On June 12, 2020, the Office for Civil Rights (OCR) of the US Department of Health and Human Services (HHS) finalized a rule under Section 1557 of the Patient Protection and Affordable Care Act (ACA) (2020 Final Rule) that rescinds certain protections afforded to LGBTQ individuals and persons with limited English proficiency (LEP). At the same time, the 2020 Final Rule removes burdensome disclosure requirements that may be a welcome relief for entities covered by Section 1557. The 2020 Final Rule will go into effect 60 days after it is published in the Federal Register. HHS believes that the 2020 Final Rule will enhance compliance, relieve billions of dollars in undue regulatory burdens, reduce provider and public confusion, and help clarify the scope of Section 1557. HHS projects that, after finalization, this 2020 Final Rule will result in an estimated $2.9 billion in cost savings for covered entities over the first five years. HHS declined to estimate the health impact the 2020 Final Rule would have on patients.

Impact of Later Supreme Court Decision

While separate from the 2020 Final Rule, on June 15, 2020, as part of the Supreme Court of the United States rulings in the combined cases of Bostock v. Clayton County, Georgia; Altitude Express, Inc., et al. v. Zarda, et al.; and R.G. & G.R Harris Funeral Homes, Inc. v. EEOC, Associate Justice Neil Gorsuch wrote for the majority of the Court that “sex plays a necessary and undisguisable role in the decision [to fire someone simply for being transgender], exactly what Title VII forbids,” preventing workplace discrimination based on gender identity and sexual orientation. Although Title VII of the Civil Rights Act of 1964 is not included in the precedential civil rights laws that gave rise to Section 1557, we nevertheless anticipate that the Bostock holding will lead to legal challenges regarding the narrow definition of “on the basis of sex” in the healthcare and health insurance space, both in Congress and in the federal and state court systems in the coming months. We also expect to see challenges regarding religious exemption, who can be a “religious employer,” and whether private corporations can qualify. These actions will likely include challenges to the 2020 Final Rule, which is at odds with the holding in Bostock.

Background

Enacted on March 23, 2010, Section 1557 of the ACA prohibits any healthcare program or activity, any part of which is receiving federal financial assistance (interpreted at the time to include insurance companies, health systems or hospitals, and individual providers) from discrimination in specific health programs or activities. In defining what constitutes discrimination, Section 1557 incorporated existing federal civil rights laws, specifically, Title VI of the Civil Rights Act of 1964 (race, color, national origin), Title IX of the Education Amendments of 1972 (sex), the Age Discrimination Act of 1975, 42 USC § 200d et seq. (race, color, national origin), Section 504 of the Rehabilitation Act of 1973 (disability) and 29 USC § 794 (disability), and applied such protections to federally funded health programs and activities. On May 18, 2016, based on its interpretation of the statutory prohibition of discrimination “on the basis of sex,” HHS finalized a key provision defining sex discrimination as including discrimination based on sex stereotyping, gender expression, gender identity and termination of pregnancy, among other things (2016 Final Rule). The 2016 Final Rule also addressed ways to ensure meaningful access to key communications for individuals with LEP and imposed requirements for communicating effectively with persons with disabilities.

Immediately upon its finalization, OCR began enforcing the 2016 Final Rule by bringing claims for health coverage on behalf of transgender employees. Later in 2016, the 2016 Final Rule was challenged in the US District Court for the Northern District of Texas. The challengers included five states and a large health system. Among the challengers’ complaints was that by defining “sex” to include “gender identity” and “termination of pregnancy,” HHS exceeded its authority pursuant to the ACA, and it failed to include religious exemptions for conscientious objections. The court agreed with the challengers and enjoined HHS from enforcing Section 1557’s prohibition of discrimination on the basis of gender identity and termination of pregnancy, in part because the aforementioned federal civil rights laws did not interpret “on the basis of sex” with the same degree of breadth as was articulated in the 2016 Final Rule (See Franciscan Alliance, Inc. v. Burwell, 227 F. Supp. 3d 660, 695 (N.D. Tex. 2016)).

Subsequently, President Donald Trump was elected, the United States experienced a change in administration, and the US Department of Justice (DOJ) and HHS began working on revising the 2016 Final Rule. In a brief filed on behalf of HHS in Franciscan Alliance, the DOJ stated that the United States has “returned to its longstanding position that the term ‘sex’ in Title VII does not refer to gender identity, and there is no reason why Section 1557…should be treated differently,” signaling a changed position for the new administration. HHS next took action on June 14, 2019, when it issued a proposed rule that would make sweeping changes to the 2016 Final Rule.

Shortly thereafter, while HHS was reviewing comments on the proposed rule, the Franciscan Alliance court decided that a permanent injunction of the unlawful sections of the 2016 Final Rule was improper. Instead, the court held that the 2016 Final Rule contained provisions that violated the Administrative Procedure Act and the Religious Freedom Restoration Act, thereby requiring vacatur of the offending portions of Section 1557. (Franciscan Alliance, Inc. v. Azar, 414 F. Supp. 928, 944 (N.D. Tex. 2019)). Notably, the 2016 Final Rule’s broad interpretation of “on the basis of sex” has not been enforced since 2016, and the Franciscan Alliance case is pending appeal with the US Court of Appeals for the Fifth Circuit.

Elimination of Overbroad Provisions Related to Sex and Gender Identity

The 2020 Final Rule removes HHS nondiscrimination protections related to gender identity, gender expression, sex stereotyping and termination of pregnancy that were outlined in the 2016 Final Rule because Title VII and Title IX do not prohibit discrimination on such grounds. Instead, arguing that reliance on biological sex is medically imperative, the 2020 Final Rule declines to promulgate a formal definition of “on the basis of sex.” However, it articulates that it intends to enforce the definition in compliance with the plain meaning of the term under Title IX: as a binary genetic construct of male and female. Further, the 2020 Final Rule rejects the inclusion of “termination of pregnancy” with the definition of “sex” for failure to incorporate Danforth Amendment provisions and other languages that would allow for conscientious objections for religious or moral purposes. The 2020 Final Rule, like the 2016 Final Rule, also does not consider sexual orientation to be encapsulated by the word “sex.”

Clarification of Scope of Covered Entities

The 2016 Final Rule applied to all health programs, activities and providers that received federal financial assistance through HHS (e.g., Medicare, excluding Part B; Medicaid; CHIP), health programs and activities administered by HHS, and health programs and activities administered by entities established under Title I of the ACA. In the 2020 Final Rule, HHS clarifies that Section 1557 applies to any health program or activity that receives federal funds from HHS, any program or activity administered under Title I of the ACA, and health insurance marketplace participants. This means that Section 1557 will no longer apply to other HHS programs or HHS itself unless it relates to and deals with the ACA program. Specifically, HHS states that “this [2020 Final Rule] does not extend [HHS’s] enforcement authority to a covered entity that is not principally engaged in the business of providing healthcare to the extent of its operations that do not receive financial assistance from [HHS].”

Originally, the 2016 Final Rule applied broadly, requiring health insurers to comply with Section 1557. However, under the 2020 Final Rule, HHS clarifies that providing health insurance is not a “health program or activity” for purposes of Section 1557. Additionally, employer-sponsored group health plans that do not receive federal financial assistance and are not principally engaged in the business of providing healthcare are not considered covered entities subject to Section 1557. This same analysis applies to the Federal Employees Health Benefits Program, employer-sponsored plans not covered by ERISA, such as self-insured church plans or non-federal governmental plans, as well as excepted benefits. That is because, according to HHS, “a health insurer is principally engaged in the business of providing coverage for benefits consisting in [sic] healthcare, which is not the same as the business of providing healthcare.”

That said, both the 2016 Final Rule and the 2020 Final Rule recognize that states may balance for themselves the various sensitive considerations that apply to medical judgment and gender identity, and may choose to extend nondiscrimination protections to transgender men, transgender women, gender nonbinary individuals and other classes of their residents. Accordingly, in 24 states, Puerto Rico and the District of Columbia, where more protective anti-discrimination measures have been extended, private insurance and/or Medicaid may not discriminate against beneficiaries on the grounds of gender identity, gender expression or sex stereotypes, unless those laws have been preempted by ERISA. However, even with these protections, 25% of transgender people reported in 2017 that they experienced a problem with their insurance in the past year because of their gender identity, even for routine care unrelated to gender confirmation services. Further, 13% of respondents reported denial of services considered to be sex-specific, such as routine Pap smears for transgender men or prostate examinations for transgender women.

Elimination of Regulatory Burdens

The 2016 Final Rule mandated that healthcare organizations take reasonable steps to provide meaningful access to each individual with LEP who was eligible to be served or likely to be encountered by the organization in its healthcare programs and activities. Specifically, the 2016 Final Rule required such organizations to post a notice regarding their nondiscrimination policy in English along with taglines in the 15 non-English languages most commonly spoken in the state. Organizations were also required to include the notice in all significant publications directed at the public along with taglines in the aforementioned 15 other languages, instructing individuals that language assistance services were available. Subregulatory guidance related to the 2016 Final Rule considered “significant communications” to include the following materials:

• Outreach, education and marketing materials
• Patient handbooks
• Notices requiring an individual’s response
• Written notices such as those relating to benefits, coverage or individuals’ rights
• Consent and complaint forms
• Written notices of eligibility criteria, including coverage rights and denials and any losses or decreases in benefits and services
• Applications to participate in services or programs.

The 2020 Final Rule eliminates the requirement for covered entities to send notices and taglines with all significant communications. However, HHS will continue to require that covered entities provide beneficiaries with a written notice of nondiscrimination. HHS believes that removing the requirement regarding significant communications will ease the regulatory burden imposed on the healthcare system and the substantial unexpected expenses that healthcare organizations incurred. However, HHS clarifies that the repeal of the tagline requirement does not repeal all other notice and tagline requirements that exist under other statutes and rules.

The 2016 Final Rule further required covered entities with 15 or more employees to have a grievance procedure and a compliance coordinator with respect to Section 1557 violations. Entities with fewer than 15 employees were not required to implement a grievance procedure or appoint a compliance coordinator. The 2020 Final Rule repeals the requirement that entities maintain specific grievance procedures to address complaints of discrimination under Section 1557. To the extent that covered entities have otherwise appropriate grievance procedures, HHS states that such other procedures are sufficient for enforcement of Section 1557.

Finally, the 2020 Final Rule repeals the definition of “national origin” as a grounds for nondiscrimination. Instead, to determine compliance with the requirement to provide meaningful access for individuals with LEP, HHS will evaluate how the entity balances four key factors:

• The number or proportion of LEP individuals eligible to be served or likely to be encountered in the eligible service population
• The frequency with which LEP individuals come in contact with the entity’s health program, activity or service
• The nature and importance of the entity’s health program, activity or service
• The resources available to the entity and costs.

HHS emphasizes that it will prohibit any actions that use criteria or methods of administering healthcare or health insurance that have the effect of subjecting individuals to discrimination on the basis of race, color or national origin, or that have the effect of defeating or substantially impairing such access by individuals on account of their race, color or national origin.

Further, HHS will permit remote English-language interpreting services to be audio-based rather than requiring them to be video-based. HHS will still require a video if a video connection is necessary to provide meaningful access to LEP individuals (e.g., for LEP individuals who are also deaf or hard of hearing). HHS also will retain the prohibition on requiring an LEP individual to provide her own interpreter or rely on an accompanying adult to interpret or facilitate communication.

Conclusion

HHS believes that the 2020 Final Rule conforms Section 1557 to the plain reading of the text and the civil rights laws that undergirded the promulgation of Section 1557. HHS states that the 2020 Final Rule will continue to prohibit discrimination based on race, color, national origin, disability, age and sex, in accordance with the text of existing federal laws and HHS regulations.

Compliance with the 2020 Final Rule permits covered entities, including employers offering employee benefit health programs that were subject to the 2016 Final Rule, to roll back some of their notice obligations. Covered entities should review and identify desired changes to grievance procedures. Communications regarding health and welfare benefits subject to the 2016 Final Rule may be revised to remove the nondiscrimination statement and required taglines in non-English languages.

In the meantime, hospitals, health systems, health insurance companies, applicable group health plans and providers must provide healthcare and coverage for such care to all individuals regardless of race, color, national origin, sex, age or disability. If they wish to add categories of nondiscrimination, they are welcome to do so. The 2020 Final Rule is merely a floor; it is not a ceiling.