This past May, the Department of Health and Human Services (HHS) issued a final rule implementing Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in the healthcare system. While Section 1557 has been in effect since 2010, the final rule extends additional protections to transgender individuals seeking transition-related health services, which can include gender reassignment surgery. The rule went into effect July 18th, although provisions affecting health insurance plan benefit design will become effective January 2017.

Key Provisions Clarifying Section 1557:

• Prohibits sex discrimination on the basis of pregnancy and gender identity

• Prohibits discrimination against transgender individuals, including denial of coverage for transition-related services

• Requires covered entities to provide effective communications and access to information technology for individuals with disabilities

• Requires covered entities to provide language assistance services for individuals with limited English proficiency

Scope and Covered Entities

Section 1557 applies to all health programs, providers, and activities that receive federal financial assistance through HHS (e.g. Medicare, Medicaid, CHIP), are administered by the federal government, or established under Title I of the ACA (e.g. state-based marketplaces). Covered entities therefore include the majority of physicians and all insurers who participate in the health insurance marketplace.

The rule also applies to federally funded medical research, health professional training programs, and physicians who receive meaningful use technology (IT) funding. Physicians that only participate in Medicare Part B or whose patients receive premium tax credits are excluded.

HHS estimates 900,000 physicians, 133,343 health facilities, 445,657 clinical laboratories, and 180 insurers are covered under the rule.

Why is the Rule Controversial? 

Section 1557 now requires covered entities to treat transgender individuals according to their gender identity and cover “medically necessary” services, which can include gender reassignment surgery and accompanying treatments. Transgender patients can also access bathrooms, hospital rooms, and other gender-specific spaces according to their gender identity.

HHS refused to allow religious organizations an accommodation to the rule. Hospitals and health plans with religious affiliations will likely continue to push for an exemption on account of religious objections, as is currently available for contraceptive coverage.

The new provisions also increase the estimated cost of implementing Section 1557 by $558 million dollars— totaling $960 million in training and administrative costs over the next five years.

The goal of Section 1557 and its new provisions is to improve access to care and coverage and eliminate barriers. According to HHS, “women and transgender individuals continue to experience discrimination in the health care context, which can lead to denials of adequate health care and increases in existing health disparities in underserved communities.”

Covered entities that fail to comply with Section 1557 will face suspension or termination of federal funding.