HHS NPRM Could Invalidate Thousands of Regulations

On November 4, 2020, the Department of Health and Human Services (HHS) issued a notice of proposed rulemaking (NPRM) titled, “Securing Updated and Necessary Statutory Evaluations Timely” (85 Fed. Reg. 70096). Subject to certain exceptions, the NPRM would add expiration dates to regulations promulgated under Titles 21 (Food and Drugs), 42 (Public Health Service, Centers for Medicare and Medicaid Services, Office of Inspector General) and 45 (Public Welfare, including Health Information Technology) of the Code of Federal Regulations (CFR) (collectively, the Regulations). These Regulations would expire between two to ten years after the NPRM becomes effective, depending on the applicable calculation set forth in the NPRM. The Regulations would expire unless:

1. HHS timely assesses them to determine if they have a significant economic impact on a substantial number of small entities;
2. If so, then the Regulations are subject to review under Section 3(a) of the Regulatory Flexibility Act (RFA) (5 U.S.C. 610);
3. HHS then would need to determine whether the Regulations should be continued without change, amended, or rescinded.

HHS explained that the purpose of sunsetting these Regulations is to effectuate the periodic retrospective reviews mandated by the RFA, and by various executive orders, which historically have not been completed.

Key Takeaways

• HHS proposes to set expiration dates for thousands of Regulations and put them at risk for inadvertent termination, including for key Regulations. HHS proposed that, subject to certain exceptions, all regulations issued by the Secretary of HHS (Secretary) or his delegates or subdelegates in Titles 21, 42 and 45 of the CFR, shall expire at the end of: (i) two calendar years after the year that this NPRM first becomes effective, (ii) ten calendar years after the year of the regulation’s promulgation (when it had been originally issued), or (iii) ten calendar years after the last year in which HHS assessed and, if required, reviewed the regulation, whichever is latest. Despite the proven record (highlighted in the preamble) of the agencies’ inability to complete the rate of review that was mandated by the RFA, HHS notes that it “does not anticipate that an important Regulation would expire due to failure to Assess or Review it.” At the same time, HHS proposes to exempt 42 C.F.R. § 1001.952 (Federal anti-kickback statute safe harbor regulation) from expiration, for example, stating that HHS is concerned certain otherwise permissible behavior could become criminal “simply because the Department did not Review this Regulation.” And if an agency does prioritize the Review, which it was unable to complete previously, what will it be unable to accomplish as a result of this prioritization?
• The NPRM offers a fairly vague Review standard for amending or rescinding Regulations that may result in uncertainty for stakeholders. HHS acknowledges that “certain members of the regulated community might rely on particular regulations, but . . . [HHS states it] would only determine that a Regulation should be amended or rescinded if the Regulation’s burdens outweigh these reliance interests and the other benefits of the Regulation or if other factors, such as a change in law, might compel amendment or rescission.” HHS does not specify, however, how the reliance interests would be measured or weighted.
• The NPRM includes exceptions to the expiration dates for certain types of regulations. The expiration dates would not apply to Regulations that were issued jointly with other Federal agencies, or that were issued in consultation with other agencies because of a legal requirement to consult with that other agency—e.g. HHS, the Department of Labor, and the Treasury jointly issue the Mental Health Parity and Addiction Equity Act regulations, so those rules would be exempt. HHS also provides regulations implementing section 104 of HIPAA as an example, but given that a “regulation” is defined as “a section of the Code of Federal Regulations,” other regulations promulgated under HIPAA, such as the HIPAA privacy and security rules, would not be exempted. The expiration dates would also not apply to: (i) 42 CFR part 73 (Select Agents and Toxins); 42 CFR 100.3 (Vaccine Injury Table); 42 CFR 1001.952 (Federal Anti-Kickback Statute Exceptions); (ii) Regulations addressed solely to internal agency management, personnel matters, or procurement; and (iii) certain other categories.
• The NPRM does not specify the statutory authority to “entirely eliminate” regulations. HHS acknowledges that President Carter’s executive order 12044 had previously “considered, but rejected, the idea of including a sunset provision in regulations on the ground that agencies cannot entirely eliminate regulations unless the law which authorized the regulations allows it.” However, HHS states that it “believes that executive order did not consider that the authorizing statutes for many regulations permit those regulations to be rescinded.” HHS does not cite to statutes which expressly permit those Regulations to be rescinded. Instead, HHS explains in the context of exceptions, that one of the statutes it cites for statutory authority, Section 1102 of the Social Security Act, 42 U.S.C. 1302, “provides that the Secretary ‘shall make and publish such rules and regulations, not inconsistent with this Act, as may be necessary to the efficient administration of the functions with which [he] is charged under this Act’,” “[b]ut the Department does not believe every regulation promulgated pursuant to section 1102 is required to have been issued, or that it would violate Federal law to rescind such regulations.”
• Congress or the Biden Administration may undo the proposed changes. If the Democrats control Congress, Congress may enact a joint resolution using the Congressional Review Act to prevent the rule from taking effect. 5 U.S.C. § 801(b). Otherwise, the Biden Administration could pursue legal challenges to the rulemaking or promulgate new rules.

Administrative Procedure Act

It is a separate question whether the NPRM passes muster under the Administrative Procedure Act (APA), given the sweeping amendment and potential termination of thousands of Regulations through an agency’s inaction. HHS afforded the public only a 30-day (in some instances 60-day) comment period to address this sweeping change for thousands of Regulations. HHS asserts that this notice-and-comment process complies with the APA but the APA mandates that agencies use the same procedures when they amend or repeal a rule as they used to issue the rule in the first instance. See 5 U.S.C. 553(b). Here, HHS applied a single 30-day notice period for amending thousands of different rules to impose expiration dates that could terminate simply due to an agency’s inaction. This could be challenged as an “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law” action to be invalidated under section 706(2)(A) of the APA.

Request for Comment

Comments were due by December 4, 2020, except that electronic or written comments on the portion of the proposed rule amending 42 CFR parts 400–429 (Medicare Program) and parts 475–499 (Quality Improvement Organizations and Standards and Certifications) are due January 4, 2021. HHS indicated that it is particularly interested in feedback on the substance of the rule, including expiration dates, exceptions, and assessment and review, as well as the impact. HHS specifically asked whether the exceptions would lead to uncertainty or litigation.

Subsequently, on November 24, 2020 HHS posted an RFI on Redundant, Overlapping and Inconsistent Regulations issued by the Chief of Staff for HHS. The first three questions ask about any redundant, overlapping, and inconsistent HHS regulations. The fourth question asks about challenges stakeholders have faced when trying to comply with redundant, overlapping, or inconsistent HHS regulations and the impact or result of facing such challenges. The RFI states that “HHS plans to use comments from the public to improve existing regulations, and eliminate unnecessary or duplicative regulations through future exercise of rulemaking authority.” Comments to the RFI are due on December 21, 2020.

Please contact us if you are interested in a more detailed analysis of the NPRM, or exploring opportunities to engage with Congress and the Biden Administration about this or other proposals.