HHS Proposes Sweeping Changes to Section 1557 Nondiscrimination Rules

HHS has released proposed regulations that “substantially revise” the regulations implementing Affordable Care Act (ACA) Section 1557, which prohibits discrimination in certain health programs and activities on the basis of race, color, national origin, sex, age, or disability. Final regulations implementing Section 1557 took effect generally in July, 2016 (see our Checkpoint article) and apply to health programs and activities funded or administered by HHS. This includes federal and state Exchanges and Exchange insurers—even with respect to plans and certain services offered outside the Exchanges. The rules also apply to employee health benefits of certain employers that receive federal funding and are principally engaged in health care (e.g., hospitals and nursing homes). In December 2016, a federal trial court issued a nationwide preliminary injunction blocking enforcement of the portion of the Section 1557 nondiscrimination regulations on gender identity and termination of pregnancy (see our Checkpoint article). The court stayed the proceedings to allow time for HHS to reconsider the regulations. Here are highlights of the changes HHS has now proposed:

• Return to Existing Civil Rights Laws. Explaining that it believes the final regulations exceeded their authority under Section 1557 and adopted erroneous and inconsistent interpretations of pre-existing civil rights law, HHS proposes to repeal and replace significant portions of the regulations that it considers duplicative of, or inconsistent with, regulations implementing Titles VI and Title IX of the Civil Rights Act of 1964 and other federal nondiscrimination rules. Notably, the proposals would repeal the final regulations’ definition of discrimination “on the basis of sex,” which includes discrimination based on gender identity or termination of a pregnancy. The proposals would also add a provision stating that Section 1557 will be enforced consistent with federal health care conscience protections (e.g., the ACA’s protections concerning abortion and assisted suicide) as well as religious freedom protections.
• Repeal of Notices and Taglines. The proposed regulations would eliminate the final regulations’ requirement that regulated health companies, including Exchange insurers, include nondiscrimination notices and “tagline” translation notices in at least 15 languages in all “significant communications.”
• Narrowed Scope of Enforcement. HHS proposes to revise the final regulations’ interpretation of Section 1557 as applying to all operations of an entity, even if it is not principally engaged in health care, and, instead, apply it to the health care activities of entities not principally engaged in health care only to the extent the activities are funded by HHS. Significantly, the proposals clarify that an entity principally engaged in the business of providing health insurance would not be considered principally engaged in the business of providing health care for purposes of Section 1557. Furthermore, the rules would not apply to self-insured ERISA group health plans so long as (or to the extent) they do not receive funding from HHS, or the entities operating them are not principally engaged in the business of providing health care.

EBIA Comment: These proposals, which would not only remove gender identity discrimination from the purview of Section 1557 but also make the nondiscrimination rules inapplicable to most group health plan insurers and self-insured health plans, have already spawned challenges in the courts. While reconsidering the Section 1557 regulations through the rulemaking process, HHS continues to abide by the preliminary injunction, which remains in place. 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.A (“What Is Title VII, as Amended by the PDA, and Who Must Comply?”).

Contributing Editors: EBIA Staff.