As anticipated, the Department of Health and Human Services (HHS) has released proposed regulations (“2022 Proposed Rule”) that restores and expands the prior interpretation of Section 1557 of the Affordable Care Act (ACA). The primary anti-discrimination provision of the ACA, Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability for certain health programs and activities. While Section 1557 has remained unchanged since its enactment, its interpretation has been an ongoing issue, as described further below.
In the last few years, the question of whether Section 1557’s protections apply to discrimination based on sexual orientation or gender identity has been in flux. HHS under the Obama administration interpreted Section 1557 as prohibiting discrimination based on sexual orientation and gender identity, as outlined in the regulations released in 2016 (“2016 Rule”). Shortly after the 2016 Rule was released, a court partially blocked its enforcement, including the prohibition of discrimination based on gender identity and termination of pregnancy.
Subsequently in 2020, under the Trump administration, HHS released a revised Final Rule Interpreting Section 1557 (“2020 Rule”), which eliminated explicit protections for discrimination based on gender identity and sex stereotyping. In addition, the 2020 Rule significantly limited the application of Section 1557 to certain entities, essentially removing Section 1557 non-discrimination protections for most employer-sponsored group health plans that previously applied under the 2016 Rule.
Since the 2020 Rule was released, several developments have hindered its implementation. Recently, as expected, the Biden administration issued a proposed rule that will again provide explicit protections under Section 1557 against discrimination based on gender identity and sex stereotyping.
The 2022 Proposed Rule largely reinstates the 2016 Rule, highlights include:
- Application to Group Health Plans: While the proposed rule returns to the broad definition of applicability (which includes health insurers who receive federal financial assistance as covered entities), group health plans are not explicitly included as covered entities with the explanation that such entities do not generally receive federal financial assistance. However, other entities that contract with a group health plan may be covered entities (e.g., insurers and third-party administrators (TPAs)).
- Discrimination: The proposed rules clarify that discrimination based on sexual orientation and gender identity is “discrimination on the basis of sex.” In addition, the 2022 Proposed Rule will prohibit discrimination against those seeking reproductive care, including discrimination on the basis of pregnancy and pregnancy termination.
- Notice Requirement: Per the 2022 Proposed Rule, HHS will require covered entities to provide an annual notice of nondiscrimination (along with notice of the availability of language assistance services and aids for those with disabilities), as well as implement civil rights written policies and procedures and train staff on such written policies.
- Religious Objections: The 2022 Proposed Rule provides a process for covered entities to notify the Office of Civil Rights of their belief that the application of Section 1557 violates their federal conscience or religious freedom rights.
Employers should be aware of these developments and understand if they will be subject to these new rules. If finalized as drafted, insurers who are covered entities (i.e., receive federal funding) will have to comply with Section 1557 and cannot issue plans that discriminate based on sexual orientation and gender identity, among other requirements. This will impact coverage required under fully insured plans, as well as self-insured plans who utilize an insurer as a TPA (e.g., where TPAs develop documents or policies on behalf of the self-insured plan, they must comply with Section 1557).
Importantly, HHS has expressed that the 2020 Rule remains in effect until the proposed rules are finalized. Meaning, there is no immediate employer action at this time. It is anticipated that HHS will issue a final rule after reviewing and responding to comments received on the 2022 Proposed Rule.
- Proposed Regulations
- HHS Fact Sheet
- HHS News Release
- Sequoia Forewords:
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