Texas Court Rejects Fixed Indemnity Insurance Disclosure and Notice Requirements

On December 4, 2024, Judge J. Campbell Barker from the U.S. District Court for the Eastern District of Texas entered final judgment to the plaintiffs in an Administrative Procedure Act (APA) challenge to the amended disclosure and notice requirements for hospital indemnity and other fixed indemnity insurance contained in a final rule issued by the U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) in May 2024 (2024 Rule). The 2024 Rule contains a new consumer notice for policies, certificates, contracts, and marketing, application, enrollment, and reenrollment materials for such insurance, which the plaintiffs, ManhattanLife Insurance and Annuity Co. and insurance brokerage and financial services firm Paschall and Associates, asserted exceeded the Departments' rulemaking authority and were arbitrary and capricious. The court's final judgment finds that the "compelled notice condition" (1) "exceed[s] statutory authority" and (2) the language of the compelled notice "was not a logical outgrowth of the compelled notice identified in the notice of proposed rulemaking." The court set aside and vacated several provisions of the 2024 Rule relating to the "compelled-notice criterion":

• The provision adding 26 C.F.R. § 54.9831-1(c)(4)(ii)(D) 
• The provision adding 29 C.F.R. § 2590.732(c)(4)(ii)(D)
• The provision adding 45 C.F.R. § 146.145(b)(4)(ii)(D)
• The provision revising 45 C.F.R. § 148.220(b)(4)(iii) 
• The provision revising 45 C.F.R. § 148.220(b)(4)(iii)(B)

The decision does not substantively change the current notice requirement for fixed indemnity insurers in the individual market. 

In another case pending in the Eastern District of Texas, American Association of Ancillary Benefits v. Becerra, No. 24-CV-783 (E.D. Tex.), the plaintiffs challenge the 2024 Rule's new definition of "short-term, limited-duration insurance" (STLDI) under the APA. The 2024 Rule redefines STLDI, which is excluded from the definition of "individual health insurance coverage" under the Public Health Service Act (PHSA) and, therefore, is generally not subject to federal individual market consumer protections and requirements for comprehensive coverage, as it's limited to three months in duration (four months with renewals or extensions). In their recent memorandum in support of their motion for summary judgment, the plaintiffs assert that the new regulatory definition is arbitrary and capricious and contrary to law, citing Loper Bright v. Raimondo to argue that the phrase "STLDI" is ambiguous and that the Departments' interpretation to prohibit "stacking" and flexible terms is unreasoned and baseless under the statutory text. The plaintiffs also argue, among other things, that the 2024 Rule violates the McCarran-Ferguson Act, which confers primary authority to states regarding the regulation of the business of insurance. The Departments have not yet responded to the plaintiffs' motion. 

Given that American Association challenges different aspects of the 2024 Rule than ManhattanLife, it should not be mooted or otherwise impacted by Judge Barker's December 4, 2024 judgment. The American Association case is pending before District Judge Sean D. Jordan, who was appointed to the federal bench in 2019 and who last month vacated the 2024 DOL regulations that raised the minimum salary employers would be required to pay executive, administrative, and professional employees to maintain their overtime exempt status under the Fair Labor Standards Act (FLSA).

Trump Nominates Representative Chavez-DeRemer to Head DOL

On November 22, 2024, President-elect Donald Trump announced his intention to nominate a relatively unknown congresswoman, Representative Lori Chavez-DeRemer (R-OR), to lead the U.S. Department of Labor (DOL) in his second term. Elected to Congress in 2022 in an Oregon swing district that voted for President Biden, Chavez-DeRemer lost her bid for another term in the November 2024 election. She currently serves on the House Committee on Education and the Workforce, which has primary jurisdiction over DOL and shares jurisdiction with the tax committees over employee benefits and retirement policy. She sits on the Health, Employment, Labor, and Pensions (HELP) subcommittee. 

Chavez-DeRemer has been behind several noteworthy health benefits initiatives while in Congress. She was a sponsor of the Health Data Access, Transparency and Affordability Act (H.R. 4527), that would amend ERISA to expand the transparency of and employers' and plan fiduciaries' access to claims and encounter data. The bill passed the House in December 2023 as part of the Lower Costs, More Transparency Act, but was not taken up by the Senate. 

Chavez-DeRemer is a co-sponsor of the Increasing Value for Families with HSAs Act of 2024 (H.R. 9141), which seeks to expand eligibility for health savings accounts (HSA) to all individuals covered by "any health insurance coverage" and not only those in high deductible health plans (HDHPs). The bill also seeks to increase HSA annual limits to $8,600 for individuals with self-only coverage and $17,500 for family coverage.

She is also one of lead sponsors of the Helping to Optimize Patients' Experience with Fertility Services Act (H.R. 8821), which would require group health plans to cover fertility services in certain circumstances. She introduced a resolution (H.Res.1037) supportive of in vitro fertilization and is a co-sponsor of a bill (H.R. 9479) to amend the Internal Revenue Code to establish a credit for expenses related to in vitro fertilization. At a June 2023 HELP hearing on competition and transparency in the health care market, she spoke about the effects of vertical integration in health insurance industry and need for pharmacy benefit price transparency. 

On the organized labor front, Chavez-DeRemer is one of only three Republican lawmakers to co-sponsor the Protecting the Right to Organize Act (H.R. 20), which includes numerous provisions to enhance union organizing and undo state right-to-work laws. On the side of employers, she voted in January 2024 to overturn the National Labor Relations Board's rule on joint employer status, which had rescinded and replaced a 2020 final rule and made it easier to establish joint-employer status and thereby expand union organizing rights for workers.

Prior to entering Congress, Chavez-DeRemer served on the city council in Happy Valley, Oregon and was elected its mayor in 2010. According to her website, Chavez-DeRemer and her husband, an anesthesiologist, founded an anesthesia management company and operate several medical clinics in the Pacific Northwest. 

Chavez-DeRemer's short congressional tenure and pro-labor record has raised eyebrows among some employers and Republicans in Congress. The in-coming Chairman of the Senate Committee on Health, Education, Labor and Pensions, Senator Bill Cassidy (R-LA), who will lead the confirmation hearings on her nomination next year, has voiced some reservations. Support for Chavez-DeRemer's nomination includes the national Teamsters Union and Senator Josh Hawley (R-MO), who said her selection was a "great pick!" Some Senate Democrats have also been cautiously supportive. Senator Elizabeth Warren (D-MA) is quoted as stating, "If Chavez-DeRemer commits as Labor secretary to strengthen labor unions and promote worker power, she's a strong candidate for the job." 

If confirmed by the Senate, Chavez-DeRemer would become the 31st Labor Secretary.