The Affordable Care Act regulatory juggernaut keeps growing.

On September 3, 2015, the Office of Civil Rights within the U.S. Department of Health & Human Services (HHS) proposed new regulations interpreting Section 1557 of the Affordable Care Act (ACA). Section 1557 is the first federal civil rights law to prohibit discrimination on the basis of sex in health care and certain health coverage plans. The proposed regulations are broad, particularly with respect to the protection of transgendered individuals, and impact health care providers, health insurance issuers, and employers.

Overview

The proposed regulations apply to "Covered Entities," which include entities that operate a "health program or activity" that receives "federal financial assistance." A "health program or activity" includes:

  • the provision of health-related services;
  • the administration of health-related services;
  • the provision of health-related insurance coverage;
  • the administration of health-related insurance coverage;
  • the provision of assistance to individuals in obtaining health-related services; and
  • the provision of assistance to individuals in obtaining health-related insurance coverage.

HHS will only enforce the regulations with respect to health programs or activities that receive "federal financial assistance" from HHS. The types of HHS financial assistance that can trigger application of the regulations include loans, grants, scholarships, health insurance premium tax credits, services of federal employees, and below-market purchases of federal property. Medicare bonuses for meaningful use of electronic medical records, grants from the National Institutes of Health, and income from work in the National Health Service Corps are additional examples. Medicare Part B reimbursements are not included in the definition of federal financial assistance.

These broad definitions will bring into the law's aim many, if not most, physicians, hospitals, health clinics, community health centers, nursing homes, home health care agencies, and health insurance companies. In fact, the definitions are so broad that HHS estimates they will affect "almost all licensed physicians because they accept federal financial assistance from sources other than Medicare Part B."

The proposed regulations also reach employers. For example, the regulations cover all activities of a health insurance company receiving federal health insurance premium tax credits—even if some of those activities, such as third-party administration, are performed for an employer's self-funded plan. And, they cover employers who are otherwise Covered Entities, such as health systems.

Prohibited Discrimination

The proposed regulations prohibit discrimination against an individual (and others associated with the individual) based on the individual’s race, color, national origin, sex, age, or disability under a health program or activity.

Discrimination "on the basis of sex" is specifically defined to include (but is not limited to) discrimination on the basis of pregnancy, false pregnancy, termination of pregnancy or recovery therefrom, childbirth or related medical conditions, sex stereotyping, or gender identity.

Specific Regulations Relating to Sex Discrimination

HHS proposed the following specific regulations for all Covered Entities relating to sex discrimination:

  • A Covered Entity shall provide equal access to health programs or activities without sex discrimination.
  • A Covered Entity shall treat individuals consistent with his or her gender identity.
  • A Covered Entity shall not deny or limit health services based on the fact that an individual's sex at birth, gender identity, or gender otherwise recorded in a medical record is different from the one to which such health services are ordinarily or exclusively available.

Additionally, a number of special regulations apply to a Covered Entity providing or administering health-related insurance or other health-related coverage ("Coverage Providers"), including the following:

  • A Coverage Provider shall not deny coverage or claims for health services ordinarily or exclusively available to individuals of one sex, based on the fact that an individual's sex at birth, gender identity, or gender otherwise recorded by the plan or issuer is different from the one to which such health services are ordinarily or exclusively available.
  • A Coverage Provider shall not categorically or automatically exclude from coverage, or limit coverage for, all health services related to gender transition.
  • A Coverage Provider may not deny or limit coverage for specific health services related to gender transition if such denial or limitation results in discrimination against a transgender individual.

Impact on Employee Benefit Plans

If an employer is principally engaged in providing or administering health services or health coverage, the employer's employee health benefit program for its own employees will be subject to these regulations. Thus, a health system or health insurance company that receives HHS financial assistance could be liable if its employee health benefit program for its own employees violates the regulations.

Gender Transition Coverage

Many are asking whether the proposed regulations would require gender transition surgery to be covered by health plans that are otherwise covered by the law. The answer is not clear, but the proposed regulations offer up a few clues.

First, it seems that some gender transition services may be categorically excluded as long as "all" gender transition services are not categorically excluded.

Second, coverage limitations or claim denials for gender transition services must not discriminate against transgender individuals. For this test, HHS intends to ask "whether and to what extent coverage is available when the same service is not related to gender transition." For example, if a plan denies coverage for a hysterectomy that is medically necessary to treat gender dysphoria, HHS will evaluate the extent of the plan's coverage of hysterectomies under other circumstances. In addition, HHS will scrutinize whether the covered entity's explanation for the denial or limitation is "legitimate" and not a pretext for discrimination.

The question of whether a plan can categorically exclude from coverage or limit coverage for a health service related to gender transition seems to depend upon the specific nature of the health service. If a health service is covered for a non-transgendered individual when it is medically necessary, it appears problematic to exclude or deny coverage for the service if it is medically necessary treatment for gender dysphoria. As an example, an insurer that covers breast removal as a medically necessary treatment for breast cancer may need to cover breast removal if it is medically necessary for the treatment of gender dysphoria.

Although HHS indicates that these prohibitions do not require covered entities to cover any particular procedure or treatment for transition-related care, these prohibitions appear to require changes to the benefit coverage provisions of many health plans.

Additional Requirements

In addition to the nondiscrimination prohibitions, the proposed regulations impose the following requirements on Covered Entities:

  • Covered Entities employing 15 or more persons must adopt grievance procedures and designate a responsible employee to coordinate compliance with the proposed regulations.
  • Covered Entities must take “reasonable steps” to provide meaningful access to individuals with limited English proficiency, including providing language assistance, auxiliary aids, and interpretation services for individuals with disabilities.
  • Covered Entities must post notice that such services are available and that the entity does not discriminate on the basis of race, color, national origin, sex, age, or disability.
  • Covered Entities must take appropriate steps to ensure that communications with individuals with disabilities are as effective as communications with others in health programs and activities.
  • Covered Entities must ensure that their health programs or activities provided through electronic and information technology are accessible to individuals with disabilities.

Penalties/Right of Action

HHS can order an entity that has violated the nondiscrimination regulations to undertake remedial action "to overcome the effects of the discrimination." The regulations do not define the term "remedial action" and it is not clear whether remedial action includes the payment of cash damages. It is proposed that individuals will have a private right of action and may seek damages for violations of the law.

Public Comment

HHS is seeking public comment on the scope of the proposed regulations, including whether the proposed regulations should include specific exemptions for health providers. Notably, HHS has stated that the proposed regulations would not displace protections afforded by provider conscience laws or the Religious Freedom Restoration Act. Nevertheless, HHS is committed to carrying out a fundamental purpose of the ACA: To ensure that essential health care services are widely available to individuals on a nondiscriminatory basis.

Entities wishing to submit comments to HHS should do so by November 6, 2015.