OVERVIEW OF SECTION 1557 AND THE PROPOSED RULE

Section 1557 of the ACA, codified at 42 U.S.C. 18116, is the nondiscrimination provision of the ACA, which prohibits discrimination on the basis of race, color, national origin, sex, age or disability in specified health programs and activities, including those that receive federal financial assistance. Section 1557 has been in effect since 2010 and the Office of Civil Rights (OCR) has been enforcing and investigating complaints filed since that time. However, the interpretation of the statute and scope of the nondiscrimination protections has been in flux for many years:

• In May 2016, the Obama administration issued a final rule first implementing the nondiscrimination provision, which included protections against discrimination “on the basis of sex,” including sex stereotyping, gender expression, gender identity and termination of pregnancy. The rule included requirements to provide certain language assistance to LEP individuals and auxiliary aids and services for individuals with disabilities.
• In June 2020, the Trump administration issued a final rule eliminating many of the 2016 protections, including those related to sex stereotyping, gender expression, gender identity and termination of pregnancy, removing regulatory burdens aimed at notifying individuals with LEP of their rights and scaling back the covered entities to which Section 1557 would apply – in particular, eliminating health insurers and employer-sponsored group health plans.
• In August 2022, the Biden administration issued an NPRM aimed at restoring and strengthening civil rights protections under federally funded health programs. The NPRM built on the administration’s executive order on advancing racial equity and support for underserved communities, as well as HHS’s Equity Action Plan.

Comments on the NPRM were due in October 2022. The agency ultimately received more than 85,000 comment submissions on its proposals. This report summarizes our top 10 takeaways.

1. Section 1557 applies to nearly the entire healthcare industry.

Except as otherwise provided in regulation, the final rule applies to:

• Health programs or activities that receive HHS funding (directly or indirectly);
• Health programs or activities administered by HHS (e.g., Medicare Part D program); and
• Health insurance state and federally facilitated exchanges.

The final rule applies to all health insurance issuers that receive federal financial assistance, including Medicare Parts A, C and D payments, as well as state Medicaid agencies, Children’s Health Insurance Programs and Basic Health Programs.

Federal financial assistance includes any grant, loan, credit, subsidy, contract (other than a procurement contract) or other arrangement by which the federal government provides assistance (e.g., advance payments of premium tax credits, cost-sharing reduction payments or subsidies).

Depending on a fact-based analysis, the rule may apply to hospitals, health clinics, physicians’ practices, home healthcare agencies and even subcontractors. For example, if an exchange or recipient of federal financial assistance, such as a health issuer, contracts with an agent or broker to perform the responsibilities of the covered entity’s health program and uses federal financial assistance to pay the agent or broker, the agent or broker would be subject to Section 1557. Similarly, if a pharmacy benefit manager (PBM) receives federal financial assistance – even indirectly – from HHS, the PBM would be subject to the rule.

As discussed in more detail here, the final rule does not apply to any employer or other plan sponsor of a group health plan, including a board of trustees or association. The rule also includes a religious freedom and conscience exemption, whereby recipients may seek written assurance of exemption from application of a particular provision (or provisions) from the OCR. Application of the final rule is not required when such religious freedom and conscience exemptions apply.

2. Medicare Part B is now considered federal financial assistance.

For nearly 40 years, HHS took the position that Medicare Part B funding did not meet the definition of “federal financial assistance” for purposes of Section 1557, as well as other federal statutes. In the 2022 NPRM, HHS proposed to change its interpretation to provide that Medicare Part B payments constitute federal financial assistance when received by providers and suppliers.

In the final rule, HHS finalizes this interpretation but amends the applicability date to allow newly covered recipients additional time to comply. HHS describes that some recipients do not currently receive any federal financial assistance other than Part B funds; therefore, these recipients will be newly required to comply with Section 1557 and other federal civil rights laws. While HHS’s revised interpretation is effective upon publication of the final rule, HHS will permit a one-year delayed applicability date. Entities whose federal program participation has been limited to Part B must comply with Section 1557 and other applicable federal laws no later than May 6, 2025.

Perhaps more importantly, this interpretation of Medicare Part B as federal financial assistance was well-reasoned by OCR and will apply to all civil rights statutes enforced by HHS. Given the wide-sweeping effect of HHS’s declaration in the final rule, this is an area ripe for potential legal challenges.

3. The final rule expands protections for LGBTQI+ individuals but does not compel covered entities to perform gender-affirming procedures.

Under the final rule, covered entities are expected to provide equal access to programs and activities without discrimination on the basis of sex. OCR reaffirms its position from the 2022 proposed rule that discrimination on the basis of sex includes sexual orientation, gender identity and sex characteristics, including intersex traits, consistent with the US Supreme Court ruling in Bostock v. Clayton County.

When evaluating whether a covered entity violated Section 1557 by denying or limiting access to gender-affirming care, OCR will continue to evaluate whether the covered entity provides the same service for other purposes. To that end, OCR clarifies that not all circumstances of sex-separated programs constitute unlawful discrimination. A covered entity is permitted to operate a program or facility differently based on sex as long as no person is subjected to more than de minimis harm based on sex. For example, a covered entity that refuses to admit a transgender person or refuses to place them in a facility inconsistent with their gender identity would violate Section 1557. Conversely, inquiring about a patient’s sex-related medical history, health status or physical traits are likely not discriminatory unless the questions or distinctions are not relevant to the patient’s condition or the patient has answered the questions sufficiently and further probing becomes harassing. And if an insurance plan places restrictions on gender-affirming surgery coverage that are no more stringent than restrictions for any other type of surgical care, those restrictions are unlikely to violate Section 1557.

In a likely attempt to circumvent state challenges, OCR states that to the extent states have laws prohibiting gender-affirming procedures, Section 1557 is deemed to preempt such laws. However, OCR will consider the specific facts of each case and any other relevant factors to determine whether a recipient has a legitimate, nondiscriminatory reason for taking actions in conflict with Section 1557, including a good-faith belief that state or local law obligates refraining from taking certain actions. In those circumstances the covered entity should demonstrate a willingness to refer or provide accurate information regarding gender-affirming care or engage in good-faith efforts to ensure medically necessary care is provided to patients.

4. The final rule reaffirms its protections of pregnant individuals but does not compel performance of abortions.

The final rule expressly states that discrimination on the basis of sex includes pregnancy or related conditions, including labor and delivery, the post-partum period and one’s pregnancy-related decisions past, present or future. However, throughout the final rule OCR repeats that the ACA should not be construed to have any effect on federal laws regarding (i) conscience protection; (ii) willingness or refusal to provide abortion; and (iii) discrimination on the basis of the willingness or refusal to provide, pay for, cover or refer for abortion or to provide or participate in training to provide abortion.

OCR observes that Section 1557 should not be read to override any state’s laws prohibiting abortion or to be noncompliant with the US Supreme Court’s determination in Dobbs v. Jackson Women’s Health Organization that there is no constitutional right to abortion. Specifically, under Section 1557, a covered entity’s decision not to provide abortions is not considered to be sex discrimination unless that decision is applied differently based on protected classifications. For example, if a covered entity generally provides abortion services but denies those services to a patient due to their race or disability, that may be considered a violation of Section 1557. But denying abortion services due to religious or conscience objections, professional or business judgments, or any other nondiscriminatory reasons would not be discrimination on the basis of pregnancy or related conditions.

5. Covered entities must ensure they are communicating with patients and their companions effectively.

HHS recognizes that effective communication is a key component to ensure that individuals with LEP and individuals with disabilities have meaningful access to covered entities’ programs and activities. Accordingly, the final rule establishes that covered entities are obligated to take reasonable steps to identify those individuals who are eligible to be served or likely to be directly affected by the covered entity’s health programs and activities and to ensure effective communication with individuals with LEP and individuals with disabilities.

In the context of individuals with LEP and companions with LEP, the final rule establishes that covered entities must provide “meaningful access.” The final rule declines to define “meaningful access” but will consider whether to issue sub-regulatory guidance to supplement the existing HHS LEP Guidance and the Language Access Annual Progress Report. This gives covered entities flexibility to identify the language assistance services that are appropriate for the individual and the specific facts present during the circumstances.

One mandatory component of “meaningful access” is obligating covered entities to provide language assistance services that are free of charge, accurate and timely, and protective of the privacy of the individual with LEP. To meet this obligation, a covered entity must use qualified interpreters and translators, and language assistance should be provided at a time and place that avoids imposing an undue burden or delay or that results in an effective denial of services. Covered entities may use bilingual/multilingual staff or another adult not accompanying an adult to serve as an interpreter during emergency situations. If an individual with LEP requests that an adult who is accompanying them serve as an interpreter, the covered entity should ensure that the individual with LEP makes the request without the accompanying adult present and with the services of a qualified interpreter, except during urgent and extraordinary situations. OCR recognizes that circumstances may arise in which exigency necessitates the use of machine-translation modalities in order to ensure an individual with LEP can access healthcare services. In such circumstances, OCR requires that the machine translation is subsequently checked by a qualified human translator as soon as practicable or that the patient is warned in advance that the translation may contain errors.

In the context of individuals with disabilities, the final rule establishes that communication with individuals with disabilities and companions with disabilities must be as effective as communication without disabilities. When appropriate, individuals with disabilities must be provided with auxiliary aids and services at no charge, in accessible formats, in a timely manner, and in such a way that protects the privacy and independence of the individual with a disability.

When a covered entity provides health programs and activities through information and communication technology (ICT), mobile applications, telemedicine modalities and web-based modules, OCR observes that Section 1557 still applies. Regardless of whether the covered entity develops the materials and platforms internally or obtains the technology through purchase or contract with a third-party vendor, any health programs and activities must be accessible to individuals with LEP individuals with disabilities. This is addressed in greater detail in the disability nondiscrimination rules promulgated by HHS and the Department of Justice.

6. Covered entities must protect against discrimination arising from AI and decision support tools.

In the final rule, OCR establishes a general prohibition on covered entities’ discrimination on the basis of race, color, national origin, sex, age or disability in healthcare programs or activities through the use of patient care decision support tools. OCR defines “patient care decision support tool” to mean any automated or non-automated tool, mechanism, method, technology or combination thereof used by a covered entity to support clinical decision-making in its health programs or activities. The final rule also creates an ongoing duty of covered entities to make reasonable efforts to identify uses of patient care decision support tools that employ input variables or factors that measure race, color, national origin, sex, age or disability. For each qualifying patient care decision support tool that is identified in the above inventory, covered entities must make reasonable efforts to mitigate the risk of discrimination resulting from the tool’s use.

Recognizing the need to give covered entities a reasonable time period to come into compliance with these new AI governance and risk management requirements, OCR is finalizing its requirements for patient care decision support tools with a delayed applicability date of no later than 300 days after the final rule’s effective date (likely in early March 2025).

Following the applicability date for the patient care decision support tool requirements, OCR will assess each allegation that a covered entity is violating such requirements on a case-by-case basis. In the final rule, OCR recognizes the challenges that covered entities may face when attempting to identify the discriminatory potential of every use of each patient care decision support tool. When analyzing whether a covered entity is in compliance with the requirement to use reasonable efforts to identify in-scope uses of patient care decision support tools, OCR states it may consider, among other factors:

• The covered entity’s size and resources (e.g., a large hospital with an IT department and a health equity officer would likely be expected to make greater efforts to identify tools than a smaller provider without such resources);
• Whether the covered entity used the tool in the manner or under the conditions intended by the developer and approved by regulators, if applicable, or whether the covered entity has adapted or customized the tool;
• Whether the covered entity received product information from the developer of the tool regarding the potential for discrimination or identified that the tool’s input variables include race, color, national origin, sex, age or disability; and
• Whether the covered entity has a methodology or process in place for evaluating the patient care decision support tools it adopts or uses, which may include seeking information from the developer, reviewing relevant medical journals and literature, obtaining information from membership in relevant medical associations, or analyzing comments or complaints received about patient care decision support tools.

The scope of patient care decision support tools as defined by OCR overlaps with the definitions for predictive decision support interventions and evidence-based decision support interventions in the HHS Office of the National Coordinator for Health Information Technology’s (ONC) recently published “Health Data, Technology, and Interoperability: Certification Program Updates, Algorithm Transparency, and Information Sharing” rule. Specifically, the final rule’s definition for “patient care decision support tool” includes non-automated and evidence-based tools that rely on rules, assumptions, constraints or thresholds (evidence-based decision support interventions identified in ONC’s regulations), and health AI tools that support decision-making based on algorithms or models that derive relationships from training data and produce output that results in prediction, classification, recommendation, evaluation or analysis (predictive decision support interventions in ONC’s regulations). While ONC’s regulations apply to and include requirements for health information technology developers, OCR’s final rule applies to and includes requirements for covered entity users of patient care decision support tools. You can read more about the ONC’s health AI regulatory framework in our Special Report.

The final rule does not apply to tools used to support decision-making unrelated to clinical decision-making affecting patient care or that are outside of a covered entity’s health programs or activities. OCR provides some examples of tools that are likely out of scope, including automated or non-automated tools that covered entities use for:

• Administrative and billing-related activities;
• Automated medical coding;
• Fraud, waste and abuse detection;
• Patient scheduling;
• Facilities management;
• Inventory and materials management;
• Supply chain management;
• Financial market investment management; or
• Employment and staffing-related activities.

In the final rule, OCR also seeks comment on whether it should engage in additional rulemaking to expand the scope of its prohibition on algorithmic discrimination, including comments on other decision support tools that are being used in health programs and activities that might not directly impact patient care and clinical decision-making but may nevertheless result in unlawful discrimination.

This component of the final rule creates new obligations for covered entities to inventory their use of patient care decision support tools and mitigate risks of discrimination or bias that might arise from use of these tools in clinical settings. The final rule’s requirements are consistent with the administration’s ongoing focus on preventing bias, unfairness and discrimination in connection with the use of AI and will necessitate a comprehensive approach to AI governance by covered entities.

7.Covered entities do not need to affirmatively request an exemption based on religious freedom or rights of conscience when denying services.

As we summarized earlier this year, HHS is taking concerted efforts to balance, on the one hand, patients’ rights to access healthcare with, on the other hand, the religious beliefs and moral convictions of providers, covered entities and benefits plan sponsors. Section 1557’s exemptions are consistent with this effort. Throughout the final rule, OCR repeats that the ACA should not be construed to have any effect on federal laws regarding (i) conscience protection, (ii) willingness or refusal to provide abortion, and (iii) discrimination on the basis of the willingness or refusal to provide, pay for, cover or refer for abortion or to provide or participate in training to provide abortion.

To further emphasize its intention, the final rule sets forth an exemption process that allows for covered entities to either rely on the protections in religious freedom and conscience laws when denying services to patients based on their beliefs, or covered entities may seek assurance from OCR that they are entitled to an exemption.

To request an exemption, a covered entity should send notification to OCR that includes (i) the type of care that the covered entity objects to providing and specifying whether the objection is to the overall service or to this particular service, (ii) an explanation of the legal basis supporting its objection and (iii) the factual basis supporting the claim. OCR provides an example of a Catholic hospital objecting to sterilization procedures that are prohibited by their religious tenets claiming a right to objection under religious freedom laws and providing evidence that it never provides sterilizations in violation of that tenet for any patient, irrespective of sex. If a covered entity is seeking an exemption after OCR has initiated an investigation, the covered entity would provide the same information, but the basis for its claim should discuss the specific context of the investigation at hand.

When OCR considers an exemption request, it will have 30 days to acknowledge receipt of the request, and the covered entity may rely on a temporary exemption that will remain in place while OCR evaluates whether the government has a compelling interest in denying the exemption. The final rule promises that, regardless of whether an exemption is sought, when a covered entity acts based on a good-faith reliance that it is exempt from providing a particular service due to the application of relevant religious freedom and conscience protections, even if it is determined that the legal requirements for an exemption have not been met, OCR will only seek forward-looking relief, which a covered entity may appeal and the temporary exemption would remain effective until the administrative appeal process is completed. Covered entities granted an exemption are encouraged to make the exemption publicly known, but they will not be obligated to do so, and OCR also does not intend to make exemptions public either, except through the FOIA process. By this mechanism, OCR believes that Section 1557 does not impose an undue burden on religious entities.

8. The notice and tagline requirements are back but significantly scaled back.

Covered entities must provide a notice of nondiscrimination annually and upon request to participants, beneficiaries, enrollees and applicants of their health programs and activities, and the notice must also be publicly available. The public version must be in a sans serif font, no smaller than 20-point font, and posted in physical location that is accessible to individuals who may have low vision.

Covered entities must also provide participants, beneficiaries, enrollees, applicants and the public with a notice of availability, translated into the 15 most prevalent non-English languages in the applicable state or states, regarding the availability of free language assistance services and auxiliary aids and services. The standards for the public-facing notice of availability are the same as the notice of nondiscrimination, but the notice of availability must also accompany the following electronic and written communications:

• Notice of nondiscrimination;
• Notice of privacy practices required by HIPAA;
• Application and intake forms;
• Notices of denial or termination of eligibility, benefits or services, including an Explanation of Benefits, and notices of appeal and grievance rights;
• Communications related to an individual’s rights, eligibility, benefits or services that require or request a response from a participant, beneficiary, enrollee or applicant;
• Communication related to a public health emergency;
• Consent forms and instructions related to medical procedures or operations, medical powers of attorney, or living wills;
• Discharge papers;
• Communication related to the cost and payment of care, including medical billing and collections materials and good-faith estimates;
• Complaint forms; and
• Patient and member handbooks.

Covered entities may provide individuals with the option to opt out of the receipt of the notice of availability on an annual basis.

Sample notices of nondiscrimination and notices of availability, including translations, are available here.

9. OCR will assist covered entities with the myriad policies and procedures that must be prepared and updated.

The final rule requires a covered entity to establish or update several policies and procedures pertaining to how it will comply with Section 1557. OCR has made templates available and expects covered entities to tailor these templates to their size, complexity, and the types of health programs or activities that they provide. Policies and procedures must have an effective date printed on them and should be dynamic insofar as a covered entity changes its operations and capabilities or the law evolves. OCR expects that relevant personnel are trained in how to comply with such policies and procedures. Specific policies and procedures include:

• A nondiscrimination policy consistent with the version required since 2016;
• A grievance procedure (for covered entities with 15 or more employees), which must be accessible to individuals with LEP and individuals with disabilities and requires records related to grievances filed to be retained for at least three years after the grievance is resolved;
• A language-access procedure, which will require a covered entity to engage in some form of analysis to identify the language access needs in the service area (this procedure must include instructions on how to access any electronic translated materials and how employees can obtain the services of qualified interpreters, translators and multilingual/bilingual staff);
• A communication procedure to address effective communication, accessibility, and availability of auxiliary aids and services for individuals with disabilities, including individuals with disabilities who also have LEP; and
• A reasonable-modification procedure describing how an individual with a disability may request a reasonable modification and how the covered entity will process and respond to such requests to avoid discrimination on the basis of disability.

A covered entity that employs 15 or more persons must also designate at least one employee as a “Section 1557 coordinator” to oversee the covered entity’s compliance with the rule. The responsibilities of the Section 1557 coordinator include, among others, processing grievances, upholding recordkeeping requirements and implementing language-access procedures. This individual does not need to be identified by name, but the designation should include sufficient information, such as phone number, email address and mailing address, that allows an individual to reach the coordinator easily.

10. Rollout will be both immediate and staggered.

The final rule will be effective 60 days after publication in the Federal Register. However, certain provisions will be phased in on longer timeframes, as outlined below.

Source: Final Rule, Summary of Regulatory Changes.