HHS Delays Trump Administration’s Healthcare Regulatory SUNSET Rule

April 12, 2021

UPDATE: On May 27, 2022, the U.S. Department of Health and Human Services (HHS) announced it was withdrawing the Securing Updated Necessary Statutory Evaluations Timely final rule (SUNSET final rule). For more details, see our July 12, 2022 alert.

On March 22, 2021, the U.S. Department of Health and Human Services announced it was delaying the Securing Updated and Necessary Statutory Evaluations Timely (SUNSET) rule until March 22, 2022. A one-year delay is unusual. The rule’s stated purpose was to reduce healthcare regulatory burden and was finalized by the Trump administration one day before the inauguration of President Biden.

Under the rule, HHS would be required to retroactively review more than 17,000 of its own regulatory rules periodically or have such rules automatically expire or sunset at a certain time following their effective date. Retroactive review allows agencies to examine existing regulations and then evaluate and draft updates based on new considerations. This unusual one-year delay by the Biden administration allows a recently filed lawsuit concerning the rule. Many in and out of government believe the suit has merit and the delay allows the suit to proceed before such review must begin.

The following outlines the major components of the finalized regulatory reform rule and the future of the rule following the announcement of the Biden administration’s postponement.

1. Finalized SUNSET rule’s retrospective regulatory review mandate

The delayed final rule seeks to address outdated regulations by requiring periodic review of HHS’ adopted regulations. This rule requires that most HHS regulations expire at the end of the later of: (a) five years after the year that the SUNSET rule first became effective; (b) 10 years after the year of the regulation’s promulgation; or (c) 10 years after the last year in which HHS assessed and, if required, revised the regulation. HHS could also extend that deadline for review one time per regulation, for up to a year. HHS originally proposed that regulations would expire at the latest of two years, instead of five years, from the rule’s effective date (or one of the other two prongs), which HHS estimated would require the review of approximately 2,430 rulemakings. In finalizing the SUNSET rule, HHS provided itself more time to review these past rulemakings, but also added to the number of regulations that would be included in the first batch of retroactive reviews, due to the additional time period.

In reviewing historic rulemaking under retroactive review, HHS was to consider a variety of factors such as the continued need for the rule, legal issues, public input, overlap and duplication with other federal or state and local governmental rules, and technological, economic or other changes. Part of the retroactive review process requires an updated cost-benefit analysis of the existing regulation. Currently, HHS analyzes regulatory cost when implementing a new rule when it is not always clear HHS has full information to assess costs or benefits until actually adopted. HHS expected that this analysis could potentially sunset many regulations, since the rule under review would expire without a positive cost-benefit analysis and public comments demonstrating necessity.

HHS did carve out certain rulemaking from this retroactive review process. First, it does not apply to certain Food and Drug Administration regulations for device-specific, food standard and over-the-counter drug-specific regulations. Second, regulations that are jointly issued with other agencies, outside HHS, will be reviewed in conjunction with those agencies to avoid duplicating or pre-empting their review process. Finally, regulatory review will not be required for regulations that (a) legally cannot be rescinded, (b) involve a military or foreign affairs function or (c) solely address internal management or personnel matters (two categories exempt from standard rulemaking requirements under the Administrative Procedure Act (APA).

2. HHS delays retrospective review at start of Biden administration due to litigation against the rule

In delaying the SUNSET rule’s effective date, the Biden administration noted litigation filed on March 9, 2021, seeking to overturn the final SUNSET rule. Numerous parties — including the County of Santa Clara, California Tribal Families Coalition, the National Association of Pediatric Nurse Practitioners and the American Lung Association — sued HHS to overturn the SUNSET final rule. In County of Santa Clara v. HHS, Case. No. 5:21-cv-01655-BLF (N.D. Cal.), the plaintiffs allege that the SUNSET rule’s implementation violated requirements under the APA. These APA challenges claim that the rule is arbitrary and capricious, and violates notice-and-comment requirements and HHS’ Tribal Consultation Policy. In addition, the plaintiffs’ complaint notes that the review schedule will rescind thousands of regulations mandated by statute, presenting additional concerns under the Regulatory Flexibility Act.

In addition to these regulatory procedural concerns, the plaintiffs allege that the SUNSET rule threatens imminent and irreparable harm to them and the general public. The plaintiffs indicated that the rule does not provide an adequate mechanism for obtaining public input on the substance of the regulations being reviewed. For example, they expressed concerns that the 30-day public comment period was an insufficient amount of time to obtain public review based on the number of regulations being reviewed. In delaying the final rule, HHS agreed that the plaintiffs’ claims were credible and the balance of equities and the public interest warranted postponement of the effective date pending judicial review.

3. Potential next steps

When the rule was proposed as part of President Trump’s broader deregulatory agenda, some called it a “time bomb.” Some critics, while supporting enhanced regulatory review, were concerned the rule would hinder the Biden administration’s agenda. To complete assessments including economic impacts of almost every one of the department’s existing regulations is a massive undertaking and potentially an impossible task. The bulk of HHS’ regulations — estimated to be 17,200 provisions encompassing 3,400 separate rulemaking packages — have already passed the 10-year mark for review or soon will.

As stated above, the SUNSET rule provides only a five-year grace period to review all of them. To meet the rule’s targets, HHS would have to conduct at least 680 reviews per year. The Trump administration’s HHS Regulatory Task Force completed 111 reviews for rules recommended for repeal in 2018 and only 15 reviews in 2019. Nearly 85 percent of HHS regulations created before 1990 have never been edited, and HHS has almost 300 broken citation references in the Code of Federal Regulations. Agencies are already required to forecast economic implications of regulations, but they are theoretical. The rule as designed would mean HHS would have to expend most of its resources in the first two years of the administration simply reviewing regulations.

When the rule was proposed, many trade associations in the healthcare sector commented that while they supported reviewing and eliminating outdated rules, they were concerned that this approach and timeline could create additional uncertainty for the healthcare industry. Past presidents and Congress have tried to impose discipline on regulatory review. The requirement for economic impact analysis before a rule was proposed was considered a great reform to the system. Congress passed the Unfunded Mandate Reform Act that requires agencies to identify and consider a “reasonable” number of regulatory alternatives and select the least costly, most cost-effective or least burdensome alternative. In 1996, Congress passed the Small Business Regulatory Enforcement and Fairness Act that established procedures for congressional review of “major” rules before they become effective. Congress has 60 days from publication of the final rule to review and stop a proposal if it costs $100 million or more. HHS has been conducting retrospective review activities in response to President Obama’s January 2011 executive order, Improving Regulation and Regulatory Review.

However, the SUNSET rule was more similar to deregulation than regulatory review because of the timeline imposed. Few are pushing for wholesale regulatory review, instead focusing on specific regulations. The Biden administration may return to the topic of review but only after the country has moved to a post-pandemic era.

Please contact one of the authors for additional information regarding this rule if you would like to discuss the potential implications of regulatory reform through retrospective review.