with the states, allowing the prohibitions to remain in effect while the case makes its way to the Court later this year.
The Court’s decision to accept the case comes on the heels of several high-profile state decisions concerning gender transition services, including an 11th Circuit Court ruling (opens a new window) that employer health plans that do not cover treatment for gender dysphoria unlawfully violate Title VII protections, and a Florida district court’s significant ruling that the state law prohibiting gender transition services was unconstitutionally discriminatory.
Lockton comment: The Court has agreed to hear this case after declining to review several other petitions related to gender transition services in past years, and we anticipate that a decision on the merits from the Court next year could provide some much-needed clarity as legal challenges to states' prohibitions are currently prevalent across the nation. State protections and prohibitions for gender transition services, ranging from puberty blockers to hormone therapies to surgeries, fall on a wide spectrum and have proved challenging for employers in structuring compliant employee benefit plans.
To assist clients in understanding current, complex patchwork of rules in place, Lockton has created a State-by-State Guide to Gender-Affirming Care Laws outlining what protections or prohibitions are in place, blocked by injunction, and/or pending further court action in every state. This guide will continue to be updated periodically as legal proceedings are finalized and ultimately ruled on by the Court.
Circuit split in post-employment benefit discrimination under ADA may soon be resolved
Background
The Court also agreed to hear a case next term to decide whether retired workers can still sue former employers for disability discrimination under Title I of the Americans with Disabilities Act (ADA) after they have left their jobs. In Stanley v. City of Sanford (opens a new window), a retired firefighter sued her former employer for discrimination based on their policy requiring her to pay her own premiums as a disabled retiree. The policy in effect during her earlier years of employment stated that employees retiring for qualifying disability reasons would receive free health insurance until they were 65 years old. The benefit changed during her employment, unbeknownst to Stanley, and when she retired, the policy stated that employees who retired with a qualifying disability were eligible for a health insurance subsidy for only two years after retirement.
The ADA defines “qualified individual” as a person who, with or without reasonable accommodation, can perform the essential functions of the job. Four circuits across the nation have ruled that former employees are not “qualified individuals” because, under the ADA, individuals must “desire or already have a job with” the employer at the time the discriminatory act is committed. Two other circuits have ruled differently, holding that the language of the ADA is unclear and that ambiguities should be resolved in workers’ favor.
Lockton comment: The Court’s decision on this case could have far-reaching impacts on employers’ post-employment actions with respect to former workers. Any changes to post-employment benefit plans and policies that impact disabled retirees may need to be reevaluated or be subject to legal challenges from former workers. Lockton will remain engaged on updates to this case through the Court’s next term and eventual decision in 2025.
Potential pathways to future litigation
Finally, while not formally before the Court at this time, two other matters may soon make an appearance, one involving medical abortions and the other involving ERISA preemption.
Involving the former, the Comstock Act (a law dating back to 1873 that prohibits the mailing of “obscene materials” including any material intended for producing abortion) has surfaced as a predicted next avenue for legal challenges to medical abortions. The abortion provisions are widely predicted to form the basis for similar challenges to mail-order access to Mifepristone and other abortifacient drugs as we saw in FDA v. Alliance for Hippocratic Medicine. Some lawmakers have anticipated this likelihood and introduced a bill in early 2024 to repeal the mail-related provisions of the Act.
Regarding ERISA preemption, the Oklahoma Insurance Department in May petitioned the Court to review a decision issued by the 10th Circuit Court of Appeals holding that federal ERISA laws preempted state laws regulating pharmacy benefit manager (PBM) practices. See PCMA v. Mulready. The request, supported by 32 state attorneys general in an amicus brief, argues that the 10th Circuit’s decision failed to follow precedent in PCMA v. Rutledge, which held that ERISA did not preempt Arkansas state laws regulating PBMs, and that preemption only targets state laws that actually regulate ERISA plans.
Lockton comment: While these topics have not yet reached the Court’s docket, it would not be a surprise if the Court agrees to review these cases next term. Lockton will continue to track further developments on these issues and provide updates to account teams and clients when available.
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