United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 15, 2016 Decided July 1, 2016

No. 15-5310

CENTRAL UNITED LIFE INSURANCE CO., ET AL.,

APPELLEES

v.

SYLVIA MATHEWS BURWELL, IN HER OFFICIAL CAPACITY AS 

SECRETARY OF U.S. DEPARTMENT OF HEALTH AND HUMAN 

SERVICES, ET AL.,

APPELLANTS

Appeal from the United States District Court

for the District of Columbia

(No. 1:14-cv-01954)

Daniel Tenny, Attorney, U.S. Department of Justice, 

argued the cause for appellants. With him on the briefs were 

Benjamin C. Mizer, Principal Deputy Assistant Attorney 

General, Mark B. Stern, and Alisa B. Klein, Attorneys, 

William B. Schultz, General Counsel, U.S. Department of 

Health and Human Services, Janice L. Hoffman, Associate 

General Counsel, and Susan Maxson Lyons, Deputy Associate 

General Counsel for Litigation.

Quin M. Sorenson argued the cause for appellees. With 

him on the brief were James C. Stansel and Tobias S. 

Loss-Eaton. 
2

Brad D. Schimel, Attorney General, Office of the 

Attorney General for the State of Wisconsin, Misha Tseytlin, 

Solicitor General for the State of Wisconsin, Daniel P. 

Lennington, Deputy Solicitor General for the State of 

Wisconsin, E. Scott Pruitt, Attorney General, Office of the 

Attorney General for the State of Oklahoma, Alan Wilson, 

Attorney General, Office of the Attorney for the State of 

South Carolina, Ken Paxton, Attorney General, Office of the 

Attorney General for the State of Texas, Sean Reyes, Attorney 

General, Office of the Attorney General for the State of Utah, 

Patrick J. Morrisey, Attorney General, Office of the Attorney 

General for the State of West Virginia, Leslie Rutledge, 

Attorney General, Office of the Attorney General for the State 

of Arkansas, Samuel S. Olens, Attorney General, Office of the 

Attorney General for the State of Georgia, Jeff Landry, 

Attorney General, Office of the Attorney General for the State 

of Louisiana, Bill Schuette, Attorney General, Office of the 

Attorney General for the State of Michigan, and Douglas J. 

Peterson, Attorney General, Office of the Attorney General 

for the State of Nebraska, were on the brief for amici curiae

the States of Wisconsin, et al. in support of plaintiffsappellees.

Before: BROWN and MILLETT, Circuit Judges, and 

GINSBURG, Senior Circuit Judge.

Opinion of the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge: At issue in this appeal is whether 

the Department of Health and Human Services (“HHS”)

colored outside the lines of its authority. The district court 

held that it did, and we agree. 

The Public Health Service Act, 42 U.S.C. § 201

(“PHSA”), establishes coverage requirements for all health 
3

insurance plans except those it deems “excepted benefits.” 

Only those forms of insurance specifically enumerated in the 

PHSA can qualify as an excepted benefit and, for the benefits 

at issue here, that status is further conditioned on specific 

requirements: (1) the insurance plans must be “provided under 

a separate policy, certificate, or contract of insurance,” and (2) 

they must be “offered as independent, noncoordinated 

benefits.” See 42 U.S.C. § 300gg-63(b); id. § 300gg-91(c)(3); 

see also id. § 300gg-21(c)(2).

Among the excepted benefits listed in the PHSA is a 

form of insurance known as “fixed indemnity.” Id. § 300gg91(c)(3)(B). As their label suggests, these policies pay out a 

fixed amount of cash upon the occurrence of a particular 

medical event. For instance, if a policyholder visits a hospital 

or purchases prescription drugs, the provider pays out a 

predetermined amount, which the policyholder is then free to 

use however she chooses. 

In 2010, Congress passed the Patient Protection and 

Affordable Care Act (“ACA”), which, among other things, 

updated the PHSA’s coverage requirements and mandated 

that all applicable individuals maintain “minimum essential 

coverage.” 26 U.S.C. § 5000A(a). Despite the ACA’s 

sweeping reforms to the health insurance market, it left intact

and incorporated the PHSA’s rules regarding excepted 

benefits. See id. § 5000A(f)(3) (stating the term “minimum 

essential coverage” does not include the excepted benefits 

described in the PHSA). And in fact, Amici claim that in the 

wake of the ACA’s passage, many individuals found it costeffective to forego minimum essential coverage (even despite

the penalty) in favor of these fixed indemnity policies. 

Amicus Br. 9.
4

But HHS foreclosed that option four years later in the 

regulation under review here. In May 2014, it announced its 

plan “to amend the criteria for fixed indemnity insurance to be 

treated as an excepted benefit” in the individual health 

insurance market. Patient Protection and Affordable Care 

Act; Exchange and Insurance Market Standards for 2015 and 

Beyond, 79 Fed. Reg. 30240, 30253 (May 27, 2014). On top 

of the requirements codified in the PHSA, HHS added 

another. To be an “excepted benefit,” the plan may be 

“provided only to individuals who have . . . minimum 

essential coverage.” Id. Now, those who had previously 

purchased these plans as a substitute for minimum essential 

coverage would have to find a fixed indemnity plan that 

satisfies the PHSA’s coverage requirements for non-excepted 

benefits. The very nature of fixed indemnity insurance, 

however, renders such plans incapable of satisfying those 

requirements, so this new rule effectively eliminated standalone fixed indemnity plans altogether. In response, several 

providers challenged the rule as an impermissible 

interpretation of the PHSA, and after a hearing, the district 

court permanently enjoined HHS’s enforcement of the rule

under Chevron Step One. See Chevron, U.S.A., Inc. v. Nat. 

Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984).

The Chevron two-step acts as a check on administrative 

overreach. Agencies may act only when and how Congress 

lets them. See La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 

374 (1986) (“[A]n agency literally has no power to act . . . 

unless and until Congress confers power upon it.”); Ry. Labor 

Execs. Ass’n v. Nat’l Mediation Bd., 29 F.3d 655, 670 (D.C. 

Cir. 1994) (en banc) (“Agencies owe their capacity to act to 

the delegation of authority, either express or implied, from the 

legislature.”). To vindicate that important principle, Chevron 

requires courts to determine first whether Congress authorized 

the agency to act. See Hearth, Patio & Barbecue Ass’n v. 
5

U.S. Dep’t of Energy, 706 F.3d 499, 453 (D.C. Cir. 2013) 

(“[W]e always first examine the statute . . . , employing 

traditional tools of statutory construction.”). Where Congress 

“has directly spoken” to the parameters of the agency’s 

authority, “the court, as well as the agency, must give effect to 

the unambiguously expressed intent of Congress.” Chevron, 

467 U.S. at 842–43. But if Congress grants an agency 

flexibility to flesh out a particular policy, the regulation will 

be upheld “as long as the agency stays within that 

delegation.” Arent v. Shalala, 70 F.3d 610, 615 (D.C. Cir. 

1995). 

Here, HHS described its rule as an attempt to “amend the 

criteria for fixed indemnity insurance to be treated as an 

excepted benefit.” 79 Fed. Reg. at 30253 (emphasis added). 

Most likely, HHS intended only to amend the regulatory 

criteria because of course only Congress can amend its 

statutes. But it’s more accurate—and fatally so—to say 

HHS’s rule proposed to “amend” the PHSA itself. The PHSA 

lists only certain defined criteria for fixed indemnity plans to 

have “excepted benefits” status: the plan (1) is provided under 

a separate policy, contract, etc., and (2) offers independent, 

noncoordinated benefits. See 42 U.S.C. § 300gg-63(b); id. § 

300gg-91(c)(3)(B); cf. id. § 300gg-21(c)(2). So long as these 

conditions are met, the plan qualifies as an excepted benefit. 

See id. § 300gg-21(c)(2) (exemption applies “if all of the 

following conditions are met”). Thus, where Congress

exempted all such conforming plans from the PHSA’s 

coverage requirements, HHS, with its additional criterion,

exempts less than all. Disagreeing with Congress’s expressly 

codified policy choices isn’t a luxury administrative agencies 

enjoy.

Nothing in the PHSA suggests Congress left any leeway 

for HHS to tack on additional criteria. See 42 U.S.C. 
6

§ 300gg-91(c)(3) (defining “excepted benefits” for fixed 

indemnity plans). Nor do any subsequent amendments to it. 

The ACA, in fact, endorses the PHSA’s definition—it 

excludes the “excepted benefits . . . described in” the PHSA

from what counts as “minimum essential coverage.” 26 

U.S.C. § 5000A(f)(3). At no point does the ACA give even

the slightest indication the definition of “excepted benefit” 

was suddenly debatable; rather, the Act doubled down on the 

PHSA’s existing requirements. Ever since it first carefully 

defined what counts as an “excepted benefit” in 1996,

Congress has never changed course or put its original 

definition in any doubt. Where the text is as clear as it is here, 

“that is the end of the matter.” Chevron, 467 U.S. at 842; see 

also Ry. Labor, 29 F.3d at 671 (en banc) (rejecting an 

argument that Step One is satisfied “any time a statute does 

not expressly negate the existence of a claimed administrative 

power” as “flatly unfaithful to the principles of administrative 

law . . . and refuted by precedent”).

Nonetheless, HHS justifies its authority to supplement 

the PHSA with reference to the Act’s requirement that the 

fixed indemnity plans must be “offered as independent, 

noncoordinated benefits.” See 42 U.S.C. § 300gg91(c)(3)(B). In HHS’s view, that requirement “presum[es] 

the existence of other coverage” but is ambiguous as to what 

kind. See 79 Fed. Reg. at 30254; HHS Br. 19–20. 

Accordingly, HHS stated, “[W]e are clarifying that there must 

be such other coverage, and that the other coverage in 

question must be minimum essential coverage.” 79 Fed. Reg. 

at 30254. Put differently, HHS reads this provision as 

implying there’s something the benefits must be independent

from or not coordinated with, and Congress’s silence left 

room for HHS to read that unspoken “something” as though it 

meant “minimum essential coverage.”
7

Ambiguity, however, “is a creature not of definitional 

possibilities but of statutory context.” Brown v. Gardner, 513 

U.S. 115, 118 (1994). Seen in its proper context, HHS’s rule 

clearly misreads the PHSA, which only requires that plans are

offered as independent and noncoordinated benefits. That 

provision regulates providers, not consumers. See Cent.

United Life, Inc. v. Burwell, 128 F. Supp. 3d 321, 329 (D.D.C.

2015) (“The only reasonable interpretation of that sentence is 

that the statute looks to the seller’s conduct—are they offering 

the ostensibly excepted benefits in tandem with other 

benefits?—and not the buyer’s. The statute allows for the 

possibility of a buyer possessing other coverage but does not 

require it.”). Another part of the PHSA addresses 

“coordination” with language that corroborates this reading. 

Listing similar conditions for “excepted benefit” status under 

that part of the PHSA, the provision requires that there be “no 

coordination between the provision of such benefits and any 

exclusion of benefits under any group health plan maintained 

by the same plan sponsor.” 42 U.S.C. § 300gg–21(c)(2)(B)

(emphasis added). HHS’s attempt to regulate consumers

under a provision directed at providers confirms the agency’s

rule was an act of amendment, not interpretation. 

Accordingly, HHS has no colorable claim to Chevron

deference. See MCI Telecomm. Corp. v. AT&T Co., 512 U.S. 

218, 229 (1994) (“[A]n agency’s interpretation of a statute is 

not entitled to deference when it goes beyond the meaning 

that the statute can bear.”); see also Jordan v. Sec’y of Educ., 

194 F.3d 169, 171–72 (D.C. Cir. 1999) (concluding, under 

similar circumstances, an agency’s decision to “add an 

obligation that is not in the statute . . . changed the nature of 

the statute” and that the “Secretary may not rewrite the 

statute”).1

 1 HHS’s rule also requires fixed indemnity application materials to 

include a notice that prominently states: “This is a supplement to 
8

Because HHS lacked authority to demand more of fixed 

indemnity providers than Congress required, the district 

court’s permanent injunction is hereby

Affirmed.

 

health insurance and is not a substitute for major medical coverage. 

Lack of major medical coverage (or other minimum essential 

coverage) may result in an additional payment with your taxes.” 45 

C.F.R. § 148.220(b)(4)(iv). No one has challenged this part of the 

rule, and we express no opinion as to its validity.