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Administrative Law and Federalism in the Age of Obamacare

Public administrators and agencies exert an enormous amount of authority in American society. They make daily judgments regarding the quality of the food we eat, the water we drink, and the air we breathe. They effectively are the fourth branch of government and the choices they make are hugely critical. Moreover, the reality of public administration today is one where policy making is more intergovernmental, and that fact implicates interesting legal issues for administrative discretion.

One of the most important powers that administrative agencies have is the authority to interpret and implement laws. As students of the policy process know, once laws are passed by Congress or another legislative body, the task generally falls to an administrative agency to enforce them. Yet laws often are not clear, require additional interpretation, or even need the creation of administrative rules. But the question is how much authority should these agencies be given when interpreting laws that they are entrusted to enforce? Courts have struggled with this question, providing unique answers at the state and federal level.

At the federal level the Supreme Court’s Chevron v. NRDC, 467 U.S. 837 (1984) articulated a two step process to clarify the limits of administrative statutory interpretation authority. In general the Court said that administrative officials responsible to the president and not the judiciary should make policy choices about the law. Having said that the Court declared that if the intent of Congress was clear and the statutory language unambiguous, then that settled the matter-follow what the law said. But if the law and intent are unclear, then the courts should defer to reasonable agency interpretation of the law.

Chevron has been hailed by many as the equivalent of a “reverse Marbury”–a reference to the Marbury v. Madison, 5 U.S. 137 (1803) Supreme Court decision by Chief Justice Marshall that effectively established the practice of judicial review for the federal courts. Chevron places significant authority and deference in the hands of administrators and agencies to interpret the law and exercise discretion. Subsequent to Chevron the Supreme Court has clarified and modified the decision, stating in cases such as United States v. Mead Corporation, 533 U.S. 218 (2001) that the judicial deference only occurs when it is clear that Congress intended to give that agency authority to interpret, or in Cuomo v. The Clearing House Association, 557 U.S. 519 (2009) that deference is given only to those areas where it has been determined that ambiguity exists. But even in areas where Chevron deference is not due, the Supreme Court ruled in Skidmore v. Swift & Company, 323 U.S. 134 (1944), that administrative construction of laws might still be given significant deference if they are persuasive.

These are rules of administrative deference that operate at the federal level. States have crafted their own rules for judicial deference to state agency interpretation of state laws. In New York in cases such as Matter of Heintz v. Brown, 80 N.Y.2d 998, (1992) and McAtee v. Environmental Control Board, 931 N.Y.S.2d 474 (2011) the rule is that the scope of judicial review is limited to an assessment of whether there is a rational basis for the administrative determination. Where the agency arrives at a conclusion, “acting pursuant to its authority and within the orbit of its expertise, [it] is entitled to deference.” In Minnesota, in Reserve Mining Co. v. Herbst, 256 N.W.2d 808 (Minn. 1977), that state’s Supreme Court declared that administrative decisions “enjoy a presumption of correctness” within their realm of technical expertise. In In the Matter of the Excess Surplus Status of Blue Cross and Blue Shield of Minnesota and Zachman, et al., 624 N.W.2d 264 (Minn.2001), the Court ruled that: “The agency decision-maker is presumed to have the expertise necessary to decide technical matters within the scope of the agency’s authority, and judicial deference, rooted in the separation of powers doctrine, is extended to an agency decision-maker in the interpretation of statutes that the agency is charged with administering and enforcing.” Other state courts have fashioned similar rules for administrative agencies within their jurisdictions.

But now, how is deference addressed in a world of federalism and intergovernmental authority? Increasingly states are being asked to implement federal policy. This of course is not a new phenomena. Many states agencies are already enforcing federal environmental and OSHA laws. But with the implementation of the Affordable Health Care Act, that includes setting up the health care exchanges, and other pressures to reduce federal spending, look to see more states taking on the responsibility to enforce federal laws. More specifically, the question is what level of discretion and deference should state courts give to state agencies interpreting and enforcing federal laws and rules? Do the Chevron rules apply? Do unique state rules apply? Or is there a need for a new set of rules? In Minnesota, its Supreme Court has been grappling with this issue for several years, seemingly producing a new hybrid that draws upon Chevron and state precedent, especially for these unique situations where states are tasked with implementing and interpreting federal law.

Now why should anyone care about what appears to be an arcane aspect of administrative law? Simply because these rules of judicial deference affect the authority of agencies to do their job in enforcing federal law. It leaves open important questions about whether we want 50 different states interpreting federal law differently, and also about should some officials, depending on the state, be given more or less authority to act under federal law. In short, these emerging rules of judicial deference to agency action raise important federalism questions that will test perhaps not only the extent of national power over states, but also how federal law may increasingly define the scope of authority and discretion given to state officials. Look to see this issue becoming increasingly more significant as a legal issue affecting public administration in 2013 and beyond.



Author: David Schultz is a professor in the school of business at Hamline University. He can be reached at [email protected].

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