On May 24, the U.S. Department of Health and Human Services (HHS) issued a proposed rule (published in the Federal Register on June 14) to substantially revise regulations implementing and enforcing Section 1557 of the Affordable Care Act (ACA), a civil rights provision that prohibits discrimination on the basis of race, color, national origin, sex, age or disability in any health program or activity that receives federal funding. While Section 1557 went into effect on March 23, 2010, much of the rule that applies to private health insurance went into effect in July 2016.

The proposed rule will repeal and replace significant portions of Section 1557, such as the definition of discrimination “on the basis of sex” and make Section 1557 inapplicable to most self-funded and fully insured group health plans.

Discrimination “on the basis of sex”

Section 1557 defines discrimination “on the basis of sex” to include discrimination based on “gender identity” and “termination of pregnancy.” It is this definition of sex discrimination that was challenged in August 2016 (See Franciscan Alliance, Inc., et al. v. Burwell, et al., 227 F. Supp. 3d 660 (N.D. Tex. 2016)). The plaintiffs argued that they would be forced to provide certain health care services against their medical judgment, and that Section 1557 violated the Administrative Procedure Act (APA) and Religious Freedom Restoration Act (RFRA). It is important to note here that Section 1557 does not require the provision or coverage of abortions; it only prohibits discrimination against women who have had an abortion.

A federal preliminary injunction on Section 1557 was granted on December 31, 2016, temporarily stopping HHS enforcement of parts of the rule (specifically, discrimination for transgender people and people who have terminated a pregnancy). This injunction is still currently in place but was limited to HHS enforcement and does not excuse covered entities from complying with the rule, since individuals may sue directly under Section 1557 in federal court.

The proposed rule

The proposed rule would do the following:

Eliminate the definitions section of the current rule and instead provide definitions “explicitly in other sections or through incorporation by reference to relevant statutes or regulations.” This would remove the “on the basis of sex” definition, which was at issue in the Franciscan Alliance, Inc. v. Burwell case. The proposed rule would eliminate specific provisions related to gender identity nondiscrimination. As such, application of Section 1557 will then depend on prohibitions based on sex under Title IX of the Civil Rights Act.
Change the definition of a “health program or activity” to include health care entities as defined in the Civil Rights Restoration Act of 1987 (CRRA)—an entity that is “principally engaged in the business of providing…health care”—that receive federal financial assistance. For non-health care entities, Section 1557 would only be applicable to the extent that the health insurance programs administered by the entity receive federal financial assistance from HHS.
Include a religious and conscience-based exemption for covered entities.
Eliminate the current rule's notice and taglines requirements.
Revise the requirements related to individuals with limited English proficiency (LEP). Under the proposed rule, covered entities would be required to take “reasonable steps to provide meaningful access” to its programs or activities by individuals with LEP. HHS would consider the following four factors to determine compliance with this provision: 1) the number or proportion of LEP individuals eligible to be served or likely to be encountered in the eligible service population; 2) the frequency with which LEP individuals are in contact with the entity's covered health program, activity, or service; 3) the nature and importance of the entity's health program, activity, or service; and 4) the resources available to the entity and costs.
Eliminate the provision that allows individuals or entities to sue directly in federal court under Section 1557.
Remove the requirement that the covered entity designate one or more employees to be responsible for enforcement of the nondiscrimination requirements or the maintenance of grievance procedures for violations of the rules.

The comment period on the proposed rule ends on August 13, 2019. Once a final rule is issued, it will go into effect in 60 days.

Even with this proposed rule on Section 1557, the debate around what is considered discrimination on the basis of sex is far from over. In April, the U.S. Supreme Court granted review of three cases that ask whether sexual orientation discrimination and gender identity discrimination is prohibited under Title VII of the Civil Rights Act of 1964 (Altitude Express v. Zarda from the U.S. Court of Appeals for the Second Circuit, Bostock v. Clayton County, Georgia from the Eleventh Circuit and R.G. & G.R. Harris Funeral Homes v. Equal Employment Opportunity Commission from the Sixth Circuit). Decisions on these cases are expected by June 2020.

While these cases are regarding employment discrimination law and do not specifically address group health plans, plan administrators will need to be mindful of the Supreme Court's decisions and will need to weigh the pros and cons of not adding benefits and/or adding a specific exclusion for transgender people to their plans.

Corrie Cripps is a plan drafter/compliance consultant with The Phia Group. She specializes in plan document drafting and review, as well as a myriad of compliance matters, notably including those related to the Affordable Care Act.

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