A Sigh of Relief For Employers Subject to Potential ACA Disparate Impact Discrimination Claims

In the aftermath of Title VI of the Civil Rights Act of 1964, litigants have pressed courts on what conduct meets the criteria for a disparate impact discrimination claim. Typically, a disparate impact discrimination claim contends that a facially neutral employment practice has a discriminatory effect on a protected class of people such as race, gender, or age.

In contrast to traditional discrimination claims, a disparate impact allegation does not need to show an intention to discriminate – creating significant liability for employers who have absolutely no intention of enacting a discriminatory practice but might, without their explicit knowledge, have a discriminatory effect.

When the Affordable Care Act (“ACA”) was passed in March 2010, Congress did not set a unique standard for individuals to pursue a discrimination claim. Instead, the first sentence of the non-discrimination provision of the ACA §1557 provides that “an individual shall not, on the ground prohibited under title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, the Age Discrimination Act of 1975, or section 504 of the Rehabilitation Act of 1973, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving Federal financial assistance.” This language, rather than creating a stand-alone standard for ACA discrimination, incorporates the discrimination prohibitions under four related statutes.

The specific meaning and scope of the ACA’s anti-discrimination provision §1557 was recently tested in a Sixth Circuit decision, Doe v. BlueCross BlueShield of Tennessee, Inc., 926 F.3d 235 (6th Cir. 2019). In Doe, the plaintiff alleged disparate discrimination under the ACA against the insurance company BlueCross BlueShield for requiring insurance beneficiaries to obtain specialty medicines, including high-cost medicines for chronic and serious diseases from a specialty pharmacy network or through the mail. Importantly, under the BlueCross contract at issue, if an insured desired to get specialty medicine at the local pharmacy and not in compliance with the contractually enumerated delivery options of the specialty pharmacy network or mail, BlueCross would not cover the cost of the medication at all.

The Doe plaintiff, an HIV-positive BlueCross insured, alleged that because he could only fill the HIV prescription through mail order or by picking it up at certain specialty brick-and-mortar pharmacies, the contact had a disparate discriminatory impact on him for two reasons. He argued that: (i) HIV-positive insureds could no longer interact with their regular pharmacists, who knew their medical history and who could spot the effects of harmful drug interactions and (ii) forcing insureds to receive medication in the mail compromised their privacy and risked heat damage to the medicine.

In making these allegations, the plaintiff tested the ACA’s unique discriminatory regulatory scheme because Doe contended he could choose which of the four incorporated disparate impact standards in §1557 to apply. The Court expressly rejected his claim. Even though it found that a private right of action existed under §1557, it emphasized that in bringing that §1557 cause of action, “picking your own adventure…is not what that sentence says.” And, “the Affordable Care Act prohibits discrimination based on several grounds. But it does not change the nature of those grounds any more than it adds a new form of discrimination, say discrimination based on political perspective, to the law. By referring to four statutes, Congress incorporated the legal standards that define discrimination under each one.”

The Sixth Circuit’s decision will have significant implications for future plaintiffs alleging disparate impact claims under the ACA. First, the Sixth Circuit effectively rejected the position of the U.S. Department of Health and Human Services (“HHS”) – which during the notice and comment period for the ACA – stated that it “interprets §1557 as authorizing a private right of action for claims of disparate impact discrimination on the basis of any of the criteria enumerated in the legislation.” The Court held that the result of this position ran counter to Congressional intent in enacting the ACA.

Interestingly, the Sixth Circuit’s ruling, aligns with HHS’ new position on §1557, articulated in proposed rule changes on May 24, 2019, which would eliminate the rights of private individuals to challenge alleged violations of §1557 in court and to obtain money damages, as well as requirements for covered entities to provide non-discrimination notices and grievance procedures and provisions preventing health insurers from varying benefits in ways that discriminate against certain groups, such as people with HIV or members of the LGBTQ community. While HHS is incapable of changing the law itself – only Congress is capable of doing that – it would change HHS’ implementing regulations of §1557.

Second, and most importantly, the Sixth Circuit concluded that only the Rehabilitation Act anti-discrimination provision could apply to Doe’s claim and that, there is no disparate impact claim available under §504 of the Rehabilitation Act. This conclusion went well beyond the Supreme Court’s holding in Alexander v. Choate, 469 U.S. 287, 299, 105 S.Ct. 712, 719, 83 L.Ed.2d 661 (1985) that only cautioned against the “boundless notion” that all disparate-impact showings establish a prima facie case under §504 of the Rehabilitation Act, and runs counter to decisions in the Seventh Circuit and Tenth Circuit which reached the opposite conclusion. See McWright v. Alexander, 982 F.2d 222, 229 (7th Cir. 1992); Robinson v. Kansas, 295 F.3d 1183, 1187 (10th Cir. 2002).

The Court insisted that, even if they adopted the plaintiff’s view, and the plaintiff could select which statute and standard to apply under §1557, the result would not change because, according to the Sixth Circuit opinion, courts have made clear that Title IX, Title VI, and the Age Discrimination Act do not prohibit disparate impact discrimination.

Certainly, the Doe decision will have significant impacts. Naturally, a Circuit split between the Sixth, Seventh and Tenth Circuits could lead to Supreme Court clarification on the availability of a Rehabilitation Act disparate impact discrimination claim particularly, because Doe will not just affect litigants seeking redress under the Rehabilitation Act, but under the ACA as well.

Furthermore, foreclosing disparate impact discrimination claims under the Rehabilitation Act would preclude scores of potential discrimination suits brought by disabled persons from judicial review creating a new scheme of immunity for employers, an insurance company like BlueCross in Doe, and other potential defendants. Finally, the Court’s decision effectively limits the availability of ACA §1557 disparate impact discrimination claims in the Sixth Circuit and forces future litigants to narrow and isolate their claims to one of the three “adventures” that the Court coined.

Doe, for the time being, creates a heavy sigh of relief for potential ACA disparate impact discrimination defendants. It will be interesting to see if other courts follow Doe’s precedent and for that matter – the May 2019 HHS regulations – which are aligned with it to comprehensively scale back the availability of ACA disparate impact discrimination claims on a wholesale basis.