HHS Gender Identity Rules Subject to Nationwide Injunction

July 16, 2024

On July 3, 2024, the US District Court for the Southern District of Mississippi issued a stay on the effective date of parts of the final rule issued by HHS on May 6, 2024 (the May 2024 Rule), that applies the ACA Section 1557 nondiscrimination provisions to discrimination on the basis of gender identity. For more information on this rule, see the article in the May 7, 2024, edition of Compliance Corner. 

The May 2024 Rule was scheduled to take effect on July 5, 2024. On May 30, 2024, the states of Tennessee and Mississippi joined with 13 other states to file a complaint for declaratory and injunctive relief from the rule on the grounds that it exceeded HHS’ statutory authority in violation of the Administrative Procedures Act (APA). 

In the midst of this litigation, and just one week before the May 2024 Rule’s effective date, the Supreme Court of the United States issued its ruling in Loper Bright Enterprises v. Raimondo, holding that federal agencies were no longer entitled to the deference accorded to them by its 1984 decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.  

With its two-step framework for judicial review of agency rules (sometimes called the “Chevron Two-Step”), Chevron had been the linchpin of federal administrative law upon which courts have relied for decades. Using the Chevron Two-Step analysis, courts would first determine whether Congress directly spoke to the precise question at issue through the language of the applicable statute (the first step). If so, then that ended the analysis. If not, then, using the second step (sometimes called “Chevron deference”) the court would determine whether the agency’s interpretation with respect to the specific issues was based upon a reasonable or permissible construction of the statute. 

The Loper Bright court overturned Chevron, holding that the APA requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, rather than deferring to an agency’s interpretation simply because statutory language is ambiguous.  

The Mississippi court issued its injunction just three days after the Loper Bright ruling and relied primarily upon Loper Bright’s rejection of Chevron’s deference for its decision. In the court’s view, the May 2024 Rule unreasonably conflates the phrase “on the basis of sex” from Title VII of the Civil Rights Act of 1964 (Title VII) and upon which the Supreme Court relied to prohibit employment discrimination on the basis of being gay or transgender in Bostock v. Clayton County with “on the basis of gender identity” in its May 2024 Rule prohibiting discrimination on that basis under ACA Section 1557 and for that reason stayed the rule’s July 5, 2024 effective date. 

HHS is all but certain to appeal the court’s decision to the Fifth Circuit, including a request for a lifting of the stay or, short of that, restrictions upon its jurisdictional scope. In the meantime, though, the court’s nationwide injunction on the new HHS rules stands until further notice. Given Section 1557’s limited application to federally funded healthcare programs and activities, its actual application to private employer-sponsored health plans remains a subject of continued discussion. Nevertheless, private employers are generally subject to Title VII’s prohibition on discrimination against gay and transgender employees (as expressed by the Supreme Court in Bostock), a prohibition that can potentially extend to employer-sponsored health plans, at least according to a recent Fourth Circuit decision. Both public and private employers should therefore remain aware of ongoing legal developments in this area and should consult with legal counsel regarding the application of Section 1557 to their specific plans. 

State of Tennessee: Memorandum Opinion and Order