Post-Chevron Test Looms in Litigation Over Mental Health Rule

Potential legal challenges against the Biden administration’s new mental health parity rule would further define agencies’ regulatory leeway after the US Supreme Court scrapped a longstanding judicial deference doctrine.

The US Health and Human Services, Labor, and Treasury departments Sept. 9 finalized a new comparative test for health plans to ensure their mental health benefits are on par with medical and surgical coverage. Any challenge to the rule will play out under the Supreme Court’s June decision in Loper Bright Enterprises v. Raimondo, which overturned the longstanding Chevron doctrine of deferring to agencies’ reasonable interpretations of ambiguous laws.

Employee benefits attorneys and industry representatives say there’s a clear path for any industry lawsuits against the new rule aimed at bolstering mental health coverage, because the underlying law doesn’t explicitly authorize certain parts. In the first two months after Loper Bright, lower courts have already blocked—at least temporarily—several other regulations.

“I don’t think it’s too difficult to see a court making a leap that the rule, at least in part, exceeds the department’s authority or is arbitrary and capricious” under the Administrative Procedure Act, said Joanne Roskey, a member of Miller & Chevalier’s ERISA and employee benefits team.

The agencies excluded some requirements included in the original proposal, but industry groups still condemned the final rule (RIN: 1210-AC11) as confusing and unworkable.

Roskey and Kathryn Cohen, senior director of regulatory affairs for the health plan group Association for Behavioral Health and Wellness, both pointed to the rule’s evaluation of outcomes—rather than the process itself—as a significant shift from the underlying 2008 law, the Mental Health Parity and Addiction Equity Act. The law simply prohibited plans from imposing excess costs or treatment limitations on mental health benefits compared to medical and surgical services.

“It was never about outcomes,” Cohen said. “It was about methodologies.”

The administration believes the rule is “consistent with all applicable law,” a senior administration official told reporters on a Sept. 6 call. At least one group—The ERISA Industry Committee (ERIC)—is already considering suing the administration, however, pointing to specific areas where it says the agencies stretched their authority too far.

Cohen cited two parts of the rule that ERIC also noted could run afoul of Loper Bright. Its “meaningful benefits” standard mandates that a plan’s mental health benefits in one classification must be on par with medical and surgical benefits of the same classification. Another provision requires plans to address “material differences” between its mental and physical health benefits. Neither of those standards was included in the 2008 law.

The rule also did not include the level of clarifying detail that the industry had hoped to see, such as de-identified examples, Cohen added.

“Instead, they’re creating kind of new, ambiguous terms that I imagine will be really susceptible to Loper Bright,” she said.

Roskey also highlighted a provision prohibiting plans from using “discriminatory” sources to design treatment limitations.

“In traditional discrimination law, adverse consequence does not necessarily mean discrimination at the forefront,” she said.

Congress Speaks

One potential defense against a Loper Bright challenge is that Congress adopted the term at the heart of the rule, “non-quantitative treatment limitations,” in the Consolidated Appropriations Act of 2021. NQTLs include prior insurance approval for drugs or services, as well as other standards plans use to control the scope of benefits.

The term originated in a 2013 agency rule, not the underlying 2008 law itself, but the spending bill language buttresses the administration’s argument that Congress granted the specific authority, Roskey said.

“That does say something in terms of what one might argue the text is supposed to embody, the statutory text, because Congress adopted that concept while this whole 2014 regulatory scheme and all of the interpretive and legal guidance that was surrounding it had already been developed to some degree,” she said.

Roskey pointed to discussions happening in cases surrounding another law, the No Surprises Act, as an example of how federal courts are now handling agency challenges. That law created an arbitration framework for insurance companies and providers to settle out-of-network charges in order to shield patients from unexpected medical bills.

The US Court of Appeals for the Fifth Circuit cited Loper Bright in rejecting the administration’s rule that arbitrators must consider the in-network median rate as a primary factor in negotiations. It was the latest win for the Texas Medical Association, which has challenged several aspects of the law’s implementation,and also cited Loper Bright in a separate but similar case during oral argument earlier this month.

In the decision over the in-network median rate, also known as the qualifying payment amount, the Fifth Circuit concluded that the administration’s rule violated Loper Bright because the law gave arbitrators the discretion to weigh the in-network rate as they saw fit along with other specified factors.

“By taking this discretion away from the Departments and giving it to the arbitrator, Congress created an ‘outer statutory boundary’ beyond which the Departments were not authorized to stray,” Judge Edith Jones wrote in the court’s opinion.

Those sorts of conclusions could help indicate how courts might view the mental health rule in the Loper Bright context, Roskey said.

Justifying the need to strengthen enforcement is the administration’s best defense against legal challenges, said Carolyn Reinach Wolf, executive partner at Abrams Fensterman, LLP, who represents both patients and providers as director of the firm’s mental health practice.

“If you’re going to cover medical/surgical illnesses, what’s the difference?” she said. “I mean, that’s the perspective we always take—that mental illness or substance use disorder is an illness.”

If nothing else, it simply looks bad for the private industry to fight the rule in the first place, Wolf said.

“I say to clients every day, often there’s the legal answer and the common sense answer or the best interest answer,” she said, adding, “yes, maybe you can find some legal challenge, but in the long run is that really what you want to do?”