While Section 1557 imposes significant nondiscrimination requirements on “Covered Entities” (as discussed in the article above), most employers are not “Covered Entities” as defined under the final rule (“non-covered employers”). The impact of Section 1557 on non-covered employers depends on whether their respective group health plans are insured or self-insured and the level of involvement in the plans by insurance issuers that are “Covered Entities” under the final rule.
Non-Covered Employers with Fully Insured Group Health Plans
Nearly all health insurance issuers are Covered Entities under Section 1557 because they offer individual policies on a federal or state Health Insurance Marketplace or otherwise receive federal funds. Non-covered employers that sponsor fully insured group health plans will be subject to Section 1557 through the underlying insurance policy (provided that the insurer offering the policy participates in an exchange or otherwise receives federal financial assistance).
As a Covered Entity, a health insurance issuer must provide special notices to plan participants, make available appropriate translations and auxiliary aids and services, and ensure that the covered benefits offered under the insurance policy are nondiscriminatory. Plan sponsors of fully insured group health plans should expect to see changes to enrollment documents, plan participant communications, and other notices from the health insurance issuer.
One of the most significant changes being made by insurance issuers to comply with Section 1557 is the elimination of any exclusion for benefit coverage of transgender health services under the insurance policy. The final rule makes clear that sex discrimination includes discrimination based on an individual’s sex, including gender identity (as well as pregnancy, childbirth, and related medical conditions, and sex stereotyping). Specifically, Covered Entities may not deny or limit coverage for health services that are ordinarily or exclusively available to persons of one gender because the person’s sex assigned at birth, gender identity, or recorded gender is different than the one to which the services are ordinarily or exclusively available. The final rule concludes that broad coverage exclusions or limitations related to gender transition are per se discriminatory and therefore unlawful. For example, many group health plans currently have explicit exclusions of coverage for all care related to gender dysphoria or gender transition, with all treatment related to transition categorized as cosmetic or experimental. Such explicit coverage exclusions under a fully insured group health plan generally are now prohibited.
Non-Covered Employers with Self-Insured Group Health Plans
If a health insurance issuer acts as a third-party administrator for a non-covered employer’s self-insured group health plan, the issuer is directly subject to Section 1557 and must administer the plan in compliance with the nondiscrimination rules. This means that if the third-party administrator is providing claims services, it must comply with the nondiscrimination rules in making any claims determinations. The non-covered employer, however, is not required to comply. Therefore, any plan coverage design decisions made by the non-covered employer in its capacity as plan sponsor are not subject to the Section 1557 nondiscrimination protections.
Nevertheless, the Section 1557 final rule clarifies that even though HHS lacks jurisdiction over a non-covered employer, HHS has the power to refer any complaint of discrimination to the EEOC and that it intends to do so. Few courts have held that discrimination based on gender identity constitutes a form of sex-based discrimination. However, the EEOC has taken the position that sex discrimination includes discrimination on the basis of gender identity and has already begun investigating allegations of gender identity discrimination in a health program or activity. From a risk perspective, a non-covered employer with a self-insured group health plan may wish to review the plan’s benefit design and determine if any changes should be made. If there is an explicit exclusion for coverage of transgender health care, a non-covered employer may choose to remove the exclusion from the plan to minimize the possibility of an EEOC investigation as it relates to the employer’s group health plan.
Finally, non-covered employers should be reminded of other nondiscrimination rules that might apply to them. For example, Section 1557 borrows from various antidiscrimination laws that apply to the employer directly, such as the requirement to provide auxiliary aids and services under the Americans with Disabilities Act. Although non-covered employers may not be required to comply with Section 1557, they are still required to abide by the various antidiscrimination laws and an employment discrimination complaint could arise through a referral to the EEOC in relation to an employer’s group health plan.
Although only Covered Entities are required to comply with the Section 1557 final rule, non-covered employers should be aware of the breadth of the final rule and how it affects them. Clearly, in developing the final rule, HHS intended for the nondiscrimination protections to apply to the greatest number of plan participants possible. To manage risk, non-covered employers may wish to review the design and operation of their group health plans to ensure that the plans do not discriminate against individuals, specifically with regards to transgender benefits, and to be aware that group health plan design and administration may be the basis of an employment discrimination complaint or EEOC investigation.
A version of this article originally appeared in the Take 5 newsletter “Five Key Issues Impacting Health Care Employers.”