ACA Nondiscrimination Rules Would Impact Health Plan Insurers

Practical Law Legal Update 0-618-5568 (Approx. 8 pages)

ACA Nondiscrimination Rules Would Impact Health Plan Insurers

by Practical Law Employee Benefits & Executive Compensation

Overview of Section 1557 and Definitions

Section 1557 of the Affordable Care Act (Section 1557) prohibits individuals from being excluded from participation in, being denied the benefits of or being subject to discrimination under any "health program or activity" that receives federal financial assistance (including grants, loans, credits and subsidies) based on grounds prohibited under:

Title VI of the Civil Rights Act of 1964 (Title VI) (race, color or national origin) (42 U.S.C. § 2000d et seq.).
Title IX of the Education Amendments of 1972 (Title IX) (sex) (20 U.S.C. § 1681 et seq.).
The Age Discrimination Act of 1975 (Age Act) (age) (42 U.S.C. § 6101 et seq.).
Section 504 of the Rehabilitation Act of 1973 (Section 504) (disability) (29 U.S.C. § 794).

Section 1557 applies to all health programs and activities, if any part of the program or activity receives federal financial assistance from a federal agency (for example, the federally-facilitated and state-based ACA health exchanges).

The enforcement provisions available under Title VI, Title IX, the Age Act and Section 504 apply regarding violations of Section 1557.

In many instances, the Section 1557 proposed regulations are based on existing guidance and standards under Title VI, Title IX, the Age Act and Section 504. Other regulatory provisions are borrowed from standards under the Americans with Disabilities Act (ADA). According to HHS, Section 1557 is not intended to apply lesser standards regarding discrimination than under Title VI, Title IX, Section 504 or the Age Act (or those statutes' implementing regulations). Also, in most cases the proposed regulations would not govern employer hiring, firing, promotions or other terms and conditions of employment (because these claims can be brought under existing laws).

Defined Terms

The proposed regulations include several defined terms for Section 1557 implementation purposes. For example, a Section 1557 "covered entity" is:

An entity that operates a health program or activity, any part of which receives federal financial assistance.
An entity established under Title I of the ACA that administers a health program or activity. (Title I established the ACA state-based and federally-facilitated health insurance exchanges.)
HHS.

For example, Section 1557 covered entities include the ACA exchange "navigators" (see Legal Update, HHS Final Rule Addresses Navigators and Certified Application Counselors Under Health Insurance Exchanges). Under the proposed rules, many health insurers also would be Section 1557 covered entities (see Applicability to Insurers and Employer-Sponsored Group Health Plans).

Another key term under the proposed regulations is "federal financial assistance." In the health care context, this term includes federal funds provided to (or on behalf of) individuals for ACA exchange premium tax credits and cost sharing reductions. Under the proposed regulations, these funds are federal financial assistance:

When extended to the entity that provides the health insurance coverage or services.
Whether the funds are paid directly by the federal government to that entity or to the individual for remittance to the insurer.

As a result, according to HHS, an insurer that participates in any ACA health exchange receives federal financial assistance when advance payments of premium tax credits or cost-sharing reductions are provided to any of the insurer's enrollees.

The term "health program or activity" includes:

Providing or administering health-related insurance coverage or services.
Providing assistance in obtaining health-related insurance coverage or services.

The term includes all the operations of an entity that is principally engaged in providing or administering health services or health insurance coverage (for example, a hospital, health clinic, group health plan or health insurer).

Comments Requested Regarding Sex Discrimination

In introductory material addressing the proposed regulations, HHS requested comments regarding whether the Section 1557 final regulations should include specific exemptions for health providers, health plans or other covered entities relating to sex discrimination (see Protections for Transgender Individuals).

Applicability to Insurers and Employer-Sponsored Group Health Plans

The proposed regulations include a prohibition on discrimination in health-related insurance and other coverage that applies specifically to:

Health insurers and group health plans that are recipients of federal financial assistance.
HHS, as a covered entity, in administering health-related coverage programs.

HHS proposed to apply this rule to all insurers that receive federal financial assistance, whether the insurer's products are offered:

Through an ACA exchange.
Outside an ACA exchange.
In the individual or group health insurance market.
As an employee health benefit program (a defined term under the proposed regulations that may include ERISA group health plans and employer-sponsored wellness programs) through an employer-sponsored group health plan (see Practice Note, Wellness Programs).

According to HHS, this means that an insurer that participates in an ACA exchange (and thereby receives federal financial assistance), and that also offers plans outside the ACA exchange, is covered under the Section 1557 proposed regulations:

For all of its health plans.
When it acts as a TPA for an employer-sponsored group health plan.

This provision specifically prohibits certain discriminatory actions. For example, in providing or administering health coverage, a covered entity could not:

Deny, cancel, limit or refuse to issue or renew a health plan or coverage on the basis of an enrollee's (or prospective enrollee's) race, color, national origin, sex, age or disability. This provision would also prohibit:
- denials or limits of coverage of claims; or
- imposition of additional cost-sharing.
Use marketing practices or benefit designs that discriminate on the basis of race, color, national origin, sex, age or disability in a health-related insurance plan, policy or other health-related coverage.

HHS indicated that it will engage in a case-by-case analysis regarding whether an entity is subject to the proposed regulations when the entity:

Acts as a TPA for an employer's health plan.
Is legally separate from an insurer that receives federal financial assistance for its insured plans.

According to HHS, the proposed regulations do not require plans to cover any particular benefit or service, though a Section 1557 covered entity cannot have a coverage policy that operates in a discriminatory manner. As a result, a plan cannot cover:

Inpatient treatment for eating disorders in men but not women (doing so would violate the prohibition of discrimination based on sex) (see Protections for Transgender Individuals).
Bariatric surgery in adults, but exclude that coverage for adults with particular developmental disabilities (doing so would violate the prohibition of discrimination based on disability).

Substantive Nondiscrimination Requirements

The proposed regulations include a far-reaching set of substantive requirements with which Section 1557 covered entities would be required to comply, including:

Disability-related prohibitions applicable to the ACA federally-facilitated exchanges and HHS, and reflecting implementing guidance under Title VI, Title IX, Section 504 and the Age Act.
Meaningful access to health programs or activities for individuals with limited English proficiency.
Requirements for interpreter services. In this regard, HHS notes that:
- the ACA exchanges, qualified health plan insurers and other Section 1557 covered entities also must comply with language access requirements under other laws;
- health insurers that offer non-grandfathered coverage must provide notices in a "culturally and linguistically appropriate manner" under the ACA (see Practice Note, Internal Claims and Appeals Under the ACA); and
- it is considering an approach under which covered entities would need to provide a range of language assistance services in non-English languages spoken by state-wide populations with limited English proficiency that meet certain thresholds.
Provisions governing effective communication with individuals with disabilities (borrowed from regulations implementing Title II of the ADA).
Accessibility standards for buildings and facilities under Section 504 that:
- apply to existing facilities, new construction and alterations; and
- according to HHS, are consistent with existing standards under the ADA.
That health programs or activities provided through electronic and information technology be accessible to individuals with disabilities, unless doing so would:
- impose financial and administrative burdens; or
- fundamentally alter the nature of an entity's health program or activity.
As an example, HHS indicated that an ACA exchange that creates a website through which enrollees can apply for health coverage must ensure that individuals with disabilities (for example, individuals who are blind or have low vision) can use the website's health coverage comparison and eligibility determination tools.
Requirements to make reasonable modifications in policies, practices or procedures to avoid discrimination on the basis of disability.
Equal access to health programs or activities on the basis of sex.

In addition, certain entities would be required to submit "assurances" that their health programs or activities are operated consistent with Section 1557. This requirement would apply to any entity that:

Is applying for federal financial assistance.
Is an insurer seeking certification to participate in the ACA exchanges.
Is a state seeking approval to operate a state-based exchange.

Grievance procedures and a notice requirement (modeled after notice rules in the regulations implementing Title VI, Title XI, Section 504 and the Age Act) also would apply. Under the notice requirement, for example, Section 1557 covered entities would need to inform certain individuals of the availability of language assistance services that are:

Free of charge and provided in a timely manner.
Available if necessary to ensure that individuals with disabilities have an equal opportunity to participate in the entity's health programs or activities.

Protections for Transgender Individuals

The proposed regulations also would prohibit coverage denials, claim denials or the imposition of additional cost-sharing (or other limitations) on any health service if the denial or limitation is because the individual's sex assigned at birth, gender identity or gender otherwise recorded by the plan or insurer is different from the one to which such services are ordinarily or exclusively available.

According to HHS, without these protections individuals will continue to suffer routine coverage denials for medically appropriate sex-specific health services because:

Of the individuals' gender identity.
The individuals were enrolled in a health plan as one sex, but the health service at issue was generally associated with another sex.

Under the proposed regulations, a Section 1557 covered entity must:

Provide individuals equal access to health programs or activities on the basis of sex (which HHS would interpret to include discrimination on the basis of gender identity).
Treat individuals consistent with their gender identity, defined as the individual's internal sense of gender (which may be different from the individual's sex assigned at birth).
Make available coverage for medically appropriate health services on the same terms for all individuals, regardless of sex assigned at birth, gender identity or recorded gender.
Not categorically or automatically exclude from coverage (or limit coverage for) all health services related to gender transition.
Not deny or limit coverage (or deny a claim) for specific health services relating to gender transition if the denial or limitation results in discrimination against a transgender individual.

HHS's position on gender identity is intended to be consistent with recent guidance and enforcement actions taken by the Equal Employment Opportunity Commission (EEOC), Department of Justice (DOJ) and Department of Education (DOE) (see Practice Note, Sex Discrimination under Title VII and the EPA: Sex Discrimination Prohibited by Title VII and Legal Updates, Restricting Transgender Employee's Access to Gender-Identity-Appropriate Restroom is Sex Discrimination: EEOC, Transgender Discrimination is Sex Discrimination under Title VII: EEOC and DOJ Will Include Gender Identity Under Sex Discrimination Employment Claims).

Section 1557 covered entities may not deny or limit health services that are ordinarily (or exclusively) available to individuals of one gender based on the fact that the individual's sex assigned at birth, gender identity or gender otherwise recorded in a medical record or by a health plan is different from one to which those health services are ordinarily or exclusively available. For example, a covered entity may not deny an individual treatment for ovarian cancer where the individual could benefit medically from the treatment, based on the individual's identification as a transgender male.

By way of process, HHS intends to address discrimination claims involving transgender identity by reviewing whether (and to what extent) coverage is available when a service is not related to gender transition. However, the proposed regulations do not:

Require Section 1557 covered entities to cover any particular procedure or treatment for transition-related care.
Prohibit a covered entity from applying "neutral standards" governing when it will offer coverage to all enrollees in a nondiscriminatory manner.

Practical Impact

Health plan insurers may be surprised by the seemingly broad reach of the Section 1557 proposed regulations' nondiscrimination rules. Under HHS's interpretation of the regulations' definition of "federal financial assistance," an insurer participating in the ACA health insurance exchanges is receiving federal financial assistance when premium tax credits (or other cost-sharing) are provided to any of the insurer's enrollees. According to HHS, an insurer that participates in the exchanges and thereby "receives" federal financial assistance also is covered under the proposed regulations:

For all its other health plans.
In its role as a TPA for employer-sponsored health plans.

As a result, these regulations may impact a broad range of insurers and plans, particularly because the nondiscrimination rules would apply well beyond an insurer's exchange-based offerings.

Stakeholders that wish to comment on the proposed regulations must do so by November 9, 2015.

ACA Nondiscrimination Rules Would Impact Health Plan Insurers | Practical Law