Can Tennessee cap health care provider prices or stop insurers from cutting reimbursement rates for rural providers?

Plain-English summary

Tennessee Attorney General Jonathan Skrmetti concluded that the General Assembly has room to regulate both health care prices and insurance reimbursement rates. Neither proposal, as described in general terms, was "fundamentally suspect as a subject for legislative action."

The first proposal would prevent health care providers from changing what they charge for services. The opinion said measured price regulation would probably receive deferential constitutional review because it is economic legislation and does not appear to involve a fundamental right. A court could view stable health care pricing as a legitimate legislative purpose.

The second proposal would prevent insurers from reducing reimbursement rates paid to providers in rural counties. The AG reached the same general answer: Tennessee may regulate insurers this way within constitutional limits, and protecting access to rural health care could provide a rational basis for treating rural reimbursement differently.

The opinion did not approve a bill or a particular statutory text. No bill had been introduced, and the request did not specify the duration, enforcement mechanism, administrative oversight, effect on existing contracts, or other details. Those details could determine whether a future law raises problems under substantive due process, the Takings Clauses, the federal and state Contract Clauses, Tennessee's retrospective-law prohibition, or equal protection.

What this means for you

Tennessee legislators and policy staff

The opinion treats both subjects as permissible areas for legislation. A provider-price rule would probably be reviewed as economic regulation, and a rural reimbursement rule could be supported by the state's interest in preserving access to health care. The AG repeatedly limited that conclusion to the proposals as generally described and did not assess any specific bill language.

Health care providers

The opinion concluded that a measured restriction on provider charges would not be inherently unconstitutional. It also recognized that the effect on a provider could matter to a regulatory-takings analysis, particularly the rule's economic impact and its interference with investment-backed expectations.

Insurance companies and rural health care providers

A law preventing reimbursement reductions in rural counties would likely qualify as constitutionally permissible economic regulation. The opinion said the rural classification would need clear criteria and could draw an equal-protection challenge, but a court could find a rational relationship between the distinction and preserving rural health care access.

Attorneys reviewing a future proposal

The opinion identifies several fact-dependent questions. A law affecting existing contracts could trigger federal and state Contract Clause analysis. A purely prospective law would not present those same contract issues. Regulatory-takings analysis would depend on economic impact and investment-backed expectations, while equal-protection review would ask whether the rural classification reasonably relates to a legitimate state interest.

Common questions

Q: Can Tennessee freeze or cap what health care providers charge?
A: The opinion says the General Assembly has constitutional room to regulate provider charges. It does not decide whether any particular price cap or freeze would be valid because no specific proposal was presented.

Q: Can Tennessee stop insurers from lowering reimbursement rates for rural providers?
A: Likely yes. The AG said such a rule could be rationally related to maintaining rural health care access, although the law would need clear criteria and its exact terms would control the analysis.

Q: Would health care price regulation be an unconstitutional taking?
A: Not automatically. The opinion says a regulatory-takings claim would require a fact-specific analysis of matters such as economic impact, interference with investment-backed expectations, and the character of the government action.

Q: What if the law changes existing provider or insurance contracts?
A: That could trigger the Contract Clauses of the federal and Tennessee constitutions. The opinion explains that contract impairment is not always unconstitutional, but the analysis would examine substantial impairment, the public purpose, and whether the adjustment is reasonable. A purely prospective law would avoid those particular concerns.

Q: Did the AG approve a specific bill?
A: No. The request described only possible legislation, and no bill had been introduced. The AG gave a general constitutional framework rather than a final judgment on statutory text.

Background and constitutional framework

The opinion starts with Tennessee's broad legislative authority and the deferential review usually applied to economic regulation. Under the substantive due process standard quoted from Newton v. Cox, legislation that does not involve a fundamental right must bear a reasonable relation to a proper legislative purpose and must not be arbitrary or discriminatory.

The AG then addresses three possible limits. First, regulation that goes too far could be challenged as a regulatory taking under Penn Central, which calls for a fact-specific inquiry. Second, a law affecting existing contracts could be reviewed under U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20. Third, treating rural reimbursement differently could prompt equal-protection review, but the opinion applies the deferential rational-basis framework because no fundamental right or suspect class was identified.

The AG's bottom line is deliberately narrow. Tennessee may legislate in both areas, but the constitutionality of an enacted law would turn on its actual mechanics and effects.

Citations and references

Constitutional provisions:

• Tenn. Const. art. I, § 8
• Tenn. Const. art. I, § 20
• Tenn. Const. art. I, § 21
• Tenn. Const. art. XI, § 8
• U.S. Const. art. I, § 10

Principal cases:

• Mansell v. Bridgestone Firestone N. Am. Tire, LLC, 417 S.W.3d 393 (Tenn. 2013)
• Newton v. Cox, 878 S.W.2d 105 (Tenn. 1994)
• Phillips v. Montgomery Cnty., 442 S.W.3d 233 (Tenn. 2014)
• Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978)
• Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400 (1983)
• Brown v. Campbell Cnty. Bd. of Educ., 915 S.W.2d 407 (Tenn. 1995)
• Doe v. Norris, 751 S.W.2d 834 (Tenn. 1988)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2026/op26-05.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
July 28, 2026

                                        Opinion No. 26-05

Legislative Proposals Concerning Health Care Services and Insurance Reimbursement
Rates

    Question 1

   If the General Assembly were to enact a law that prevents health care providers from

changing their billing costs for services, would the law be constitutional?

    Opinion 1

     Although the specific details surrounding such a legislative proposal would invariably

control its constitutionality, the Tennessee Constitution leaves room for the General Assembly to
regulate health care charges within the limits of federal law.

    Question 2

    If the General Assembly were to enact a law that prevents insurance companies from

reducing reimbursement rates to health care providers in rural counties, would the law be
constitutional?

    Opinion 2

    Although the specific details of the proposal would again invariably control its

constitutionality, there is room for the General Assembly to regulate insurance companies in this
way within constitutional limits.

                                            ANALYSIS

   The request asks about two separate legislative proposals related to health care. As we

understand the situation, no bills have been introduced in the General Assembly concerning the
proposals, and the request references them in only general terms.1

    Because the request references only the general thrust of potential legislation, this analysis

is necessarily abstract and cannot assess whether specific restrictions that may be enacted would
survive constitutional muster. The relevant law gets quite complicated, and specifics will likely
matter to the outcome of any legislative effort in this area. But that qualification aside, and subject
1
The mechanics and parameters of the respective proposals are left unstated. Among other things, it is not clear
whether the proposals’ restrictions would be limited to defined temporal windows, or whether (and how) an
administrative agency might be involved in oversight of the issues regulated.

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to other caveats discussed below, it is our opinion that neither of the proposals as generally
described is fundamentally suspect as a subject for legislative action.

    1. The first question asks whether a law enacted to prevent health care providers from

changing their “billing costs for services” would be constitutional. As phrased, this question
appears to be interested in some type of potential regulation pertaining to what health care
providers charge for their services. Although the devil oftentimes lies in the details, it is unlikely
that legislation enacted to regulate health care charges would itself be fundamentally suspect—
despite Tennessee’s constitutional commitments to the right to property and the freedom to
contract,2 the plenary lawmaking authority of the General Assembly remains quite broad.

     Under Tennessee law, substantive due process principles are said to bar “oppressive

government action,” Mansell v. Bridgestone Firestone N. Am. Tire, LLC, 417 S.W.3d 393, 409
(Tenn. 2013), but judicial review is highly deferential when a fundamental right is not implicated.
The substantive due process protections conferred by the Tennessee Constitution have been
identified as “identical” with those provided by the United States Constitution. See id. at 407
(discussing the historical interpretation of the “law of the land” clause in Tenn. Const. art. I, § 8).3
And “unless a fundamental right is involved, the test for determining whether a statute comports
with substantive due process is whether the legislation bears a reasonable relation to a proper
legislative purpose and is neither arbitrary nor discriminatory.” Newton v. Cox, 878 S.W.2d 105,
110 (Tenn. 1994) (cleaned up). This low standard makes it highly unlikely that economic
regulation of the kind generally contemplated here would be deemed constitutionally problematic.
After all, though it is enshrined in the state constitutional text,4 the right to contract “is not
unalienable or absolute.” Id. And a court could plausibly regard some type of measured restriction
on health care charges to be rationally related to the presumably permissible objective of bringing
stability to the health care market.

2
See Tenn. Const. art. I, § 8 (“That no man shall be taken or imprisoned, or disseized of his freehold, liberties or
privileges, or outlawed, or exiled, or in any manner destroyed or deprived of his life, liberty or property, but by the
judgment of his peers or the law of the land.”); Tenn. Const. art. I, § 20 (“That no retrospective law, or law impairing
the obligations of contracts, shall be made.”); Tenn. Const. art. I, § 21 (“That no man’s particular services shall be
demanded, or property taken, or applied to public use, without the consent of his representatives, or without just
compensation being made therefor.”).

3
No discussion of substantive due process in the federal Constitution would be complete without an acknowledgment
that the entire concept has received withering critique from the bench for decades. See, e.g., McDonald v. City of
Chicago, 561 U.S. 742, 811 (2010) (Thomas, J., concurring in part and concurring in the judgment) (“The notion that
a constitutional provision that guarantees only ‘process’ . . . could define the substance of those rights strains credulity
for even the most casual user of words.”); United States v. Carlton, 512 U.S. 26, 39 (1994) (Scalia, J., concurring in
the judgment) (“If I thought that ‘substantive due process’ were a constitutional right rather than an oxymoron, I would
think it violated by bait-and-switch taxation.”). But the Tennessee Supreme Court stands as the ultimate interpreter
of the Tennessee Constitution, and cracks in the foundation of federal substantive due process are only relevant to
Tennessee law to the extent they persuasively influence the state high court’s interpretation. Cf., e.g., Tennessee v.
Tuttle, 515 S.W.3d 282, 307 (Tenn. 2017).

4
See State ex rel. Astor v. Schlitz Brewing Co., 104 Tenn. 715, 59 S.W. 1033, 1040 (1900) (discussing Tenn. Const.
art. I, § 8 and stating that “[t]he right of contract is confessedly an inherent part of both the right of ‘liberty’ and the
right of ‘property’”).

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    Conceivably, challengers to regulation in this area might assert that an enacted restriction

constitutes a regulatory taking requiring just compensation under either the United States or
Tennessee Constitutions. See Phillips v. Montgomery Cnty., 442 S.W.3d 233, 244 (Tenn. 2014)
(holding that Tenn. Const. art. I, § 21 “encompasses regulatory takings to the same extent as the
Takings Clause of the Fifth Amendment to the United States Constitution”). In broad strokes,
such a claim involves the assertion that governmental regulation “goes too far,” id. at 239 (quoting
Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)), and when a regulatory takings claim does
not involve categories implicating “per se” takings,5 a court will evaluate it by employing the
standards from Penn Central Transportation Co. v. New York City.6 As our State Supreme Court
has relayed, primary considerations are the economic impact of the regulation and the extent to
which the regulation has interfered with distinct investment-backed expectations. Id. at 240
(cleaned up). Further, the character of the governmental action may be relevant. Id. (cleaned up).

    This inquiry is, “essentially,” an “ad hoc, factual” one. Penn Cent. Transp. Co. v. New

York City, 438 U.S. 104, 124 (1978). But if a substantive due process challenge is likely to fail—
as we believe would probably be the case in light of the case law—“it would be surprising indeed
to discover” that a takings challenge would succeed. Concrete Pipe & Prods. of Calif., Inc. v.
Constr. Laborers Pension Trust for S. Calif., 508 U.S. 602, 641 (1993) (quoting Connolly v.
Pension Benefit Guar. Corp., 475 U.S. 211, 223 (1986)). The burden on the challengers, after all,
would be heavy. See Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 493 (1987)
(noting that “petitioners have not shown any deprivation significant enough to satisfy the heavy
burden placed upon one alleging a regulatory taking”).

    Another issue could arise if the legislation in this area worked to affect relationships

governed by existing contracts. In that circumstance, the legislation could face specific scrutiny
under U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20. As this Office has explained before,
these provisions both prohibit laws that impair the obligation of a contract. Tenn. Att’y Gen. Op.
12-28 (Mar. 2, 2012).

    Importantly, though, restrictions would not constitute an unconstitutional impairment of

contracts simply because they were applied to existing contractual relationships. The prohibitions
in U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20 are not absolute, and “[i]t has long been
recognized that the prohibition of laws impairing the obligation of contracts does not prevent states
from acting pursuant to their inherent police power to promote the public welfare.” Minn. Ass’n
of Health Care Facilities, Inc. v. Minn. Dep’t of Pub. Welfare, 742 F.2d 442, 449 (8th Cir. 1984);
see also Tenn. Att’y Gen. Op. 11-61 (Aug. 8, 2011) (noting that federal and state law recognize
that all contracts are subject to interference by statutes enacted “in the government’s bona fide
exercise of its police power”). But opponents of legislation in this area could lodge concerns

5
“Per se” takings include situations in which the government requires an owner to suffer a permanent physical invasion
of property, as well as “total” regulatory takings where governmental actions deprive a property owner of “all”
economically beneficial use of property. Phillips, 442 S.W.3d at 240.
6
438 U.S. 104 (1978).

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relative to U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20 depending on the ultimate terms of
the proposal as implemented.7

    Claims that legislation unconstitutionally impairs the obligations of contracts are “fact-

intensive,” Tenn. Att’y Gen. Op. 11-61 (Aug. 8, 2011), and the requisite legal analysis consists of
three parts. The threshold consideration concerns whether the state law has operated as a
substantial impairment of a contractual relationship. Energy Reserves Grp., Inc. v. Kansas Power
& Light Co., 459 US. 400, 411 (1983). And if it has, the State must have a “significant and
legitimate public purpose behind the regulation . . . such as the remedying of a broad and general
social or economic problem.” Id. at 411–12. Then, assuming a legitimate public purpose is
identified, the final inquiry concerns whether the adjustment of rights and responsibilities of
contracting parties is based upon reasonable conditions and is of a character appropriate to the
public purpose justifying the legislation’s adoption. Id. at 412. Unless the State is a contracting
party, courts defer to legislative judgment as to the necessity and reasonableness of a measure. Id.
at 412–13.8

     Given these considerations—and specifically considering that health care is a highly

regulated industry9—there is probably some latitude to legislate in this area without creating issues
under U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20 even if contractual relationships were to
be impacted. But any legislation’s potential relationship to existing contracts should not be
ignored. Of course, the above analysis may not even be triggered by the referenced proposal. If
any legislation enacted in this area signaled that its restrictions were purely prospective—and did
not apply to relationships governed by existing contracts—these potential issues would not be
present.

    To summarize, a court would likely regard some type of measured restriction related to

health care charges as rational and valid economic legislation. But because the request only speaks

7
Because the request provides no firm details surrounding the proposal, we are unaware of the specific provisions and
terms contemplated by it; this includes uncertainty as to whether the proposal contemplates applying any enacted
restrictions to relationships governed by pre-existing contracts. Contract clause concerns would be mitigated by
legislation that was purely prospective.
8
In addition to containing a specific prohibition on laws impairing contractual obligations, we note that the language
of Tenn. Const. art. I, § 20 also provides “[t]hat no retrospective law . . . shall be made.” Retrospective laws are
defined “as those which take away or impair vested rights acquired under existing laws or create a new obligation,
impose a new duty, or attach a new disability in respect of transactions or considerations already passed.” Morris v.
Gross, 572 S.W.2d 902, 907 (Tenn. 1978). A vested right is one “so fixed[] that it is not dependent on any future act,
contingency, or decision to make it more secure.” Kennedy Coal Corp. v. Buckhorn Coal Corp., 124 S.E. 482, 484
(Va. 1924) (cited by Nat’l Life & Accident Ins. Co. v. Atwood, 29 Tenn. App. 141, 147, 194 S.W.2d 350, 353 (1946)).
After determining that a “vested right” exists, Tennessee courts have sometimes applied a multi-factor analysis to
determine whether applying a “law will ‘impair’” the right. In re D.A.H., 142 S.W.3d 267, 274 (Tenn. 2004) (citation
omitted). The analysis—which may include consideration of whether the public interest is advanced and whether the
provision defeats the reasonable expectations of affected persons—is “similar to the . . . analysis in impairment-of-
contract cases.” Am. Traffic Sols., Inc. v. City of Knoxville, No. E2012-01334-COA-R3-CV, 2013 WL 5677342, at
*5 (Tenn. Ct. App. Oct. 18, 2013).
9
See Energy Reserves Grp., Inc., 459 U.S. at 411 (noting that, in determining the extent of impairment, consideration
is given to whether the industry the complaining party has entered has been regulated in the past).

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in general terms, we are unable to opine whether the specifics of what may be contemplated would
create any type of constitutional problem. As discussed herein, some potential concerns would be
factually dependent.

    2. The second question asks whether a law enacted to prevent insurance companies from

reducing reimbursement rates to health care providers in rural counties would be constitutional.
Our conclusion regarding this proposal essentially tracks our assessment of the first question. In
short, although the specific details of the proposal would again invariably control its
constitutionality, the General Assembly has the constitutional latitude to regulate insurance
companies along these lines.

     Just as our conclusion is similar, so too is the legal analysis that would likely be triggered

by legislation in this area. To begin, a court is not likely to regard economic regulation in this vein
as an affront to substantive due process. Again, “unless a fundamental right is involved, the test
for determining whether a statute comports with substantive due process is whether the legislation
bears a reasonable relation to a proper legislative purpose and is neither arbitrary nor
discriminatory.” Newton, 878 S.W.2d at 110 (cleaned up). And here, given the importance of
rural health care to millions of Tennesseans and the challenges providers face in caring for them,
restricting the reduction of reimbursement rates to rural health care providers would likely be
regarded as a rational measure to promote the availability of appropriate services.

    Like the concept at issue in the first question, however, a proposal to regulate

reimbursement rates might conceivably be subject to regulatory takings claims or face scrutiny
under U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20. But as evidenced from our earlier
discussion, the resolution of those issues would be factually driven and, under most circumstances,
would likely resolve in the State’s favor. Indeed, although we need not repeat the respective legal
frameworks in full here, primary considerations in the takings inquiry are the economic impact of
the regulation and the extent to which the regulation has interfered with distinct investment-backed
expectations. Phillips, 442 S.W.3d at 240 (cleaned up). And judicial scrutiny relative to claims
lodged under U.S. Const. art. I, § 10 and Tenn. Const. art. I, § 20 would also be dependent on the
facts, including the threshold consideration of whether the law has operated as a substantial
impairment of a given contractual relationship. Energy Reserves Grp., Inc., 459 US. at 411.

    To be sure, though, legislation enacted to protect rural health care providers with respect

to reimbursement rates would need clear criteria as a basis for the classification, and the
implementation of some type of distinction in reimbursement requirements could also be the
subject of an additional equal protection challenge.10 But such a challenge may not be successful.
“Equal protection does not require absolute equality.” Brown v. Campbell Cnty. Bd. of Educ., 915
S.W.2d 407, 414 (Tenn. 1995). The General Assembly is given initial discretion to determine
what is “different” and what is “the same,” Doe v. Norris, 751 S.W.2d 834, 841 (Tenn. 1988)
10
Although the right to equal protection is guaranteed by the Fourteenth Amendment of the United States Constitution,
it is also guaranteed by the Tennessee Constitution through Tenn. Const. art. I, § 8 and Tenn. Const. art. XI, § 8. The
Tennessee Supreme Court has held that these guarantees confer “essentially the same protection,” Tenn. Small Sch.
Sys. v. McWherter, 851 S.W.2d 139, 152 (Tenn. 1993), and it has followed the framework developed by the United
States Supreme Court for analyzing equal protection claims, McClay v. Airport Mgmt. Servs., LLC, 596 S.W.3d 686,
695 (Tenn. 2020).

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(cleaned up), and it is afforded “considerable latitude” in making its determination, id. Moreover,
“[i]n most instances,” as would be the case here, “the judicial inquiry into the legislative choice is
limited to whether the classifications have a reasonable relationship to a legitimate state interest.”
Id.; see also Harrison v. Schrader, 569 S.W.2d 822, 825 (Tenn. 1978) (explaining that a
classification will be subject to strict scrutiny “only when it impermissibly interferes with the
exercise of a fundamental right . . . or operates to the peculiar disadvantage of a suspect class”).
A proposal that treats rural health care reimbursement rates differently from other reimbursement
rates could well be regarded as rational and in furtherance of a legitimate governmental interest to
preserve rural health care access.

    In summary, then, the regulation of reimbursement rates for the benefit of rural health care

providers would likely be a constitutionally permissible form of economic regulation. A more
definite answer is not possible in the absence of a more specific proposal.

                                                         JONATHAN SKRMETTI
                                                         Attorney General and Reporter


                                                         JAMES P. URBAN
                                                         Senior Deputy Attorney General



                                                         MATTHEW KERNODLE
                                                         Assistant Attorney General

Requested by:

   The Honorable Lowell Russell
   State Representative
   425 Rep. John Lewis Way North
   Nashville, Tennessee 37243




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