EPA Proposes Repeal of Greenhouse Gas Emissions Standards and Update to Toxic Emission Standards for Power Plants
On June 11, 2025, the EPA Administrator signed a proposed rule that would repeal the greenhouse gas (GHG) emissions standards established for fossil-fired power plants under the Biden administration’s Carbon Pollution Standards (CPS) and a 2015 GHG New Source Performance Standards rule. The proposal includes two approaches: a primary proposal that would repeal all GHG standards for fossil-fired power plants based on a finding that such emissions do not “contribute significantly” to endangerment of public health and welfare, and a narrower alternative proposal that would repeal a subset of the requirements under the CPS based on a substantive, technical review of those standards. Either approach, if finalized, would significantly alter the federal regulatory landscape for GHG emissions from the power sector.
The EPA Administrator also signed a proposed rule that would repeal 2024 updates to the Mercury and Air Toxics Standards (MATS) for power plants.
Key Elements of Proposed Rule
Significant Contribution Finding. EPA’s primary proposal centers on a reinterpretation of its authority under Section 111 of the Clean Air Act (CAA).
Section 111 requires EPA to list and regulate a category of major emission sources that the Administrator, “in his judgment,” finds “causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare” (referred to as a “Significant Contribution Finding”).
In its initial 2015 GHG standards for fossil-fired power plants, EPA asserted that it need not make a Significant Contribution Finding for emissions of GHGs for such plants because it already had made the finding for fossil-fired power plants for other pollutants. However, EPA also found that it had a “rational basis” for Section 111 regulation of GHG emissions from fossil-fired power plants on account of their high volume of such emissions.
Now, EPA is proposing to find that the agency is required, or at least is authorized to require, a pollutant-specific Significant Contribution Finding prior to regulation of that pollutant for a Section 111 source category. Further, EPA is proposing to find that GHG emissions from fossil fuel-fired power plants do not “contribute significantly” to the endangerment of the public health and welfare. This is not a direct reversal of EPA’s 2009 Endangerment Finding (which applied to mobile sources) but rather a separate, additional Section 111-specific requirement for a Significant Contribution Finding, which EPA is proposing not to find for GHGs from fossil fuel-fired power plants.
EPA also proposes to broaden the scope of what informs “significance” to take into account cost and policy factors. EPA cites the following rationales for not making the Significant Contribution Finding: the declining share of power sector GHG emissions in the U.S and globally; the absence of cost-effective controls; the attenuated causal connection between power sector GHG emissions and climate-related harms; and “because this Administration’s priority is to promote the public health or welfare through energy dominance and independence secured by using fossil fuels to generate power.”
EPA’s primary proposal would therefore rescind all GHG emissions standards for existing, new, modified, and reconstructed fossil fuel-fired electric generating units (EGUs) promulgated under CAA section 111. These standards potentially subject to repeal include the 2015 New Source Performance Standards (NSPS) (40 CFR part 60, subpart TTTT) (adopted as part of the “Clean Power Plan”) and the 2024 Carbon Pollution Standards (40 CFR part 60, subparts TTTTa and UUUUb).
Carbon Pollution Standards Repeal.As an alternative, EPA proposes a narrower repeal that would eliminate specific GHG emission standards that require the use of carbon dioxide capture and sequestration (CCS) and 40 percent co-firing of natural gas for specific subcategories of plants in the CPS because the requirements fail to meet the Section 111 requirements for a valid “performance standard.” Section 111(a)(1) provides that a performance standard must “reflect[] the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.”
In general, EPA finds that the system of emission reduction that forms the basis of each of the standards has not been adequately demonstrated, the costs of compliance are unreasonable, and degree of emission limitation required by the standards are not achievable due to the unlikelihood of building supporting infrastructure by the compliance deadlines. The technical findings unpinning the proposed repeal of these standards are reversals of findings EPA made in the 2023 CPS rulemaking.
The alternative proposal would leave certain performance standards unaffected including: (1) the standard that applies to new and reconstructed gas-fired combustion turbines that have a capacity factor between 20 percent and 40 percent (intermediate-load units); and (2) the phase 1 standard that applies to new and reconstructed gas-fired combustion turbines that have a capacity factor at or above 40 percent (baseload units). The proposed rule solicits comments on the viability and validity of these standards.
Economic and Compliance Impacts
EPA estimates present value compliance cost savings of approximately $19 billion (3% discount rate) or $9.6 billion (7% discount rate) over the 2026–2047 period for both the full and partial repeal scenarios. The rule would primarily impact owners and operators of fossil fuel-fired EGUs, including utilities and certain government entities. Because EPA has rescinded the “social cost of carbon” calculation, the agency’s Regulatory Impact Analysis does not assign any cost to the public from forgoing GHG reductions that would be achieved by standards subject to proposed repeal.
Mercury and Air Toxics Standards (MATS) Proposal
Simultaneous with proposing to repeal GHG standards for power plants, EPA released a proposed rule to repeal all the new regulatory requirements adopted by the 2024 Mercury and Air Toxics Standards (MATS) Rule pursuant to a mandated technology review occurring every 8 years.
In effect, the proposal would repeal the new, more stringent, filterable particulate matter (PM) standards for all coal-fired power plants and the tightened mercury standards for lignite-fired power plants. It also would repeal the requirement that all coal-fired power plants install the PM continuous emissions monitoring systems (CEMS) for demonstrating compliance with applicable MATS performance standards.
Notably, the proposal would have no effect on the initial MATS regulatory requirements that EPA adopted in 2012. Those 2012 MATS requirements would continue to apply to all affected coalfired power plants.
In support of its proposal, EPA points out that both the Biden EPA and the first Trump EPA expressly made determinations that the air toxic emissions from power plants currently do not pose “a residual risk” to human health because those risks are below the statutory standard for acceptable health risks (set at one in one million lifetime risk of cancer). As a result, the Agency has made its decision to repeal new MATS control requirements based on a technical determination that those more stringent performance standards are neither cost-effective nor based on a breakthrough of new control technologies.
Next Steps
Comments on both proposals will be accepted for 45 days following publication in the Federal Register, which is scheduled for June 17, 2025. EPA staff have informally suggested that requests for extensions of the comment deadline will likely not be granted given the tight timeframe for finalizing both proposed rules by the end of this year. EPA will conduct virtual public hearings on the two proposals 15 days after publication, with pre-registration required for speakers.
Healthcare Preview for the Week of: June 16, 2025
Short, Significant Senate Week
The House is out this week for the Juneteenth holiday, but the Senate will be in town through Wednesday. We expect these three days to be significant because the Senate Finance Committee has announced that it intends to release its reconciliation text today. The Finance Committee has jurisdiction over some of the most controversial provisions, including Medicaid, the Affordable Care Act (ACA), Medicare, and taxes. While we are focused on the health provisions, it is important to remember that reconciliation is mainly a tax bill, and much debate is focused on the tax provisions. Last week, the Senate Health, Education, Labor, and Pensions Committee released its text, which included one ACA provision that mirrors the House-passed language to fund cost-sharing reduction payments for Marketplace plans, with strict limitations against those funds going to plans that cover abortions. The Finance Committee text will likely include additional ACA provisions like those included in H.R. 1 as it passed the House. The committee may also make substantive changes to the House-passed Medicaid provisions.
One important caveat is that the Finance Committee language is likely to have gaps and placeholders for language that is still being developed or negotiated, and any provision is subject to change. Senate language also must comply with the Byrd rule to enable Senate passage by a simple majority, so additional modifications may be made via that process as well.
Republican leadership set July 4, 2025, as the target date to send the bill to President Trump’s desk. That leaves three weeks, one of which is supposed to be a congressional recess week, to pass the bill in the Senate and send it back to the House for its consideration. Senate Majority Leader Thune (R-SD) indicated he’d like the Senate to vote on the package the week of June 23, 2025, to meet this timeline. As the Senate modifies language to win votes from Republicans who have expressed concerns, it will have to be careful to ensure that the changes will be able to pass the House.
Given all of these complicating factors, the timeline could slip as negotiations and the Byrd rule process continue. Because Republicans aim to address the debt limit in reconciliation, the more significant deadline to sign the bill into law is by the August recess, which is when the US Department of the Treasury expects the United States to reach the debt limit.
Navigating OSHA’s Updated Inspection Strategy
In May 2025, the Occupational Safety and Health Administration (OHSA) released an updated Site-Specific Targeting (SST) Inspection Program directive. The SST Inspection Program is OSHA’s main site-specific programmed inspection initiative for non-construction workplaces that have 20 or more employees. The SST Inspection Program uses employer-submitted injury and illness information (i.e., Form 300A data) to determine workplaces that will receive comprehensive (e.g., site-wide) inspections. The updated SST Inspection Program now utilizes Form 300A data for calendar years (CY) 2021, 2022, and 2023.
The main focus of the revised program is establishments with high injury and illness rates reported between 2021 and 2023, especially those with inconsistent record-keeping or injury rates exceeding twice the national private sector average. For example, sectors like trucking, warehousing, and nursing facilities tend to have higher Days Away, Restricted, or Transferred (DART) rates, which OSHA uses to assess injury severity.
This update signals a heightened focus on workplaces in sectors like warehousing, transportation, and healthcare. Employers in these industries should be prepared for increased on-site inspections. Notably, on-site inspections will not just be limited to workplaces with high rates of injuries. Workplaces with lower injury rates are also at risk of being randomly selected to verify the reliability of submitted data.
Other significant updates to the program include:
For high-rate establishments, individual establishments will be selected for inspection based on CY 2023 Form 300A data, instead of 2021 data.
For upward trending establishments, individual establishments will be selected for inspection based on CY 2021-2023 Form 300A data, instead of CY 2019-2021 data.
The low-rate establishments list will be generated using CY 2023 Form 300A data, instead of CY 2021 data.
The non-responders list will be generated using CY 2023 data, instead of CY 2021 data.
This update only reconfirms OSHA’s trend towards an increasingly data-driven approach, aiming to target workplaces with the greatest potential hazards. Employers are advised to scrutinize their injury logs and ensure accurate documentation, especially if their data indicates rising or elevated injury rates.
It is also important to keep in mind that while OSHA may begin an on-site inspection for one reason (e.g., injury rates), these inspections often result in citations for unrelated violations observed during the inspection. That being said, with anticipated workforce reductions within OSHA and other budget cuts, OSHA’s ability to maintain a robust number of on-site inspections is uncertain. Nevertheless, employers should proactively review their injury data, address hazards, and ensure compliance to avoid surprises during inspections.
Employer Considerations During Civil Unrest
Recent protests across major U.S. cities, including Los Angeles, have resulted in business disruptions impacting both employers and their employees. The events are a reminder for employers to prepare for emergencies in the face of increasing civil unrest and government responses.
Quick Hits
With ongoing protests in many major U.S. cities and resulting action by the federal, state, and local governments, such as imposing curfews, employers may want to revisit and revise their emergency plans, including to ensure compliance with all applicable laws and to ensure employee safety and preservation of safe operations.
Maintaining clear communication and providing adequate notice of changes to schedules and flexibility in work arrangements can help businesses navigate disruptions caused by protests and other emergency situations effectively, including dealing with curfews.
Legal Considerations
Compliance With Curfews and Emergency Orders
Employers may need to consider compliance with emergency orders, including potentially closing operations temporarily or providing other accommodations for employees to ensure their compliance. Curfews often have exceptions for employees traveling to and from work as well as essential workers. Employers may want to consider providing employees with identification cards or employer-provided letters detailing their status.
Wage and Hour Requirements
Even during workplace disruptions caused by civil unrest, the Fair Labor Standards Act (FLSA) and many state and local wage and hour laws require that employers pay nonexempt employees for all hours worked, including overtime hours, and require that employee hours worked are recorded and tracked.
Leave Policies
Employers may be required to provide leave to employees or family members of employees who may be injured or face other unique health issues exacerbated by civil unrest, such as smoke or tear gas inhalation from crowd control measures.
Health and Safety Regulations
Federal and some state regulations require that employers ensure employees are not exposed to “recognized” workplace hazards. Notably, the federal Occupational Safety and Health (OSH) Act allows employees to refuse to work when they believe they will be exposed to a hazard that presents the risk of death or serious physical harm. Civil unrest, including riots or violent demonstrations, may potentially create hazardous environments for employees.
Reductions in Force
Employers forced to permanently shut down businesses or business locations due to long-term civil unrest may be subject to requirements to provide advanced notice of a reduction in force under the federal Worker Adjustment and Retraining Notification (WARN) Act or state “mini-WARN Acts,” such as Cal-WARN. However, civil unrest may be considered an exception to the notice requirements in certain circumstances.
Potential Responses
Emergency Preparedness Plans
Employers may want to consider developing plans for dealing with an immediate emergency and contingency plans on how the business will operate during emergency circumstances, such as natural disasters or quickly growing protests.
Communication Protocols
Communication with employees is critical to maintaining their safety, keeping track of employees, and informing employees of potential hazards and/or workplace closures. As part of emergency preparedness plans, employers may want to include communication protocols, call sheets, and regularly updated emergency contact lists.
Flexible Schedules/Working Arrangements
Employers may want to consider suspending attendance control policies or implementing flexible work schedules to accommodate curfew restrictions while ensuring employees get adequate working hours. Under certain circumstances and where possible, employers may want to permit remote working arrangements to enable employees to avoid hazards while maintaining workplace productivity.
Enhanced Safety Measures
Employers may also want to provide transportation or make other arrangements to ensure safe travel for employees who need to work during curfew hours or near areas facing protests.
Employee Assistance Programs (EAPs)
Employers may further wish to offer EAPs to support employees who may be experiencing stress or anxiety due to curfews and protests. Providing access to counseling and other resources can help employees cope with these challenging situations
Next Steps
Curfews and protests can present serious challenges for employers that require careful planning and consideration of employment law. Such challenges could become increasingly prevalent across the United States amid the current political climate and heightened polarization on social issues. It is critical for employers to prioritize employee safety, maintain clear communication, and ensure compliance with legal requirements.
McDermott+ Check-Up: June 13, 2025
THIS WEEK’S DOSE
Reconciliation Moves Forward. Senate committees continue to release their reconciliation provisions.
NIH Director Testifies on FY 2026 Budget. National Institutes of Health (NIH) Director Bhattacharya discussed the agency’s fiscal year (FY) 2026 budget request in front of the Senate Appropriations Subcommittee on Labor, Health and Human Services (HHS), Education, and Related Agencies.
House Approves Rescissions Package. The $9.4 billion rescissions package now moves to the Senate.
House Energy and Commerce Health Subcommittee Holds Hearing on Healthcare Supply Chain. Members examined current challenges and incentives to establish a reliable, safe, resilient, and efficient healthcare supply chain.
HHS Secretary Reconstitutes ACIP. Secretary Kennedy terminated all 17 members of the Advisory Committee on Immunization Practices (ACIP) and appointed eight new members.
HHS Releases FY 2026 Congressional Justification for Administration for a Healthy America. The justification provides more detail on the budget request for the proposed new division of HHS.
White House Issues Memo Limiting Medicaid State Directed Payments. The memo seeks to ensure the payments are not more than Medicare payments.
Judge Partially Blocks Diversity, Equity, and Inclusion EOs. The preliminary injunction only addresses parts of the EOs and applies to the parties who brought the suit.
CONGRESS
Reconciliation Moves Forward. H.R. 1, the One Big Beautiful Bill Act, was officially sent to the Senate after the House had to make some last-minute, mostly technical changes to the legislation to comply with the Senate’s reconciliation procedure. The changes required the House to vote again on the bill – which it did as part of a procedural rule vote on the rescissions package. The bill is also going through the Byrd rule procedures in the Senate, which could result in some provisions being dropped or modified. Republican senators also are considering modifications that they deem necessary to secure enough votes to advance the party-line bill through this chamber, where the bill can only lose three Republican votes (visit our Reconciliation Roadmap resource center for additional background on the Byrd rule and a comprehensive summary of the health provisions in H.R. 1).
Senate committees are not expected to hold markups and are instead releasing bill language within each committee’s jurisdiction on a rolling basis. This week, the Senate Health, Education, Labor, and Pensions (HELP) Committee released its language. Provisions that impact healthcare include the elimination of grad PLUS loans in the future and implementation of aggregate loan limits for graduate students in the unsubsidized graduate loan program. The Senate differs from the House here, as its draft caps the loans at $200,000 while the House caps them at $150,000. The HELP language also includes a provision to reinstate funding for cost-sharing reductions for Affordable Care Act (ACA) Marketplace plans that is almost identical to the House-passed language. Notably, the committee print does not include the House-passed provision codifying the ACA program integrity rule, which the Congressional Budget Office (CBO) scored as saving $105 billion over 10 years. The Senate is not expected to actually leave those provisions out of the full bill; the text released by committees can change before a final bill is released. We still await the Senate Finance Committee provisions, which are expected as soon as today. In addition to tax policy, the Finance Committee has jurisdiction over the Medicaid and Medicare programs and much of the ACA.
This week, it briefly appeared that senators were considering adding changes in Medicare payment policies to the reconciliation package. In particular, there was discussion surrounding Sen. Cassidy’s (R-LA) No UPCODE Act, including at a meeting between the Finance Committee and President Trump at the White House. However, as the week progressed, senators indicated unwillingness to make changes to the House-passed bill in the Medicare arena.
CBO also released new publications analyzing the distributional effects of H.R. 1. At the request of House Budget Committee Ranking Member Boyle (D-PA) and House Minority Leader Jeffries (D-NY), CBO released a letter with an updated distributional analysis, finding that H.R. 1 would cause a 3.9% decrease in household resources for the lowest 10% of the income distribution and a 2.3% increase in household resources for the highest 10% of the income distribution. CBO also released an interactive tool that allows users to see the distributional impact of various types of provisions on households with different income levels.
President Trump continues to request that the bill reach his desk for signature by July 4, 2025. Majority Leader Thune (R-SD) is working toward Senate consideration the week of June 23, which would leave time for the Senate to complete action, and the House to vote again on the Senate’s version of the bill, in days leading up to the holiday. However, that is a self-imposed deadline. If it is missed, debate would continue into July.
NIH Director Testifies on FY 2026 Budget. During the Senate Appropriations Subcommittee on Labor, HHS, Education, and Related Agencies hearing, Republicans emphasized the importance of spending NIH money on research rather than indirect costs to universities, and advocated for more research on chronic diseases and greater geographic representation in grantees. Democrats expressed concerns about delays and terminations of FY 2025 NIH funding and the proposed FY 2026 cuts impacting research on cancer and Alzheimer’s disease. They asked for more information about agency restructuring and the number of employees who have left NIH. Bhattacharya emphasized his commitment to working with Congress to improve the budget proposal and attempted to reassure senators that vital research was still being conducted.
House Approves Rescissions Package. In a 214 – 212 vote, the House approved a $9.4 billion rescissions package, agreeing to rescind funding previously appropriated for foreign aid and the Corporation for Public Broadcasting. The package includes rescissions of funding from health programs within the US Department of State and US Agency for International Development (USAID), including $500 million in global health USAID funding and $400 million in President’s Emergency Plan for AIDS Relief (PEPFAR) funding. The Senate needs a simple majority to approve the package and has until July 12, 2025, to act.
House Energy and Commerce Health Subcommittee Holds Hearing on Healthcare Supply Chain. Republicans emphasized the importance of addressing the United States’ reliance on adversarial countries for essential medications and healthcare products, highlighting the risks to national security and patient safety. Democrats pointed to the vulnerabilities in the medical supply chain exposed by the COVID-19 pandemic, stressing the need for a system that fosters a resilient and reliable supply chain. Witnesses emphasized the critical need to strengthen and secure the US pharmaceutical and medical supply chains by reducing reliance on foreign manufacturers, addressing regulatory and financial challenges, and investing in domestic production.
ADMINISTRATION
HHS Secretary Reconstitutes ACIP. In an op-ed, Secretary Kennedy announced the removal of all 17 members of ACIP and their pending replacement with individuals he deems free from conflicts of interest. ACIP is an independent advisory committee responsible for vaccine recommendations, which the Centers for Disease Control and Prevention adopts as official policy. The HHS secretary normally chooses ACIP members following an application and nomination process, and members serve four-year terms. Shortly after the op-ed published, Kennedy announced eight new ACIP members in an X post:
Joseph Hibbeln, MD
Martin Kulldorff, MD, PhD
Retsef Levi, PhD
Robert Malone, MD
Cody Meissner, MD
James Pagano, MD
Vicky Pebsworth, PhD, RN
Michael Ross, MD
HHS Releases FY 2026 Congressional Justification for Administration for a Healthy America. The justification includes more detail about the structure and funding levels for the proposed new HHS division called the Administration for a Healthy America (AHA). HHS requests $14.1 billion in discretionary funding for AHA and $6.5 billion from other sources, for a total of $20.6 billion. Highlights include:
$7.2 billion for primary care programs, which assumes the elimination of 23 programs (including the National Diabetes Prevention Program) and represents a cut of $675 million from current levels
$1.7 billion for environmental health, which assumes the elimination of nine programs and represents a $718 million cut from current levels
$2.7 billion for HIV and AIDS prevention and treatment, which assumes the elimination of five programs and represents a $927 million cut from current levels
$1.7 billion for maternal and child health, which assumes the elimination of five programs and represents a $661 million cut from current levels
$5.8 billion for mental and behavioral health, which assumes the elimination of 40 programs and represents a $1.4 billion cut from current levels
$948 million for the health workforce, which assumes the elimination of 14 programs (including the Children’s Hospital Graduate Medical Education program) and represents an $878 million cut from current levels
$568 million for policy, research, and oversight, which assumes the elimination of four programs and represents an increase of $147 million from current levels
These budget documents represent a request only, and Congress may revise the proposed funding levels and programmatic and structural changes during the FY 2026 appropriations process.
White House Issues Memo Limiting Medicaid State Directed Payments. The memo calls Medicaid state directed payments (SDPs) a “gimmick” and directs the HHS secretary to reduce waste, fraud, and abuse by ensuring that Medicaid SDPs are not higher than Medicare rates. Currently, the Biden-era managed care rule allows SDPs to reach the average commercial rate, which is substantially higher than the Medicare rate.
The future of SDPs is currently being debated by Congress in the reconciliation process. H.R. 1 would cap new SDPs in expansion states at the Medicare rate and would cap new SDPs in non-expansion states at 110% of the Medicare rate; approval for existing SDPs would be grandfathered. That policy differs from what is in the Administration’s memo. The forthcoming Senate Finance Committee reconciliation language could make changes to the House bill language as well.
COURTS
Judge Partially Blocks Diversity, Equity, and Inclusion EOs. The US District Court for the Northern District of California issued a partial injunction to prevent the Trump administration from enforcing three provisions of EOs 14168, 14151, and 14173 against the parties who brought the suit:
The equity termination provision, which directs agencies to terminate federal funding for all equity-related grants or contracts
The gender termination and gender promotion provisions, which direct agencies to terminate funding for any programs that promote gender ideology
The court did not grant an injunction against the certification provision, which requires entities to certify that they do “not operate any programs promoting diversity, equity, and inclusion, that violate any applicable Federal anti-discrimination laws.”
BIPARTISAN LEGISLATION SPOTLIGHT
Reps. Matsui (D-CA) and Balderson (R-OH) and Sens. Smith (D-MN) and Cassidy (R-LA) reintroduced the Telemental Health Care Access Act, which would permanently remove the statutory requirement that Medicare beneficiaries be seen in person within six months of being treated for mental and behavioral health services through telehealth. This requirement is currently delayed until September 30, 2025. Read the press release here.
QUICK HITS
MEDPAC and MACPAC Release June 2025 Reports. The Medicaid and CHIP Payment and Access Commission (MACPAC) report includes chapters on transitions from pediatric to adult care for Medicaid-covered children and youth with special healthcare needs, residential behavioral health treatment services for children, access to medications for opioid use disorder in Medicaid, the Program of All-Inclusive Care for the Elderly, and Medicaid home- and community-based services. The Medicare Payment Advisory Commission (MedPAC) report includes chapters on physician fee schedule payment reform, supplemental benefits and home healthcare use in Medicare Advantage, Medicare Part D prescription drug plans, Medicare beneficiaries in nursing homes, Medicare rural provider quality measurements, and cost sharing for outpatient services at critical access hospitals.
FDA Discusses Medical Product Review Test Program. FDA Commissioner Makary and Center for Biologics Evaluation and Research Director Prasad wrote a JAMA article about the FDA’s priorities that mentioned a new review pathway.
Senators Release Bipartisan Report on Organ Procurement Organizations. The bipartisan report, published by Senate Finance Committee Ranking Member Wyden (D-OR) and Sen. Grassley (R-IA), shares findings of their investigation into organ procurement organizations and discusses policy recommendations. Read the press release here.
FTC, DOJ Announce Listening Sessions on Pharmaceutical Market Competition. The listening sessions hosted by the Federal Trade Commission (FTC) and US Department of Justice (DOJ) Antitrust Division will discuss anticompetitive practices by pharmaceutical manufactures, formulary and benefit practices impacting drug prices, and further regulatory actions.
FTC Announces Workshop on Gender-Affirming Care Practices. The invite-only workshop will take place on July 9, 2025, and will investigate whether consumers have been exposed to false or unsupported claims about gender-affirming care.
NEXT WEEK’S DIAGNOSIS
Next week is the Juneteenth federal holiday, and the House will be in recess. The Senate is scheduled to be in session Monday through Wednesday.
Council of the EU and EP Agree on “One Substance, One Assessment” Legislative Package
The Council of the European Union (EU) announced on June 12, 2025, that it reached a provisional agreement with the European Parliament (EP) on the “one substance, one assessment” (OSOA) legislative package, “which aims to streamline assessments of chemicals across relevant EU legislation, strengthen the knowledge base on chemicals, and ensure early detection and action on emerging chemical risks.” The package contains three proposals: a directive concerning the re-attribution of scientific and technical tasks; a regulation aimed at enhancing cooperation among EU agencies in the area of chemicals; and a regulation establishing a common data platform on chemicals. According to the Council, the co-legislators maintain the objectives of the European Commission’s (EC) legislative package but expanded the information available in the common platform to include scientific data submitted voluntarily, clarified the treatment of medical data, and ensured that the content of the platform will be publicly available. The provisional agreement will now be considered by the Council of the EU and the EP for formal adoption.
According to the press release, the OSOA package would create a common platform to integrate existing databases and provide a “one-stop shop” for chemical data from EU agencies and the EC. The platform would allow one legislative area to share knowledge with another and would mandate the systematic collection of human biomonitoring data to inform policymakers about chemical exposure levels. The press release notes that a monitoring and outlook framework “will detect chemical risks early, support fast regulatory responses, and track impacts through an early warning system and indicators.” It would also empower the European Chemicals Agency (ECHA) to generate data when needed and ensure transparency of scientific studies.
Under the agreement, the platform, hosted by ECHA, would provide access to all chemical data generated or submitted as part of the implementation of “about” 70 pieces of EU legislation. The agreement requires ECHA to create and manage a database, inside the common data platform, that lists alternatives to substances of concern. The database should include alternative technologies and materials that do not require such substances of concern. The agreement specifically supports the voluntary submission of scientific data to be included in the platform.
The press release states that the agreement considers that certain categories of newly generated data relating to chemical substances present in medicinal products from the European Medicines Agency (EMA) must also be addressed. According to the press release, the EC will assess whether to add further categories of chemical data related to medicinal products (for instance, other elements than active substances, substances that are now considered non-relevant, or data held by national agencies) in the future. The press release notes that the co-legislators agreed that legacy data from EMA (i.e., data generated and submitted before the entry into force of the regulation) would be gradually integrated into the platform, starting six years after the regulation enters into force.
Under the agreement, the platform would provide access to data that are already public, in line with the rules of the originating legal acts. The press release notes that the OSOA package will help ECHA, and other agencies, to generate studies for multiple purposes. The agreement proposes that four years after the regulation on the common data platform enters into force, ECHA should commission an EU-wide human biomonitoring study to understand better the population’s exposure to chemicals. Human biomonitoring data from the EU and national research programs will also be included in the platform.
Commentary
OSOA is part of the 2020 Chemicals Strategy for Sustainability (the CSS), a key building block of the European Green Deal. As a core element of the European Green Deal’s zero pollution ambition, the CSS aims to strengthen protection for people and the environment while driving innovation toward safer and more sustainable chemicals. One of the goals of the CSS is to simplify and consolidate the EU regulatory framework on chemicals, and OSOA is intended to establish a simpler process for assessing chemical risks and hazards.
Supreme Court: Stop Holding Disabled Students to a Higher Bar
Must a student with a disability prove that their school acted in “bad faith” to win a discrimination case? Until now, courts in some parts of the country said yes, requiring disabled students to meet a higher standard than other litigants bringing a civil rights claim. But in a unanimous decision issued on June 12, 2025, the U.S. Supreme Court rejected that rule, holding that students suing for damages under the Americans with Disabilities Act (ADA) or Section 504 of the Rehabilitation Act—a federal law that prohibits disability-based discrimination by programs receiving federal funds—are entitled to the same legal standards that apply for disability discrimination claims outside of educational services context, like employment and public access to government services.
The case, A.J.T. v. Osseo Area Schools, involved a teenager with severe epilepsy who could only attend school in the afternoon. Her district refused to adjust her schedule — and when her parents sued under the ADA and Section 504 and sought damages, the lower courts said they had to prove the school acted with “bad faith or gross misjudgment,” a high bar.
The Supreme Court disagreed. Writing for a unanimous Court, Chief Justice Roberts made clear: there is no special, heightened intent standard just because the case involves education. Disabled students — like any other plaintiffs — can prevail on an intentional discrimination claim by showing “deliberate indifference,” not an ulterior motive. The Court acknowledged what it described as the “daunting challenges” students with disabilities face on a “daily basis.” But it emphasized that “those challenges do not include having to satisfy a more stringent standard of proof than other plaintiffs to establish discrimination under Title II of the ADA and Section 504 of the Rehabilitation Act.”
Implications for Public Schools
Greater likelihood of legal challenges and OCR investigations: With a lower burden of proof, families may be more inclined to pursue claims (for example, in cases involving denial of services, shortened instructional time, or exclusion from school programs).
Deliberate indifference replaces bad faith as the key threshold: Plaintiffs no longer need to prove malice or ill intent. Instead, liability may arise where school officials “disregarded a strong likelihood that the challenged action would result in a violation of federally protected rights,” as the Supreme Court articulated. This is the same legal standard used in disability cases involving public healthcare, correctional facilities, and other contexts— and now governs the provision of accommodations for disabled students in public education as well.
Good faith no longer insulates districts from liability: Even well-intentioned decisions may result in legal exposure if schools fail to meet the known needs of students with disabilities. The focus now rests on whether the denial of services or accommodations reflects deliberate indifference, not the motivations behind it.
Flexibility is key in meeting accommodation obligations: School districts should reexamine rigid policies around instructional hours, staffing, and service delivery. Administrative convenience resulting in denying students with disabilities access to education risk exposure to litigation. In some cases, creative scheduling or individualized service models may be prudent for districts to ensure compliance with federal law.
Selling Your Physician Practice? Don’t Miss Out on ESOPs as an Alternative Exit Strategy
Leonard Lipsky and Carly Eisenberg Hoinacki from Sheppard Mullin’s Healthcare Team recently sat down with Nick Francia[i] and Sarah Bothner[ii] of The Capital ESOP Group at UBS Financial Services Inc.[iii], to explore the ins and outs of employee stock ownership plan (ESOP) transactions as a potential exit strategy for physician practices. Below is the Q&A from their conversation.
Leonard Lipsky (Sheppard Mullin): While many well-performing practices still command robust prices, the overall physician transaction market sentiment is more measured than it was a couple of years ago (particularly for smaller or less attractive specialties). In our experience, many physicians are not familiar with an ESOP as a potential exit strategy. Can you start by giving us an overview of what an ESOP is and how it differs from other exit strategies that physician practices might consider?
Nick Francia (UBS): An ESOP transaction can provide selling physicians with a flexible, tax-efficient exit strategy in which they receive fair market value for their stake in the practice. At the same time, an ESOP allows them to preserve their legacy. This is because an ESOP, unlike a sale to an external buyer, can help transition the practice’s leadership to its existing management team and key employees who have helped build it to where it is today. Another way that ESOPs differ from other exit strategies is the ability for the selling physicians to maintain control after the sale, as they have the choice to sell anywhere from 1% to 100% of the practice to the ESOP.
Carly Eisenberg Hoinacki (Sheppard Mullin): Can you explain in more detail how ESOP transactions differ from traditional M&A transactions, particularly in terms of the financial benefits physicians see at the time of sale and in the long term? In an ESOP transaction, sellers typically receive less cash at closing compared to a traditional M&A deal. Can you explain how this works and why practice owners might prefer an ESOP transaction from an economic standpoint?
Sarah Bothner (UBS): Many ESOP transactions are structured so that the seller(s) receive part of their proceeds in cash at closing, with the remaining proceeds paid out over time. This might differ from other exit strategies in which a majority of the sale proceeds are received upfront. However, in an ESOP transaction, the seller has the option to defer (or, with proper planning, eliminate) the capital gains taxes in connection to their equity sale. The ESOP transaction can also be structured to allow the seller the ability to benefit from the future growth and success of the practice, either through a partial transaction or the use of warrants.
Carly Eisenberg Hoinacki (Sheppard Mullin): We regularly advise large physician practices contemplating M&A transactions, and one challenge we sometimes encounter is divergent ownership objectives, whether driven by differences in practice specialty or career stage. These differing interests can complicate the transaction process. Can an ESOP transaction help resolve this issue?
Sarah Bothner (UBS): An ESOP transaction can be a great fit for a practice with multiple owners who have different goals. With an ESOP, one owner can choose to exit the practice without requiring the remaining owners to sell any of their shares, or to buy out the seller’s stake. Once the ESOP is established, remaining owners can simply sell their shares to the ESOP when they wish to retire. Additionally, a partial ESOP transaction can allow an owner to diversify their wealth away from the practice in the present, while remaining active in the practice with potential for upside exposure to its future — for example, by selling 49% of the shares to the ESOP and holding on to the remaining 51% interest.
Leonard Lipsky (Sheppard Mullin): What would you say are some of the most common misconceptions about ESOP transactions among physician practices?
Sarah Bothner (UBS): One common misconception about ESOPs in any industry is the idea that the employees need to pay out of pocket for shares of the company. In reality, the shares are owned by the ESOP trust; the employees will become economic beneficiaries of that trust and will receive contributions at no cost. The ESOP creates a retirement benefit for every qualifying employee – clinical and non-clinical. While the employees may not be true equity owners of the company, they can benefit directly from higher share values as the company continues to grow and succeed. Another misconception is that the employees will control the company after the ESOP transaction. In reality, the seller can (and is often encouraged to) stay involved in the operations and management of the company for as long as they would like.
Leonard Lipsky (Sheppard Mullin): As you know, approximately two-thirds of the states prohibit non-physicians from owning a physician practice (referred to as a prohibition on the “corporate practice of medicine”) and most states have some form of fee-splitting prohibition that prohibits physicians from sharing their professional fees with non-physicians. As a result, in states that have a “corporate practice of medicine” prohibition, M&A transactions involving a physician practice are typically structured using a “PC-MSO” model, whereby the non-clinical assets of a physician practice are acquired by a management services organization (MSO) and the MSO provides management services to the professional corporation (PC) in exchange for a fair market value fee, while the PC, through its physicians, focuses on providing clinical care. Are ESOP transactions structured similarly?
Nick Francia (UBS): Yes, ESOPs are structured similarly; however, instead of a third-party investor owning the MSO, it’s the ESOP trust that owns the MSO. In an ESOP transaction, the employees of the practice become economic beneficiaries of the ESOP trust. The ESOP then appoints a trustee to manage and protect the assets of the ESOP trust (and, hence, the MSO) for the benefit of the employees.
Listen to this post
FOOTNOTES
[i] Nick Francia, Managing Director, Wealth Management, The Capital ESOP Group at UBS ([email protected]; (202) 585-5354).
[ii] Sarah Bothner, Senior Wealth Strategy Associate, The Capital ESOP Group at UBS ([email protected]; (202) 942-2836).
[iii] Nick Francia is a Financial Advisor with UBS Financial Services Inc. a subsidiary of UBS Group AG. Member FINRA/SIPC in Washington, DC. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. Neither UBS Financial Services Inc. nor its employees (including its Financial Advisors) provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion, strategy or investment, including any estate planning strategies, before you invest or implement. UBS Financial Services Inc. is not affiliated with Sheppard Mullin. For our client relationship summary disclosures, please visit ubs.com/relationshipsummary. UBS Financial Services Inc., Member FINRA/SIPC.
Oregon SB 951, Regulating the Corporate Practice of Medicine, Is Signed Into Law—But Changes May Be in the Works Already
Oregon Governor Tina Kotek has signed SB 951—which, as we noted on June 4, 2025, disrupts historically accepted corporate practice of medicine (CPOM) structures by banning arrangements that are inherent to friendly PC models and placing limitations on Management Service Organizations (MSOs).
SB 951 is now Oregon law, with staggered effective dates.
The new law will be the strictest in the nation when it comes to limiting health care ownership and influence, and it seems certain to affect corporate investment in the state’s medical sector.
Yet in an unusual twist, the Oregon legislature is now poised to pass related legislation, HB 3410A, that would amend portions of SB 951 in the course of the same legislative session.
Introduced in January, HB 3410 originally ordered the Oregon Health Authority to merely “study health care” and to submit a report, with possible legislative recommendations, to the committees of the state Legislative Assembly related to health, by September 15, 2026. By early June, this directive had gained new life as HB 3410A, as a means to amend SB 951. It had become apparent that the latter would soon become law, and necessary fixes had already been identified.
HB 3410A
HB 3410A, as amended, would make changes relating to the SB 951 prohibition that an MSO or its shareholders, directors, members, managers, officers, or employees may not own or control a majority of shares in a professional medical entity (PME)—individually, or in combination with the MSO or any other shareholder, director, member, manager, officer, or employee or contractor (adding contractor to SB 951).
HB 3410A would remove SB 951’s prohibition that an MSO or its shareholders, directors, members, managers, officers, or employees may not serve as a director of officer of, be an employee of, with, or receive compensation from, an MSO to manage a PME with which the MSO has contracted.
As currently written, HB 3410A clarifies that a PME may enter into an agreement with a shareholder of a PME and an MSO to control or restrict a transfer or sale of the PME’s stock, interest, or assets, under certain conditions. Regarding the conditions under which PMEs may enter into such agreements, a PME’s breach of contract for management services with an MSO is expanded to include a shareholder or member’s breach of contract for management services with the PME or an MSO on behalf of the PME. HB 3410A would further allow individuals who provide services for the PME to be a shareholder, director, or manager of an MSO if they do no own more than 10 percent of shares in the PME and are compensated at the market rate for services provided.
HB 3410A would also change the criteria in SB 951 establishing when a noncompetition agreement between a medical licensee and another is valid and enforceable. This includes if the ownership interest of a medical licensee in a PME is 1.5 percent or more of the entire ownership or membership interest—a change from 10 percent in SB 951. Such an agreement would also be valid under HB 3410A if it is with a PME that provides the medical licensee with documentation of the PME’s “recruitment investment” (changing SB 951’s “protectable interest”) and has a term that is not longer than:
Five (5) years from the date when the medical licensee was hired, if the licensee is directly providing medical services, health care services, or clinical care in a health professional shortage area; or
Three (3) years, if not.
Takeaways
Even before the enactment of SB 951, Oregon law required that in a professional corporation organized for the purpose of practicing medicine, licensed physicians must hold the majority of each class of shares entitled to vote; must constitute a majority of directors; and must make up most officer positions. MSOs typically adapt by agreeing to manage nonclinical operations in exchange for an equity stake or ownership in a professional corporation (PC) owned by physicians—in a friendly PC model that complies with CPOM laws while allowing physicians to focus on non-administrative tasks.
As passed by the Oregon legislature and signed by the governor, SB 951 aims to amend Oregon’s CPOM law to prevent those who are not physicians from both running the company and controlling physicians who make medical decisions. The new law does not ban MSOs yet limits their ability to control physician decision-making. Those investing or planning to invest in health care entities in Oregon will now need to proceed carefully to ensure compliance with SB 951—whether amended or not by HB 3410A—and stay alert as to changes in other states that may enact similar legislation.
SB 951 is a complex piece of legislation which almost certainly will have unanticipated impacts as it is implemented. As mentioned in our last post, litigation is expected.
Navigating the Legal Risks of Consumer Protection Claims in Healthcare
Hospitals and health systems are familiar with traditional medical malpractice cases, but as healthcare is increasingly seen as a business, healthcare providers need to understand the potential for, and limitations of claims brought under the guise of consumer protection laws.
Consumer protection laws can be tempting causes of action for individuals who believe they have been wronged by the healthcare system. Unlike medical malpractice claims, which require expert testimony and may include damages caps, consumer protection statutes often include treble damages, punitive damages, and attorneys’ fees. Consumer protection laws may also offer injunctive relief as a remedy, do not require a plaintiff to prove causation or damages, and have the potential for class action lawsuits. To prevent plaintiffs from reframing a negligence case to sidestep the limitations of medical malpractice cases, some courts and states have drawn boundaries between consumer protection and medical malpractice cases.
While each state has its own consumer protection laws, the statutes generally prohibit unlawful business or trade practices, which can be broadly defined. For example, Oregon’s Unlawful Trade Practices Act lists over 80 separate ways to violate the statute, including the use of “deceptive representations” in connection with a service or making false or misleading representations about the price of a service.[1] Other states, such as Texas, prohibit “unconscionable” actions, which includes taking advantage of “the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.”[2]
Healthcare services are not traditionally viewed through a consumer protection lens but nevertheless pose a high risk for this type of claim. Patients necessarily rely on the specific knowledge, ability, and experience of a provider. Advertising and marketing by healthcare providers is ubiquitous. Moreover, the care is often removed or distant from the marketing and billing for the service. Traditionally, “learned professions” such as “practitioners of the healing arts” were not considered a “trade” subject to consumer protection laws.[3] Today, no such clear limitation exists.
Many courts have clarified that hospitals and healthcare providers are subject to the same consumer protection laws as any other business, but some guardrails still exist. Some states and courts have restricted the types of cases that may be brought against healthcare providers under the guise of consumer protection laws. Several states have statutes that expressly prohibit claims under the state consumer protection act if the case alleges personal injury resulting from negligence.[4] To determine whether the case alleges an injury resulting from negligence, Texas courts look to whether the cause of action refers to an applicable standard of care. In one case, a plaintiff alleged that the physician engaged in an unconscionable course of action when she went to a mental health facility seeking advice related to her medication but was then admitted without consent and not permitted to leave the facility.[5] Because the plaintiff’s claim was premised on an alleged departure from accepted standards of care relating to involuntary commitment, the claim sounded in negligence and could not be brought under the consumer protection act.[6]
Even where there is no statute precluding negligence-based claims, some courts look for a nexus between the claims at issue and the entrepreneurial or business aspect of practicing medicine.[7] The Appeals Court of Massachusetts applied consumer protection law to a class action case related to overcharging for medical records, noting that the service was an entrepreneurial element of the practice.[8] Others, such as the Kentucky Court of Appeals[9] or the Supreme Court of Montana[10] have declined to apply consumer protection laws to cases where there was no connection between the care and any improper financial relationship or incentive or where there was no connection to the entrepreneurial, commercial, or business aspects of running a medical practice.
Other courts have refused altogether to require a nexus between the care provided and the entrepreneurial aspect of medicine. The District of Columbia Court of Appeals rejected any such requirement, noting “concern that the line between [consumer protection law] claims and traditional medical malpractice claims will be blurred appears to be overstated.”[11] Similarly, the Western District of Pennsylvania noted that consumer protection law is to be “construed liberally,” and neither intent nor actual deception are required.[12]
Whether consumer protection laws will apply to a potential claim is a fact-intensive question that necessarily relies on state law. The broad spectrum of available damages, potential for class action, attorneys’ fee entitlement, and possibility of injunctive relief make consumer protection claims particularly disruptive for providers. Courts across the country have been skeptical of medical malpractice cases filed under the guise of consumer protection cases, but skepticism may be eroding as case law develops and marketing by providers increases.
Healthcare entities and providers alike need to be on the lookout for potential consumer protection risks. Entities should be aware of the potential application of consumer protection law in their jurisdiction and consider proactive strategies, such as evaluating marketing statements and educating providers about consumer protection pitfalls.
ENDNOTES
[1] ORS § 646.608.
[2] 2 Texas Business and Commerce Code § 17.45(5)
[3] Frankeny v. District Hospital Partners, LP, 225 A.3d 999, 1005 (2020) (analyzing the District of Columbia Consumer Protection Procedures Amendment Act).
[4] See, e.g., Texas Medical Liability Act (TMLA), Texas Civil Practices and Remedies Code § 74.004(a). See also Kansas Consumer Protection Act, Ks. St. 50-635(b).
[5] Loya v. Hickory Trail Hospital, L.P., 673 S.W.3d 1, 8-10 (2022).
[6] Id. at 10.
[7] See, e.g., Beauchesne v. New England Neurological Associates, P.C., 159 N.E. 3d 728 (2020).
[8] Id. at 729.
[9] Barnett v. Mercy Health Partners-Lourdes, Inc., 233 S.W.3d 723 (2007).
[10] Hastie v. Alpine Orthopedics & Sports Medicine, 363 P.3d 435 (2015).
[11] Frankeny, 225 A.3d at 1007 (noting that a medical malpractice claim has entirely different elements and uses different types of evidence, making potential crossover unlikely).
[12] Schiff v. Hurwitz, No. 12cv0264, 2012 WL 1971320, at *4 (W.D. Pa, June 1, 2012) (applying Pennsylvania’s Consumer Protection law to a claim against an institutional review board where the board did not consider the risk of injury and approved a medical device despite the fact that the Food and Drug Administration was neither aware of nor approved of the use of the device).
No Surprises Here! Connecticut District Court Confirms IDR Awards Are Enforceable Under the NSA, Deepening Judicial Divide Over Award Enforcement Mechanisms
The U.S. District Court for the District of Connecticut has become the latest court to weigh in on whether Independent Dispute Resolution (“IDR”) awards issued under the No Surprises Act (“NSA”) are enforceable. In a recent decision, the District Court has held that providers may sue to enforce arbitration awards issued in their favor under the NSA, rejecting the argument that the NSA contains no private right of action to enforce such awards. The decision comes amid an ongoing split among federal district courts on this issue, further amplifying uncertainty around the NSA’s implementation—and raising the stakes for insurers, providers, and policymakers alike.
The NSA’s Arbitration Process and the Awards at Issue
Passed in 2020, the NSA protects patients from so‑called “surprise” out‑of‑network medical bills. These bills often arise in emergency situations or when a patient unknowingly receives care from an out‑of‑network provider at an in‑network facility.
When the NSA applies, it caps patient cost‑sharing at in‑network levels and also prohibits out‑of‑network providers from balance billing to collect the remainder of their billed charges. If a provider seeks additional reimbursement for services rendered, the NSA permits the provider to engage in a two‑step dispute resolution process: (1) a 30‑day open negotiation period between the provider and payer, and if negotiation fails, (2) a “baseball‑style” arbitration conducted by a certified Independent Dispute Resolution Entity (“IDRE”). The IDRE’s role is to choose between the provider’s and the payer’s offer, considering multiple statutory factors, including the Qualifying Payment Amount (“QPA”). An IDRE decision is binding upon the parties and must be paid within 30 days. The NSA limits judicial review of IDR awards to narrow circumstances outlined in the Federal Arbitration Act (“FAA”).
However, the NSA does not specify if IDR awards can be enforced by a Court if the payor fails to pay the awarded amount, an omission that led directly to the current litigation. In this groundbreaking case, the plaintiffs—Guardian Flight LLC and several affiliated air ambulance providers—rendered out‑of‑network emergency transport services to patients covered by health plans administered and/or insured by Aetna and Cigna. After receiving unreasonably low initial payments, service providers initiated the NSA’s IDR process and prevailed. Despite the binding nature of the awards, however, both Aetna and Cigna failed to make timely payments or, in many cases, made no payments at all on the NSA awards, leading Guardian Flight and the other air ambulance companies to file suit to enforce the awards.
In their complaint, the service providers alleged multiple causes of action. First, they sought to enforce the unpaid awards under the NSA. They also brought additional claims under ERISA § 502(a)(1)(B), asserting that as the assignees of their patients’ benefit rights, they were entitled to payment of the full arbitration award. Finally, they also alleged violations of the Connecticut Unfair Trade Practices Act (“CUTPA”), based on Cigna and Aetna’s pattern of low, late, or non‑payment that they characterized as a deliberate business strategy. In response, Aetna and Cigna moved to dismiss, arguing that the NSA does not provide a private right of action to enforce IDR awards, that the plaintiffs lacked standing under ERISA to bring their claims, and that the CUTPA claims were preempted.
The District Court sided with the service providers, holding that the NSA permits parties to IDR awards under the NSA. Here, the court found that the statutory text of the NSA contained multiple examples of mandatory and rights‑creating language—specifically that insurers “shall” make payment and that awards “shall” be binding. The court also emphasized that while Congress did not incorporate the FAA’s award confirmation provision, that omission was consistent with the fact that NSA awards are self‑executing and immediately enforceable upon issuance, unlike traditional arbitration awards, which must be confirmed in court under the FAA. Critically, the court rejected Cigna and Aetna’s argument that the absence of an express enforcement mechanism precluded judicial enforcement, warning that such an interpretation would lead to “absurd” results—namely, that compliance with IDR awards would rarely be required.
Finally, the court also upheld the service providers’ ERISA claims, finding that they had standing as assignees of their patients’ health plan benefits and could therefore sue to recover benefits due under those plans. The court rejected the defendants’ argument that there was no concrete injury because the patients were not balance billed, emphasizing that the denial of full reimbursement constituted a redressable injury under ERISA regardless of whether the provider or the patient ultimately bore the financial burden. In addition, the court also upheld the plaintiffs’ CUTPA claims, holding that such state law claims were not preempted by either the NSA or ERISA, reasoning that CUTPA claims premised on systemic underpayment practices could coexist with the federal scheme and, if anything, could support its implementation by incentivizing insurers to comply with the NSA’s 30‑day payment deadline through the threat of state‑level penalties.
What’s Next? Growing Judicial Divide and Increasing Likelihood of Appellate Review
The Connecticut court’s decision adds to a growing body of federal district court decisions grappling with how—and whether—IDR awards under the NSA can be enforced. Previously, two other district courts reached conflicting conclusions: the District Court for the District of New Jersey held that the FAA provides a mechanism to confirm NSA awards, while the Northern District of Texas concluded that there is no statutory basis to enforce them under either the FAA or the NSA. The Connecticut ruling generally tracks with the New Jersey District Court, though, by contrast, it grounds enforceability of IDR awards in the NSA itself, independent of the FAA. At bottom, however, with decisions now issued in three separate circuits—and a growing majority of courts concluding that IDR awards are enforceable—the issue is rapidly ripening for appellate resolution.
Meanwhile, appeals are ongoing in the Fifth Circuit, which recently granted a petition for an en banc rehearing of a separate appeal relating to other aspects of the NSA’s implementation. And, in the weeks since the Connecticut court’s decision came down, Aetna has already sought leave to file an interlocutory appeal of the court’s ruling, so the ultimate force and effect of the ruling remains unclear. These developments make further review by the Courts of Appeals all but certain, and review by the Supreme Court increasingly likely. Accordingly, providers and payers alike should take note that the risk landscape for NSA non‑compliance is becoming more defined—and more actionable—and seek legal counsel to guide them as needed.
HHS Announces Release of MAHA Report
On May 22, 2025, the U.S. Department of Health and Human Services (HHS) announced the release of a new federal report, Making Our Children Healthy Again (MAHA Assessment) issued by the Make America Healthy Again (MAHA) Commission. The MAHA Commission was established by Executive Order (EO) 14212 to:
(a) study the scope of the childhood chronic disease crisis and any potential contributing causes, including the American diet, absorption of toxic material, medical treatments, lifestyle, environmental factors, Government policies, food production techniques, electromagnetic radiation, and corporate influence or cronyism;
(b) advise and assist the President on informing the American people regarding the childhood chronic disease crisis, using transparent and clear facts; and
(c) provide to the President Government-wide recommendations on policy and strategy related to addressing the identified contributing causes of and ending the childhood chronic disease crisis.
The MAHA Commission was required to submit to the President, within 100 days of the EO’s release on February 13, 2025, this MAHA Assessment. Within 180 days of the date of the EO, or by August 12, 2025, the MAHA Commission is required to submit to the President a “Make Our Children Healthy Again Strategy” based on the findings from the MAHA Assessment.
According to HHS, the MAHA Assessment identifies key drivers behind childhood chronic diseases, including poor diet, accumulation of environmental toxins (such as pesticide exposure), insufficient physical activity, chronic stress, and overmedicalization.
Among other things, the MAHA Assessment examines pesticide use in agriculture and the perceived negative impacts it has on children. It calls for more research and potential shifts in food and farming policies to improve children’s health.
The MAHA Assessment includes a subsection entitled “Why Children Are Uniquely Vulnerable to Environmental Chemicals,” where pesticides are mentioned several times. The MAHA Assessment states that children are at heightened risk when exposed to environmental chemicals, including pesticides. The MAHA Assessment states the following as key factors:
Sensitive Developmental Windows: Even minor exposures during critical periods — in utero, infancy, early childhood, and adolescence — can result in developmental delays or permanent harm.
Developing Immune Systems: Young children have maturing immune systems, making them susceptible to chemical exposures that can disrupt lifelong immune development.
Detoxification Challenges: Babies struggle to detoxify chemicals as effectively as adults, allowing chemicals to accumulate in their smaller bodies.
Accelerated Brain Development: Early childhood is marked by rapid brain development, with up to one million new neural connections forming every second. Toxic exposures during this time can derail neurodevelopment, leading to lifelong learning disabilities and behavioral disorders.
Endocrine Disruption: Multiple developmental stages, from fetal growth to onset of puberty, are regulated via exquisitely sensitive hormonal signaling that can be disrupted by endocrine-disrupting chemicals, impacting growth trajectories and outcomes from conception through early adulthood.
Adolescent Brain Remodeling: The brain undergoes a second phase of remodeling during adolescence, particularly in regions responsible for impulse control and emotion. Neurotoxic substances — such as solvents and heavy metals — can have lasting effects that extend well beyond the teenage years.
With regard to how children are exposed to hazardous substances in different ways, the MAHA Assessment states several factors including:
Breastmilk: The MAHA Assessment states: “Virtually every breastmilk sample … tested in America contains some level of persistent organic pollutants (POPs), including pesticides, microplastics, and dioxins”;
Household Dust: Infants and toddlers ingest more household dust than adults, and according to the MAHA Assessment, much of household dust “contains detectable levels of lead, flame retardants, and pesticide residues”;
Home Environment: The MAHA Assessment cites to a 2009 American Healthy Homes Survey, a collaborative effort by the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Housing and Urban Development (HUD), for demonstrating “the widespread presence of pesticides in U.S. homes, with almost 90% showing measurable levels of at least one insecticide on floors”; and
Food: The MAHA Assessment states: “More than eight billion pounds of pesticides are used each year in the food systems, around the world, with the U.S. accounting for roughly 11%, or more than one billion pounds.”
The MAHA Assessment states some epidemiological and clinical studies raised concern about possible links between pesticides, herbicides, and insecticides and adverse health outcomes in children. It specifically notes that glyphosate may have a wide range of possible health effects, ranging from reproductive and developmental disorders to cancer, liver inflammation, and metabolic disturbances. Atrazine is also specifically mentioned as causing endocrine disruptions and birth defects. The MAHA Assessment notes that federal government reviews of epidemiologic data for the most common herbicide did not establish a direct link between correct use of the herbicide and adverse health outcomes. In addition, the MAHA Assessment acknowledges that “more recent data from the USDA’s Pesticide Data Program found that 99% of food samples tested in 2023 were compliant with EPA’s safety limit.” HHS states that an updated health assessment by the federal government on common herbicides is expected in 2026.
Commentary
The MAHA Assessment specifically names pesticides chlorpyrifos, atrazine, and glyphosate as examples presenting notable risks from modern agricultural production methods. The MAHA Assessment highlights many of the problems said to be associated with modern food production as a system — processed food ingredients, nutrition, and typical farming practices. The references to pesticides are generally grouped with other categories or substances, including heavy metals, per- and polyfluoroalkyl substances (PFAS), fluoride, and phthalates. The MAHA Assessment acknowledges that EPA has a “robust risk-based approach that considers hazard and exposure for assessing the risks of chemicals, including pesticides, to human health and the environment.”
Throughout the MAHA Assessment, there are footnotes citing studies in an effort to raise concerns about the dangers of the modern food production system, yet the established data about pesticide residues are found to be compliant with the requirements of the Food Quality Protection Act (FQPA). When discussing EPA’s “robust risk-based approach,” the MAHA Assessment does not explicitly note that pesticide residues in food have been found to have a “reasonable certainty of no harm” based on EPA’s robust review of a comprehensive data set. There is no mention of the safety standard in FQPA that there is a “reasonable certainty of no harm” from pesticide residues — perhaps since such notes might sound contrary to the MAHA Assessment’s tone that the food supply and its components are causing widespread harm to the consuming public. Separately, it is curious that in any cross-agency review process, EPA did not insist on such an explanatory note.
It also is interesting to note that in the MAHA Assessment’s “Next Steps” section, where the MAHA Commission sets forth research initiative recommendations that are underway or will begin in the near future, there are no specific recommendations for EPA. There is, however, a recommendation to “fund independent studies evaluating the health impact of self-affirmed GRAS [Generally Recognized As Safe] food ingredients, prioritizing risks to children and informing transparent FDA [U.S. Food and Drug Administration] rulemaking.”
As noted above, the MAHA Commission has until August 12, 2025, to submit the Make Our Children Healthy Again Strategy, based on the findings noted in the MAHA Assessment. While Administrator’s Zeldin’s press release regarding the MAHA Assessment did not respond to or address any statements in the MAHA Assessment regarding pesticide exposures, it will be important to see what recommendations are forthcoming in the Strategy as they relate to pesticides and food.