Update 8/11/2026: In June 2026, HHS published a Notice of Vacatur confirming the invalidated portions of the Section 1557 regulations that expanded Title IX sex discrimination to include gender-identity discrimination, as explained below. HHS will not investigate or enforce those vacated provisions. The notice applies to all covered entities only as to the vacated provisions; the remaining 2024 regulations remain in effect.

Update 12/29/2025: In Tennessee v. Kennedy, a federal trial court vacated portions of the Department of Health and Human services’ (HHS) May 2024 regulations implementing ACA Section 1557. Those regulations expanded the meaning of “sex discrimination,” by incorporating Title IX concepts, to include discrimination based on sexual orientation, gender identity, sex characteristics, pregnancy, and sex stereotypes. Section 1557 applies to certain health programs and activities and prohibits discrimination on the basis of race, color, national origin, sex, age, or disability.

Updated January 7, 2026: In Tennessee v. Kennedy, a federal trial court vacated portions of the Department of Health and Human Services’ (HHS) May 2024 regulations implementing ACA Section 1557. Those regulations expanded the meaning of “sex discrimination,” by incorporating Title IX concepts to include discrimination based on sexual orientation, gender identity, sex characteristics, pregnancy, and sex stereotypes. Section 1557 applies to certain health programs and activities and prohibits discrimination on the basis of race, color, national origin, sex, age, or disability.

Fifteen states challenged the portions of the regulations addressing gender identity. The court initially blocked those provisions and, after appeals, issued a final ruling in October 2025. In that decision, the court ruled HHS exceeded its statutory authority by redefining “sex” to include gender identity. Relying in part on the US Supreme Court’s Skrmetti decision, the court explained that the relevant inquiry is whether sex itself is the determining factor in the alleged discrimination. As in Skrmetti, the court concluded that an individual’s medical diagnosis, rather than their sex or transgender status, was the basis for the challenged covered decisions. On that reasoning, the court held that the refusal to provide gender-affirming care does not constitute sex discrimination under Section 1557.

As a result, the court vacated nationwide the portions of the Section 1557 regulations that treated gender identity discrimination as a form of sex discrimination. This means HHS may not enforce those gender identity provisions at the federal level.

For employers sponsoring group health plans, this ruling narrows federal enforcement risk under Section 1557, but it does not eliminate all obligations related to gender identity or gender-affirming care. State nondiscrimination laws, insurance mandates, plan terms, and carrier requirements may still apply.

Updated July 16, 2024: Recently, the U.S. Supreme Court overruled their landmark decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., which had previously required a court to uphold an agency’s interpretation of a regulation (so long as it was reasonable) in situations where federal laws had not directly addressed the matter at hand. This is often referred to as “Chevron deference”.

With the Chevron deference no longer applicable, three district courts (Texas, Florida, and Mississippi) have stayed and enjoined (i.e., prohibited) the Department of Health and Human Services (HHS) from enforcing certain provisions of the Section 1557 final regulations discussed below, including provisions that involve HHS’s interpretation that Section 1557’s prohibition on sex discrimination includes discrimination on the basis of gender identity. Importantly, the Mississippi decision imposes a nationwide stay of the final regulations, prohibiting HHS from enforcing provisions concerning gender identity. Post-Chevron, we anticipate additional forthcoming challenges to federal agency regulations and will continue to monitor and communicate any impact to health and welfare benefits.

Recently, the Department of Health and Human Services (HHS) issued a final rule expanding protections under Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability for certain health programs and activities. While Section 1557 has been effective since 2010, the interpretation and scope of its protections has been ever-changing since inception. For more, see our prior blog HHS Final Rule Makes Significant Changes to the Affordable Care Act’s Section 1557 Anti-Discrimination Protections.

This final rule aims to strengthen the protections against discrimination in healthcare and expand accessibility. Highlights include:

  • Clarification of “Covered Entities.” For purposes of Section 1557 compliance, covered entities include health insurance carriers, HHS-administered health programs and activities, and certain entities that provide healthcare services (e.g., hospitals, physician practices, pharmacies, health clinics). Note that group health plans will vary rarely be considered a covered entity for these purposes (which would only occur if they received federal financial assistance). The final rule exempts employers or other plan sponsors of group health plans from being covered entities solely based on providing health care benefits to employees through a group health plan; however, employers may be indirectly impacted by Section 1557 nondiscrimination requirements if an insurance carrier (or a third-party administrator (TPA) of a self-insured health plan) is subject to Section 1557 as a covered entity.
  • Alignment with U.S. Supreme Court landmark 2020 case, Bostock v. Clayton County. The final rule affirms that protections against sex discrimination include protections against discrimination on the basis of sexual orientation and gender identity. In addition, it clarifies that sex discrimination includes discrimination on the basis of sex stereotypes, sex characteristics, and pregnancy or related conditions.
  • Nondiscrimination Requirements. Covered health programs and activities offered via telehealth must be accessible to individuals with limited English proficiency (LEP) and individuals with disabilities. In addition, covered entities are prohibited from having plan limits that would discriminate in plan design, or impose cost-sharing, limitations, or restrictions regarding claims based on protected classes, which includes gender identity. Categorical coverage exclusions or limitations for all health services related to gender-affirming care or gender transition are prohibited, as is imposing additional cost sharing or limitations on coverage related to the same. Note that plans are permitted to limit or exclude coverage, so long as it is non-discriminatory (i.e., does not limit coverage based on a protected basis).
    • Covered entities have additional requirements, such as appointing a Section 1557 Coordinator and developing a grievance process and record retention (if the entity has more than 15 employees); providing an annual notice of nondiscrimination (and a notice of language assistance services); and training staff on the grievance process.

While the final rule will be effective July 5, 2024, the OCR provided a delayed applicability date for some provisions, as outlined in the FAQs (more specifically, the delay applies to the provisions which may require plan changes effective for plan years beginning on or after January 1, 2025).

Employer Takeaways

While much of the final rule requires action for covered entities, employer plan sponsors should be aware of these developments which could indirectly impact their plan (via their insurer or TPA) and may want to review their plan provisions, discussing any Section 1557 nondiscrimination risks with counsel.

Additional Resources

Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources. 

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Diane Cross

Diane Cross

Diane is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Diane enjoys spending time with her family, live music, and cycling.