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Court Applies Section 1557 Nondiscrimination Requirements to Insurer’s Entire Operations



Fain v. Crouch, 2021 WL 2657274 (S.D. W.Va. 2021)

Two health plan participants sued the plan’s insurer, alleging that the plan’s gender-confirming care exclusion discriminated against transgender individuals in violation of Section 1557 of the Affordable Care Act. Section 1557 prohibits discrimination in “any health program or activity” on the basis of race, color, national origin, sex, age, or disability, and the insurer asked the court to dismiss the case, arguing that it was not a “health program or activity.” As background, HHS issued regulations in 2016 that interpreted Section 1557 as applying to all operations of health insurers that receive federal financial assistance. Regulations issued in 2020, however, repealed significant portions of the 2016 regulations and narrowed the scope so that entities not “principally engaged in the business of providing healthcare” (such as most health insurers) are regulated “only to the extent” they receive federal financial assistance (see our Checkpoint article). Courts have blocked enforcement of other portions of the 2020 regulations that removed gender identity and sex stereotyping from the nondiscrimination protections, but these rulings did not address the narrowing of Section 1557’s applicability (see our Checkpoint article).

Declining to defer to the 2020 regulations, this court rejected the insurer’s argument that it was not subject to Section 1557. The court explained that Section 1557 prohibits discrimination under any health program or activity, “any part of which” receives federal financial assistance and therefore, the plain text of the statute unambiguously prohibits discrimination by an insurer under its “entire portfolio.” Pointing out that the insurer offered a Medicare plan that was receiving federal financial assistance, the court denied the insurer’s request to dismiss the case, ruling that the insurer’s acceptance of federal assistance under its Medicare plan meant that its entire portfolio must comply with Section 1557.

EBIA Comment: Section 1557’s application to employer-sponsored health plans is clearly in flux. Most recently, HHS announced that it will interpret Section 1557’s prohibition on discrimination “on the basis of sex” to include discrimination on the basis of sexual orientation and gender identity (see our Checkpoint article). However, this recent guidance, like the previous cases blocking enforcement of portions of the 2020 regulations, does not address the question of which entities are subject to Section 1557 that is raised in this case. For more information, see EBIA’s Health Care Reform manual at Section XXXIV.A (“Section 1557 Nondiscrimination: Grounds Prohibited Under Federal Laws”) and EBIA’s Group Health Plan Mandates manual at Section XXI.M.1 (“Interaction of Title VII and Section 1557”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.D.5 (“Section 1557 Nondiscrimination: Nondiscrimination in Health Programs and Activities”).

Contributing Editors: EBIA Staff.

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