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On May 24, 2019, the Department of Health and Human Services (HHS) released proposed regulations that make significant changes to the current regulations of Section 1557 (“Final Rule”), which is the primary anti-discrimination provision of the Affordable Care Act (ACA). Section 1557 prohibits discrimination based on race, color, national origin, sex, age, and disability under any health program that receives Federal financial assistance.

The proposed regulations make changes on the following fronts:

  1. Limits the scope of the programs and activities that are subject to Section 1557;
  2. Significantly rolls back protections for discrimination based on gender identity, sex stereotyping, termination of pregnancy, and national origin; eliminates the notice “tagline” requirements; and adds explicit religious freedom and abortion exceptions;
  3. Removes nondiscrimination protections for sexual orientation and gender identity from other HHS regulations (which apply to states, marketplaces, agents, brokers, insurers, and certain Medicare programs); and
  4. Changes enforcement mechanisms for Section 1557.

Below is an analysis of the proposed rule. For now, the current Final Rule remains in effect.

 

Scope of Section 1557

Section 1557 applies to health programs or activities that receive federal financial assistance, is administered by the federal government under Title I of the ACA, or any entity established under Title I of the ACA (state-based marketplaces).

Under the current Final Rule, if an insurer receives any federal financial assistance (through advance premium tax credits, Medicaid or CHIP managed care payments, or the Medicare Advantage program), insurers must comply with Section 1557 across all activities, not just for the products in which they receive financial assistance. This means that employer-sponsored group health plans are subject to Section 1557, if offered by an insurer who receives any Federal funding.

Under the proposed regulations, Section 1557 only applies to an insurer’s specific activities that receive federal funding. This means that if the insurer doesn’t receive funding for their group health plans, then insurers would not have to apply the Section 1557 rules to these plans.

The proposed regulations continue to apply to entities principally engaged in the business of health care, such as hospitals, nursing facilities and providers, and employer-sponsored group health plans that receive federal funding.

Changes in Section 1557 Regulations

Discrimination on the Basis of Sex:

Section 1557 prohibits discrimination on the basis of sex. The Final Rule defined “sex” to include “gender identity” and “termination of pregnancy,” thereby expanding Section 1557 anti-discrimination protections to transgender individuals and individuals who terminated pregnancies.

Several lawsuits were brought specifically challenging the Final Rule’s expanded definition of sex. On December 31, 2016, a federal court found the Final Rule’s definition of sex unlawful and issued a nationwide injunction, which stopped HHS from enforcing the antidiscrimination provisions related to gender identity and termination of pregnancy. HHS continues to abide by the court ruling.

HHS asserts that the proposed regulations aim to comply with the court ruling by eliminating the definition of sex, thereby eliminating “explicit” protections for gender identity (transgender) and termination of pregnancy. Under the proposed regulations, insurers subject to Section 1557 would no longer be required to cover gender transition services and covered entities will no longer be required to treat individuals consistent with their gender identity (as far as it relates to Section 1557, though other federal laws or state laws may still apply).

Even though the proposed regulations eliminate protections for gender identity, courts have ruled in favor of individuals who alleged gender identity discrimination based on the plain text of Section 1557, not on the regulation’s interpretations. Thus, the elimination of the explicit gender identity protection in the regulations may have little impact on the application of the law.

Religious Exemption

The proposed regulations add explicit abortion and religious exemptions. The Final Rule currently provides for an exemption to Section 1557 if its application violates applicable federal statutory protections for religious freedom and conscience. The proposed regulations go further by including an explicit religious exemption and stating that Section 1557 must comply with a series of “healthcare conscious laws,” the Religious Freedom Restoration Act, and the First Amendment.

The proposed regulations also add an abortion exemption, which would not require any individual or entity to pay for abortion-related benefits or require any individual, hospital, or institution receiving federal funds to perform or pay for an abortion.

Taglines and Notice Requirements

The proposed rules eliminate the notice and “taglines” requirement, which requires covered entities to post and disseminate detailed notices of nondiscrimination, information on disability-access services, and translation services to beneficiaries, enrollees, and the public.

Conforming Amendments

HHS also proposes to amend other regulations (separate from the Section 1557 regulations) that protect against sexual orientation and gender identity discrimination to “conform them to the scope of the changes defined by [the] proposed rule.” These regulations include nondiscrimination provisions related to the marketing, administration, enrollment, and delivery of HHS funded or administered programs by States, Exchanges, agents, brokers, insurers, qualified health plans, Programs for All-inclusive Care of Elderly (PACE) programs, and Medicaid programs.

Enforcement

Currently, the Final Rule provides individuals and entities with a private right of action for racial, national origin, sex, age or disability discrimination under Section 1557. The proposed regulations are unclear whether Section 1557 provides for such cause of action. The proposed regulation does designate the Director of the Office of Civil Rights to receive complaints, conduct compliance reviews, investigate, and take enforcement action for violations of discrimination under Section 1557.

Impact

Under the proposed regulations, certain employer-sponsored fully insured plans may no longer be subject to Section 1557 anti-discrimination provisions (though self-insured plans who received federal funding are still subject to Section 1557).

For plans subject to the new Section 1557 proposed regulations, insurers will not be required to offer coverage for certain benefits related to gender identity (transgender) or termination of pregnancy (though other laws may still apply). Although courts have found that Section 1557 provides for transgender protections, the proposed regulations may make it more difficult for individuals to bring a private right of action for transgender discrimination.

Under the proposed religious and abortion exemptions, insurers can refuse to pay for, and providers can refuse to provide, abortion services (though other laws may still apply). In addition, providers may assert a religious exemption to provide certain services.

It is important to note that the proposed regulations would only affect federal law and applicable state laws may still provide for protections that the proposed regulations eliminate. For example, under the 2005 California Insurance Gender Nondiscrimination Act, California state law prevents certain insurers from excluding services related to gender transition.

It is also important to highlight that these are merely proposed regulations and there is no timeline on when, or if, they will be enacted. HHS will be accepting comments on the proposed regulations until approximately July 23, 2019. HHS must consider and respond to comments before the proposed rules go into effect, which will likely provide additional insight on how the proposed rules will affect individuals, insurers, and providers.

Resources:

HHS Section 1557 Proposed Regulation

HHS Press Release

HHS Fact Sheet: HHS Proposes to Revise ACA Section 1557 Rule

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.