Sick of Healthcare? Healthcare Benefit Update for Employers – What to Watch in 2025
Regardless of party affiliation, the one issue that most Americans seem to be able to agree about in 2025 is that we all are sick of our healthcare system. Healthcare reform is no stranger to the American political discourse, but recent public sentiment at the expense, difficulty, and confusion inherent in navigating the American healthcare is at an all-time low. Americans’ dissatisfaction with the current state of the healthcare industry is unsurprising when between 2008 and 2022, the per enrollee cost of private health insurance has grown by 61.6% according to a study by the Kaiser Family Foundation.¹ Despite rising costs, rates for denials of coverage have increased nationally with a current average of around 19%.² Add to these statistics the change of administration and corresponding anticipated changes in healthcare benefits policy, along with increased litigation against Plan Sponsors reminiscent of the retirement plan litigation in the late 2000s, and we are all left scratching our heads with how to provide healthcare coverage to employees at an affordable cost – especially when, according to a recent study by Forbes, two-thirds (2/3) of American employees name employer-covered healthcare as the most important benefit in considering whether to take a job.³ Below are key issues for employers to watch in the healthcare benefits space this year to guide in planning your organization’s healthcare benefits and to budget accordingly:
Challenge to Affordable Care Act’s Preventive Care Coverage
Currently, the Patient Protection and Affordable Care Act (ACA), also known as Obamacare, mandates that most health insurance plans must cover certain preventive services at no cost share to patients.⁴ These services include benefits such as an annual wellness visit, maternity care, STD testing, certain immunizations for adults and children, cancer screenings, and well-baby/well-child visits.⁵ The United States Preventive Services Task Force (USPSTF)⁶, the Health Resources and Services Administration (HRSA), and the Advisory Committee on Immunization Practices (ACIP) are various agencies tasked with recommending what benefits must be covered at no cost share under the preventive care mandate.⁷ Proponents of the mandate argue that covering these benefits at no cost-share leads to earlier detection of serious medical conditions, earlier medical intervention, and more positive patient outcomes which can decrease the number of high-cost claims in the population and deter costs, while critics oppose the increased costs to employers/plan sponsors and may also oppose certain preventive services on religious grounds, such as the requirement to cover pre-exposure prophylaxis for HIV (PrEP) or birth control.
This April, SCOTUS is set to hear a challenge brought by Braidwood Management, Inc., and other employers to the mandate on the basis that the USPSTF, in its role as an administrative body that recommends what services are covered at no cost share, are “principal officers” who must be nominated by the U.S. President and confirmed by the Senate in accordance with the Constitution’s Appointment’s Clause.⁸ These employers also challenged the mandate on religious grounds, arguing that the ACA’s requirement that plans cover medication for HIV prevention violated the Religious Freedom Restoration Act (RFRA). In 2022, a Texas District Court agreed with the employers, holding that the USPSTF’s recommendations are unconstitutional because its members are officers of the United States that were not appointed in accordance with the Appointments Clause.⁹ The District Court held that because the members were unconstitutionally appointed, all recommendations implemented by the USPSTF after March 23, 2010 (the effective date of the ACA) must be vacated and issued a nationwide injunction blocking enforcement of the ACA’s preventive care mandate. The District Court also held that the USPSTF’s recommendation to cover PrEP at no cost share violated the RFRA.
On appeal, the Fifth Circuit Court of Appeals affirmed the District Court decision that the USPSTF members were unconstitutionally appointed; however, the Fifth Circuit held that the District Court had erred in vacating all agency actions to implement and enforce the USPSTF’s preventive care requirements and erred by enjoining enforcement nationally.¹⁰ The Fifth Circuit limited the remedy of enjoining enforcement to the particular plaintiffs and those similarly situated in lieu of a national injunction. The Fifth Circuit also declined to issue similar decisions against ACIP and the HRSA and issued a remand to address whether the Secretary of Health and Human Services properly ratified the recommendations of those agencies.
SCOTUS granted certiorari and will specifically review whether USPSTF members are “inferior officers” of the United States, meaning their appointment was constitutional, and whether the District Court failed to sever the allegedly unconstitutional provision. SCOTUS denied certiorari on the Plaintiff’s cross-petition for review of whether all ACA preventive care requirements violated the non-delegation canon; consequently, all ACA preventive care requirements recommended prior to March 23, 2010 are preserved.
What employers should consider for 2025:
Until SCOTUS renders an opinion, employers subject to the ACA should continue to cover the preventive services recommended by the USPSTF at no cost-share to their employees. If the challenge is successful, employers may be able to impose cost sharing for certain preventive services and/or benefits which may initially reduce healthcare costs. However, it is important to remember that federal law sets the floor, and not the ceiling for required covered benefits – and that while imposing cost-sharing on employees may have an immediate financial gain in the short-term, shifting costs to employees can cause delays in care, which can lead to later medical interventions, higher cost claims, and ultimately, a sicker workforce.
Financial Impact of Prescription Drug Developments
Prescription drug costs are skyrocketing with prescription drug cost trends outpacing medical cost trends in 2025: according to a Segel Health Plan Cost Survey, prescription drug costs grew by 11.4% and medical costs increased by 8%. This trend is heavily influenced by the emergence of glucagon-like peptide-1 receptor agonists (commonly known as GLP-1s) used to treat type 2 diabetes and obesity. While the monthly cost of these drugs is low compared to some other medications, typically ranging from $900 – $1300 per month per patient, their widespread utilization by the public has left employers and health insurers scrambling with how to maintain costs. The financial impact of GLP-1s has been so staggering that many insurers have begun to offer buy-up options to employers if they choose to include GLP-1s on their covered medications list (i.e. Formulary) for weight loss. Proponents of GLP-1s argue that inclusion of the medications on Formulary greatly reduces other costly medical interventions such as gastric bypass surgery, and likewise reduces cardiovascular conditions such as heart attack, and stroke. Those against coverage of GLP-1s argue that there is a lack of independent studies on the impact of long-term usage of GLP-1s, that the costs have significant negative fiscal impacts to the healthcare system, and that the side effects cause even more high-cost claims. Big Pharma continues to seek approvals from the FDA for expanded indications of GLP-1s including for the treatment of sleep apnea, kidney disease, and liver disease.
Additionally, the financial savings that were anticipated when biosimilars, or biologic drugs that are highly similar to an already FDA-approved biologic product, hit the market as many brand medications began to lose their patent protection has been underwhelming. Biosimilar adoption has been slow due to concerns about safety and efficacy among healthcare providers and patients, complex Formulary and reimbursement structures that favor brand drugs over biosimilars, and lack of patient and provider education despite the significantly decreased price tag.
Specialty medications, which on average account for 50% of prescription drug spend, continue to be developed and while these medications offer life altering treatments for patients living with severe illnesses – they also come with a hefty price tag. For example, a new treatment to cure Hemophilia B, a lifelong debilitating bleeding disorder, comes at a price tag of $3.5 Million per treatment. While many balk at the cost, consider on average that an individual with Hemophilia averages $700,000-$800,000 in medical costs per year – so in theory the treatment would pay for itself in 4-5 years. However, for employer-sponsored plans, a single claim of $3.5 million would have an extreme impact on renewals.
Finally, the Trump Administration announced on April 8, 2025 that his administration would soon announce tariffs on pharmaceutical imports. While it is uncertain how Big Pharma will respond to such tariffs, it is certain that if such tariffs come into effect, they will very likely cause significant increases to how much consumers – and specifically plan sponsors/employers will spend on prescription medications. For reference, the U.S. imported over $210 Billion in pharmaceuticals in 2024.
What employers should consider for 2025:
Employers should anticipate prescription drug costs to continue increasing and budget accordingly as GLP-1s are here to stay and increased indications for GLP-1 drugs continue to be considered by the FDA. Employers looking to reduce costs should consider whether to cover GLP-1s for weight loss only. Likewise, employers should speak to their carriers and pharmacy benefits managers (PBMs) about their biosimilar strategy as a means to reduce cost. Employers should investigate copay accumulator programs as a means to leverage drug manufacturer coupon dollars to lower costs of specialty medications and consider plan design changes to their prescription benefits. Finally, employers should prepare for the impact of tariffs on their plans’ prescription drug spends.
Challenge to Mental Health Parity and Addiction Equity Act
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) generally requires health plans to cover mental health and substance use disorder benefits similarly to medical and surgical benefits. Since MHPAEA’s enactment, complex federal regulations have been published to determine whether a health plan treats these benefits in parity which has led to significant difficulty for issuers and plan sponsors in determining whether a health plan is in compliance. In late 2020, Congress enacted the Consolidated Appropriates Act (CAA) which requires group health plans and health insurers to conduct comparative analyses to demonstrate that both quantitative treatment limitations (QTLs), or treatment limitations that are numerical in nature such as visit limits and copays, and non-quantitative treatment limitations (NQTLs), i.e. non-numerical limitations such as network access to providers, are no more stringently applied to mental health/substance abuse benefits than medical/surgical benefits. Since 2021, plans and insurers have been required to make these comparative analyses available to the Department of Labor, HHS, and Department of Treasury (Departments), upon request – but due to the complexity of the rules, enforcement has been challenging and many plans have been found to be out of compliance.
This led to the Departments eventually publishing final rules amending the longstanding 2013 rules on September 23, 2024 (2024 Final Rules). The 2024 Final Rules establish new NQTL standards, bolster the comparative analysis requirements that were added by the CAA, and prohibit plans and issuers from using discriminatory information, evidence, sources, or standards that systematically disfavor or are specifically designed to disfavor access to mental health/substance use disorder benefits as compared to medical/surgical benefits when designing NQTLs.¹¹ Some of these regulations are already in force while others begin on or after January 1, 2026.
Earlier this year, the ERISA Industry Committee (ERIC) filed suit against the Departments in the U.S. Court of Appeals for the D.C. Circuit seeking to invalidate the 2024 Final Rules, or at a minimum, invalidate key provisions and prohibit the Departments from implementing or enforcing the new rules, asserting that the 2024 Final Rules violate the U.S. Constitution and the Administrative Procedure Act and impose vague and burdensome requirements on health plans.¹² That same day, the Departments released a report to Congress indicating that employers had made progress on complying with MHPAEA but still fell short. The executive director of the ERIC Legal Center asserted that the new regulations “threaten the ability of employers to offer high quality, affordable coverage for the mental health and substance use disorder needs of employees and their families.”¹³
Prior to the establishment of the 2024 Final Rules, compliance with the MHPAEA caused significant financial strain on health plans and health insurers alike, and by extension drive up compliance costs associated with healthcare benefits coverage. If the additional requirements under the 2024 Final Rules pass constitutional muster, health insurers and plans will incur additional monitoring and reporting costs. Additionally, though MHPAEA enforcement was a top priority for the Biden administration, it is unclear what the Trump administration’s position will be – or what impact the recent workforce cuts at the DOL and HHS will have on the enforcement of MHPAEA going forward.
What employers should consider for 2025:
The 2024 Final Rules may not be here to stay between budget constraints, federal staffing constraints, and the ERIC lawsuit targeting the 2024 Final Rule. In the meantime, employers should monitor updates and budget accordingly for the additional requirements in the 2024 Final Rules to ensure continued compliance with MHPAEA as applicable.
________________
[1] Amin, K., Cox, C., Ortaliza, J. & Wager, E., Health Care Costs and Affordability, Kaiser Family Foundation, (May 28, 2024) https://www.kff.org/health-policy-101-health-care-costs-and-affordability/.
[2] Lo, J., Long, M., et al, Claims Denials and Appeals in ACA Marketplace Plans in 2023, Kaiser Family Foundation, (Jan. 27, 2025) https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans-in-2023/#:~:text=Key%20Takeaways,by%20insurer%20and%20by%20state.
[3] O’Reilly, Dennis, Best Employee Benefits, Forbes (October 30, 2024) https://www.forbes.com/advisor/business/best-employee-benefits/#:~:text=More%20than%20half%20of%20American,as%20the%20most%20important%20benefit.
[4] 42 U.S.C. § 300gg-13(a)(1).
[5] Preventive Services Covered by Private Health Plans Under the Affordable Care Act, Kaiser Family Foundation (Feb. 28, 2024) https://www.kff.org/womens-health-policy/fact-sheet/preventive-services-covered-by-private-health-plans/#:~:text=The%20services%20required%20to%20be,is%20published%20or%20otherwise%20released.
[6] The USPSTF determines what preventive services must be covered at no cost share by reviewing scientific evidence related to the effectiveness, appropriateness, and cost-effectiveness of clinical preventive services for the purpose of developing recommendations for the health care community, and updating previous clinical preventive recommendations. 42 U.S.C. § 299b-4(a)(1).
[7] The USPSTF recommends what services must be provided at no cost-share, while ACIP recommends which immunizations must be covered, and the HRSA determines what contraceptives require coverage.
[8] Petition for a Writ of Certiorari, Becerra et al. v. Braidwood Management, Inc. et al., No. 24-316 (Sept. 19, 2024).
[9] Memorandum Opinion & Order, Braidwood Mgmt. v. Becerra, 627 F. Supp. 3d 624 (N.D. Tex. 2022)
[10] Braidwood Management, Inc. v. Becerra et al., No. 23-0326 (5th Cir. 2024).
[11] Fact Sheet: Final Rules Under the Mental Health Parity and Addiction Equity Act (MHPAEA), U.S. Department of Labor (last visited Apr. 1, 2025) https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rules-under-the-mental-health-parity-and-addiction-equity-act-mhpaea.
[12] See Complaint, Erisa Industry Committee v. Department of Health and Human Services et al., No. 1:25-cv-00136 (D.D.C. 2025).
[13] Kellie Mejdrich, Trade Group Sues to Stop Federal Mental Health Parity Regs, LAW360 (Jan. 17, 2025) https://www.law360.com/articles/2286079.
Employment Tip of the Month – April 2025
Q: May an employer make changes to an employee’s retirement benefits, including retirement benefits for employees with disabilities?
A: Generally, yes, but not for “protected benefits,” and not if those changes impact retirees with disabilities differently than those without disabilities.
Retirement benefit plans are governed by the Employee Retirement Income Security Act (ERISA), a federal statute that protects participants and beneficiaries in employee benefit plans and sets minimum standards for retirement and health plans in the private sector. If an employer voluntarily establishes benefit plans for its employees, ERISA requires that those plans provide specific plan information (e.g., minimum standards for participation, vesting, benefit accrual and funding).
Generally speaking, ERISA allows employers to amend or terminate the terms of retirement benefits plans so long as those amendments comply with ERISA’s “anti-cutback rules,” which prohibit reductions or eliminations of “protected benefits.”
“Protected benefits” include:
Accrued benefits
Early retirement benefits
Retirement-type subsidies
Any optional forms of benefit.
In addition, before making any amendments, ERISA requires that employers provide notice to affected participants specifying the nature and timing of any changes.
That being said, employers should take care that any amendments to retirement benefits do not disparately impact retirees with disabilities, as that may violate the Americans with Disabilities Act (ADA). The ADA makes it unlawful to discriminate (intentionally or inadvertently) against qualified individuals with disabilities and applies to all employers – including state and local government employers – with 15 or more employees. A “qualified individual” is an employee who “can perform the essential functions” of their job with or without reasonable accommodation.
The ADA proscribes discrimination in all employment practices, including employer-provided benefits. Therefore, employers should always evaluate whether any proposed changes to retirement benefits have the potential to impact retirees with disabilities differently than those without disabilities. This is especially true given the U.S Supreme Court’s recent decision to hear a case regarding an employee’s disability discrimination lawsuit against her former employer for the termination of disability retirement benefits.
In Stanley v. City of Sanford, Florida, a city firefighter (Karyn Stanley) worked for nearly 15 years until being diagnosed with Parkinson’s Disease, which rendered her unable to perform her essential job functions. Because of her disability, the employee retired early at the age of 47. At the time Stanley joined the fire department, the City provided free health insurance until age 65 for employees who served for 25 years as well as those retiring early due to disability.
However, while she was still employed, the City amended its retirement benefits, limiting coverage for health insurance retirement benefits to 48 months only for disabled retirees. Employees who had served the full 25 years were still provided coverage until the age of 65. Stanley filed a lawsuit alleging disparate treatment on the basis of disability. The federal district and the Eleventh Circuit Court of Appeals rejected Stanley’s claim, opining that the ADA prohibited discrimination against current (not former) employees. However, other federal circuit courts disagree and have upheld similar claims from former employees, prompting the Supreme Court to agree to hear the case.
The Supreme Court will likely issue a ruling in this case before the end of its current term in late June 2025. Specifically, the Supreme Court will decide whether a former employee who was qualified to perform her job and earned certain retirement benefits while still qualified loses her right to sue under the ADA solely because she no longer holds her job.
The Stanley case exemplifies the exceptionally broad reach of the ADA, which may very well extend its protections to former employees who are no longer “qualified individuals” due to their disabilities.
As always, but particularly if the Supreme Court rules in favor of the firefighter in the Stanley case, employers should take care to document all nondiscriminatory reasons for amending or eliminating employee benefits. In addition, employers should evaluate existing policies and proposed changes to ensure that any changes do not disparately impact retirees with disabilities.
Misapplied Employee Fitness Exam Leads to Back Pay Under Americans with Disabilities Act, Seventh Circuit Holds
U.S. Court of Appeals for the Seventh Circuit recently held that an employee who was neither disabled nor perceived as disabled was entitled to back pay damages under the ADA
The court found that a medical exam requirement was a form of disability discrimination, even though the plaintiff had no actual or perceived disability
Given this ruling, employers should be cautious when requiring medical examinations and ensure they are clearly job-related and consistent with business necessity
While the Americans with Disabilities Act (ADA) is generally designed to protect employees with actual or perceived disabilities, the U.S. Court of Appeals for the Seventh Circuit recently held that an employee who was neither disabled nor perceived as disabled was entitled to back pay damages under the ADA.
In Nawara v. Cook County, the plaintiff, John Nawara, engaged in a series of altercations with superiors and consequently was required to undergo a fitness-for-duty exam before he could return to work. Nawara stalled in agreeing to the exam before ultimately submitting and being returned to work. He sued under the ADA and prevailed because medical exams and inquiries are generally prohibited for active employees unless they are job-related and consistent with business necessity and his exam did not reach that threshold.
However, the jury awarded Nawara no back pay. The trial court upheld the award of zero back pay, holding that Nawara must prove he had an actual or perceived disability to prove disability discrimination that merited back pay.
Nawara appealed, and the Seventh Circuit reversed and remanded on the back-pay issue. The appellate court held that the medical exam requirement constituted a form of disability discrimination, even though Nawara had no actual or perceived disability. Once the court found that disability discrimination had occurred, the award of back pay based on this discrimination was held to be consistent with the law.
Takeaways
Employers should be cautious when requiring medical examinations or making disability inquiries once employment starts. Any such inquiries and examinations must be job-related and consistent with business necessity. While such inquiries and examinations will likely be allowed when evaluating an accommodation request or evaluating whether an employee poses a direct threat due to a medical condition, they seldom are allowed in other contexts, and an employer who makes such inquiries or requires such exams in other contexts may now be responsible for enhanced damages following the Seventh Circuit’s ruling. Employers should consider consulting with legal counsel when considering a medical examination in such contexts.
The LDT Final Rule Bites the Dust: Examining the Repercussions of the Federal Court’s Vacatur and What the Future May Hold
On March 31, 2025, Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas ruled that the Food and Drug Administration (FDA) lacks the statutory authority to regulate laboratory developed tests (LDTs).[1]
The court’s judgment vacates the agency’s controversial final rule of May 6, 2024 (“Final Rule”), regulating LDTs as medical devices—just weeks before the Final Rule’s initial implementation deadline—and remands the issue back to FDA for further consideration.
The two cases that were the subject of the ruling were filed shortly after FDA’s issuance of the Final Rule. In American Clinical Laboratory Association et al. v. FDA, and Association for Molecular Pathology et al. v. FDA, the plaintiffs challenged the Final Rule under the Administrative Procedure Act (APA).[2] Notably, the strength of the plaintiffs’ cases was enhanced when, on June 28, 2024, the U.S. Supreme Court issued its landmark decision in Loper Bright Enterprises v. Raimondo, overruling the long-standing Chevron doctrine. Under Loper, courts considering challenges to agency action under the APA must now exercise their independent judgment in deciding whether an agency has acted within its statutory authority, rather than deferring to an agency’s interpretation of an ambiguous statute, as had been the prevailing rule under Chevron.
The impact of that decision was not lost on U.S. District Judge Jordan, who—like the Supreme Court in Loper—noted that this exercise of independent judgment “is rooted in the ‘solemn duty’ imposed on courts under the Constitution to ‘say what the law is.’” Reiterating Loper’s directive that courts use “‘all relevant interpretive tools’ to determine the ‘best’ reading of a statute; a merely ‘permissible’ reading is not enough,” Judge Jordan’s 51-page memorandum opinion and order granting summary judgment to the plaintiffs explores the history of LDTs, their regulation over time, and, more broadly, FDA’s historical regulation of medical devices. The order also explores why the text, structure, and history of the federal Food, Drug, and Cosmetic Act (FDCA) and the Clinical Laboratories Improvement Act of 1967 and 1988 Amendments (CLIA) support the court’s conclusion that the Final Rule is unlawful.
Part One: History
Judge Jordan’s order noted that FDA began regulating medical devices in 1938 with the advent of the FDCA: “FDA was authorized to regulate ‘foods,’ ‘drugs,’ ‘devices,’ and ‘cosmetics,’ all of which were physical products that were mass-manufactured and commercially distributed.” The Medical Device Amendments of 1976 (MDA) expanded FDA’s authority to regulate devices so that unless exempt, the agency must grant one of three types of premarket authorization before any new medical device can be commercially distributed, based substantially on a device’s classification, risk profile, and marketing history. Focusing on the terms used in the FDCA to define a medical “device” subject to its authority—namely those describing a device as an “instrument,” “apparatus,” “implement,” “machine,” “contrivance,” “implant,” “in vitro reagent” and “article”—the court determined that each term refers only to a tangible, physical object and does not include intangible services.
By contrast, the order states that CLIA, not the FDCA, governs laboratory test services: “A[n LDT] is a methodology or process by which a laboratory generates biochemical, genetic, molecular, or other forms of clinical information about a patient specimen for use by the treating physician … [LDTs] are offered as services.” CLIA is administered primarily by the Centers for Medicare & Medicaid Services (CMS). Although the court acknowledged that FDA had claimed authority to regulate LDTs as medical devices starting in the early 1990s, and although FDA has relied on its claimed authority on several occasions on a case-by-case basis throughout the years (e.g., through sending FDA warning letters to clinical laboratories), the 2024 Final Rule was its first attempt to establish binding, industry-wide regulations for LDTs. Similarly, the court noted that since CLIA’s 1988 amendments, Congress has considered several pieces of legislation that would have overhauled the regulatory framework for LDTs, including certain bills that would have expressly regulated LDT services as medical devices subject to FDA’s oversight. However, to date, Congress has declined to pass any such legislation. As such, the court concluded that FDA is bound to the current statutory framework and cannot impose regulations that would circumvent it.
Part Two: Text and Structure
After finding that the laboratory plaintiffs had standing to sue—owing to the potential for injury by the Final Rule’s “massive compliance costs … often amounting to hundreds of thousands or millions of dollars per test”—the court’s order concluded that the “text, structure, and [additional] history of the FDCA and CLIA” precluded expansion of FDA’s authority to regulate LDTs as medical devices. In particular, the court noted the following:
The FDCA’s text is clear that the “devices” within its purview do not include professional medical services, which include LDTs.
FDA has no authority to expand or alter the FDCA’s definition of “device.”
The Final Rule’s regulation of in vitro device (IVD) test systems made by laboratories improperly collapses the distinction between test kits and testing services. Specifically, the court explained that a laboratory test kit made by a laboratory for commercial distribution is a device, but when laboratory professionals use a series of tools to perform a test, or develop new test protocols that call for the use of such tools, they are conceiving and carrying out professional services.
An examination of various canons of statutory construction confirms that LDT services are not “devices” under the FDCA.
The statute as a whole “repeatedly and consistently refers to the making of devices as ‘manufacturing,’” which is distinct from professional services.
The FDCA and the MDA were not enacted to regulate clinical laboratory test services.
CLIA’s 1988 amendments, passed after the MDA of 1976, created a detailed statutory framework to govern clinical laboratories.
The FDCA’s relevant text, being unambiguous, cannot support FDA’s “untenable” interpretation of the FDCA to include LDTs as detailed in the Final Rule.
Notably, the court also determined that FDA’s assertion of its long-standing authority to regulate LDTs as medical devices turns on the assumption that the laboratory industry has been operating for decades “in open and direct violation of the law.” FDA’s continued exercise of enforcement discretion for many categories of LDTs, as expressed in the Final Rule, would result in the industry continuing to operate going forward at substantial risk of civil and criminal penalties if FDA decides to curtail its policy of enforcement discretion. In rendering its ruling, the court declined to accept an interpretation of FDA’s authority under existing law that would result in that outcome and would require many years and an implausible level of administrative effort and resources to bring the industry into compliance with the Final Rule.
What Happens Now?
As we explained in our 2024 blog post, the Final Rule would have required virtually all clinical laboratories that offer their own LDTs to come into compliance with FDA’s expectations for medical device manufacturers in phases over a four-year period. The Final Rule provided for different levels of enforcement discretion for certain LDTs that were on the market prior to May 6, 2024; LDTs that are approved by the New York State Clinical Laboratory Evaluation Program (CLEP); LDTs for unmet needs manufactured and performed by labs integrated in a health system; and others. Yet it still required all labs, regardless of enforcement discretion category, to comply with Phase 1 and Phase 2 implementation requirements. Phase 1 requirements included implementation of Medical Device Reporting requirements, correction and removal reporting requirements, and quality systems requirements under 21 C.F.R. § 820.198 (complaint files), beginning on May 6, 2025. In Phase 2, laboratories were required to comply with establishment registration and device listing, labeling, and investigational use requirements, beginning on May 6, 2026. Those mandates, and others that were supposed to follow in Phases 3, 4, and 5 to the extent applicable (including, notably, submission of product applications to FDA by November 6, 2027, for high-risk tests and by May 6, 2028, for all other tests), are no longer enforceable. As the March 31 order states, data suggests that the Final Rule would have affected about 1,181 existing laboratories, resulting in the need for submission by laboratories and the review by FDA of approximately 10,013 new tests each year. Implementation of the Final Rule would have imposed major burdens on many laboratories that will, now, no longer apply.
The vacated and remanded Final Rule now goes back to FDA for further consideration, and the laboratory plaintiffs’ motions for summary judgment are granted. Yet as we noted in our April 1 blog post, the judge’s conclusions that (1) “the [FDCA]’s relevant text is unambiguous and cannot support FDA’s interpretation” and (2) “FDA’s asserted jurisdiction over laboratory-developed test services as ‘devices’ under the FDCA defies bedrock principles of statutory interpretation, common sense, and longstanding industry practice”—leave little to no room for FDA to salvage its effort to regulate LDTs broadly under existing statutory authorities. While still a possibility, the legal arguments relied on by the court and the post-Loper legal landscape suggest that an appeal of the court’s order is unlikely to be successful. Perhaps more likely would be future congressional action. Therefore, stakeholders and advisors should keep an eye on news coming from Capitol Hill.
Looking to the Future of FDA’s Role in LDTs
Although, absent an appeal of the court’s order, this chapter of the decades-long LDT saga may be winding down, FDA has not yet been written out of the story. Even though the court decided that FDA cannot regulate LDTs under existing law, it, of course, acknowledged that the FDCA provides FDA with authority to regulate device “articles” in interstate commerce. While it remains to be seen whether the current administration has an interest in, or if FDA will have sufficient remaining personnel and resources to effectuate, an increase in oversight of laboratory industry stakeholders, FDA could enhance its reliance on its existing authorities to exert oversight of several aspects of the laboratory industry even if it is unable to regulate LDTs directly.
Enhanced Oversight of Specimen Collection Kits and the Laboratories That Distribute Them
Existing device authorities continue to allow the FDA to reach many of the articles that labs rely upon to provide LDT services. For example, FDA regulates specimen collection devices. As a result of the court’s vacatur of the Final Rule, FDA could, in theory, seek to more aggressively enforce these authorities. Occasionally in the past, FDA has taken the position that a lab distributing specimen collection kits for use with its LDTs resulted in violations of the FDCA if the collection kits had not been cleared by FDA for use with the LDT. Of note, FDA has exercised enforcement discretion for what the agency calls “convenience kits” since 1997, taking the position that multiple articles packaged together are not subject to premarket review requirements if they all are in their respective original packaging and are intended for use consistent with their respective labeling. While the enforcement discretion allows such kits to forego premarket review, the kit assembler still must register as a manufacturer and list the kit product with FDA. Thus, if a lab assembling and distributing such a kit fails to follow that registration process, the lab could be subject to agency scrutiny. Also, if a component of a kit is only FDA-cleared for specific uses (e.g., use with specific FDA-cleared tests), manufacturing and distributing a kit intended for use that is not consistent with those uses (e.g., use with a non-cleared LDT) might be argued by FDA to result in commercial distribution of an unapproved and misbranded collection kit. FDA could use these and similar approaches to restrict access to LDTs, discourage their use, or try to persuade laboratories to share information about test performance in order to secure clearance of their test kits
Enhanced Enforcement Against Manufacturers and Distributors of Laboratory Reagents and Equipment
Another approach FDA has taken to indirectly regulate LDTs is to threaten enforcement against manufacturers and distributors of laboratory equipment, reagents, and other FDA-regulated articles when they view those entities as inappropriately supporting the development of LDTs using their devices. Manufacturers may be subject to FDA enforcement if their support or advice to a clinical laboratory regarding LDT development is deemed by FDA to be evidence that the products they provide to a clinical lab are intended for unapproved uses. As a result, barriers remain regarding communications between laboratories and manufacturers of equipment used to perform LDTs, such as analyte-specific reagents, instrument platforms, and research-use-only products. Though there are mechanisms for “scientific exchange” under some FDA guidances, the means of communication, who can communicate, and what they can say about medical device products used in the performance of LDTs impose significant limitations and hinder more organic collaborations between product manufacturers and labs that could potentially aid in optimizing LDTs.
Therefore, even in the absence of an FDA regulation that directly regulates their laboratory testing services, it is important for laboratories and their component suppliers, as well as others collaborating with labs to provide direct access testing services, to consider how they mitigate risks of potential FDA enforcement going forward, whether on a case-by-case basis or as part of a broader initiative. As to broader initiatives, with the recently added “suggestion box” on Regulations.gov for areas that should be considered for deregulation, an opportunity may have arisen for stakeholders concerned about these issues to coalesce around proposals that would support access to components and collaboration in LDTs going forward with fewer restrictions.
What Else Could the Future Hold?
It is important to appreciate that nothing in the court’s order prohibits the Executive Branch from pursuing changes to how it regulates LDTs in the future. The order only appears to prohibit the government from establishing a regulatory regime for LDTs under its FDCA authorities. CLIA continues to govern clinical laboratories and their testing services and, like the FDCA, vests authority for regulation with the Secretary of the Department of Health and Human Services (HHS). The Secretary has historically delegated authorities further to HHS’s subagencies FDA (for the FDCA) and CMS (for CLIA). However, some states (like New York) have implemented an LDT-specific review and approval process under their own clinical laboratory regulatory regime (e.g., CLEP, which is approved by CMS as satisfying CLIA requirements in New York). It is not beyond reason that some other states could decide to follow suit in the wake of this development.
To proponents of the Final Rule, one of its virtues was to provide parity in terms of the performance requirements and premarket review of the development of laboratory tests. The idea was that whether a laboratory test for a given disease was an IVD or LDT, it would (i) need to meet similar standards with regard to analytical and clinical validity and performance, and (ii) be subject to a similar level of review to demonstrate that those standards were met. FDA’s preference was that tests go through the FDA regulatory process to achieve this goal, but that’s not what parity requires. Parity in this context could be achieved by other means of ensuring that IVDs and LDTs receive comparable treatment, e.g., establishing the clinical validity of a new diagnostic test marker should require the same amount of data whether the test is an LDT or IVD, or that tests should be held to the same requirements for sensitivity and specificity if they have the same indicated use. Although there are differences in the manner of test production (e.g., manufacturing concepts in an IVD plant versus LDT assembly in a clinical laboratory), the idea that both kinds of tests should meet the standard for analytical and clinical validity and performance because the results—regardless of test type—will have the same potential clinical impact on patient’s clinical care does not lose its appeal from a parity perspective simply because FDA lost a court case.
HHS itself could potentially move to establish comparable standards and requirements for IVDs and LDTs by relying on both its FDCA and CLIA authorities—perhaps reaching a middle ground between the current FDA and CMS approaches. Under the previous administration, just before issuance of the Final Rule, FDA and CMS issued a joint statement aligning on their respective roles in the regulation of LDTs, so it will be interesting to see whether an update to that position will be released. Epstein Becker Green will continue to monitor whether there will be further efforts toward greater parity between test requirements.
ENDNOTES
[1] Memorandum Opinion and Order, American Clinical Laboratory Association et al. v. U.S. Food and Drug Administration, No. 4:24-CV-479-SDJ (E.D. Tex. Mar. 31, 2025).
[2] These cases were subsequently consolidated for review by the Texas district court, which considered the parties’ cross-motions for summary judgment.
Mental Health Accommodations in the Workplace [Podcast] [Video]
Accommodation requests for mental health issues are on the rise. Even though these types of disabilities might not be outwardly apparent, employers must address requests for mental health accommodations in the same way they would evaluate— and potentially accommodate—any disability as legally required.
Transcript
INTRO
Accommodation requests for mental health issues are on the rise. Even though these types of disabilities might not be outwardly apparent, employers must address requests for mental health accommodations in the same way they would evaluate— and potentially accommodate—any disability as legally required.
On this episode of We get work®, we explore how employers can effectively engage in the interactive process to ensure employees struggling with mental health concerns can remain productive members of the workforce.
Our hosts today are Cepideh Roufougar, co-leader of the California Advice and Counsel resource group, and Joanne Lambert, principals, respectively, in the San Francisco and Orlando offices of Jackson Lewis.
Cep and Joanne, the question on everyone’s mind today is: What steps can employers take right now to remain ADA-compliant when addressing employees’ requests for mental health accommodations, and how does that impact my business?
CONTENT
Cepideh RoufougarPrincipal, San Francisco
I am Cepideh Roufougar, and I’m joined today by my colleague, Joanne Lambert. Hi, Joanne.
Joanne LambertPrincipal, Orlando
Hello, Cep.
Roufougar
Thanks for joining me today, Joanne, to talk about accommodating individuals with mental health disabilities. This is an area of the law that I know both you and I have done quite a bit of work in, and it’s an area that we’re both pretty passionate about.
I want to kick off today by starting with a short story about how I got into this space in the first place. For me, I started working in the mental health disability space about 20 years ago when I had a client who had an employee who was struggling with schizophrenia. We did not know that this individual had schizophrenia when he was hired about a year and a half before the employee started to experience symptoms at work. Through the interactive process, which I can’t stress enough employers really should utilize, we learned about the employee’s diagnosis. Unfortunately, in this particular situation, we weren’t able to come up with some accommodations that would really enable this person to remain employed with the employer. But we were able to, through leave, a lot of patience and a lot of work with his representative, who was his brother, get to a place where everybody- the employer, the employee and his family- felt like the employer had done their part in at least trying to assist this person the best that we could.
It was really one of those things that highlighted for me this really human aspect of what our human resources departments do for employers. While it wasn’t the outcome that everybody would have wanted, it was still a positive process because everybody felt good at the end. That is such an important part of the interactive process. When you’re dealing with disability related accommodations, employers sometimes struggle with how to make sure that we get through this process with everybody still feeling good and that people were heard. It’s particularly difficult in the mental health space because it’s not like a physical disability where you’re seeing it.
Joanne, what about you? How did you fall into this space, and what are some of the struggles that you see that employers have?
Lambert
Well, Cep, just along the way somewhere after doing this for 30+ years, scary to say it out loud, that we just started to get more and more employers calling and needing help with these kinds of accommodations. One of my children is neurodivergent. My son taught me that word, by the way, because I am simply a lawyer. I’m not a doctor, but these are new things for all of us to learn. If you do have someone in your life who has some of these issues, you might have some small insight, but a lot of people don’t, especially in the workplace. So, I think that there was just an increase and a rise in situations like, we’ve got this employee who says they have a learning disability or this employee who has OCD or ADHD. We get that, but we still need them to do their job. Do we have to accommodate these things? So, Cep, the answer to that is I got into it because they started to increase their requests. I became more passionate about it, if you will, and more attuned to it because I have someone that I love who has some of these issues, which helps me see the other side.
It’s part of our job as employment attorneys who specialize in this space to help employers get their heads around this. You said it, Cep, because these conditions are not usually visible. Some of the symptoms can be, but you can’t really touch them. It is not a weightlifting restriction, not a standing and sitting issue or someone saying I can’t drive to work. These are amorphous concepts for a lot of people, and it’s harder for employers to really get their heads around it. Then questions come up like, is this real? Do we have to take their word for it? The answer is no. Just like any accommodation, you’re entitled to some healthcare provider documentation. What do we do for accommodations? In your case, as creative as you guys tried to be, you couldn’t really come up with anything that could keep that person in the job.
One of the first ones I remember was a gentleman who worked in a cubicle farm with a lot of coworkers in a big room. He had OCD, and his routine every morning was to sharpen all of his pencils and unwrap these throat lozenges that he would suck on during the day. He had to get them all unwrapped and laid out before the workday started, and it was very disruptive because it took half an hour and was very noisy. The employer was beside themselves. I was like, let’s take a step back. What can we do here? It was a really easy fix. Can we let him come half an hour early, do his routine before anyone else gets there and let him leave half an hour early? It was like, yeah, no further problems. So, with that, Cep, I’m sure you’ve had some very interesting accommodations.
What are you seeing trending right now in the mental health space for employee accommodation requests?
Roufougar
Well, Joanne, I’m seeing a lot of requests for leave. Naturally, people are taking time off to get treatment, to help address their issues or because they need time to adjust to medication changes. That was one of the things in my original case that I was talking about. We were giving the employee a lot of leave as he was adjusting to medications to see if they would help alleviate the symptoms of his schizophrenia so that he could come back to work. I’m also seeing folks wanting differences in how they receive pieces of information, whether it’s that they need a lot more detailed instructions or the manner in which instructions are provided.
Joanne, I want to go back to something you said because you said something really important there. You mentioned this idea of people not being believed or employers asking do we have to believe them? One of the areas where employers struggle in this space is because oftentimes the questions or requests for accommodations come up after someone gets a negative performance evaluation, and the person is struggling with making deadlines or following directions and instructions. They’ve gotten the performance management documentation. Now, for the first time, they’re saying to the employer, but I have ADHD, I have anxiety or I have some other condition like PTSD or depression.
Employers really need to take a step back when these requests are coming up in that context, instead of asking initially, is this real, or is this just someone trying to come up with an excuse for why they’re performing poorly? Because we don’t do that when it’s a physical disability, that’s not where we go to when it’s a physical disability. Employers should really take that step back and say, okay, is there something that I could do differently for this person that could help them overcome the particular struggle that they’ve identified that is impacting their performance? That’s where I always try to ask folks like, well, we obviously will adjust how we communicate with someone who’s hearing impaired. Why wouldn’t we make that a communication adjustment for someone who has ADHD and maybe provide more written direction instead of verbal direction all the time?
I talked a lot about accommodations that I’ve seen, but Joanne, I know that one of your specialty areas is dealing with service animals. I know they can be really important and helpful in the mental health space. So, would you tell us a little bit more about your experiences with service animals in the mental health space?
Lambert
Service animals are amazing. I learn, probably once a month, a new thing that an animal can be trained to help someone with. There are obvious ones like site support functions that service animals can do, which we call assistance animals since there are service animals, emotional support animals, comfort animals, therapy animals and all sorts of animals. The things that animals can be trained to help people with are really super impressive, especially in the mental health space.
This concept of emotional support animals has been ramping up. First, with service animals, with the physical assistance you see. Then, I would say probably in 2010, maybe a couple of years later, you started to see this emotional support animal concept coming up. You started seeing people fly on airplanes with their emotional support animals, and the Fair Housing Act provides for you to allow people in a pet-free housing place to have their emotional support animal. So, that started to bleed into Title I of the ADA, which is what we’re talking about today- employment accommodations.
People get really confused and say, well, if it has something to do with mental health, it’s an emotional support animal. No, that’s not necessarily true because there are so many tasks that an animal can be trained to help a person who has a mental health disability do, which is a service animal. For example, if you have an employee who has post-traumatic stress disorder, PTSD, a dog can be trained to go in and clear the room like when you watch a cop or procedural show on television or a streaming service when they go in with their weapons drawn, look in all the closets, open all the doors and they say clear. The animal actually performs that function for this person with PTSD and comes back to the person and gives a signal that the room is clear and that it is safe for them to enter this space. It’s amazing that an animal can do that.
Another thing that assistance animals can do to help people with mental health disabilities is recognize an oncoming panic attack or anxiety attack. They can divert their handler’s process, help them back down, and not actually have the attack. They can remind their handler to take medication for their mental health disability. They can soothe their anxiety by actually signals or touching that they might do. This is much more than an emotional support animal.
I know, Cep, that you like that because animals are so interesting. Are you seeing a lot of support animal requests in the workplace? Because I know that I am from this.
Roufougar
I am, and I will say that this is one of those areas where I do think that employers should really be utilizing their interactive process to figure out what the person’s functional limitations are and how the animal in the workplace helps them. I know a lot of employers use standardized forms for the interactive process, and that that can sometimes be difficult and a hindrance to getting the information that you really need in the mental health space. I find that some of those standardized forms aren’t really getting at the questions that we need answered when it’s a mental health disability versus a physical health disability.
Joanne, what about you? Are you seeing that with the forms as well?
Lambert
Absolutely. Even when it’s a physical health disability, I’ve never been a big fan of having a form that you don’t customize. I get that we need forms, and I know employers need the forms. You need somewhere to start with, but that’s what it has to be. When you’re talking about engaging in the interactive process with an employee who has advised you that they have some sort of mental health issues that they need accommodations for, some of the standard questions on your form are not going to make any sense or have any correlation to finding out what’s going on with them, what it is they can and cannot do without an accommodation and what accommodations might work for them. That’s the number one thing.
Thing number two with forms, especially in the mental health space, is if you don’t customize your interactive form to tell the healthcare provider the relevant parts of the job and the work environment as it relates to this employee, the issues they are having and the accommodations they’ve put out there, then the healthcare provider is not going to be able to give you good information back. If you don’t provide that, it’s bigger than attaching a job description. It’s so much bigger, especially with a mental health condition where someone like the doctor needs to understand their work environment. Because what happens when we go to the doctor? You tell your doctor the information, they believe you and they rely on it. They don’t sit there and cross-examine you to get all the other information. That’s the employer’s job. If you want to get good information to make a good decision, and let’s face it, later on defend that decision in litigation if you end up there, it’s super, super important that you’re not using a cookie cutter, one size fits all form, especially when it comes to mental health.
I’ll throw in here too on service animals; that’s a whole different world of interactive documents and requests, completely different. I’ve got some templates I put together for that, and every time somebody asks me for it, I open it up and revise it. I swear I must revise it at least once or twice a month because I think of a better way to express something, or I encounter an accommodation situation that I should add. So, I’m not a huge fan of forms.
How about you, Cep?
Roufougar
I also am not a huge fan of just sticking to the forms. I agree with you. They do have a place and are important. I like to use them as a starting point and get them tailored for each individual situation.
This brings us to how I’d like to close our discussion today. I want to share with folks a quote out of a U.S. Supreme Court decision, U.S. Airways, INC. v. Barnett, that I think really stresses what the whole purpose behind the Americans with Disabilities Act is and is very important in the mental health disability accommodation space. In this decision, now-retired Justice Breyer says,
“The statute referring to the ADA seeks to diminish or eliminate the stereotypical thought processes, the thoughtless actions, and the hostile reactions that far too often bar those with disabilities from participating fully in the nation’s life, including the workplace. These objectives demand unprejudiced thought and reasonable responsive reaction on the part of employers and fellow workers alike. They will sometimes require affirmative conduct to promote entry of disabled people into the workforce. They do not, however, demand action beyond the realm of the reasonable.”
That opening part of it, this idea of trying to diminish or eliminate stereotypical thought processes and thoughtless actions and hostile reactions, is incredibly important when you’re dealing with mental health disabilities. We’re always striving to remove some of the stigma that is attached to mental health disabilities and helping to encourage employees to more openly talk about it since it will enable employers to come up with better and creative solutions to keep people productive members of the workforce. That’s what I think the whole purpose of the ADA is about- what we as employers can do that’s within the realm of reasonableness to help an individual with a disability become or remain a productive member of the workforce.
Lambert
Absolutely. I love that quote, and it really does encapsulate everything that we’re talking about here today. With that, we’d like to thank you both on behalf of Cep and me for joining us today. Glad you could hop on, and please be sure to tune into and follow Jackson Lewis’ We get work® podcast. We have all sorts of exciting new content coming up in the future for you to listen to. Thanks.
DOH Issues Guidance on New York’s Material Health Care Transaction Law
Nearly two years ago, and as previously discussed in a Proskauer alert, New York enacted Public Health Law Article 45-A (the “Material Transactions Law”), which requires reporting of certain material health care transactions. Last month, the New York State (“NYS”) Department of Health (“DOH”) published long-awaited guidance concerning the reporting obligations under the Material Transactions Law.
As a general matter, “health care entities” party to a “material transaction” must notify DOH at least 30 days before the transaction’s closing. This notice is then posted on the DOH website and shared with the Office of the NYS Attorney General.
DOH’s recent guidance concerning the Material Transactions Law is categorized into four distinct topics: (i) entities required to report; (ii) the definition of “material transaction”; (iii) assessing impacts of the transaction; and (iv) the public comments process.
Health Care Entities Subject to the Material Transactions Law
The guidance clarifies that the Material Transaction Law applies to a broad range of businesses in the health care sector, including, but not limited to:
physician practices or groups;
management services organizations (“MSOs”);
health insurance plans;
provider-sponsored organizations; and
health care facilities, organizations and plans providing services in NYS (this includes out‑of-state entities if the transaction impacts in‑state gross revenues above the threshold amount).
DOH cautioned that the above list is not exhaustive.
The guidance further clarifies that DOH considers the following entities to be “health care entities” covered by the Material Transactions Law: dental practices, clinical laboratories, pharmacies, independent practice associations and accountable care organizations.
What Constitutes a Material Transaction?
The Material Transactions Law defines a material transaction, in part, as a transaction (or series of related transactions within a rolling 12-month period) that results in a health care entity increasing its total gross in-state revenues by $25 million or more.
The recent guidance underscores that such transactions include, but are not limited to:
mergers, acquisitions and transfers of assets or control;
affiliation agreements and contracts;
acquisition of one or more health care entities, including the assignment, sale, or other conveyance of assets, voting securities, membership or partnership interests or the transfer of control, such as contracting for services commonly provided through a management or administrative services agreement between a practice and an MSO; and
formation of joint ventures, partnerships or management organizations for administering contracts with health plans or providers.
The recent guidance clarifies that “material transaction” includes “an acquisition of one or more health care entities, including the assignment, sale, or other conveyance of assets, voting securities, membership or partnership interests or the transfer of control, such as contracting for services commonly provided through a management or administrative services agreement between a practice and an MSO.”
Materiality Threshold
The DOH guidance provides two specific examples to distinguish between a single transaction and a series of related transactions. If the transaction is a single transaction, the parties must assess whether the entity(ies) to be acquired/merged into the surviving entity will have had $25 million or more of combined gross in-state revenue in the prior 12‑month period from the anticipated closing date (“Lookback Period”). Notably, neither the DOH guidance nor the Material Transactions Law define “gross in-state revenue.”
If the transaction is a series of related transactions, the parties must assess the revenue associated with each related transaction that took place, or will take place, during the Lookback Period. Specifically, for each of those transactions, the parties must assess the added gross in-state revenue that is attributable in the Lookback Period based on the actual or anticipated closing date of that particular transaction. The series of related transactions will be subject to PHL Article 45-‑A if the total added combined gross in-state revenue calculated across all of these transactions is $25 million or more. Notably, neither the DOH guidance nor PHL Article 45-A define what constitutes a “series” of related transactions.
Assessing Impacts of the Transaction; Detailed Electronic Form Is Forthcoming
Similar to other state transaction laws, like California, entities that are subject to New York’s Material Transactions Law must conduct an impact assessment and submit information concerning the transaction’s impact to the State.
In the guidance, DOH makes clear that an electronic Material Transactions Notice Form is forthcoming, “which may require more specific information to conduct [the] impact assessment.” In the meantime, DOH instructs parties to “provide a good faith assessment of the impact of the proposed transaction.” The DOH guidance provides a variety of factors that parties should assess and potentially report, including whether:
services will be eliminated, reduced, added or expanded (in terms of staffing available or available hours/days of service);
contracts with certain insurance carriers will be added or eliminated as a result of the transaction, including whether Medicaid participation will be impacted;
locations will open or close, or expand or reduce service availability;
healthcare staffing changes are expected (i.e., staff additions or cuts);
contracted commercial payor rate increases are anticipated;
changes in the share of services provided to historically underserved populations are anticipated; and
the parties expect any increase in market consolidation (as evidenced by changes in market share in any region of the state).
A Closer Look at Proposed Changes to Medicare Advantage in the “No UPCODE Act”
On March 25, 2025, U.S. Senators Bill Cassidy, M.S. (R-LA) and Jeff Merkley (D-OR) introduced the No Unreasonable Payments, Coding, or Diagnoses for the Elderly (No UPCODE) Act (the “Bill”).
According to Senator Cassidy’s press release, the Bill aims to improve how Medicare Advantage plans evaluate patients’ health risks, reduce overpayments for care, and save taxpayers money by removing incentives to overcharge Medicare. If passed, this Bill would have a tremendous impact on plans, vendors, and risk-bearing provider groups relative to Medicare Advantage (“MA”).
Background
Traditional Medicare (Parts A and B) reimburses health care providers based on the cost of services already rendered (known as “Fee-for-Service” or “FFS”). Conversely, MA functions as a prospective payment model, whereby Medicare Advantage Organizations (“MAOs”) contract with the Centers for Medicare & Medicaid Services (“CMS”) to administer and insure their respective member population.
MAOs are paid what amounts to be a fixed amount per member per month that reflects the projected health care costs of a given MAO’s members. MA payments are adjusted by CMS using a risk adjustment (“RA”) model, which weighs the relative health care financial risks of each member based on (1) his or her health status and (2) demographic information. Broadly and logically speaking, sicker members and/or those with more conditions are at risk for higher medical spend. Accordingly, MAOs are paid more under the RA model to address those risks.
This model is not without its criticism on both sides of the table. Health plans generally feel like changes to the payment model have a significant impact typically in the negative direction. For example, the most recent update to the V28 model has gutted funding for a number of cost-driving conditions. And budget hawks take the opposite view, i.e., that MA is, to some extent, overfunded and subject to overcoding and abuse. Nonetheless, the aim of the risk adjustment model (and MA/value-based care generally) is to ensure that MAOs and other MA entities are not deterred from caring for sicker patients.[1]
Senator Cassidy’s Bill purports to address concerns regarding perceived incentives that could lead to exaggerated health conditions aimed at securing improper payments.
Breakdown of the No UPCODE Act
If passed, the Bill would amend title XVII of the Social Security Act, starting in 2026, and implement the following changes to the MA program:
The Secretary of the U.S. Department of Health & Human Services (“HHS”), and under its umbrella, CMS, would use two years of patient diagnostic data in its RA model, instead of the existing one-year model;
Patient diagnoses identified through “chart reviews” and “health risk assessments” (“HRAs”) would be excluded entirely from the RA model; and
The Secretary of HHS would be required to assess the impact of coding differences between MAOs and traditional Medicare providers on risk scores, and to publicly report the findings, ensuring adjustments account for unrecognized coding pattern differences.
Implications on the Medicare Advantage Industry:
This is not the first time this Bill has been introduced in Congress, as Senators Cassidy and Merkley proposed an essentially identical bill in late March 2023 that did not lead to further congressional action.
The three components of this Bill would have a sizeable impact on the MA industry, as described in greater detail below.
Using Two Years of Diagnostic Data
The Bill requires CMS to use two years, rather than one year, of risk-adjusted data when determining payment. This facet of the Bill represents potential good news for MAOs, which spend time and money each year ensuring that chronic conditions are coded and submitted by a provider annually. The MA risk adjustment model, from a financial standpoint, currently “cures” all risk-adjusted diseases at the stroke of midnight each December 31, requiring annual recapture of diseases—even those that are chronic and/or do not resolve.
As discussed below, however, this may be inseparable from the other facets of the Bill, which render the upside of two years versus one year of data dubious. At a high level, requiring this change would appear to positively financially affect MAOs and MA value-based entities (“VBEs”), as their members/patients would now only need to have a Hierarchical Condition Category (“HCC”) attributed to them in just one of the prior two years to predict costs and trigger payment under the new RA model.[2]
The unintended consequence might be a reduction in patient care. The annual requirement of reconfirming diagnoses in many ways forces intervention by plans and their contractors. These take the form of in-home assessments, various gap closure interventions, and similar activities to effectuate a qualifying encounter with a licensed provider. As such, this change might have the unintended consequence of less care provided to MA beneficiaries, as MAOs and value-based entities may be disincentivized from identifying diagnoses and documenting them in the medical record on a yearly basis, as currently required, which in part incentivizes at least these annual provider encounters. This is especially true if in-home assessments are effectively hobbled by this Bill.
Notably, in its June 2020 Report to Congress, the Medicare Payment Advisory Commission (“MedPAC”) concluded from its study that using two years of diagnosis data to determine beneficiaries’ conditions produces payment adjustments that are about as accurate as using one year of diagnosis data, though it produces larger underpayments for those with high levels of Medicare spending than using one year of diagnosis data, which MedPAC attributes to lower coefficients for HCCs in the two-year RA model and high prediction-year (base year) spending.[3]
This means that not only did MedPAC determine that the two-year RA model would not substantively improve the predictive accuracy of the existing one-year RA model, but it would also likely result in greater underpayments to MAOs (and indirectly, VBEs) serving higher-risk member populations. MAOs and VBEs would naturally be reluctant to continue to serve those high-risk populations if they are not adequately compensated. This could lead to a reduction in members and potential increased utilization and government spending under traditional Medicare.
The 21st Century Cures Act in 2016 permitted CMS to use at least two years of diagnostic data, but CMS has yet to do so in nearly ten years. Doing so now would have a profound (and perhaps even unascertainable at this time) impact on the MA industry.
Excluding Diagnoses Identified from Chart Reviews and HRAs
Chart reviews, or so called “retrospective chart reviews” of medical records are utilized to help ensure member medical diagnoses—which are documented in the medical record, but for a variety of reasons are not submitted to health plans—are appropriately reflected in CMS data. Dropped or missing codes on claims data is exceptionally common. So common, in fact, that it birthed a private equity backed risk adjustment vendor industry. Providers typically focus on service level coding such as EM codes and CPT coding, not ICD diagnostic coding, and retrospective reviews are the last chance that plans have to ensure accurate data is submitted to CMS.
The prospective RA model, built to be an actuarial equivalent of FFS Medicare, requires MAOs to document all conditions to receive accurate payment. It stands to reason that MAOs (and VBEs) should utilize tools like retrospective chart review to capture valid conditions diagnosed and appropriately documented by a provider and submit member data that comprehensively reflects the risks the MAOs are assuming on behalf of CMS.
Should this Bill become law, plans and risk-bearing organizations that rely on retrospective review could be materially and negatively impacted. It would also likely serve as a death blow to a number of retrospective solutions vendors that provide such services.
HRAs differ significantly from chart review. HRAs are an established and longstanding practice in the MA care coordination model that are used to identify gaps in care, identify chronic conditions early, and prevent those conditions from worsening, causing comorbidities, or becoming more costly. These may occur in a patient’s home (often a vital component of comprehensive “In-Home Assessments” or “IHAs,” which are sometimes conflated with HRAs) or in the provider’s office. HRAs have evolved over the course of the MA program, as CMS has issued standards and best practices for conducting HRAs, and it continues to more broadly utilize other tools to ensure payment and data accuracy in MA (and in diagnosis codes identified via HRAs specifically), including through Risk Adjustment Data Validation (“RADV”) audits and HCC coefficient and model changes.
However, HRAs and IHAs have become the lightning rod for risk adjustment criticism by politicians, government agencies, and the media. Tapping into zeitgeist and perceived momentum, the Bill seeks to disqualify their use in the MA RA model. CMS has already taken a contrary view. CMS has, and continues to take, a balanced approach to these interventions and evaluated the appropriateness of using HRAs in MA. It has consistently supported their use, including in August 20, 2021 and September 5, 2024 letters from former CMS Administrator Chiquita Brooks-LaSure to the HHS Office of Inspector General (“OIG”) responding to OIG’s report that certain MAOs used HRAs to drive a disproportionate share of risk adjustment payments. Notably, in the 2024 CMS letter, CMS stated that it did not concur with OIG’s recommendation to “restrict the use of diagnoses reported only on in-home HRAs or chart reviews linked to in-home HRAs for risk-adjusted payments,” as it “allows MA organizations to use HRAs as a source of diagnoses used for the calculation of risk adjusted payments, as long as those diagnoses meet CMS’s criteria for risk adjustment eligibility.” To reinforce this point, CMS later addresses that it “will continue its efforts to conduct RADV audits to inform our understanding of the accuracy of these diagnoses.” CMS has also pointed out that despite OIG’s concern that diagnoses obtained from in-home HRAs may be inaccurate, OIG has “not conducted medical record reviews of the diagnoses that came from visits that may have contained an HRA and have not concluded that these diagnoses are not accurate.”
In addition to this support for HRAs in MA, CMS requires that Dual Eligible Special Needs Plans (“D-SNP”) use HRAs. If the Bill passes, it would likely cause confusion and potential misallocation of resources for MAOs with multiple plan products that have inconsistent legal requirements for HRAs. Additionally, similar to the above risks with excluding chart review-derived diagnosis codes from the RA model, if this Bill passes, MAOs and VBEs may forgo using HRAs altogether and instead initiate more basic encounters (like a less comprehensive PCP visit), which may lead to a deficiency in identifying and submitting diagnoses to CMS for payment under the RA model and therefore insufficient funds to manage the risk of the MAO’s member population.
Notably, this Bill charges the Secretary of HHS to “establish procedures to provide for the identification and verifications of diagnoses collected from chart reviews and health risk assessments,” but it does not give any other details, so it is unclear how these processes will be defined moving forward.
Adjustments in Coding Between FFS Medicare and Medicare Advantage
If passed, the Bill also requires CMS to calculate and publish the difference in coding growth between FFS Medicare and MA and set the adjustment to “fully account[] for the impact of coding pattern differences.” Currently, CMS applies a “minimum adjustment” of 5.9% for CY2025 pursuant to Section 1853(a)(1)(C)(ii)(III) of the Social Security Act, but this calculated adjustment would replace the minimum adjustment.
Importantly, CMS “may include [this coding intensity] adjustment on a plan or contract level,” meaning CMS could implement the adjustment differently among plans and contract years. This would create even more uncertainty for MA stakeholders.
Ultimately, given the wide-ranging implications this Bill will likely have on the MA industry and its members, MAO, VBEs, and other MA stakeholders should be monitoring this legislation and similar aims to materially change the MA program.
ENDNOTES
[1] It should also be noted that MAOs are bound to a percentage cap on profits, as Medical Loss Ratio (“MLR”) rules require MAOs to pay 85% of their revenue towards claims experience or quality improvement activities, with the remaining 15% allocated to various large administrative costs before profits are factored.
[2] For example, if projecting 2025 costs, DOS years 2023 and 2024 would be analyzed under the new RA model, and the MA beneficiary would need to have an HCC in just one of those years for the MAO to receive payment for that HCC.
[3] See Medicare Payment Advisory Commission (“MedPAC”) June 2020 Report to Congress. A separate, 2019 NIH study similarly found that incorporating additional years of clinical information into a Veterans Affairs prospective risk adjustment model did not result in a material increase in fit or predictive capability.
Strengthening Injury Cases with Expert Life Care Planning
When catastrophic injuries occur, accurately assessing your client’s current and future care needs is essential for their quality of life. Incomplete or inaccurate information can lead to gaps in care and insufficient long-term support. This is where a Certified Life Care Planner can become indispensable.
By developing a comprehensive, evidence-based life care plan for your injured client, these certified experts give you the tools to support your clients’ recovery and ensure they get the care and resources they’ll need now and in the future.
A Holistic Approach to Life Care Planning
Life care planners take a holistic approach by evaluating an injured individual’s medical, psychological, and related financial needs. Working closely with healthcare professionals, they create adaptable life care plans that evolve alongside treatment and recovery progress. Each life care plan provides a clear, detailed outline of medically necessary care, including the rationale, frequency, duration, and associated costs.
As Certified Life Care Planner John Maier, MA, CRC, CCM, CLCP, CVE, explains:
“Collaboration with healthcare professionals is essential to creating a strong, comprehensive life care plan that facilitates optimal recovery outcomes. A well-crafted plan should cohesively show how each recommendation connects and informs the next, helping others understand the full scope of an individual’s health needs.”
Key Components of a Comprehensive Life Care Plan
A comprehensive life care plan typically consists of three core elements: medical considerations, psychological and emotional considerations, and cost analyses.
Medical Considerations
Life care planners thoroughly assess all current and future medical needs to maximize individual health, functionality, and independence. This includes:
Medical Care
Immediate and ongoing treatments such as surgeries, specialist visits, medications, and regular checkups.
Rehabilitation Services
Customized physical, occupational, and speech therapy programs tailored to the injury or condition.
Home Modifications
Ensuring accessibility and safety through structural changes like ramps, widened doorways, and bathroom alterations.
Transportation Needs
Addressing mobility limitations with specialized vehicle modifications or transportation services.
Assistive Devices
Providing tools like wheelchairs, prosthetics, orthotics, and communication aids to promote independence.
Caregiver Support
Planning for in-home care, respite care, or long-term nursing needs, including associated costs and logistics.
Psychological and Emotional Consideration
A catastrophic injury often takes a significant toll on a person’s mental and emotional well-being. Life care plans incorporate strategies to address these challenges, including:
Post-Traumatic Stress Disorder (PTSD)
Access to therapy and counseling to manage emotional trauma.
Grief and Loss
Support for coping with the loss of physical abilities, independence, or pre-injury quality of life.
Social Isolation
Encouragement of community engagement, support groups, and social connections to prevent isolation.
Chronic Pain Management
Multidisciplinary approaches to manage pain and its psychological effects.
Strained Relationships
Counseling services for individuals and families to navigate the emotional impact of injury or illness.
Cost Analyses
The financial burden of long-term care can be overwhelming, especially when medical and psychological care costs are unclear. Life care planners address this by providing detailed cost analyses to ensure all necessary resources are properly allocated, including:
Current Medical Costs
Immediate expenses for hospitalizations, therapies, medications, and treatments.
Future Medical Expenses
Projections for long-term care, surgeries, therapies, and assistive devices as needs evolve.
Accessibility and Therapy Costs
Cumulative expenses for home modifications, ongoing rehabilitation, and specialized equipment.
Assistive Devices and Caregiving
Recurring costs for maintaining equipment, professional caregiving services, respite care, or institutional care.
Certified Life Care Planner and Nurse Practitioner Kerri Martin, MSN, RN, FNP-C, CLCP, highlights the importance of this holistic approach to life care planning:
“Each injured individual is a whole person. Medical needs are, of course, critical, but there are other aspects of overall health that must be addressed to promote the best outcomes. As life care planners, our goal is to restore a patient’s quality of life to as close as possible to their pre-injury level.”
The Role of Life Care Planning in Litigation
A comprehensive life care plan is a vital resource for strengthening your client’s case. By combining expertise and reliable evidence, it equips attorneys with the tools to:
Clearly Communicate Needs
Effectively present your client’s current and future care requirements to judges, juries, and opposing counsel, ensuring clarity and precision.
Substantiate Damages
Bolster compensation claims with reliable, evidence-based data that withstands scrutiny and enhances credibility.
Address Challenges
Proactively mitigate disputes regarding the validity of your client’s care needs during negotiations or trial, promoting resolution.
Provide Expert Testimony
Leverage the expertise of life care planners in depositions and trials to educate involved parties on care needs and associated costs.
By delivering expert projections, life care planners add credibility to your arguments and increase your chances of achieving the best outcomes for your client.
Supporting Settlement Negotiations
In case settlement discussions, a comprehensive life care plan serves as a powerful negotiating tool. With clear projections for both short-term and long-term care needs, attorneys can:
Validate the full extent of damages caused by the injury
Provide a solid foundation for calculated costs associated with current and future care needs
Minimize ambiguity about ongoing medical and financial requirements
By presenting a life care plan grounded in evidence and expert analysis, attorneys can advocate for settlements that accurately reflect the needs of their client. This prevents underestimation of care needs and costs and ensures injured individuals are adequately supported throughout recovery.
Your Life Care Planning Partner
A comprehensive life care plan is an essential tool for ensuring injured clients receive the care, support, and resources they need. It provides attorneys with the critical data and evidence necessary to build a strong case. Whether you’re advocating for your client’s whole-person care and fair compensation, navigating litigation, or supporting settlement negotiations, life care planners play a vital role in supplying the insights and projections needed to support the best possible outcomes.
NIH Funding Pressure: Impacts of Indirect Cost Caps and Grant Freezes
Institutions of higher education (IHEs) and affiliated medical centers and research centers are aware of the significant policy shifts affecting National Institutes of Health (NIH) funding since January 2025. This client alert examines the legal, operational, and strategic impacts of the 15% indirect cost reimbursement cap and the freeze on grant and contract processing at the NIH. Specific examples of enforcement, institutional responses, and pending legal challenges illustrate how these changes are unfolding in practice and the risks institutions face.
NIH’s Indirect Cost Cap
On February 7, 2025, the NIH issued Supplemental Guidance NOT-OD-25-068, which imposes a cap of 15% on indirect cost rates for all grant awards. This measure replaces institution-specific negotiated rates that, in many cases, exceeded 50%. The proposed 15% indirect cost cap has not only caught many institutions off guard but also immediately strained their finances. Institutions rely on these reimbursements to support research infrastructure and administration and may need to reallocate institutional funds or seek private funding to fill the gap.
Legal challenges have followed swiftly. A coalition of 22 states filed suit against the federal government in Commonwealth of Massachusetts v. National Institutes of Health , No. 1:25-cv-10338 (D. Mass. filed Feb. 10, 2025), arguing that the NIH’s abrupt imposition of a uniform cap constitutes a substantive rule change requiring formal rulemaking under 5 U.S.C. § 553, and that the policy change is arbitrary and capricious under 5 U.S.C. § 706(2)(A), lacking a rational basis or sufficient explanation. Two related lawsuits are Association of American Universities v. National Institutes of Health (D. Mass.) and Association of American Medical Colleges v. National Institutes of Health (D. Mass.). In response, the federal district court in Massachusetts issued a nationwide preliminary injunction on March 10, 2025, halting enforcement of the cap. The court’s ruling emphasized the potential for irreparable harm to research institutions.
However, final adjudication of these cases may either reinstate or permanently vacate the indirect cost cap. Given this uncertainty, colleges and universities have reacted by restricting incoming Ph.D. admissions, implementing hiring freezes, and larger capital projects centered on their research enterprises.
Grant Funding Freezes at the NIH
On January 27, 2025, the Office of Management & Budget (OMB) issued a memorandum directing federal agencies, including the NIH, to pause funding. As a result of two federal court cases, National Council of Nonprofits et al. v. Office of Management & Budget et al. (D.D.C.) and State of New York et al. v. Donald J. Trump et al. (D.R.I.), the funding freeze was enjoined.
Yet, issues have persisted at the NIH where scheduled NIH study sections for grants were paused and NIH advisory councils have not convened, leading delays in the timely review and processing of new grant applications and renewals.
Funding freezes and delays have created significant uncertainty in vital research areas, including oncology, neurodegenerative diseases, and public health initiatives. These disruptions not only affect current research but also threaten the pipeline of future scientific innovation and talent development, as incoming Ph.D. admissions may be restricted, faculty members may see funding for research dry up, and principal investigators may lack the funds to hire research assistants in their labs.
Restricting Funding as an Enforcement Mechanism
Certain institutions have expressed concern that the administration is using funding cuts to circumvent processes under Title VI or Title IX, citing concerns related to alleged race/ethnicity or gender-based discrimination.
We anticipate that institutions may challenge such enforcement efforts as exceeding statutory authority under the enabling legislation for federal agencies, such as the NIH, as well as exceeding statutory authority under the civil rights laws. Constitutional claims may also arise under the Spending Clause, arguing that the federal government cannot impose new conditions on previously awarded funds.
Strategic Considerations for Higher Education
In light of these developments, IHEs should proactively manage the risks associated with NIH funding changes, including:
Reviewing current NIH grant and contracts and internal compliance policies to identify vulnerabilities.
Planning for potential budget shortfalls within the research enterprise, identifying alternative funding sources, and reallocating institutional resources as needed.
Closely following ongoing litigation concerning the indirect cost cap and funding freezes to inform compliance and financial planning.
Collaborating with peer institutions, higher education associations, and legal counsel to support coordinated advocacy and collaborative solutions.
Evaluating internal decision-making processes to ensure preparedness for potential federal inquiries, enforcement actions, or policy shifts.
Conclusion
Colleges and universities and their affiliated medical centers and research centers face an evolving NIH funding environment. While court orders have temporarily halted some measures, the broader shift in federal research funding has significant implications for research continuity, institutional budgets, and academic autonomy.
Old North State Report – April 7, 2025
UPCOMING EVENTS
April 8, 2025
NC Chamber Spring Member Roundtable – Raleigh
April 14, 2025
Raleigh Chamber Business After Hours – Raleigh
April 16, 2025
Federalist Society Housing Policy and Regulation in NC – Raleigh
April 17, 2025
Raleigh Chamber Young Professionals Network Social – Raleigh
NC Chamber Building NC – Durham
April 22, 2025
NC Chamber Spring Member Roundtable – Asheville
April 24, 2025
RTAC – Association of Corporate Counsel Spring Reception – (Raleigh)
April 28, 2025
Thinkers Lunch: Rob Christensen
LEGISLATIVE NEWS
PHARMACY BENEFIT MANAGERS LEGISLATION ADVANCES
A bill advancing in the North Carolina legislature, House Bill 163, could change prescription costs for consumers, but opinions differ on its impact. Pharmacists believe the bill would limit profits for pharmacy benefit managers (PBMs), while PBMs argue that restrictions would raise drug prices for patients. Critics claim PBMs are motivated to keep prices high, with only three companies managing 80% of U. S. prescriptions.
PBMs play a significant role in healthcare by negotiating drug prices and determining costs for insurers and pharmacies, often lacking transparency. They can also require patients to use specific pharmacy chains, hurting competition.
The bill would mandate PBMs to pay pharmacies at least the national average drug cost and a $10 dispensing fee, allow patient choice of pharmacies, and share drug rebates with consumers. It passed the House Health Committee, following a similar bill from last session that did not progress in the Senate.
Read more by WRAL NEWS
CON LEGISLATION ADVANCES TO RULES COMMITTEE
State lawmakers in North Carolina are once again looking to change the certificate-of-need rules, which regulate the approval of new healthcare equipment or facilities. On Wednesday, the Senate Health Committee discussed Senate Bill 370, which aims to repeal these rules, and recommended it for further consideration by the Senate Rules Committee.
The North Carolina Healthcare Association supports keeping the rules, stating they help ensure access to care for underserved populations and prevent excess supply, which can raise costs. Opponents argue that the rules limit competition
While the legislature has made minor adjustments to these laws recently, broad repeal efforts have faced strong opposition from the hospital industry. Additionally, a recent ruling from the North Carolina Supreme Court could challenge the rules’ constitutionality. During the committee meeting, various health groups voiced differing opinions on the proposed changes.
Read more by WRAL News
FOSTER CARE LEGISLATION INTRODUCED
House Bill 612, a bill seeking to improve the state’s child welfare system by helping move children from foster care to permanent homes and preventing them from staying in unsafe environments, was introduced on Monday. The bipartisan bill has almost 70 co-sponsors in the House.
Representative Allen Chesser (R-Nash), the bill’s lead sponsor, emphasized that the focus is on achieving better life outcomes for children, promoting an environment that supports permanency and reunification. The Department of Health and Human Services sets policies, but counties implement them, leading to inconsistent practices.
Key points of the bill include:
County social services directors must update reporters of child abuse or neglect within five days about investigations.
Parental rights will not be lost due to inability to pay for care.
Lawyers for county agencies need six hours of yearly training.
Open adoptions are allowed with parental consent and end at age 18.
Foster parents and relatives caring for children over a year can meet judges before placement changes.
The DHHS can review cases and require remedies for rule violations.
The bill has been referred to the House Health Committee.
Read more by NC Newsline
Read more by WUNC
BILL TO EXPAND TREATMENT BY PHARMACISTS
A bill making its way through the Senate, Senate Bill 335, aims to expand pharmacists’ roles in testing and treating influenza and strep throat during a serious flu season. This season, 484 people have died from the flu, including five children, prompting the need for quicker access to treatment.
The bill, whose primary sponsor is Senator Benton Sawrey (R-Johnston), seeks to reduce the time it takes for patients to receive medication. Supported by the North Carolina Board of Pharmacy and the North Carolina Association of Pharmacists, it allows pharmacists to use accurate CLIA-Waived tests to provide rapid results.
The legislation outlines protocols for pharmacists, with some patients still needing referrals to a primary care doctor. Additionally, it mandates insurers to cover care similarly to visits to doctors or urgent care. The bill has passed the Senate Health Committee unanimously and may soon be voted on in the Senate.
Read more by WRAL NEWS
NC SENATE ELECTS NEW MAJORITY LEADER
The Senate Republican Caucus has selected Senator Michael Lee as its new Majority Leader. Lee, serving his fifth term, represents New Hanover County. The position became available after Paul Newton resigned unexpectedly and was appointed general counsel at UNC-Chapel Hill.
Lee was elected by acclamation, as he was the sole candidate. The Majority Leader is the third-highest ranking Senate leader, following Senator Phil Berger (R-Rockingham) and Deputy President Pro Tempore Ralph Hise (R-Alleghany). The Majority Leader leads caucus meetings, where members discuss policies and votes. Before becoming Majority Leader, Lee chaired the Senate Appropriations/Base Budget and Education/Higher Education committees.
Read more by WUNC
WHAT WE’RE LISTENING TO
Under the Dome Podcast
Do Politics Better Podcast
WUNC Politics Podcast
Carolina Newsmakers Podcast
NC Capitol Wrap Podcast
WHAT WE’RE READING
Asheville Citizen Times
Carolina Journal
Charlotte Observer
Fayetteville Observer
Greensboro News & Record
NC Insider
New Bern Sun Journal
News & Observer
North State Journal
Our State Magazine
Triangle Business Journal
Under the Dome
Wilmington Star News
Winston-Salem Journal
WRAL
Green Commercial Leases
Green leases are emerging as a key component of commercial leasing, as both landlords and tenants in different industries place an increasing emphasis on sustainability and environmental impact.
A “green lease” is a commercial real estate lease agreement that focuses on environmental performance and sustainability practices, and aligns the environmental and financial goals of the parties. The parties to a green lease commit to work together to meet certain environmentally-sound goals, such as efficient energy consumption, waste reduction, water conservation and healthier air quality.
The benefits of green leases to both landlords and tenants include:
Cost savings resulting from reduced energy consumption, water conservation and efficiency measures such as energy-efficient HVAC systems, lighting an insulation;
Health benefits and increased productivity stemming from employees enjoying better air quality, use of non-toxic cleaning materials, temperature comfort and use of natural lighting;
Increased property value and marketability by demonstrating a commitment to the environment with green certifications or eco-friendly features, which leads to attracting and retaining tenants who value sustainability practices;
Positive long-term environmental impact of reducing a building’s carbon footprint by preserving natural resources and reducing waste;
Fostering collaboration between landlords and tenants by creating shared accountability for meeting common sustainability goals;
Supporting the building’s compliance with current and evolving environmental standards, such as reducing carbon emissions and meeting energy-efficiency standards; and
Potential for governmental incentives for sustainable building practices, which provide economic benefits for both parties.
Green lease provisions often include:
Data sharing and performance assessments clauses to allow landlords and tenants to track progress and identify areas in need of improvement with respect to sustainability goals;
Specific obligations for installation of energy efficient appliances and equipment, adherence to waste management practices and recycling programs, use of non-toxic cleaning materials and minimizing water consumption;
Cost sharing of capital improvements that reduce energy costs, ensuring that each party has an interest in the success of their joint sustainability efforts;
Requirements that tenant improvements align with sustainability goals, such as use of certain sustainable construction materials;
Establishment of communication channels for sustainability issues, such as designation of a point person or group for each party, a schedule of meetings and training programs;
Agreement of the parties to cooperatively strive toward meeting sustainability goals and to work together to identify new opportunities for conservation of natural resources throughout the lease term; and
Flexibility provisions that allow the parties to modify the lease to meet new legal requirements and incorporate new sustainability technologies and standards.
Green leases can have a particularly important impact in healthcare space. Hospitals and clinics consume enormous amounts of energy and have substantial carbon footprints as a result of medical equipment use and heating, ventilating and cooling needs. By promoting energy efficient measures, water conservation practices, better waste management practices, recycling programs and use of renewable energy sources, green leases in healthcare space can have a significant impact on the environment. Green leases also encourage natural lighting and better air quality, which can be particularly important in a hospital setting for both recovering patients and overworked healthcare providers.
As concern for the environment and sustainable practices continues to grow, green leases will play an increasingly significant role in commercial real estate. These leases offer significant financial, health and environmental benefits to the parties and foster collaboration between landlords and tenants. The result of green leases is the development of more sustainable buildings, which has a positive environmental impact on the broader global community.
Healthcare Preview for the Week of: April 7, 2025 [Podcast]
Final Week Before Easter Recess
Focus this week on Capitol Hill will remain on reconciliation, as Republicans aim to pass the unified budget resolution in the House before leaving on Thursday for the two-week Easter recess. The Senate passed the resolution in a 51 – 48 vote after considering 800 amendments from Democrats in a “vote-a-rama.” Senators Paul (R-KY) and Collins (R-ME) joined all Democrats to vote against the resolution. As a reminder, the unified budget resolution includes instructions for the House Committee on Energy and Commerce to save at least $880 billion, likely to come from Medicaid reforms.
After Republicans won two House special elections last week, the House margin is at 220 – 213. That means Speaker Johnson can only lose three votes to pass the resolution, which may be challenging since House Budget Committee Chair Arrington (R-TX) and members of the House Freedom Caucus are currently opposed. A floor vote is scheduled for Wednesday, and passage may require intervention from President Trump.
The House Committee on Energy and Commerce will mark up 26 bills, six of which are bipartisan healthcare bills. It will be worth watching if they advance easily out of the committee, or if Democrats use the markup as an opportunity to continue to express their concerns with Republicans and the Trump administration. The Senate Health, Education, Labor, and Pensions Committee will mark up S. 932, the Give Kids a Chance Act. Hearings will also be held to discuss lowering the cost of biosimilars and how to restore trust in the US Food and Drug Administration. The Senate continues to advance Trump nominees, and the Senate Homeland Security and Governmental Affairs Committee will vote on the nominations of Scott Kupor to be director of the Office of Personnel Management and Eric Ueland to be deputy director for management at the Office of Management and Budget.
Meanwhile, US Department of Health and Human Services Secretary Kennedy will be on a Make America Healthy Again tour in Utah, Arizona, and New Mexico to discuss state, tribal, and local initiatives to improve healthy eating and ban fluoride in drinking water. Later in the week, the Medicare Payment Advisory Commission (MedPAC) and Medicaid and CHIP Payment and Access Commission (MACPAC) will hold their final meetings of 2024 – 2025 cycle. Both commissions will vote on recommendations, including a MedPAC vote on reforming the physician fee schedule and a MACPAC vote on recommendations for its June report to Congress.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Julia Grabo to discuss priorities in the House of Representatives ahead of the Easter recess, including reconciliation and an Energy & Commerce Committee markup of several healthcare bills.