Sixth Circuit Rejects HIV/Genvoya Claim Under ACA Section 1557

Practical Law Legal Update w-020-6753 (Approx. 5 pages)

Sixth Circuit Rejects HIV/Genvoya Claim Under ACA Section 1557

by Practical Law Employee Benefits & Executive Compensation

High-Cost Prescription Medications Available Through Specialty Network

The participant in this case, an HIV-positive individual who takes Genvoya to manage his condition, was covered under an insured health plan administered by the health insurer-defendant. Although the participant initially purchased the HIV medication from his local pharmacy, the health insurer adopted a policy under which certain high-cost prescriptions (including Genvoya) could only be obtained at in-network prices through a specialty pharmacy network. This meant that the participant's prescription could only be filled through mail order or at specialty pharmacies, many of which (according to the participant) were located far from the participant's home. The insurer rejected the participant's request to opt out of the specialty medications program.

In a class action lawsuit, the participant claimed that the insurer's policy discriminated against him and other HIV-positive individuals in violation of the nondiscrimination requirements under ACA Section 1557 (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557)). The district court granted the insurer's motion to dismiss the complaint, and the participant appealed.

Sixth Circuit Analyzes Claim Under Section 504 of the Rehabilitation Act

In affirming the district court, the Sixth Circuit addressed whether:

Section 1557's standard of liability includes a relaxed form of disparate-impact discrimination.
The participant could bring a private lawsuit to enforce his claim.

Disparate-Impact Discrimination

Section 1557 incorporates the grounds for prohibited discrimination under the following four civil rights laws:

Title VI of the Civil Rights Act (Title VII) (race, color, or national origin).
Title IX of the Education Amendments of 1972 (Title IX) (sex).
The Age Discrimination Act of 1975 (Age Act) (age).
Section 504 of the Rehabilitation Act of 1973 (Section 504) (disability).

(See Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557.)

Regarding Section 1557's standard of liability, the participant acknowledged that some of the laws incorporated under Section 1557 permit discrimination claims based on a relaxed disparate-impact theory, while others do not. The participant asserted, however, that he could choose the most liberal standard from among the four laws and apply that standard regarding his disability discrimination claim.

Rejecting this argument, the Sixth Circuit concluded that Section 1557 does not change the nature of the grounds for prohibited discrimination under each of the four civil rights laws. Rather, according to the court, Congress incorporated the legal standards that define discrimination under each of the laws. Moreover, the Sixth Circuit reasoned that the available enforcement mechanisms under Section 1557 (for example, disparate-impact discrimination) are the distinct methods provided for using the four underlying laws. Regarding discrimination, as a result, the court held that Section 1557 prohibits disability discrimination using a standard of care consistent with showing a violation of Section 504 – not the other three laws incorporated under Section 1557. The court rejected the argument that the participant could use any of the four substantive legal standards for proving discrimination and apply that standard to any of the four classifications. "Picking your own adventure," the Sixth Circuit concluded, is not an option under Section 1557.

The Sixth Circuit observed that each of the statutes incorporated under Section 1557 has its own enforcement rules applicable to the corresponding type of discrimination under each law.

HHS Regulatory Interpretation Under May 2016 Final Regulations Rejected

In reaching its conclusion, the Sixth Circuit rejected a regulatory interpretation advanced by the Department of Health and Human Services (HHS) in Section 1557 final regulations issued in May 2016 (see Legal Update, ACA Nondiscrimination Rules, Now Final, Target Insurers and TPAs). In issuing those regulations, HHS took the view that a private right of action for disparate-impact discrimination claims was authorized for any of the four civil rights laws referenced under Section 1557. The Sixth Circuit reasoned that because HHS's view was plainly inconsistent with the Section 1557 statute, this view was not entitled to Chevron deference.

Private Right of Action

Because Section 504 contains a private right of action, the Sixth Circuit also concluded that Section 1557's enforcement mechanism provision permitted the participant to enforce the disability prohibition under the ACA.

Section 504 of the Rehabilitation Act Does Not Prohibit Disparate-Impact Discrimination

The Sixth Circuit therefore analyzed the participant's claim under Section 504, which required the participant to demonstrate that:

He is an individual with a disability.
He is otherwise qualified for participation in a health program or activity.
He was excluded from participation in, denied the benefits of, or subjected to discrimination under the program solely by reason of his disability.
The program received federal assistance.

(29 U.S.C. § 794; see Practice Note, Discrimination Under the Rehabilitation Act: Basics: Liability Theories Under Section 504.)

Addressing the third of these elements, the Sixth Circuit held that the participant was not excluded from participation in, denied the benefits of, or subjected to discrimination under the health plan. The court concluded that the insurer did not intentionally discriminate against him because the plan's specialty medications list is neutral on its face. The common trait linking drugs subject to the insurer's specialty medications list was their cost, not the disabled status of the drugs' users.

However, the participant also argued that even if the plan did not intentionally discriminate against the disabled, it caused a cognizable disparate impact. Resolving an open question, the Sixth Circuit held that Section 504 does not prohibit disparate-impact discrimination. The court reasoned that Section 504:

Prohibits discrimination solely by reason of an individual's disability, which does not encompass actions taken for nondiscriminatory reasons.
Applies only to individuals who are "otherwise qualified" for the program involved, meaning that disabled individuals may be disparately affected by legitimate job criteria.

The court also observed that Title VI, on which Section 504 was patterned, does not reach disparate-impact discrimination.

Citing the participant's claim as an example, the Sixth Circuit concluded that entertaining disparate-impact liability under Section 504 would invite "fruitless challenges to legitimate, and utterly nondiscriminatory distinctions."

Practical Impact

Two weeks ago, the Trump Administration's HHS issued re-proposed regulations under ACA Section 1557 that would significantly scale back and revise requirements under the agency's May 2016 final regulations implementing Section 1557 (issued under the Obama Administration) (see Legal Update, Re-Proposed ACA Section 1557 Rules Include Scaled Back Compliance Obligations). In doing so, HHS criticized its own regulatory interpretation under the May 2016 final regulations of blending substantive requirements and enforcement mechanisms of the four civil rights laws underlying Section 1557 (which HHS now referred to as a "hodgepodge approach"). Like the Sixth Circuit in this decision, HHS (under its re-proposed regulations) would not allow claimants to mix-and-match the substantive requirements and enforcement mechanisms under the four laws cross-referenced in Section 1557.

Sixth Circuit Rejects HIV/Genvoya Claim Under ACA Section 1557 | Practical Law