 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 plaintiffs-
appellees.

    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. § 300gg-
91(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 cost-
effective 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 stand-
alone 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. § 300gg-
91(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.
