HHS Finalizes Long-Awaited Nondiscrimination Regulations

On Friday April 26^th, the Office of Civil Rights (“OCR”) at the U.S. Department of Health and Human Services (“HHS”) released regulations under Section 1557 of the Affordable Care Act[1] (“Section 1557”), the nondiscrimination provision of the Affordable Care Act (the “Final Rule”). Promulgated almost two years after OCR’s proposed rule for Section 1557, the Final Rule restores critical protections for LGBTQI+ and pregnant individuals and significantly expands the scope of activity that is subject to Section 1557’s nondiscrimination provisions, in both instances by removing limitations to the scope of Section 1557 that went into effect during the Trump Administration.

Further, in response to the President’s Executive Order on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence and comments received in response to OCR’s proposed rule for Section 1557, the Final Rule provides guidance about the applicability of Section 1557’s prohibitions on discrimination and bias resulting from the use of “patient care decisions support tools” as defined in the Final Rule, including, but not limited to artificial intelligence (“AI”) clinical decision-making tools. We will cover these provisions in more detail in a forthcoming post.

Most of the provisions in the Final Rule will become effective 60 days after publication in the Federal Register with compliance for certain provisions expected on a later timeframe based on a timetable included in the Final Rule.

Background on Section 1557

Enacted in 2010 as part of the Affordable Care Act, Section 1557 is aimed at ensuring that individuals are not excluded from participation in, denied the benefit of, or subjected to discrimination under any health program or activity that receives federal financial assistance.  It does so by incorporating and building on four long-standing and familiar federal civil rights laws: Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, the Age Discrimination Act of 1975, and Section 504 of the Rehabilitation Act of 1973.

The interpretation of Section 1557 has widely varied since its enactment in 2010 depending on the presiding administration. The Obama-era Department of Health and Human Services (“HHS”) promulgated the first set of regulations implementing Section 1557 in May 2016, but many of the protections that were initially included in those regulations were overturned by the Trump administration regulations in 2020, which, among other things, limited protections based on gender identity and for transgender individuals and limited the activities and entities covered by the requirements. With this new set of regulations, the Biden administration restores some of those Obama-era protections and takes the regulations a step further.

Expansion in Scope

Section 1557 applies to any health program or activity, any part of which is receiving federal financial assistance, involving credits, subsidies, or contracts of insurance.[2] What this actually means has significantly varied from administration to administration, particularly as it pertains to health insurance issuers, one type of entity that receives federal financial assistance.

Under the initial Section 1557 regulations promulgated in 2016, Section 1557 applied to all operations of any covered entity that received any federal financial assistance and was “principally engaged in health services, health insurance coverage, or other health coverage, even if only part of the health program or activity receives such assistance.”[3] However, the 2020 Trump regulations curtailed that language, by adding that health insurers are not considered to be principally engaged in the business of providing health care, in effect limiting the applicability of Section 1557 to insurers to their specific health programs and activities that receive federal financial assistance.[4] Whereas between 2016 and 2020 the Section 1557 regulations would generally cover all products a health insurance issuer offered, including commercial products, since 2020, health insurance issuers have only needed to comply with Section 1557 as it pertains to the products that received federal funding, such as Medicare, Medicaid, and exchange products.

With the Final Rule, the Biden Administration reinstates the applicability of Section 1557 to all health insurance issuer functions by removing the language stating that health insurers are not principally engaged in the business of providing health care and specifying that health insurance issuers, among other entities, would be considered to be principally engaged in provision of health care.[5]

OCR also expands the scope of entities subject to Section 1557 in two other key ways. First, it included a notice of interpretation in the preamble to the Final Rule that Medicare Part B payments would be considered a form of federal financial assistance that could cause an entity to be subject to Section 1557.[6] Second, OCR expands the scope of the regulations to apply to all health programs and activities of HHS itself.[7]

Protections for LGBTQIA+ and Pregnant Individuals

With the Final Rule, the Biden Administration also reinstates important protections under Section 1557 for LGBTQIA+ and pregnant individuals that have been subject to a litany of regulation changes and legal challenges since 2016.

One of the incorporated laws in Section 1557 (Title IX of the Education Amendments of 1972) prohibits sex discrimination, and, in the 2016 regulations, discrimination on the basis of gender identity and termination of pregnancy explicitly fell within this prohibition.[8] This rule was soon challenged in the Northern District of Texas in Franciscan Alliance v. Azar by religiously-affiliated healthcare providers and states, resulting in an October 2019 final decision that the regulations violated the Administrative Procedures Act and the Religious Freedom Restoration Act.[9] This decision vacated the inclusion of gender identity and termination of pregnancy in the definition of sex discrimination. Further, in June 2020, the Trump-era regulations eliminated the remainder of the provision detailing the potential grounds for sex discrimination.

However, also in 2020, the Supreme Court held, in a sex-based employment discrimination case brought under Title VII of the Civil Rights Act of 1964 (Bostock v. Clayton County, Georgia),[10] that discrimination based on sex encompasses sexual orientation and gender identity. While Bostock was not directly dispositive on the interpretation of Title IX, the Fourth Circuit and the Eleventh Circuit issued decisions saying that the same interpretation should be made of Title IX.[11] However, the Northern District of Texas, in Neese v. Becerra,[12] took the opposite approach in 2022, finding that Bostock did not impact interpretation of Title IX, and oral argument was heard by the Fifth Circuit on an appeal of that decision in January of this year.

The Biden Administration has not waited until 2024 to clarify their stance on this point. In May 2021, HHS announced that OCR would interpret and enforce Section 1557 and Title IX’s prohibitions on sex discrimination to include discrimination based on sexual orientation and gender identity. However, the Final Rule codifies that entities subject to Section 1557 cannot deny or limit services based on gender identity or sex assigned at birth, adopt any policy of treating individuals differently on the basis of sex, including to the extent it prevents an individual from engaging in a health program or activity consistent with the individual’s gender identity, or deny or limit services sought for gender transition or other gender-affirming care based on sex assigned at birth or gender identity.[13]

Further, the Final Rule adds back in language stating that sex discrimination includes discrimination relating to pregnancy or related conditions.[14] OCR notes in the preambles that the discrimination protections would extend to “termination of pregnancy,” but does not specify in the regulation the scope to which it believes Section 1557 applies to abortion.

There are exceptions to these expanded protections. Covered entities are allowed to deny or limit such services where there is a “legitimate, nondiscriminatory reason.” Further, the Final Rule addresses the religious freedom concerns raised in Franciscan Alliance, by creating a process for covered entities can seek a religious exemption by submitting a notification to the director of OCR.[15]

This law could have significant impacts in the current legal landscape, where 24 states have enacted laws or policies limiting youth access to gender-affirming care[16] and 25 states have a form of abortion ban.[17] The Final Rule could be found to preempt many of those laws. However, it remains to be seen if states will change their restrictions in response to these new regulations and what providers and health insurance issuers will do when faced with conflicting federal and state mandates. Further, the Biden Administration will need to defend the Final Rule in the legal challenges that are almost certain to occur.

Other Provisions

In addition to the transformative changes above, the Final Rule requires recipients of federal financial assistance to build up their Section 1557 compliance program with policies, staff training, and designation of a Section 1557 coordinator and to post notices about nondiscrimination and availability of language assistance services and auxiliary aids and services.[18] It also implements new requirements relating to the use of patient care decision support tools and AI in clinical care,[19] adds provisions relating to access for individuals with limited English proficiency and disabilities,[20] includes specific prohibitions on discrimination with respect to health insurance coverage (such as a prohibition on discriminatory benefit designs), [21] clarifies applicability of discrimination prohibitions in the delivery of services through telehealth,[22] and describes procedures for review of complaints and voluntary resolution.[23]