Under Section 1557 of the Affordable Care Act, codified at 42 U.S.C. § 18116 and effective March 23, 2010, health programs and activities that receive federal financial assistance are generally prohibited from discriminating against any individual on the basis of race, color, national origin, sex, age, or disability. These grounds for discrimination are those prohibited under four longstanding federal civil rights laws: (1) Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d et seq.); (2) Title IX of the Education Amendments of 1972 (20 U.S.C. § 1681 et seq.); (3) the Age Discrimination Act of 1975 (42 U.S.C. § 6101 et seq.); and (4) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. § 794). The enforcement mechanisms under these civil rights laws apply to violations of Section 1557 and include suspension and termination of federal financial assistance, referral to the Department of Justice, and a private right of action and damages.

The final rule that implemented Section 1557 was issued by the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) on May 13, 2016 and published in the Federal Register on May 18, 2016. The regulations are set forth at 45 C.F.R. Part 92 and became effective July 18, 2016 or, with respect to provisions requiring changes to health insurance or group health plan benefit design, the first plan year beginning on or after January 1, 2017. The final rule applies to health care providers and health insurance issuers that receive federal financial assistance from HHS, such as premium tax credits and cost-sharing reductions associated with coverage offered through both federally facilitated and state-based Health Insurance Marketplaces, and Medicare Parts A, C, and D payments.

Who Is Covered?

The final rule applies to “covered entities,” defined to consist of “any entity that operates a health program or activity, any part of which receives federal financial assistance from HHS.” “Health program or activity” includes the provision or administration of health-related services, health-related insurance coverage, or other health-related coverage. The definition goes on to state that for entities that are principally engaged in providing or administering such services or coverage, all of the entity’s operations are considered part of the health program or activity, unless expressly exempted. Examples of such entities that are “principally engaged” are hospitals, health clinics, group health plans, health insurance issuers, physician practices, and nursing facilities. The OCR noted that a group health plan that receives federal financial assistance is a covered entity for purposes of the final rule, because it operates a health program or activity by virtue of its provision or administration of the employee health benefits program. An “employee health benefits program” is any health benefits or insurance coverage provided by an employer to its employees and/or their dependents, including a wellness program, a health clinic, and long-term care coverage. 45 C.F.R. § 92.4.

Excepted benefits (e.g., limited-scope dental and vision plans offered on a standalone basis), which are exempt under certain Health Insurance Portability and Accountability Act (HIPAA) and market reform provisions, are not exempted from the final rule. In addition, the services of third-party administrators are not excluded from the final rule. However, the OCR stated it will engage in special procedures to evaluate on a case-by-case basis whether a third-party administrator is covered under the final rule when it does not directly receive federal financial assistance and appears to be legally separate from an issuer that receives federal financial assistance. The evaluation will rely on principles developed in the case law of the above-mentioned civil rights laws, such as the degree of common ownership and control between the two entities.

Thus, the final rule applies across all lines of business of any entity principally engaged in a health program or activity, and it possibly applies across affiliated entities of a corporate enterprise. The final rule does not apply to discrimination by a covered entity against its own employees except with respect to its employee health benefit programs.

What Is Required?

The final rule provides, among other items, general and specific discrimination prohibitions, a meaningful access standard for individuals with limited English proficiency, discrimination prohibitions specific to health-related insurance and coverage, that an employer would be liable for discrimination in employee health benefit programs, accessibility requirements and notice (e.g., tagline and website posting) requirements, and that covered entities with 15 or more employees are obligated to implement certain grievance procedures and designate an employee responsible for Section 1557 compliance, including the investigations of grievances. A few of these are further described below.

With respect to non-discrimination in health-related insurance and other health-related coverage, a covered entity is prohibited from discriminating on the basis of race, color, national origin, sex, age, or disability. Specifically, a covered entity must not do any of the following in providing or administering health-related insurance or other health-related coverage:

  1. deny, cancel, limit, or refuse to issue or renew such coverage, or deny or limit coverage of a claim, or impose additional cost sharing or other limitations or restrictions on coverage, on the basis of race, color, national origin, sex, age, or disability;
  2. have or implement marketing practices or benefit designs that discriminate on the basis of race, color, national origin, sex, age, or disability in a plan, policy, or other health-related coverage;
  3. deny or limit coverage, deny or limit coverage of a claim, or impose additional cost sharing or other limitations or restrictions on coverage, for any health services that are ordinarily or exclusively available to individuals of one sex, to a transgender individual based on the fact that an individual's sex assigned at birth, gender identity, or gender otherwise recorded is different from the one to which such health services are ordinarily or exclusively available;
  4. have or implement a categorical coverage exclusion or limitation for all health services related to gender transition; or
  5. otherwise deny or limit coverage, deny or limit coverage of a claim, or impose additional cost sharing or other limitations or restrictions on coverage, for specific health services related to gender transition if such denial, limitation, or restriction results in discrimination against a transgender individual. 45 C.F.R. § 92.207.

Scientific or medical reasons can justify distinctions based on the grounds for discrimination enumerated in the Section 1557 rules. In addition, the final rule does not require coverage of all medically necessary health services related to gender transition. It requires only that the same neutral, nondiscriminatory criteria used for other conditions be used for coverage determinations related to gender transition. If certain types of elective procedures that are beyond those strictly identified as medically necessary or appropriate are covered, the same standards must be applied to coverage of comparable procedures related to gender transition.

The final rule includes a provision that “[i]nsofar as application of any requirement under this part would violate applicable Federal statutory protections for religious freedom and conscience, such application shall not be required.” 45 CFR § 92.2(b)(2); 81 Fed. Reg. 31376 (May 18, 2016). The OCR offered the following examples of such protections: provider conscience laws, the Religious Freedom Restoration Act (RFRA, codified at 42 USC § 2000bb-1), and certain provisions of the Affordable Care Act regarding abortion and preventive health services. These federal statutory protections are narrow and do not constitute an express blanket religious exemption from all of the Section 1557 rules. Such protections are unlikely to prohibit the application of the requirements of the final rule related to a meaningful access standard for individuals with limited English proficiency, accessibility and notice (e.g., tagline and website posting) requirements, and obligations related to grievance procedures.