The U.S. Supreme Court (the "Court") completed its term in 2024 with several decisions that have a broad impact on employee benefits and health plan sponsors. These decisions are summarized below.
Executive Summary
First, although employers are not required to take any action , health plan sponsors may have to come to terms with the uncertainty associated with federal agencies' legal interpretations after the Court overturned a longstanding rule that courts generally had to defer to regulatory interpretations of ambiguous laws.
Second, there has been a nationwide decision to suspend certain provisions of the Affordable Care Act's recently published Section 1557 regarding gender transformation services. But this year, two appeals courts also ruled that denying coverage for gender dysphoria treatment benefits violates Title VII equal protection.
Third, employers whose participants and beneficiaries are located in or travel through Idaho may reconsider offering reproductive and emergency benefits following a June Supreme Court decision temporarily allowing EMTALA to overturn Idaho's abortion ban. The decision did not affect the merits of the case, but reinstated a lower court order blocking enforcement of Idaho's ban while it is litigated in federal court.
Finally, the court declined to address the merits of another reproductive health case and instead ruled on procedural grounds that groups challenging the FDA's approval of expanded access to mifepristone (a common abortion pill) have no standing to sue. The decision still leaves open expanded access to these drugs nationwide, including dispensing at pharmacies, teleconsultation, and mail order.
Here's more information about several important decisions and their potential effects on employees. NOTE: While these decisions may affect employee benefit plans, none of them require employers to take immediate action at this time.
Courts should no longer rely on agency interpretations of ambiguous statutes
In a landmark decision released at the eleventh hour, the Court overturned the " Chevron doctrine," the longstanding 1984 requirement that courts defer to federal agencies' reasonable interpretations of ambiguous statutes. See Loper Bright Enterprises v. Raimondo (opens in a new window). In doing so, the Court states that lower courts must independently examine statutes to determine what is the best interpretation of the statutory language. While regulatory interpretations should be given deference, especially in questions of fact, courts have the duty and exclusive power to determine questions of law.
Comment: The decision, as can be understood from the background material below, does not directly affect any laws related to employee benefits. Nevertheless, it is incredibly important because it establishes a new framework for courts to use when evaluating any regulations issued by any regulatory agency (e.g., Department of Labor, IRS, Health and Human Services).
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In Loper Bright , a group of New England fishermen challenged a National Marine Fisheries Service (NMFS) regulation that required them to cover the costs of observers stationed on their fishing vessels to ensure that the vessels complied with certain fishing regulations. The statute under which the NMFS regulation was based did not specifically require the fishery to cover the cost of observers, so the question before the court was whether the NMFS regulation complied with the law. The lower courts, relying primarily on the Chevron doctrine, upheld the NMFS regulation.
What happened
The Court overruled Chevron , which essentially put its finger on the scales in favor of the agency's interpretation of the law. Instead, it instructed the lower courts to independently evaluate the text of the law to determine whether the requirement that fisheries pay observers' costs is consistent with the best interpretation of the law. The Court stopped short of saying that NMFS's interpretation was irrelevant, but made clear that a regulatory agency's interpretation of a law must be given deference, especially if it was established at the time the law was enacted and if that interpretation has been consistently applied over time.
Comment : Many regulations have been upheld under the Chevron diferential concept . The Court has made it clear that these decisions remain valid, but has opened the door to review in light of Loper Bright .
What this 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 that all of these regulations will be challenged in the courts. Courts will sometimes attempt to declare that their decision applies nationwide, but this may also result in plan sponsors having to navigate many different interpretations of the law depending on the jurisdiction of a particular court.
Example: The Eighth Circuit Court of Appeals may decide that an agency's interpretation is invalid and unenforceable, but the Ninth Circuit Court of Appeals may uphold the agency's interpretation. This could mean that employees in Iowa (a state in the 8th Circuit) are treated differently than employees in California (a state in the 9th Circuit).
Loper Bright has already been used to challenge recently issued regulations (opening a new window) under Section 1557 of the Affordable Care Act. Citing Loper Bright , three district courts have stayed the application of Section 1557. Significantly, a federal judge in Mississippi issued a nationwide stay in State of Tennessee et al. v. Becerra (opening a new window), enjoining the Department of Health and Human Services (HHS) from enforcing, relying on, or otherwise acting in accordance with the regulations' conclusion that the statutory prohibition against sex discrimination includes a prohibition against discrimination based on gender identity.
Comment: As a reminder, two appeals courts this year also ruled that denying coverage for benefits related to gender dysphoria violates Title VII's Equal Protection Clause. Lockton will continue to monitor developments in these areas and recommends discussing any plan exclusions or limitations on gender transformation services with legal counsel.
The Loper Bright decision also means that plan sponsors should become more involved in the legislative and regulatory process. The decision places the burden on Congress to more precisely draft the law, which means that plan sponsors will have a greater opportunity to participate in the legislative drafting process. In addition, the court's analysis that the statutory text and contemporaneous interpretations of the law determine how much deference should be given to the statutory interpretation means that plan sponsors may have a greater opportunity to shape the final regulations if they provide formal written comments on the proposed rules.
Emergency abortions: Should state bans on abortion include an exception for cases of serious health complications?
In late June, the court postponed for another day the resolution of a dispute between Idaho and the federal government in which Idaho argued that a state law banning certain emergency abortions overrides a federal law (Emergency Medical Treatment and Labor Act, or EMTALA) that permits such abortions. See Moyle v. United States (opens in a new window) .
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Idaho's abortion ban contains a limited exception that authorizes abortion to prevent the death of a pregnant patient, but does not extend the exception to protect the patient's health. In 2022, the U.S. Department of Justice (DOJ) sued Idaho, alleging that the state law violates EMTALA, which requires hospitals receiving Medicare funds to stabilize all patients in need of emergency care, regardless of their insurance coverage or ability to pay. The DOJ argued that Idaho's statute violates EMTALA, which requires stabilization of patients in life-threatening emergencies or health, including serious impairment of bodily functions or serious dysfunction of any organ or part of the body. In other words, the DOJ argued that Idaho hospitals and their staff covered by EMTALA (which is almost every hospital) could not be penalized for providing abortion services to prevent serious health harm, even though Idaho law says otherwise.
What happened
The Court decided that it should not have agreed to hear the case, and ordered the lower courts to proceed. Importantly, the Court reinstated a previous lower court ruling blocking Idaho's enforcement of the ban in medical emergencies. As a result of that ruling, doctors are allowed to perform abortions to stabilize patients with urgent conditions, including those that threaten the pregnant patient's health, on a temporary basis while the case continues in federal court.
Comment: Although the case as it stands now involves only Idaho law, the court's broader decision will essentially settle the dispute over whether EMTALA preempts the most restrictive state abortion bans. Lockton will continue to monitor this case and its potential broad application across the country.
What this means for health benefits
The court's decision does not resolve the central issue - whether federal law protects access to abortion in medical emergencies that threaten a patient's life and health - but the practical effect of the ruling is that Idaho health care providers can continue to perform emergency abortions when a patient's health is at risk under the current EMTALA regulations. Several other states, including Texas, Mississippi, and South Dakota, continue to ban emergency abortions except to prevent death, and others have health exceptions as well. Failure to understand what emergency care can be provided under the state's restrictions forces pregnant patients to seek care outside the state, and the hospitals that provide care to them transfer patients to out-of-state facilities where bans are less stringent.
Comment: Lockton maintains an abortion law guide for every state in the country to help clients navigate the complex landscape of abortion laws. Lockton's guide will be updated periodically to reflect further decisions in this case as well as other changes in state law.
Employers that include abortion and related services in their plans should review access to services (e.g., telemedicine, early contraception, and mail-order pharmacy), provide medical travel benefits and paid leave for patients who may need to travel out of state for emergency care, and update employee information to make clear what reproductive benefits and resources are available, especially for employees in states with restrictive bans.
Medical abortion: Expanding access to mifepristone remains on track
In June, in a unanimous decision, the court issued another ruling that similarly refused to consider the merits of a case challenging the Food and Drug Administration's (FDA) approval of expanded access to mifepristone (a widely used abortion pill). See FDA v. Alliance for Hippocrates Medicine (opens in new window) .
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The Alliance for Hippocrates (AHM) filed suit in 2022, alleging that the FDA's approval process for expanded access to mifepristone was inadequate because the FDA did not sufficiently review the scientific evidence, failed to follow its own policies and procedures in approving it, and ignored the safety risks associated with the drug.
What happened
The court unanimously ruled that AHM did not have standing to sue because they were not directly harmed by the FDA's decision (this legal requirement is known as "standing"). Specifically, the court noted that despite recognizing the anti-abortion coalition's sincere moral and political objections and the FDA's relaxed regulation of mifepristone, current federal laws already protect physicians from having to perform abortions (or any other treatment) contrary to their beliefs, and that the lawsuit did not identify a single instance in which a physician had been required to perform an abortion or any other abortion-related treatment in violation of his or her conscience since mifepristone was approved in 2000.
What this means for health benefits
While the decision does not address the broader question of whether the FDA's approval process was adequate and lawful, it preserves access to mifepristone through expanded options, including allowing certified retail pharmacies to dispense the drug in states where abortion is legal and permanently eliminating the in-person dispensing requirement, which expands access to the drug through teleconsultation and mail order. A notable by-product of the court's decision is that it avoided the potential consequences of restricting access to mifepristone even in states where abortion is permitted without restriction.
Comment: Because this decision simply dismissed the claim for lack of merit, it remains an open question whether problems with access to abortion medication may persist in other legal forms (e.g., see discussion of the Comstock Act, below).
What to expect from the court's next term
Since the court has completed its 2023-2024 session, we will not see any new decisions this year, but several cases are already on the docket for the next term (October 2024-June 2025).
The Supreme Court will hear several other cases that are likely to continue the evolution of the benefits system, including challenges to state bans on sex reassignment assistance and whether retirees can sue former employers for discrimination after termination under the ADA.
U.S. Supreme Court agrees to consider state restrictions on sex reassignment services
The Court announced that it will hear a lawsuit arising out of the Tennessee and Kentucky cases challenging state bans on sex reassignment services for minors during the next term. See United States v. Scrmetti (opens in a new window).
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The state laws at issue prohibit various sex reassignment surgeries, hormone therapy and puberty blockers for minors, and were challenged by a group of families and doctors as unconstitutional under Title VII's protection against sex discrimination. Last July, the 6th Circuit Court of Appeals ruled in those cases, which sided with the states and allowed the bans to remain in place while the case goes to trial later this year.
The court's decision to take the case follows several high-profile state decisions involving gender transformation services, including the 11th Circuit's decision (opens in a new window) that employer health plans that do not cover gender dysphoria treatment unlawfully violate Title VII, and an important decision by a Florida district court that a state law prohibiting gender transformation services is unconstitutional discrimination.
Comment: The court agreed to hear this case after refusing to hear several other petitions related to sex reassignment services last year. We expect that the court's decision on the merits of the case next year may provide much-needed clarity, as litigation over state bans is currently prevalent across the country. State defenses and prohibitions against gender transition services, ranging from puberty blockers to hormone therapy and surgeries, are wide-ranging and have proven challenging for employers in designing compliant employee benefit plans.
To help clients understand the current complex web of applicable regulations, Lockton has created a guide to gender affirming care laws for each state that identifies the current protections or prohibitions blocked by injunctive relief and/or pending further litigation in each state. This guide will be updated periodically as litigation is finalized and a final judgment is rendered by the court.
The county's split on the issue of discrimination in connection with post-employment benefits under the ADA may soon be resolved
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The Court also agreed to hear the case next term to decide whether retirees can sue former employers for disability discrimination under Title I of the Americans with Disabilities Act (ADA) after they left their jobs. In the case of Stanley v. City of Sanford (opens in 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 early years of employment, stated that employees retiring on disability were required to receive free health insurance until age 65. During her employment, Stanley was unaware of this benefit change, and when she retired, the policy stated that employees retiring on disability were only eligible for a subsidy for health insurance for two years after retirement.
The ADA defines a "qualified individual" as a person who, with or without reasonable accommodations, can perform the essential functions of a job. Four circuits across the country have ruled that former employees are not "qualified individuals" because, under the ADA, people must "desire or already have employment with the employer" at the time of the discriminatory act. Two other circuits have ruled otherwise, holding that the ADA language is unclear and that ambiguities should be resolved in favor of employees.
Comment: The court's decision in this case could have far-reaching implications for employers' post-retirement actions with respect to former employees. Any changes to post-employment benefit plans and policies that affect disabled retirees may require reevaluation or be subject to litigation by former employees. Lockton will continue to monitor developments in this case over the next term of the court and will ultimately issue a decision in 2025.
Potential avenues for future litigation
Finally, although the court is not formally considering this issue at this time, two more may be on the horizon: one involving medical abortion and the other involving ERISA preemption.
With respect to the former, the Comstock Act (an 1873 law prohibiting the mailing of "obscene materials," including any abortion materials) was one of the next possible avenues for prosecuting medical abortion. It is widely believed that the abortion regulations could form the basis for a similar challenge to mail-order access to mifepristone and other abortifacients, as in FDA v. Alliance for Hippocrates Medicine . Some legislators foresaw this possibility and introduced a bill in early 2024 to repeal the mail-order provisions of the Act.
In May, the Oklahoma Department of Insurance asked the court to review the 10th Circuit Court of Appeals' ruling that federal ERISA laws do not apply to state laws governing pharmacy benefit managers (PBMs). See PCMA v. Mulready . The request, which was supported by 32 state attorneys general in an amicus brief, argues that the 10th Circuit's decision does not follow precedent in PCMA v. Rutledge , which held that ERISA does not preempt Arkansas state laws regulating PBMs and that the preemption applies only to state laws that actually regulate ERISA plans.