ACA’s Section 1557 Nondiscrimination Regulations Updates

On June 12, 2020, the U.S. Department of Health and Human Services (HHS) announced a Final Rule (“2020 Final Rule”), narrowing the agency’s previous interpretation of Section 1557 of the Affordable Care Act (ACA). The 2020 Final Rule provides “minor and primarily technical corrections” from the proposed regulations issued in May 2019.

Section 1557 is the nondiscrimination provision of the ACA and prohibits discrimination on the basis of race, color, national origin, sex, age, or disability for individuals participating in: (1) any health program or activity any part of which received funding from HHS; (2) any health program or activity that HHS itself administers; or (3) health Insurance Marketplaces and all plans offered by issuers that participate in those Marketplaces. Section 1557 has been in effect since its enactment in 2010. Section 1557 derives from several federal statutes, including Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972, the Age Discrimination Act of 1975, and Section 504 of the Rehabilitation Act of 1973.

In 2016, HHS finalized regulations interpreting Section 1557 (“2016 Rule”) to prohibit discrimination based on gender identity, gender expression, and transgender status. The 2016 Rule provided, among other things, that sex discrimination includes discrimination on the basis of gender identity and termination of pregnancy. Gender identity was defined as “one’s internal sense of gender, which may be male, female, neither, or a combination of male or female.” The 2016 Rule applied only to health programs and activities funded or administered by HHS. Under the 2016 Rule, it would be per se discriminatory if a group health plan subject to Section 1557 categorically excludes or limit coverage for all health services related to gender transition.

In December 2016, a federal trial court issued a nationwide preliminary injunction blocking enforcement of the portion of the regulation prohibiting discrimination based on gender identity and termination of pregnancy on a nationwide basis. As a matter of law, HHS has not enforced these provisions and vacated these provisions since October 2019.

The 2020 Final Rule repeals portion of the prior 2016 Rule that defined discrimination “on the basis of sex” to include discrimination based on gender identity, gender expression or termination of pregnancy and limit the entities subject to Section 1557.

The 2020 Final Rule provides that gender identity is not captured within Titles VII and IX’s prohibition against discrimination “on the basis of sex.” Rather, HHS will enforce the definition in compliance with the plain meaning of the term under Title IX: as a binary genetic construct of male and female. The 2020 Final Rule does note that “[n]othing in this final rule prohibits a healthcare provider from offering or performing sex-reassignment treatments or surgeries, or an insurer from covering such treatments and procedures, either as a general matter or on a case-by-case basis.” However, HHS states there is no legal requirement to do so under Section 1557.

The 2020 Final Rule provides that Section 1557 applies to any health program or activity that receives federal funds from HHS, any program or activity administered under Title I of the ACA, and health insurance marketplace participants. The 2020 Final Rule does not apply to employer-sponsored group health plans that do not receive federal financial assistance from HHS and are not principally engaged in the business of provided healthcare.

The 2020 Final Rule also eliminates the requirement that covered entities send nondiscrimination notices and “tagline” translation notices in at least 15 languages for all “significant communications.” However, HHS will continue to require that covered entities are required to take reasonable steps to ensure meaningful access for limited English proficiency (LEP) individuals.

The 2020 Final Rule is effective August 18, 2020. Employers offering employee benefit plans that were subject to the 2016 Rule should review any notice obligations they had in consideration of the 2020 final rule. Communications may be revised to remove the nondiscrimination statement and required taglines.

The fate of 2020 Final Rule will undoubtedly be challenged in light of the recent U.S. Supreme Court’s landmark decision that Title VII’s prohibition of employment-based discrimination “because of sex” applies to discrimination based on sexual orientation or transgender status. While the Court’s decision is limited to employment actions under Title VII and has no impact on the 2020 Final Rule, its rationale may apply to other federal nondiscrimination statutes, such as Title VI and Title IX.

Check out this recent blog post to learn more about the decision: U.S. Supreme Court Protects LGBTQ+ Rights in the Workplace.