Cent. United Life Ins. Co. v. Burwell

• Decision Date: 01 July 2016
• Docket Number: No. 15-5310,15-5310
• Parties: Central United Life Insurance Co., et al., Appellees v. Sylvia Mathews Burwell, in her official capacity as Secretary of U.S. Department of Health and Human Services, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

827 F.3d 70

Central United Life Insurance Co., et al., Appellees

v.Sylvia Mathews Burwell, in her official capacity as Secretary of U.S. Department of Health and Human Services, et al., Appellants.

No. 15-5310

United States Court of Appeals, District of Columbia Circuit.

Argued April 15, 2016

Decided July 1, 2016

Daniel Tenny, Attorney, U.S. Department of Justice, argued the cause for appellants. With him on the briefs were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Mark B. Stern, and Alisa B. Klein, Attorneys, William B. Schultz, General Counsel, U.S. Department of Health and Human Services, Janice L. Hoffman, Associate General Counsel, and Susan Maxson Lyons, Deputy Associate General Counsel for Litigation.

Quin M. Sorenson argued the cause for appellees. With him on the brief were James C. Stansel and Tobias S. Loss–Eaton.

Brad D. Schimel, Attorney General, Office of the Attorney General for the State of Wisconsin, Misha Tseytlin, Solicitor General for the State of Wisconsin, Daniel P. Lennington, Deputy Solicitor General for the State of Wisconsin, E. Scott Pruitt, Attorney General, Office of the Attorney General for the State of Oklahoma, Alan Wilson, Attorney General, Office of the Attorney for the State of South Carolina, Ken Paxton, Attorney General, Office of the Attorney General for the State of Texas, Sean Reyes, Attorney General, Office of the Attorney General for the State of Utah, Patrick J. Morrisey, Attorney General, Office of the Attorney General for the State of West Virginia, Leslie Rutledge, Attorney General, Office of the Attorney General for the State of Arkansas, Samuel S. Olens, Attorney General, Office of the Attorney General for the State of Georgia, Jeff Landry, Attorney General, Office of the Attorney General for the State of Louisiana, Bill Schuette, Attorney General, Office of the Attorney General for the State of Michigan, and Douglas J. Peterson, Attorney General, Office of the Attorney General for the State of Nebraska, were on the brief for amici curiae the States of Wisconsin, et al. in support of plaintiffs-appellees.

Before: Brown and Millett, Circuit Judges, and Ginsbur g, Senior Circuit Judge.

Brown, Circuit Judge:

At issue in this appeal is whether the Department of Health and Human Services (“HHS”) colored outside the lines of its authority. The district court held that it did, and we agree.

The Public Health Service Act, 42 U.S.C. § 201 (“PHSA”), establishes coverage requirements for all health insurance plans except those it deems “excepted benefits.” Only those forms of insurance specifically enumerated in the PHSA can qualify as an excepted benefit and, for the benefits at issue here, that status is further conditioned on specific requirements: (1) the insurance plans must be “provided under a separate policy, certificate, or contract of insurance,” and (2) they must be “offered as independent, noncoordinated benefits.” See 42 U.S.C. § 300gg-63(b) ; id. § 300gg-91(c)(3); see also id. § 300gg-21(c)(2).

Among the excepted benefits listed in the PHSA is a form of insurance known as “fixed indemnity.” Id. § 300gg-91(c)(3)(B). As their label suggests, these policies pay out a fixed amount of cash upon the occurrence of a particular medical event. For instance, if a policyholder visits a hospital or purchases prescription drugs, the provider pays out a predetermined amount, which the policyholder is then free to use however she chooses.

In 2010, Congress passed the Patient Protection and Affordable Care Act (“ACA”), which, among other things, updated the PHSA's coverage requirements and mandated that all applicable individuals maintain “minimum essential coverage.” 26 U.S.C. § 5000A(a). Despite the ACA's sweeping reforms to the health insurance market, it left intact and incorporated the PHSA's rules regarding excepted benefits. See id. § 5000A(f)(3) (stating the term “minimum essential coverage” does not include the excepted benefits described in the PHSA). And in fact, Amici claim that in the wake of the ACA's passage, many individuals found it cost-effective to forego minimum essential coverage (even despite the penalty) in favor of these fixed indemnity policies. Amicus Br. 9.

But HHS foreclosed that option four years later in the regulation under review here. In May 2014, it announced its plan “to amend the criteria for fixed indemnity insurance to be treated as an excepted benefit” in the individual health insurance market. Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond , 79 Fed. Reg. 30240, 30253 (May 27, 2014). On top of the requirements codified in the PHSA, HHS added another. To be an “excepted benefit,” the plan may be “provided only to individuals who have ... minimum essential coverage.” Id. Now, those who had previously purchased these plans as a substitute for minimum essential coverage would have to find a fixed indemnity plan that satisfies the PHSA's coverage requirements for non-excepted benefits. The very nature of fixed indemnity insurance, however, renders such plans incapable of satisfying those requirements, so this new rule effectively eliminated stand-alone fixed indemnity plans altogether. In response, several providers challenged the rule as an impermissible interpretation of the PHSA, and after a hearing, the district court permanently enjoined HHS's enforcement of the rule under Chevron Step One. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc. , 467 U.S. 837, 842–43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

The Chevron two-step acts as a check on administrative overreach. Agencies may act only when and how Congress lets them. See La. Pub. Serv. Comm'n v. FCC , 476 U.S. 355, 374, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986) (“[A]n agency literally has no power to act ... unless and until Congress confers power upon it.”); Ry. Labor Execs. Ass'n v. Nat'l Mediation Bd. , 29 F.3d 655, 670 (D.C. Cir. 1994) (en banc) (“Agencies owe their capacity to act to the delegation of authority, either express or implied, from the legislature.”). To vindicate that important principle, Chevron requires courts to determine first whether Congress authorized the agency to act. See Hearth, Patio & Barbecue Ass'n v. U.S. Dep't of Energy , 706 F.3d 499, 503 (D.C. Cir. 2013) (“[W]e always first examine the statute ..., employing traditional tools of statutory construction.”). Where Congress “has directly spoken” to the parameters of the agency's authority, “the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Chevron , 467 U.S. at 842–43, 104 S.Ct. 2778. But if Congress grants an agency flexibility to flesh out a particular policy, the regulation will be upheld “as long as the agency stays within that delegation.” Arent v. Shalala , 70 F.3d 610, 615 (D.C. Cir. 1995).

Here, HHS described its rule as an attempt to “amend the criteria for fixed indemnity insurance to be treated as an excepted benefit.” 79 Fed. Reg. at 30253 (emphasis added). Most likely, HHS intended only to amend the regulatory criteria because of course only Congress can amend its statutes. But it's more accurate—and fatally so—to say HHS's rule proposed to “amend” the PHSA itself. The PHSA lists only certain defined criteria for fixed indemnity plans to have “excepted benefits” status: the plan (1) is provided under a separate policy, contract, etc., and (2) offers independent, noncoordinated benefits. See 42 U.S.C. § 300gg-63(b) ; id. § 300gg-91(c)(3)(B); cf. id. § 300gg-21(c)(2). So long as these conditions are met, the plan qualifies as an excepted benefit. See id. § 300gg-21(c)(2) (exemption applies “if all of the following conditions are met”). Thus, where Congress exempted all such conforming plans from the PHSA's coverage requirements, HHS, with its additional criterion, exempts less than all . Disagreeing with Congress's expressly codified policy choices isn't a luxury administrative agencies enjoy.

Nothing in the PHSA suggests Congress left any leeway for HHS to tack on additional criteria. See 42 U.S.C. § 300gg-91(c)(3) (defining “excepted benefits” for fixed indemnity plans). Nor do any subsequent amendments to it. The ACA, in fact, endorses the PHSA's definition—it excludes the “excepted benefits ... described in” the PHSA from what counts as “minimum essential coverage.” 26 U.S.C. § 5000A(f)(3). At no point does the ACA give even the slightest indication the definition of “excepted benefit” was suddenly debatable; rather, the Act doubled down on the PHSA's existing requirements. Ever since it first carefully defined what counts as an “excepted benefit” in 1996, Congress has never changed course or put its original definition in any doubt. Where the text is as clear as it is here, “that is the end of the matter.” Chevron , 467 U.S. at 842, 104 S.Ct. 2778 ; see also Ry. Labor , 29 F.3d at 671 (en banc) (rejecting an argument that Step One is satisfied “any time a statute does not expressly negate the existence of a claimed administrative power” as “flatly unfaithful to the principles of administrative law ... and...