Behavioral health enters ‘era of uncertainty’ after end of Chevron doctrine

The U.S. Supreme Court has thrown the mental health industry into a world of uncertainty by eliminating the decades-old Chevron Doctrine.

The elimination of the Chevron Doctrine, a high-profile legal decision, makes it easier for behavioral health providers to point out loopholes in state and federal laws that rely on regulatory agencies’ interpretations of statutes. But now that judges don’t have to rely on agency interpretations, there will be significant confusion and regional variability in the laws and regulations implementing the statutes until time allows the new norm to find some semblance of balance.

“This is a radical change,” Alicia Macklin, partner and co-chair of the behavioral health practice group at Hooper, Lundy & Bookman, PC, told Behavioral Health Business. “Where are the venues for different parties who have not been successful before to challenge agencies?”

“You could call it an era of uncertainty,” Macklin added.

On June 28, the Supreme Court effectively ended a judicial practice that stemmed from a 40-year-old high court decision involving the Environmental Protection Agency’s (EPA) pollution regulations. In short, the case established the courts’ practice of deferring to agencies’ interpretations of statutes when they are ambiguous or silent on a given issue.

That allowed agencies to fill in the blanks in statutes passed by Congress. As long as the laws were reasonable, courts would uphold the statute “even if there’s no fundamental statement about it in the statute that Congress passed,” explained Tani Weiner, co-chair of Polsinelli’s behavioral law group.

“Now that that deference has been stripped away, statutes have a much greater impact than regulations,” Weiner added. “There will be a tug-of-war in legal challenges to agencies enforcing regulations, not statutes.”

The healthcare industry is generally heavily regulated. Significant portions of the industry are defined or dictated by regulations promulgated by executive agencies.

The U.S. Department of Health and Human Services and its subordinate entities accounted for 21% of all regulations analyzed by the White House Office of Management and Budget (OMB) from 2019 to 2023 — by far the most of any agency, according to a review of public records by BHB.

“Regulatory certainty, even if it’s regulations you don’t necessarily like, is helpful because it tells you the rules of the game before you act, as opposed to having to learn them through enforcement action or some type of litigation where you’re left with nothing,” Matthew Wolfe, attorney and managing shareholder at Baker Donelson, told BHB.

Need for a Stronger Behavioral Health Lobby

The question remains how Congress will change its approach to legislation in the face of the demise of the Chevron Doctrine.

Several sources told BHB that Congress will have to curtail its long-standing practice of leaving the details of regulation to federal agencies. Similarly, Congress will have to be more specific in provisions of the bill that allow agencies to make their own decisions when it comes to developing regulations.

But many legal experts doubt that Congress will suddenly become a bastion of highly specialized experts in a given field.

“Congress doesn’t have the staff to do this; they don’t have the right assistants for this kind of thing,” Bragg Hemme, a shareholder and health care regulatory attorney at Polsinelli, told BHB. “They’re used to deferring to agencies, and that’s part of their thinking in this, in this statutory deference.”

The expertise needed in a given area falls even more heavily on lobbyists and advocacy groups. That requires these organizations to step up their game and be able to craft ultra-specific health care regulations that affect the behavioral health industry. That could require stronger coordination of shared goals among organizations and investment in additional expert staff, such as bill drafters, Hemme said.

These experts are already working in Congress. But they may not have the bandwidth to anticipate and craft increasingly detailed legislation to ensure that the will of legislators will withstand legal challenges.

“We have a Congress writing laws that have no experience in health care; we now have judges with no experience in health care interpreting the laws,” Hemme said. “And now agencies that have a lot of experience in health care could be getting their legs cut.”

More uncertainty, but more opportunities

The heavily regulated nature of the health care industry has conditioned it for decades to favor certainty. Eliminating an arcane but fundamental element of administrative law now allows for increasingly rapid regulatory changes. That’s because federal agencies like the Centers for Medicare & Medicaid Services funding dictate continue to take effect at a steady pace.

“I will continue to argue that the safest course of action is to continue to comply with the (new) rule,” Hemme said. “That said, if the rule has a significant negative impact on a behavioral health provider, that opens up a new avenue for rebuttal. There could be litigation challenging the implementation of that rule, depending on what the specific statute says about the rule.”

This could have a chilling effect on agencies, Wolfe suggested, meaning that fear of a legal challenge to an agency’s goals, given the lack of a statute as a basis, could cause them not to promulgate regulations at all. It could also increase the number of subregulatory actions agencies take. These include manuals, instructions and memos that outline an agency’s interpretation of the statute but don’t have the binding force of a rule.

There is also an additional opportunity to influence agencies and their regulations. The federal rulemaking process includes a comment period that agencies are expected to consider, at least in appearance, before issuing a final rule. Now, if the rule doesn’t go the way the industry wants, there is a greater chance of successfully challenging the rule in court.

But this involves significant compromises.

Different courts will likely rule differently on federal rules, creating a patchwork of rules based on court jurisdiction, “unless Congress enacts clearer rules and provides a unified approach,” Macklin said.

“It’s going to be really tough to navigate, especially in an industry where compliance is so important,” Hemme said.

The new role of regulatory courts will also significantly increase the time costs of the regulatory environment. The rulemaking process typically takes months. Legal battles can drag on for years.

However, there may be some reason for optimism and hope that this will benefit the mental health industry.

“I think behavioral health, in general, is an area where Congress and regulators are often on the same page,” Macklin said. “It’s an area where Congress has done a lot of work, particularly around mental health parity, expanding Medicare coverage.”