On June 27, 2024, the U.S. Supreme Court ruled in SEC v. Jarkesy that imposition of civil monetary penalties in at least some cases requires a jury trial.¹ The next day, the high court reversed the longstanding practice of Chevron deference in Loper-Bright Enterprises v. Raimondo.² Then, on July 1, 2024, in Corner Post v. Board of Governors, FRS, it extended the time that agency actions can be challenged under the Administrative Procedures Act.³

These three key rulings are expected to usher in the reshaping of the federal regulatory environment and accordingly may have significant effects on health and retirement benefits.

Federal regulatory agencies play a significant role in many insurance markets and serve a primary role in many facets of health insurance and retirement benefits. Employers, health plans, providers, consumers, and other stakeholders rely on rules issued by these agencies to make a wide range of business and personal decisions. While these Supreme Court decisions do not directly apply to these rules, they create an environment of increased uncertainty as a wide range of interested parties evaluates potential legal action and federal regulators evaluate how these changes may impact future regulatory actions.

The focus of this article is on considerations for health markets and retirement benefits. The scope of these rulings is far broader, and will affect many segments of the U.S. economy, ranging from climate regulations to artificial intelligence (AI) and beyond.

Prior precedents and court actions

Administrative law is a frequent topic in litigation, and the 2023 term of the U.S. Supreme Court resulted in a series of particularly impactful decisions that combine to create the potential for significant disruption to the current regulatory environment.

Loper-Bright Enterprises v. Raimondo

Beginning with the U.S. Supreme Court’s 1984 ruling in Chevron USA, Inc. v. Natural Resources Defense Council, Inc., judges were instructed to accept or defer to a federal agency’s regulatory interpretation of an ambiguous provision of statute⁴ as the correct interpretation as long as it is reasonable, a concept called Chevron deference. This ruling has been referred to in over 18,000 cases since its release,⁵ a sign of its strong role in American regulatory jurisprudence. In reversing Chevron deference, the Supreme Court determined that such deference conflicts with the Administrative Procedure Act (APA)—under the APA, “courts must exercise independent judgment in determining the meaning of statutory provisions.”⁶ As a practical matter, this ruling makes clear that federal judges, rather than federal regulators, bear final authority with regard to ambiguous provisions of law, cementing the concept of such regulation as interpretation rather than creation of law. Further, this reversal puts the responsibility on Congress to write less ambiguous laws, particularly when legislators want to increase certainty that implementation of their legislative priorities survives judicial scrutiny. This decision does not automatically invalidate any specific regulations not directly addressed in the court’s ruling in Loper-Bright, nor does it invalidate any court decisions that relied upon Chevron. However, the decision does provide a foothold for interested parties to challenge the validity of many regulations where agencies have exercised interpretive authority and it significantly increases the possibility of reversal of decisions founded on Chevron deference. Given the complex technical nature of modern healthcare and retirement benefits policy, the U.S. Departments of Health and Human Services, Labor, and Treasury (collectively, the Departments) have frequently relied on internal and external expertise to implement ambiguous provisions of law. It is reasonable to assume that a large number of these provisions were intentionally left vague by Congress in order to allow regulators sufficient flexibility to pursue specific policies that best align with Congressional goals.⁷ Many of these provisions may be called into question, leaving adjudication of the legality of these policies fully in the hands of the courts, absent additional Congressional clarification.

Corner Post, Inc. v. Board of Governors, Federal Reserve System (FRS)

In order to bring a case in federal court, injured parties must both have the legal authority to bring a lawsuit and must do so within a set period of time. Historically, this set period of time—the statute of limitations—has started with the finalization of a given regulation. Most federal regulations are subject to a default statute of limitations of six years, meaning that regulations over six years old have historically been much more difficult to contest. In Corner Post, the court held that the statute of limitations starts when an injured party first experiences that injury—meaning that a newly formed entity that first experiences injury from a regulation has six years from that point to bring suit under the standard statute of limitations. This opens the path to legal action against a wide variety of longstanding regulations.

Securities and Exchange Commission (SEC) v. Jarkesy

Even for regulations that may be on firmer legal ground, federal enforcement often takes the form of civil monetary penalties or other consequences imposed by agencies through internal processes. Even when agencies have authority to bring penalties through the court system, they often choose to use internal processes for reasons that include maximization of limited resources. In Jarkesy, the court held that an individual’s right to a jury trial applies in at least some of these cases, calling into question the legality of many agency-originated penalties. As jury trials are much more resource-intensive than internal agency action, requiring jury trials to uphold penalties has the potential to reduce the number and type of penalties imposed by agencies.

It is worth noting that these developments apply primarily to matters of statutory interpretation through notice-and-comment rulemaking (federal regulations). Interpretive guidance (which is nonbinding on the market but may bind the agency) does not have the force of law. But the evaluation of whether guidance is interpretive is substantive in nature—if information published by an agency has binding effect on stakeholder behavior, then the guidance may potentially no longer be interpretive, which may lead to valid procedural complaints if the guidance was not subject to stakeholder feedback.

Implications for health markets

These decisions are likely to have a significant effect on health coverage in the United States. Federal regulators are the primary source of regulation for Medicare and self-funded employer coverage and share regulatory authority over other private health coverage and Medicaid. Collectively, these programs address the vast majority of healthcare expenditures in the United States. Federal mandates in these programs have been a significant source of legal action in recent years. Cases have addressed issues ranging from the legality of a wide range of provisions governing health coverage, including the legality of certain preventive service mandates,⁸ treatment of pharmaceutical manufacturer cost-sharing coupons,⁹ the requirement to provide coverage for contraceptives,¹⁰ the legality of work requirements in Medicaid,¹¹ and the treatment of different kinds of pharmacy rebates and other discounts in Medicare.¹² But recent litigation only addresses a very small slice of broader regulatory interpretation affecting healthcare and health coverage.

While federal regulators typically have the authority to craft federal regulations, the complex and evolving nature of healthcare requires federal agencies to make judgment calls on specific topics where a statute is ambiguous, including (but certainly not limited to):

• Factors used in risk adjustment programs in Medicare Advantage, Medicare Part D, and Affordable Care Act (ACA) markets
• Hospital and payer price transparency requirements
• The scope and extent of certain nondiscrimination provisions
• Benefit generosity evaluation, including the Out-of-Pocket Cost tool in Medicare, the Actuarial Value Calculator for ACA coverage, and the Minimum Value Calculator for employer-sponsored health plans
• Actuarial soundness requirements in Medicaid
• Approvals of specific therapies by the U.S. Food and Drug Administration (FDA)
• Policies regarding service coverage and payment levels in many of Medicare’s fee schedules
• Certain elements of implementation of the recent redesign of Medicare Part D
• Minimum medical loss ratio (MLR) requirements
• Mental health parity

Moreover, these rulings could affect how stakeholders view the significant rulemaking activities undertaken affecting coverage, including the annual notice of benefit and payment parameters in commercial markets, updates to Medicaid’s managed care regulations, Medicare fee schedules, and many of the numerous Medicare Advantage and Part D regulatory actions.

Implications for retirement plan sponsors

The recent Supreme Court decisions are also expected to significantly impact retirement plan operations and administration, particularly in terms of compliance, investment strategies, and participant outcomes. These decisions will likely influence ongoing legal challenges related to environmental, social, and corporate governance (ESG) investing,¹³ fiduciary obligations under the Retirement Security Rule,¹⁴ utilization of forfeitures in defined contribution (DC) plans,¹⁵ assumptions for calculating withdrawal liability in multiemployer defined benefit (DB) plans,¹⁶ and the selection of an annuity provider in pension risk transfer (PRT) transactions.¹⁷

The future landscape of regulatory action and litigation that may affect employer-sponsored retirement plans remains uncertain, with even long-standing regulations vulnerable to challenges. Regulatory bodies such as the Internal Revenue Service (IRS), Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) have numerous regulations on their agendas—some related to the implementation of SECURE 2.0 Act provisions—that could be subject to judicial review if challenged, creating uncertainty in plan operations and compliance. As a result, retirement plan sponsors and professionals will need to closely monitor judicial interpretations across the country to ensure compliance with evolving legal standards, and proactively engage with plan legal counsel, retirement plan consultants, and actuaries to navigate these complexities effectively.

Looking toward the future

While these cases have the potential for major impact, the effect is unlikely to be immediate in nature. Affected parties must decide to initiate litigation, and even a favorable ruling at the district court may be stayed pending any appeal. Moreover, rulings at the district level may not apply broadly—in most instances, district court rulings lack force and effect outside of the district itself.¹⁸ Over the next several years, careful monitoring of litigation by healthcare and retirement benefits stakeholders will be essential, as the potential patchwork of federal regulations presents compliance challenges and increased uncertainty across these markets.

Caveats and limitations

The materials in this document represent the opinion of the authors and are not representative of the view of Milliman, Inc. Milliman does not certify the information, nor does it guarantee the accuracy and completeness of such information. Use of such information is voluntary and should not be relied upon unless an independent review of its accuracy and completeness has been performed. Materials may not be reproduced without the express consent of Milliman.

Milliman is not a law firm and thus is not qualified to offer legal opinions. This document represents opinions and conclusions of the authors, who are Milliman consultants drawing from their considerable experience in the area of federal regulation. We recommend readers consult with their own legal counsel regarding the interpretation of federal statutes, regulations, and related policies and guidance before taking any actions.

¹ The full text of the ruling, 22-859 SEC v. Jarkesy (June 27, 2024), is available at https://www.supremecourt.gov/opinions/23pdf/22-859_1924.pdf.

² The full text of the ruling, 22-451 Loper Bright Enterprises v. Raimondo (June 28, 2024), is available at https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf.

³ The full text of the ruling, 22-1008 Corner Post, Inc. v. Board of Governors, FRS (July 1, 2024), is available at https://www.supremecourt.gov/opinions/23pdf/22-1008_1b82.pdf.

⁴ While statute and law may have different meanings in a legal context, we use them interchangeably through the remainder of this article and are referring specifically to statute or statutory text.

⁵ Howe, A. (June 28, 2024). Supreme Court strikes down Chevron, curtailing power of federal agencies. SCOTUSblog. Retrieved July 30, 2024, from https://www.scotusblog.com/2024/06/supreme-court-strikes-down-chevron-curtailing-power-of-federal-agencies/.

⁶ The full text of the ruling, 22-451 Loper Bright Enterprises v. Raimondo (June 282024), is available at https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf.

⁷ For example, the ACA’s risk adjustment program consists of three short paragraphs in the statute that serve to indicate that the program should transfer dollars from issuers with low actuarial risk to issuers with high actuarial risk. This program, which plays a large role in the individual and small group markets, is otherwise left to regulators to define.

⁸ See Braidwood Management 5th Circuit 6-21-2024 at https://www.dropbox.com/scl/fi/u49xqitq9bpgooye9xyfl/Braidwood-Management-5th-Circuit-6-21-2024.pdf?rlkey=cknw1kbf0tl5n5y2nk8sjrpju&e=2&st=2vf6hv4p&dl=0.

⁹ See HIV-AND-HEPATITIS-POLICY_2023.12.22_MEMORANDUM-OPINION-AND-ORDER at https://litigationtracker.law.georgetown.edu/wp-content/uploads/2023/04/HIV-AND-HEPATITIS-POLICY_2023.12.22_MEMORANDUM-OPINION-AND-ORDER.pdf.

¹⁰ See Little Sisters of the Poor Saints Peter and Paul Home v. PENNSYLVANIA et al. at https://www.supremecourt.gov/opinions/19pdf/19-431_5i36.pdf.

¹¹ Thanawala, S. (July 16, 2024). Judge refuses to extend timeframe for Georgia’s new Medicaid plan, only one with work requirement. AP. Retrieved July 30, 2024, from https://apnews.com/article/medicaid-georgia-work-extension-judge-e882c2396b9c77966891a4095b2c38a0.

¹² King, R. (December 2, 2021). PCMA pulls lawsuit over rebate disclosure rule after reaching deal with Biden admin. Fierce Healthcare. Retrieved July 30, 2024, from https://www.fiercehealthcare.com/payer/pcma-pulls-lawsuit-over-rebate-disclosure-rule-after-reaching-deal-biden-admin.

¹³ See https://www.govinfo.gov/content/pkg/FR-2022-12-01/pdf/2022-25783.pdf.

¹⁴ See https://www.govinfo.gov/content/pkg/FR-2024-04-25/pdf/2024-08065.pdf.

¹⁵ See https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03778.pdf.

¹⁶ See https://www.govinfo.gov/content/pkg/FR-2022-11-10/pdf/2022-24588.pdf.

¹⁷ DOL. Interpretive Bulletins Relating to ERISA. Interpretive Bulletin 95-1. Retrieved July 30, 2024, from https://qualifiedannuity.com/pdfs/95-1text.pdf.

¹⁸ Rulings in the D.C. District and the Court of Appeals for the Federal Circuit apply to federal agencies, which can extend the effect of any ruling affecting those agencies across the entire nation.