Re-Proposed Section 1557 Regulations Would Apply to Many Health Insurers and Require Adoption of Policies and Procedures | Practical Law

Re-Proposed Section 1557 Regulations Would Apply to Many Health Insurers and Require Adoption of Policies and Procedures | Practical Law

On July 26, 2022, the Department of Health and Human Services (HHS) re-proposed its implementing regulations under Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. The July 2022 re-proposed regulations would reinstate certain requirements from the May 2016 final regulations (issued under the Obama administration), including provisions that define discrimination on the basis of sex to include discrimination based on gender identity.

Re-Proposed Section 1557 Regulations Would Apply to Many Health Insurers and Require Adoption of Policies and Procedures

by Practical Law Employee Benefits & Executive Compensation
Published on 02 Aug 2022 • USA (National/Federal)
On July 26, 2022, the Department of Health and Human Services (HHS) re-proposed its implementing regulations under Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. The July 2022 re-proposed regulations would reinstate certain requirements from the May 2016 final regulations (issued under the Obama administration), including provisions that define discrimination on the basis of sex to include discrimination based on gender identity.
On July 26, 2022, HHS re-proposed its implementing regulations under Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities (87 Fed. Reg. 47824 (Aug. 4, 2022); see Article, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557). The July 2022 re-proposed regulations would reinstate some provisions from the May 2016 final regulations issued under Section 1557, including provisions that define discrimination on the basis of sex to include discrimination based on gender identity (see Legal Update, ACA Nondiscrimination Rules, Now Final, Target Insurers and TPAs). The July 2022 re-proposed regulations would also add requirements for Section 1557 covered entities—for example, a notice of availability of language assistance services that is similar to tagline requirements found in the former Section 1557 regulations (from May 2016).

ACA Section 1557 Prohibits Discrimination in Health Programs and Activities

ACA 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) on specified grounds, including sex discrimination (see Article, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557 and Practice Note, Affordable Care Act (ACA) Overview). Section 1557 incorporates the grounds for prohibited discrimination under four civil rights laws, including discrimination based on sex under Title IX of the Education Amendments of 1972 (Title IX).
In May 2016, HHS issued final regulations (under the Obama administration) that, among other things, defined sex discrimination to include discrimination based on gender identity and sex stereotyping (see Legal Update, ACA Nondiscrimination Rules, Now Final, Target Insurers and TPAs). In December 2016, however, a federal district court in Texas preliminarily enjoined HHS from enforcing the 2016 final regulations' prohibitions against discrimination on the basis of:
  • Gender identity.
  • Termination of pregnancy.
(Franciscan Alliance, Inc. v. Burwell, 227 F. Supp. 3d 660 (N.D. Tex. 2016).)
In December 2019, the Texas district court formally vacated portions of the May 2016 final regulations (see Legal Update, Texas District Court Vacates Parts of ACA Section 1557 Final Rules).
Also during this time, the Trump administration's HHS issued re-proposed Section 1557 regulations that repealed, redesignated, or replaced numerous aspects of the May 2016 final regulations. For example, these re-proposed regulations repealed the definition of "on the basis of sex" that included discrimination on the basis of gender identity.
HHS finalized the Trump-era 2019 re-proposed regulations in June 2020, just days after the Supreme Court ruled that the phrase "because of sex" for Title VII purposes prohibits employers from terminating employees on the basis of their sexual orientation or transgender status (Bostock v. Clayton County, GA, 140 S. Ct. 1731 (2020))). For more information, see:
In August 2020, a federal district court stayed the repeal of the definition of discrimination on the basis of sex (Walker v. Azar, 480 F. Supp. 3d 417, 430 (E.D.N.Y. 2020)). Subsequent litigation has challenged various other aspects of the June 2020 regulations.
Upon taking office in January 2021, the Biden administration issued an executive order directing the federal agencies to review agency actions that prohibit discrimination on the basis of sex for consistency with the Supreme Court's Bostock ruling (Executive Order 19888 (Jan. 20, 2021)). Relatedly, HHS then issued an updated enforcement position regarding Section 1557 that was intended to be consistent with the Bostock ruling and Title IX (Bostock Notification). Under the Bostock Notification, HHS took the position that—effective May 10, 2021—it would interpret and enforce Section 1557's prohibition on discrimination on the basis of sex to include discrimination on the basis of:
  • Sexual orientation.
  • Gender identity.
For more information on the May 2016 and June 2020 final regulations, see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities and Article, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557.

Re-Proposed Regulations Would Reinstate Some Prior Rules and Add New Ones

The July 2022 re-proposed regulations would reinstate several provisions from the May 2016 final regulations, including certain definitions, protections against discrimination based on gender identity, and notice requirements. As noted, the re-proposed regulations would also expand certain requirements for Section 1557 covered entities.

Definitions Section Restored

The June 2020 final regulations eliminated the definition of "federal financial assistance." The July 2022 re-proposed regulations would reinstate the May 2016 definition of "federal financial assistance" but with changes to provide that federal financial assistance provided or administered by HHS includes advance payments of premium tax credits under the ACA's health insurance exchanges (see Article, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Federal Financial Assistance).
The July 2022 re-proposed regulations also would reinstate the definition of "health program or activity." The June 2020 final regulations eliminated this definition and narrowed the scope of the regulations. Under the June 2020 regulations, if an entity is not principally engaged in the business of providing health care, the entity's operations are subject to the regulations' requirements only to the extent that those operations receive federal financial assistance from HHS.
Under the July 2022 re-proposed regulations, the term "health program or activity" would include:
  • Providing or administering health-related insurance coverage or services.
  • Furnishing assistance in obtaining health-related insurance coverage or services.
The term would include all the operations of an entity that is principally engaged in providing or administering health services or health insurance coverage (for example, a health insurer or hospital). However, the July 2022 re-proposed regulations would not expressly include group health plans in the list of entities that are categorically covered, because not all group health plans receive federal financial assistance.

Notice Requirements

The May 2016 final regulations required Section 1557 covered entities to provide notices of nondiscrimination and taglines describing the availability of free language assistance services to be sent with all significant communications. Citing cost concerns, the June 2020 final regulations repealed these provisions.
The July 2022 re-proposed regulations would:
  • Reinstate the requirement to provide individuals a notice of nondiscrimination.
  • Impose a new requirement to furnish a notice of availability of language assistance services and auxiliary aids and services. This notice would need to be provided in:
    • English and the 15 most common languages spoken by limited English proficient (LEP) individuals in each state; and
    • alternative formats for individuals with disabilities who request auxiliary aids and services.
In response to cost concerns regarding the requirement to include taglines about free language assistance services in all "significant communications," the July 2022 re-proposed regulations would list the specific communications that must be accompanied by the notice of availability (for example, HIPAA privacy notices and benefit claim denial letters) (see Standard Document, HIPAA Notice of Privacy Practices for Group Health Plans). HHS indicated that it would provide a sample notice of availability in English and the 15 most common non-English languages in the relevant geographic area.

Substantive Nondiscrimination Requirements

The July 2022 re-proposed regulations would reinstate, with modifications, rules from the May 2016 final regulations concerning discrimination on the basis of sex. Under the re-proposed regulations, discrimination on the basis of sex would include discrimination based on gender identity, sex stereotypes, sexual orientation, sex characteristics, including intersex traits, and pregnancy or related conditions (for example, termination of pregnancy).
In this regard, HHS indicated that it could be helpful to include a provision in the re-proposed regulations specifically prohibiting discrimination on the basis of pregnancy-related conditions as a form of sex-based discrimination. HHS expressly sought comments on what impact, if any, the Supreme Court's recent decision overruling Roe v. Wade and Planned Parenthood v. Casey may have on implementing Section 1557 and HHS's re-proposed regulations (Dobbs v. Jackson Women’s Health Org., 142 S. Ct. 2228 (2022)).
For more information on the Dobbs ruling, see Abortion and Contraceptives Services for Group Health Plans Toolkit.

Protections for Transgender Individuals

The July 2022 re-proposed regulations also would prohibit covered entities from categorically excluding coverage or imposing limitations or additional cost-sharing for all gender affirming care if the exclusion or other limitations result in discrimination on the basis of sex.

Short-Term, Limited-Duration Insurance (STLDI)

The June 2020 final regulations limited application of the Section 1557 nondiscrimination requirements to the portion of a covered entity's operations for which it received federal financial assistance. Accordingly, short-term, limited duration insurance (STLDI) and excepted benefits were generally exempt from the nondiscrimination requirements (see Practice Notes, Short-Term, Limited-Duration Insurance (STLDI) and Excepted Benefits).
Under the re-proposed regulations, the Section 1557 nondiscrimination requirements would apply to all operations of a covered entity that provides or administers health insurance coverage or health-related coverage and receives federal financial assistance, which would result in STLDI and excepted benefits being covered by the nondiscrimination requirements, despite not being subject to the ACA's market reforms.

PBM Utilization Management Techniques

Under the July 2022 re-proposed regulations, pharmacy benefit managers (PBMs) could potentially violate the nondiscrimination requirements if they use utilization management techniques in a way that makes it harder for individuals in institutional settings to access prescription medications as compared to individuals in the community.

TPAs of Self-Insured Health Plans

As with the May 2016 final regulations, the July 2022 re-proposed regulations address application of the nondiscrimination requirements to third-party administrators (TPAs) that administer self-funded health plans. HHS acknowledged concerns that TPAs could be held liable for benefit plan design features that are discriminatory under Section 1557, but over which the TPAs have little or no control. In this situation, HHS would assess whether responsibility for an alleged discriminatory decision or action rests with the TPA or the plan sponsor. If the TPA is responsible, HHS would process the complaint against the TPA. If the plan sponsor is responsible for the discriminatory terms or conduct, HHS would refer the complaint to the Equal Employment Opportunity Commission (EEOC) or Department of Justice (DOJ).

Telehealth Services

The July 2022 re-proposed regulations also would apply the nondiscrimination requirements to the delivery of telehealth services, including with respect to:
  • Accessibility of the telehealth platform.
  • Availability of auxiliary aids and services for individuals with disabilities.
  • Language assistance services for LEP individuals.

Relationship to Other Laws, Including Religious Exemptions

The July 2022 re-proposed regulations would not incorporate Title IX's religious exceptions. According to HHS, the statutory text of Section 1557 does not require Title IX's exceptions to be incorporated, and incorporating the exceptions, which concern educational institutions or other entities that operate educational programs or activities, would compromise the ACA's goal of increasing access to health care. HHS reiterated its commitment to rights protected under conscience and religious freedom laws, including the Religious Freedom Restoration Act (RFRA).
In addition, the July 2022 re-proposed regulations would include a process for an entity to notify HHS of their belief that applying a provision of the Section 1557 regulations to the entity would violate federal conscience or religious freedom laws. HHS would then determine if an exemption or modification was warranted.

Miscellaneous Provisions

Other provisions in the re-proposed regulations address:
  • Requirements for state and federally facilitated health insurance exchanges.
  • Retaliation and interference with Section 1557 rights.
  • Related amendments to CMS regulations.

Effective Date and Delayed Applicability Date

The July 2022 re-proposed regulations would be effective 60 days after publication of the final regulations in the Federal Register. Provisions requiring changes to health insurance or group health plan benefit design, however, would have a delayed applicability date of the first day of the first plan year beginning on or after the year following the final regulations' effective date.

Guidance on Nondiscrimination in Telehealth

Relatedly, HHS and DOJ issued guidance addressing nondiscrimination in telehealth services provided to individuals with disabilities and LEP individuals (Telehealth Guidance (July 29, 2022)). Regarding disability discrimination, the telehealth guidance states that health care providers must make reasonable accommodations for individuals with disabilities, including:
  • Providing additional time before a telehealth appointment for an individual with a disability to become familiar with the online platform.
  • Scheduling longer appointments for individuals who need additional time to communicate because of their disability.
  • Allowing individuals to bring a support person to telehealth appointments.
(See Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Making Reasonable Accommodations.)
Additionally, providers must offer communication aids and services (for example, a sign language interpreter, real-time captioning, audio descriptions, and screen-reader compatibility) to enable effective commination between the provider and individuals with disabilities.
The telehealth guidance also addresses national origin discrimination, which includes discrimination against LEP individuals. HHS and DOJ reiterate that providers may need to provide free language assistance services to ensure that LEP individuals have meaningful access to health programs and activities. Examples of language assistance services include:
  • Providing a non-English statement in communications explaining how to obtain the information in a language the individual understands.
  • Providing a qualified interpreter and written translations of documents.
  • Permitting an interpreter to join the telehealth appointment via telephone or video.
In the guidance, HHS and DOJ direct providers to prior HHS guidance concerning audio-only telehealth services and HIPAA compliance obligations (see Legal Update, HHS Address HIPAA Compliance and Audio-Only Telehealth Services).

Practical Impact

The Section 1557 nondiscrimination requirements have now been the topic of rulemaking under three presidential administrations. After being scaled back under the Trump administration, the Section 1557 requirements, as implemented under the July 2022 re-proposals, would once again include an expansive set of requirements for Section 1557 covered entities—including notice requirements, a Section 1557 coordinator, and various Section 1557 policies and procedures (for example, grievance protocols). As a result, Section 1557 covered entities may wish to submit comments on the July 2022 re-proposed regulations (especially regarding some of the potentially challenging compliance aspects of HHS's proposals). Comments must submitted on or before October 3, 2022.