On January 17, 2025, the ERISA Industry Committee (“ERIC”), a national nonprofit trade association representing large employers that provide comprehensive health and retirement benefit programs to their workforces, filed a complaint in the U.S. District Court for the District of Columbia, seeking to invalidate the final rules under the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) that the Departments of the Treasury, Labor and Health and Human Services (collectively, the “Departments”) promulgated in September, 2024 (“Requirements Related to the Mental Health Parity and Addiction Equity Act,” 89 Fed. Reg. 77,586 (September 23, 2024)) (“Final Rules”). The Final Rules impose significant new requirements on plan sponsors and group health insurance issuers that are intended to prohibit use of nonquantitative treatment limitations (“NQTLs”) that place greater restrictions on access to mental health and substance use disorder benefits as compared to medical and surgical benefits (see our alert here for a summary of the final rules).
Industry stakeholders had anticipated challenges to the Final Rules following the U.S. Supreme Court’s reversal of its Chevron doctrine of agency deference in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024). By way of background, Chevron and Loper Bright address the fundamental question of who gets to decide the meaning of federal statutes in light of the ambiguities they contain (both in terms of their language as well as the gaps in their coverage). Loper Bright significantly limits agencies’ power of statutory interpretation and how much deference courts give those interpretations because it says this power resides with the courts rather than the agencies tasked with implementing the statutes.
Although ERIC does not explicitly cite Loper Bright in its complaint, the decision’s doctrinal principles underlie many of the trade group’s arguments for why the Final Rules should be overturned. The trade group generally alleges that the Final Rules: (i) exceed the Departments’ statutory authority and contravene Congressional intent according to the implementing legislation, (ii) violate the Due Process Clause of the U.S. Constitution, and (iii) are vague, arbitrary and capricious in violation of the Administrative Procedure Act (“APA”). ERIC is asking the court to declare that certain provisions of the Final Rules are invalid, contrary to law and arbitrary and capricious, and as a result, to vacate the Final Rules (or in the alternative, vacate these challenged provisions). The trade group is also requesting a permanent injunction prohibiting the Departments from implementing, administering, acting upon, or enforcing the Final Rules (or at a minimum, the challenged provisions) against ERIC and its members.
According to ERIC, the Final Rules’ goal of addressing “material differences in access” is “far afield from the Departments’ statutory authority to ensure parity in plan terms and the application of those terms.” (Italics in the original). In addition, ERIC points to the Final Rules’ “meaningful benefits” requirement as another example of the Departments’ overreach and a violation of the APA because it essentially amounts to a benefits mandate on plan sponsors, “effectively dictating the types of inpatient, outpatient and pharmacy treatment that plans must cover if they cover those categories of treatment.” Moreover, ERIC asserts how the meaningful benefits standard’s reliance on independent professional medical or clinical sources violates the APA’s notice-and-comment rulemaking process because it “unlawfully delegates the Departments’ executive power to private entities, and it also deprives regulated parties of any opportunity to comment on those standards before they are altered.”
The complaint also alleges that the Final Rules’ comparative analysis requirements are arbitrary and capricious and violate the Due Process Clause of the U.S. Constitution because they require plans to undertake a comparative analysis for every NQTL adopted for mental health and substance use disorder benefits in order to evaluate their compliance with the material differences in access standard and to report these analyses to the Departments. However, as ERIC alleges, these requirements fail to specify what information plans must provide, “resulting in an unbounded universe of plan terms, conditions, strategies, and processes that must potentially be included in the comparative analysis.” Additionally, ERIC claims that the comparative analysis requirements incorporate vague and undefined terms (i.e., “material differences” or “access”) which further compounds the problem by leaving plans without sufficient clarity of their reporting obligations.
ERIC has further challenged the January 1, 2025 effective date for certain provisions of the Final Rules, asserting how it is unreasonable and arbitrary and capricious in violation of the APA. According to ERIC, this date affords too little time for plans to alter their analysis of NQTLs. Furthermore, since open enrollment for 2025 was already taking place during the four months between when the Final Rules were issued and the January 1 applicability date, if coverage provisions for 2025 have to be changed pursuant to the comparative analyses, it will likely be too late for plans to alter their 2025 plan terms or premiums, meaning that plans will be undercompensated for the services they provide. The trade group suggests that an applicability date of January 1, 2026 or later would have prevented disruption to 2025 premiums and would have ensured that plans had sufficient time to set premiums for 2026 that accounted for any changes to coverage required by the Final Rules.
As of the time of publication, the Trump administration has not yet indicated whether it will implement and enforce the Final Rules in their current form and how the Departments will respond to this lawsuit. That said, it is notable that the lead attorney representing ERIC in this matter served as the Secretary of Labor during the first Trump administration. We will continue to monitor this litigation and the overall status of the Final Rules as new developments emerge.
If you have any questions, please reach out to your usual Ropes & Gray advisor.
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