993 F.3d 408
5th Cir.2021Background
- Medicaid managed-care states pay MCOs a capitation rate; rates must be “actuarially sound.”
- HHS’s 2002 "Certification Rule" required actuarial certifications to follow practice standards set by the private Actuarial Standards Board (ASB) and be certified by actuaries meeting American Academy of Actuaries qualifications.
- In 2015 the ASB issued a practice standard that required capitation rates to account for a new "Provider Fee," increasing states’ payment obligations.
- Texas (joined by five states) sued, arguing the Certification Rule unconstitutionally subdelegated legislative/regulatory power to private entities; the district court agreed and invalidated the rule.
- A Fifth Circuit panel reversed, finding either no subdelegation or that HHS retained sufficient oversight; the court denied rehearing en banc, but Judge Ho issued a detailed dissent arguing the Rule is an unlawful private subdelegation of lawmaking power.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHS unconstitutionally subdelegated lawmaking to a private body (ASB) | The Certification Rule hands substantive rule-defining authority to a private board and private actuaries, violating the nondelegation/private-delegation prohibitions | HHS argued the ASB only provides technical standards and private actuaries merely apply those standards; any role by private parties is reasonably connected to agency decision-making | Fifth Circuit panel held there was no unlawful subdelegation; en banc rehearing denied (majority). Dissent argues Rule is unconstitutional double-delegation to private actors. |
| Whether HHS retained "final reviewing authority" over standards and certifications | Plaintiffs: HHS does not meaningfully review ASB standards or actuary rejections; private certifications can block CMS review, so HHS lacks final authority | Defendants: CMS reviews and approves state contracts and can amend/repeal the Rule; agency retains ultimate authority and oversight | Panel held HHS retained ultimate oversight and review authority; dissent contends agency review is illusory because private certifications gatekeep final action. |
| Whether precedent (Adkins, Currin, Telecom, Sierra Club, etc.) permits the scheme | Plaintiffs: Precedents allowing private involvement do not apply because those involved congressional authorization or governmental entities; this is a private subdelegation by an agency without statutory authorization | Defendants: Cited cases permitting private input or incorporation of private standards, arguing the Certification Rule fits within established lines allowing outside-party input | Panel relied on such precedents to uphold the Rule; dissent distinguishes them, stressing they allow Congress (not an agency) to enlist private roles or permit limited factual assistance, not the present private lawmaking. |
| Whether the nondelegation doctrine should be applied to prevent agency-to-private lawmaking | Plaintiffs: Nondelegation forbids Congress/agency from vesting lawmaking power in private, unaccountable entities; the Constitution requires accountable, bicameral lawmaking | Defendants: Practical administrative practices and precedents allow use/incorporation of private standards and technical expertise | Panel upheld status quo precedents; dissent urges renewed enforcement of nondelegation when an agency subordinates substantive regulatory standards to a private body. |
Key Cases Cited
- Carter v. Carter Coal Co., 298 U.S. 238 (1936) (delegation to private persons is "legislative delegation in its most obnoxious form")
- A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) (private delegation inconsistent with Congress’s constitutional duties)
- Dep't of Transp. v. Ass'n of Am. R.Rs., 575 U.S. 43 (2015) (discussion of bicameralism, presentment, and limits on delegation; concurrence on private-entity delegation concerns)
- United States Telecom Ass'n v. FCC, 359 F.3d 554 (D.C. Cir. 2004) (agency may not subdelegate absent congressional authorization; narrow exceptions for governmental conditions)
- Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940) (Congress may authorize private parties to propose standards subject to agency approval)
- Currin v. Wallace, 306 U.S. 1 (1939) (Congress may condition federal action on private approvals in certain contexts)
- Sierra Club v. Lynn, 502 F.2d 43 (5th Cir. 1974) (limits on agency rubber-stamping; distinguishes fact-finding assistance from substantive rulemaking)
- Seila Law LLC v. CFPB, 140 S. Ct. 2183 (2020) (refusal to extend precedent where separation-of-powers concerns arise)