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HHS Again Proposes Nondiscrimination Regulations under Section 1557 of the Affordable Care Act

by | Aug 16, 2022 |

By Dannae Delano, Roberta Casper Watson and Barry Salkin

Section 1557 of the Affordable Care Act (“ACA”) prohibits discrimination on the basis of race, color, national origin, sex, age or disability in a health program or activity receiving federal financial assistance, including credits, subsidies or grants.  The grounds of discrimination under Section 1557 and the procedures for enforcing Section 1557 are set forth in Title VI of the Civil Rights Act of 1964; Title IX of the Educational Assistance Act of 1972; the Age Discrimination Act of 1975; and Section 504 of the Rehabilitation Act of 1974.

Unlike many of the provisions of the ACA, Section 1557 became enforceable upon enactment of the ACA in 2010. However, enforcement of Section 1557 by the Department of Health and Human Services(“HHS”) has varied by administration.  The Obama administration issued regulations in 2016that were largely repealed by the Trump Administration in 2020 and, for the most part, are now fully restored under these 2022 proposed regulations. A significant portion of the preamble to the proposed regulation is devoted to explaining why, in the current iteration of HHS, both earlier sets of regulations were the subject of numerous judicial challenges, and we anticipate the same to be true when these regulations are finalized. While gender identity and sexual orientation protections are a primary focus of the proposed regulations, along with protections for disabled individuals and individuals with limited English proficiency (“LEP”), a number of other issues are addressed, including several for which HHS has requested comments.

The proposed regulations would apply to every health program or activity, any part of which receives federal financial assistance from HHS. “Federal financial assistance” is broadly defined to include any financial assistance that HHS plays a role in providing, including the advance payment of premium tax credits and cost sharing reductions under the Internal Revenue Code.  “Health program or activity” is also broadly defined, to include all health insurance programs and activities, regardless of whether they are subject to ACA market reforms.  Thus, excepted benefits and short-term limited duration benefits are still covered under Section 1557.  The proposed regulations include a non-exclusive list of entities that are subject to the proposed rules.  The list does not include group health plans because there are group health plans that do not receive federal financial assistance.  In addition, it is clear that Section 1557 does not apply to an employer’s employment practices, including its promise of employee health benefits.   Entities that are subject to the Section 1557 nondiscrimination requirements would be required to file a certificate of assurance with HHS.

While covered entities generally do not include self-funded group health plans, they do include third party administrators (“TPAs”) that administer self-funded group health plans and insurers.  Therefore, the rules are relevant to all group health plan sponsors.

The proposed regulations contain fairly onerous compliance requirements for covered entities (think HIPAA compliance requirements).  They require covered entities with 15 or more employees to designate one such employee as a Section 1557 coordinator, with some delegation of responsibility permitted, and contain a detailed listing of the responsibilities of the Section 1557 coordinator.  Covered entities are required to develop and implement written policies and procedures designed to facilitate compliance with Section 1557.   Each covered entity, in its health program and activities, would be required to adopt and implement a nondiscriminatory policy; grievance procedures (if the entity has 15 employees or more); language access procedures; auxiliary aids and service procedures; and procedures for reasonable modifications for individuals with disabilities, without regard to whether a disabled individual requested the modification.  HHS indicated that it intends to issue sample documents reflecting these procedures, which documents could also be used by entities with fewer than 15 employees. Affected individuals would not be obligated to use the grievance procedures and could instead submit a claim to the Office of Civil Rights (“OCR”) division of HHS.

The proposed regulations would also require the development and implementation of written effective communication procedures to ensure that communications in a covered entity’s health programs and activities with individuals with disabilities are as effective as communications with individuals without disabilities.

After Section 1557 policies and procedures have been adopted, relevant staff must be trained in them, although specific training methods are not specified. Training should occur as soon as practicable after the policies and procedures are adopted.  A covered group health plan must also provide a notice of nondiscrimination relating to its health programs and activities to participants, beneficiaries, enrollees, applicants for its programs and activities, and the general public.  The notice, which must be provided annually and on request, must be placed on the employer sponsor’s website and in prominent physical locations.

The public must also be notified of language assistance services.  The language assistance notice must be provided in English and at least 15 of the most common languages spoken by LEP individuals of the relevant state or states, and in alternative formats for individuals with disabilities.  OCR will provide a Notice of Availability, and a list of the 15 most commonly spoken non-English languages.  The language assistance notice also must be provided annually and on request and must be posted on the employer sponsor’s website and in prominent physical locations.  The proposed regulations provide a list of the specific employee communications, which must include a notice of availability.  The list includes an explanation of benefits, even if the item is fully covered at no cost to the affected individual.  To ease the administrative burden associated with providing the Notice of Availability, affected LEP individuals are provided with an opt-out option.

The proposed regulations provide that Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability, whether actual or perceived.  The proposed regulations also take the position that, in addition to the grounds specified in Title VI of the Civil Rights Act of 1964, Title IX of the Educational Assistance Act of 1972, the Age Discrimination Act and Section 504 of the Rehabilitation Act of 1974, Section 1557 also provides an independent ground for assessing liability.  With respect to sex discrimination, it includes six different types of activities: sex stereotypes; sex characteristics; pregnancy or related conditions; sexual orientation; gender identity; and intersex traits.

One of the pregnancy conditions with respect to which HHS solicited comments is pregnancy termination.  HHS had at least three concerns in this regard.  First, Title IX requires abortion neutrality, and there is an issue of whether that abortion neutrality must be incorporated into the Section 1557 regulations.  HHS did not believe this was necessary but acknowledged a District Court case holding to the contrary.  Second, a series of Congressional actions limits the permissible activities of HHS with respect to abortions.  Third, the reversal by the Supreme Court of Roe v. Wade could influence the treatment of pregnancy termination under Section 1557.

The proposed regulations listed specific actions required to be nondiscriminatory:

  • Covered entities must take reasonable steps to provide meaningful access to each LEP individual eligible to be served or likely to be affected by the covered entity’s health programs and activities. The language assistance services must be provided free of charge, be accurate and timely, and protect the privacy and decision making of the LEP individual.
  • Covered entities must provide effective communications for individuals with disabilities. Any communications with an individual with a disability and a companion with disability must be as effective as communications with individuals who do not have disabilities.
  • Covered entities are required to provide appropriate auxiliary aids and services to individuals with impaired sensory, manual, or speaking skills, where necessary, to afford these individuals an opportunity to benefit from the services in question. Health programs provided through information and communication technology must be made accessible to individuals with disabilities unless doing so would result in an undue financial or administrative burden or require a fundamental alteration in the nature of the health program or activities.
  • Covered entities are prohibited from denying, cancelling, limiting, or refusing to issue or renew health insurance coverage or other health-related coverage, or denying or limiting coverage of a claim, or imposing additional cost-sharing or other limitations in coverage on the basis of race, color, national origin, sex, age or disability.
  • Covered entities are prohibited from marketing or establishing a benefit design that discriminates on the basis of race, color, national origin, age, sex or disability. Because the determination is fact-specific, HHS did not identify any per se examples of discriminatory benefit design.  HHS also indicated that insurers must develop networks in a way that does not discriminate on the basis of race, color, national origin, sex, age or disability.  With respect to these structures, HHS was concerned about potentially disparate effects of facially neutral structures.
  • It is prohibited discrimination for a covered entity to deny or limit coverage under the plan, deny or limit coverage of a claim, or impose additional cost-sharing or other limitations or restrictions on coverage to an individual based upon the individual’s sex at birth, gender identity, or gender otherwise recorded.
  • Covered entities are prohibited from having or implementing a categorical coverage exclusion or limitation for all health services related to gender transition or other gender affirming care.
  • Covered entities are prohibited from having or implementing a plan design that does not provide or administer health insurance coverage or other health-related coverage in the most integrated setting appropriate to the needs of qualified individuals with disabilities. The concern of HHS in this regard is that the lack of integration results in the unjustified institutionalization or segregation of individuals with disabilities.
  • Covered entities are prohibited from imposing discriminatory limits on coverage for specific services related to gender transition or other gender-affirming care, which would generally be the case if such limit was not applied when the same services are not related to gender transition.

The nondiscrimination rules under Section 1557 have some caveats.  Section 1557 does not:

  • require a covered entity to cover any particular procedure or treatment;
  • prohibit the use of medical management techniques in a neutral, nondiscriminatory manner; or
  • prohibit a covered entity from inquiring about an individual’s relevant medical history and physical traits when necessary to determine the medical necessity of a health service for that individual.

However, covered entities should proceed cautiously in relying on these caveats.

The proposed regulations reverse HHS’s longstanding position that Medicare Part B does not constitute federal financial assistance.  Therefore, the group of entities affected by the proposed regulations has been expanded considerably.

The proposed regulations make clear that the use of clinical algorithms cannot be a basis for discrimination, and that covered entities may need to make reasonable accommodations in the use of clinical algorithms unless doing so would cause a fundamental alteration in their health program or activity.  A covered entity would not be liable for the algorithms themselves, because it did not develop them, but it would be responsible for discriminatory decisions based on its use of the clinical algorithms.  HHS does not dispute the value of clinical algorithms that were frequently used during the pandemic, but expressed a concern that over-reliance on these algorithms could result in discrimination in practice.

While telehealth was in existence in 2016, the first round of proposed regulations did not address it.  However, its widespread use during the pandemic resulted in HHS addressing it in this third round of proposed regulations.  A covered entity in delivering telehealth services cannot discriminate on the basis of race, color, national origin, sex, age, or disability.  Issues in connection with telehealth services include ensuring that the platforms are available to individuals who are deaf or blind, or have cognitive disabilities, as well as LEP individuals.

With respect to TPAs, the threshold question is whether they are subject to Section 1557, especially if the TPA is a separate legal entity from the health insurance issuer with which it is associated.  Assuming that a TPA is covered by Section 1557, since a group health plan subject to ERISA must be administered in accordance with its terms, HHS would not pursue an action against a TPA based on compliance with a discriminatory plan term.  Rather, if an employer is responsible for a discriminatory plan provision, HHS would refer the matter to EEOC.  However, a TPA may be liable under Section 1557 if it is responsible for the underlying discriminatory plan design adopted by a group health plan.

From an enforcement perspective, the proposed regulations provide that if a covered entity engages in discriminatory conduct with respect to a health program or activity, it must take voluntary action to correct it.  Failure to take such action would subject a covered entity to administrative actions by HHS.  Also importantly, HHS now takes the position that private causes of action are available to enforce Section 1557.

The proposed regulations also contain, for the first time, procedures regarding exemptions and modifications of the proposed regulations based on the application of federal conscience and religious freedom laws, and various acts limiting actions that HHS can take with respect to abortion.

When these regulations are issued in final form and published in the Federal Register, assuming no changes are made to this timetable, they will generally be effective the first day of the first plan year beginning in the year immediately following the effective date of the final rule in the Federal Register.  However, the general purpose provision of the proposed regulations will become effective sixty (60) days after publication in the Federal Register.  Of course, they are likely to be challenged, so in practice we will have to await any ensuing litigation to determine their ultimate fate.

Employer plan sponsors should be aware that these regulations are on the horizon, but due to their somewhat controversial and politically charged content, are very likely to be challenged through litigation.  However, on President Biden’s inauguration day, the administration made it clear, through Executive Order 13985, that these regulations would be an important part of its  domestic policy and has publicly reinforced that agenda since.