HHS Issues Proposed Rule to Clarify Health Plan Nondiscrimination Rules

The Department of Health and Human Services (HHS) released a proposed rule intended to advance health equity and reduce discrimination in health care. The proposed rule rescinds earlier guidance that narrowed the scope of Section 1557 of the ACA.

Section 1557 is the nondiscrimination provision that 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 receives federal financial assistance from HHS;

(2) any health program or activity that HHS administers; or

(3) Health Insurance Marketplaces and all plans offered by issuers participating in those Marketplaces.

Section 1557 Background

Section 1557 was intended to become effective on March 23, 2010, but HHS was first required to issue regulations implementing it. In May 2016, HHS issued final regulations implementing Section 1557. The 2016 Rule applies to all health programs and activities that receive federal financial assistance and 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).

The 2016 Rule required covered entities to provide, in “significant communications,” notice and information regarding the availability of language assistance services in the 15 most common languages spoken by limited English proficient (LEP) persons in each state. Additionally, it required covered entities to take reasonable steps to provide meaningful access to each LEP individual eligible to be served in covered entities’ health programs and activities.

The 2016 Rule also prohibited discrimination based on sex, including gender identity; outlined requirements for equal program access based on sex; and explicitly prohibited discrimination in health-related insurance and other health-related coverage, including a ban on categorical exclusions of gender-transition-related care in health insurance coverage and other health-related coverage.

In June 2020, HHS reissued final regulations repealing and replacing significant portions of the 2016 Rule. The 2020 Rule rescinded the 2016 Rule’s definition of “on the basis of sex” and did not include a new definition for “on the basis of sex.” Instead, the 2020 Rule identified examples of other government entities that referred to “sex” in “binary and biological” terms and suggested that Section 1557’s prohibition on sex discrimination may not extend to gender identity discrimination.

The 2020 Rule also eliminated the requirement that covered entities send nondiscrimination notices and “tagline” translation notices in at least 15 languages for all “significant communications.” Additionally, the 2020 Rule significantly limited which entities and health care activities are subject to Section 1557 nondiscrimination protections.

The 2020 regulations were slated to take effect on August 18, 2020; however, a federal trial court blocked HHS from enforcing the 2020 regulations that removed gender identity and sex stereotyping from the nondiscrimination protections under Section 1557. In May 2021, HHS announced, consistent with the Supreme Court’s decision in Bostock v. Clayton County, that it will interpret and enforce Section 1557’s prohibition on discrimination “on the basis of sex” to include discrimination on the basis of sexual orientation and gender identity.

Summary of the 2022 Proposed Rule

The new proposed 2022 Rule proposes to revise the 2020 Rule to reinstate rules based on the 2016 Rule. The 2022 proposed rule would:

•  Return to a broader definition of programs and activities and clarify that many health insurers are covered entities
• Attempt to bring HHS regulatory guidance in line with recent federal court decisions that states discrimination on the basis of sex includes discrimination on the basis of sexual orientation and gender identity.

The 2022 proposed rule notes that the 2016 Rule included group health plans as categorically covered entities. In contrast, the 2022 proposed rule does not explicitly include group health plans as covered entities. This is because group health plans are not recipients of federal financial assistance. However, if HHS receives complaints against group health plans, they will evaluate the facts on a case-by-case basis to determine whether the group health plan is a covered entity. The proposed rule also revises the definition of “federal financial assistance” to include Medicare Part B funding.

The 2022 proposed rule reinstates the requirement that covered entities provide staff with policies, procedures, and guidance to help LEP individuals and to have reasonable accommodations for people with disabilities. Language assistance and auxiliary aids must again be provided in English and at least the 15 most common languages spoken by LEP persons of the relevant state or states.

Covered entities would also be required to provide an annual notice of nondiscrimination along with a notice of the availability of language assistance services to participants, beneficiaries, enrollees, and applicants of its health programs and activities.

The 2022 proposed rule also provides a specific process for recipients of federal financial assistance to notify HHS of their belief that the application of Section 1557 would violate their rights under federal conscience and religious freedom laws.

Employers may wish to submit comments (due within 60 days of publication of the proposed regulations in the Federal Register) and will want to review the proposed rules. However, given the history of these regulations, now on the third round, it is possible these too will be subject to litigation.

If you have questions about this proposed regulation, contact your OneDigital consultant. For the latest compliance and regulatory updates register for: Need-to-Know Quarterly Compliance Recap for Employers.