This client alert was co-authored by Ken Preede of Parker Poe Federal Strategies.

For nearly 40 years, federal courts have been required to defer to an agency’s interpretation of an ambiguous statute, even if the court did not agree with that interpretation. This deference, commonly referred to as Chevron deference, has served as a significant roadblock for regulated entities that wish to challenge an agency’s implementation of a statute. Early this summer, the U.S. Supreme Court in Loper Bright Enterprises v. Raimondo overruled Chevron, holding that the mandate that courts defer to an agency’s interpretation of the law violated constitutional separation of powers. In so doing, the court blazed a clear path for regulated entities such as health care providers and payors to convince federal courts that an agency’s interpretation and implementation of a statute is unlawful.

Most observers agree that the Loper decision will create a significant increase in the number of cases in federal courts over the coming years. Health care providers, payors, and pharmaceutical companies may very well be leading the charge given the complex nature of the regulations affecting them. These heavily regulated companies often have many complaints that the Centers for Medicare & Medicaid Services (CMS), the Food and Drug Administration (FDA), and the Department of Health and Human Services (HHS) far exceeded their statutory authority. As these challenges progress through the legal system, courts may assert their own interpretations of the law, unbound by any obligation to defer to the agency. This will very likely result in interpretations of statutes that vary from district to district and circuit to circuit, creating a patchwork of interpretations that could force health care providers and payors to operate differently depending on their location. It is also likely that in a post-Chevron world, the Supreme Court will be increasingly tasked with providing the type of clarity as to a law’s meaning that had been previously created by agency interpretation.

While Loper is only binding on federal courts, its effects will undoubtedly be felt in state courts as well. For example, the South Carolina Court of Appeals recently cited Loper to argue that South Carolina courts can independently review and make decisions about ambiguous agency interpretations of statutes. North Carolina’s Supreme Court, which never fully adopted Chevron deference, is currently considering if agencies are even entitled to deference when interpreting the meaning of their own regulations. Proponents of overturning such deference have argued that Loper provides the court with a framework for removing such deference. While it is difficult to predict how Loper will play out in any particular state’s legal system, it seems reasonable to expect that the state supreme courts whose judicial philosophies generally align with the six justices who voted to overrule Chevron will use Loper as a guide to limiting or eliminating agency deference in their states. More liberally aligned state courts, however, may ignore Loper entirely and argue that the deference state courts afford to state agencies is not bound by federal constitutional principles.

Congress will also feel the effects of Loper as it grapples with the knowledge that any statutory ambiguity it creates will be settled, perhaps in disjointed ways, by judges and not by a singular agency. In that regard, health care providers and payors should recognize Loper as an opportunity to significantly increase their federal lobbying efforts, since Congress will need to rely on industry experts and lobbyists to suggest clear and unambiguous language for legislation to better avoid long legal disputes, which could delay a statute’s implementation for years.

Loper is not the only important decision the Supreme Court issued this summer that will affect challenges to agency actions. In Corner Post v. Board of Governos of the Federal Reserve System, the Supreme Court ruled that the statute of limitations for challenging agency regulations only begins to run when the plaintiff is injured by a regulation, even if the injury occurred long after the regulation was finalized. With new health care providers and actors entering the market every day, Corner Post has the potential to create a nearly never-ending statute of limitations and an increased opportunity for newly formed regulated entities to challenge agency action long after regulations have been implemented.

With the overturning of Chevron and the expansion of statute of limitations in Corner Post, regulated entities should prepare for a more dynamic and varied regulatory framework to arise as courts across the country hear regulatory challenges. Courts, and not agencies, will now play a much larger role in how laws are implemented by federal (and likely state) regulatory agencies. Health care providers and payors will accordingly have more opportunities to successfully challenge administrative interpretations they view as harmful. On the front end, Congress will need to be more prescriptive, deliberate, and careful when drafting statutory language because of the potential that judges may interpret laws in different and potentially contradictory ways. As a result, regulated entities will need to ensure they have a place at the table when legislation is drafted if they wish to avoid the costs associated with operating under a patchwork of judicially created regulatory interpretations.

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