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Court Vacates Portions of Section 1557 Nondiscrimination Final Regulations



Franciscan Alliance, Inc. v. Azar, 2019 WL 5157100 (N.D. Tex. 2019)

The federal trial court that issued a nationwide preliminary injunction blocking enforcement of portions of the May 2016 HHS final regulations implementing health care reform’s Section 1557 has now vacated those same rules. As background, Section 1557 prohibits discrimination in certain “health programs and activities” on the basis of race, color, national origin, sex, age, or disability. It applies broadly to a variety of federally assisted entities, although the regulations apply only to health programs and activities funded or administered by HHS (see our Checkpoint article).

The court issued a preliminary injunction in December 2016, after it concluded that HHS’s interpretation of discrimination “on the basis of sex” to include “gender identity” and “termination of pregnancy” exceeded its authority, and likely violated the Religious Freedom Restoration Act (RFRA) (see our Checkpoint article). The court stayed the proceedings while HHS reconsidered the 2016 regulations. In May 2019, HHS issued proposed regulations that would substantially revise the 2016 regulations (see our Checkpoint article). However, the 2016 regulations remained in place, and the proposals, which would repeal the 2016 regulations’ definition of discrimination “on the basis of sex,” have not yet taken effect.

Noting that the 2016 regulations remain on the books despite HHS’s “better efforts,” the court granted the challengers’ motion for judgment without a trial, ruling that the 2016 regulations exceed HHS’s authority and substantially burden religious exercise in violation of the RFRA because they do not achieve a compelling governmental interest through the least restrictive means and expressly prohibit religious exemptions. The court did not grant a permanent injunction, but instead vacated the offending portions of the regulations and remanded them (again) to HHS for reconsideration.

EBIA Comment: All eyes are now on HHS for the finalization of its proposed revisions to these regulations. Although the court’s decision prohibits HHS from enforcing the vacated portions of the 2016 regulations, HHS has already refrained from enforcing the rule due to the preliminary injunction. The new regulations will likely provide grounds for more challenges and ongoing litigation. In the meantime, Section 1557 provides for a private right of action, so entities subject to the law may still be sued. In fact, a court has ruled that gender identity discrimination violates the plain, unambiguous language of the statute, regardless of the validity of regulations (see our Checkpoint article). For more information, see EBIA’s Health Care Reform manual at Section XXXIV.A (“Section 1557 Nondiscrimination Provisions: Grounds Prohibited Under Federal Laws”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.D.5 (“Section 1557 Nondiscrimination: Nondiscrimination in Health Programs and Activities”) and EBIA’s Group Health Plan Mandates manual at Section XXI.M.1 (“Interaction of Title VII and Section 1557”).


Contributing Editors: EBIA Staff.

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