HHS Strips Gender Identity, Sex Stereotyping, Language Access Protections From ACA Anti-Discrimination Rule

On June 12, 2020, the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) issued a new final rule to dramatically revise the agency’s prior interpretation of Section 1557 of the Affordable Care Act (ACA), the law’s primary anti-discrimination provision. The final rule rewrites an Obama-era regulation that was issued in 2016 and has been the source of ongoing litigation; the new rule removes protections against discrimination based on sex stereotyping and gender identity afforded by the 2016 rule. The final rule is accompanied by a press release and fact sheet.

OCR has been relying on Section 1557 to take action against states during the COVID-19 pandemic, citing policies that discriminate on the basis of disability, but otherwise opted to finalize the rule. The final rule also comes ahead of a highly anticipated Supreme Court decision on the related issue of whether sex discrimination under Title VII of the Civil Rights Act includes discrimination based on sexual orientation and gender identity. Even the religious plaintiffs in a case known as Franciscan Alliance asked the Fifth Circuit Court of Appeals to stay their challenge over Section 1557; the plaintiffs’ reasons for asking that their case to be put on hold pending a decision from the Supreme Court suggest that OCR might have waited for the Court’s decision before issuing the final rule.

OCR received more than 198,000 comments on the proposed rule, including from members of Congress, state and local governments, state-based marketplaces, tribes, and all major health care industry stakeholders, among others. Some commenters argued that the rule exceeds OCR’s authority and that the rule is inconsistent with the ACA. Others pointed to the impact that the rule would have on vulnerable populations and expressed concern that the proposed rule would reduce civil rights protections for individuals with limited English proficiency, LGBT people, people with disabilities, and women. Still others noted wide inconsistencies in OCR’s approach to interpreting Section 1557 (where it is eliminating definitions and trying to limit the scope of Section 1557’s protections) compared to its approach to interpret provider conscience statutes (where it adopted broad definitions and tried to expand the scope of those laws).

These concerns notwithstanding, the final rule is virtually unchanged from the proposed rule from May 2019. The final rule eliminates major parts of the 2016 regulation and tries to make significant changes to the scope of Section 1557. The final rule entirely eliminates:

• The definitions section of the current rule (thereby eliminating definitions of key terms such as “covered entity” and “on the basis of sex”);
• Specific nondiscrimination protections based on sex, gender identity, and association;
• Major language access requirements (such as a requirement that covered entities include translated taglines on notices and significant communications to consumers);
• Notice requirements that require covered entities to post information about Section 1557 and nondiscrimination at its locations and on its website;
• Requirements to have a compliance coordinator and written grievance procedure to handle complaints about alleged violations of Section; and
• Various enforcement-related provisions (such as protections against intimidation and retaliation).

Separately, the final rule eliminates explicit nondiscrimination protections for LGBT people in 10 unrelated HHS regulations, such as nondiscrimination standards for qualified health plans and the marketplaces. HHS characterizes these changes as “conforming amendments,” even though many of these regulations were adopted before the 2016 rule, are unrelated to Section 1557, and are implemented and enforced by the Centers for Medicare and Medicaid Services (not OCR).

OCR does not adopt a new explicit definition of “on the basis of sex” but newly confirms in the preamble and its press release that it will interpret “sex” solely as “biological sex” (which HHS defines to mean a person’s genetic sex at birth) in its enforcement activities. OCR believes this is the “plain meaning” of “sex” and is consistent with the Department of Justice’s (DOJ’s) position in the pending Supreme Court cases on Title VII. (This is also generally consistent with news reports from late 2018 about a leaked memo suggesting that HHS OCR was “spearheading” a multi-agency effort to establish a legal definition of sex under Title IX based on its view of biology. The Department of Education recently made a similar interpretation of Title IX in a leaked letter to school officials in Connecticut.)

OCR revised the Obama-era rule on Section 1557 because, in its view, the prior rule exceeded its statutory authority, erroneously interpreted civil rights law, led to confusion, and imposed unjustified costs and regulatory burdens. OCR believes the final rule will provide additional clarity and reduce regulatory burdens for covered entities. OCR also relies heavily on a ruling issued in Franciscan Alliance (which is cited no less than 40 times) to vacate and remand parts of the 2016 rule, even though other courts have reached the opposite conclusion and litigation in that and other cases is far from resolved. In what appears to be a new justification for the rule that was not included in the proposed rule, OCR now notes “various policy considerations” to justify the final rule. One of these policy considerations is that the 2016 rule was confusing for providers and “potentially burdened” provider conscience protections.

OCR is also motivated by its estimate of the rule’s savings of about $2.9 billion over five years (down from the estimate of $3.6 billion in the proposed rule). Much of these savings result from elimination of the notice and tagline requirements, especially for pharmacy services and explanations of benefits.

OCR fully expects insurers, hospitals, and other regulated entities to roll back current nondiscrimination protections. In particular, half of 137,501 covered entities are expected to revise their policies to stop prohibiting discrimination under the 2016 rule. OCR counts this as savings: organizations will have lower labor costs, lower litigation costs, and lower grievance processing costs because they will no longer have to process complaints or defend against lawsuits brought by transgender people. An estimated 60 percent of the increase in expected complaints following the 2016 rule arises from claims of discrimination based on gender identity and sex stereotyping. The “decrease in grievance caseload” will result in an estimated $123.4 million in annual savings.

OCR made this estimate while ignoring commenter suggestions to account for potentially billions in costs associated with the denial or delay of health care to LGBT people because of discrimination. OCR similarly dismissed the possibility of higher costs for state human rights commissions due to an increase in complaints, since OCR will no longer receive complaints based on gender identity.

Once published on June 19, the new rule will go into effect in 60 days, although lawsuits are expected. Organizations such as the Human Rights Campaign and Lambda Legal have already announced their intent to challenge the regulation. In the meantime, litigation over the Obama-era regulation on Section 1557 will continue before the Fifth Circuit.

Background

Section 1557 is the primary anti-discrimination provision in the ACA; it prohibits health programs or facilities that receive federal funds from discriminating based on race, color, national origin, age, disability, or sex. An individual cannot be excluded from participation in, denied the benefits of, or subjected to discrimination on these bases by any health program or activity of which any part receives federal financial assistance. Section 1557 also applies to any program or activity that is administered by an agency of the federal government or any entity established under Title I of the ACA.

Section 1557 incorporates existing federal civil rights laws and applies them to federally funded health programs. The prohibited grounds for discrimination are specified by Title VI of the Civil Rights Act of 1964 (Title VI) (race, color, national origin), Title IX of the Education Amendments of 1972 (Title IX) (sex), the Age Discrimination Act of 1975 (Age Act) (age), and Section 504 of the Rehabilitation Act of 1973 (Section 504) (disability). The statute incorporates the enforcement mechanisms under those laws for purposes of violations of Section 1557. Section 1557 does not apply to discrimination based on religion.

Section 1557 is one of the few provisions of the ACA that went into effect on March 23, 2010, the day the law was signed. OCR, which is charged with enforcing section 1557, released an opinion letter in 2012 that defined sex discrimination to include gender identity and sexual orientation, issued a request for information in 2013, and issued final implementing regulations in 2016. Much of that rule went into effect in July 2016, while the provisions that apply to private health insurance went into effect for the plan or policy year beginning on or after January 1, 2017. Even in the absence of implementing regulations, OCR took various enforcement actions and resolved complaints under Section 1557.

2016 Rule

The 2016 rule addressed a variety of topics, including meaningful access for individuals with limited English proficiency (LEP) and effective communication for individuals with disabilities. In the rule, OCR did not create a new religious exemption under Section 1557 but stated that covered entities maintained the right to claim a religious exemption that already exists in federal law.

Critics, however, took aim at a particular component of the rule: discrimination “on the basis of sex” which OCR defined to include discrimination based on “gender identity” and “termination of pregnancy.” These critics included the current director of OCR, Roger Severino, who was then serving as Director of the DeVos Center for Religion and Civil Society at the Heritage Foundation. While there, Severino wrote a brief that heavily criticized OCR’s proposed rule on Section 1557; he was then appointed and tasked with enforcing Section 1557.

Franciscan Alliance Case

In August 2016, the Franciscan Alliance (a Catholic hospital system), a Catholic medical group, a Christian medical association, and five states (later joined by three additional states) challenged OCR’s interpretation regarding sex discrimination. They argued that OCR exceeded its authority in making this interpretation, that they would be forced to provide certain health care services against their medical judgment, and that the rule violated constitutional and statutory religious freedom protections.

The case was brought before Judge Reed O’Connor of the Northern District of Texas who, in a separate case regarding a similar interpretation by the Department of Education, had previously concluded that Title IX’s sex discrimination protections do not include gender identity. Similar cases were filed in North Dakota but stayed in light of Franciscan Alliance; HHS cannot enforce those parts of Section 1557 against the named plaintiffs in those cases.

On December 31, 2016, Judge O’Connor issued a nationwide injunction to stop OCR from enforcing the parts of the Section 1557 rule that prohibit discrimination on the basis of gender identity or termination of pregnancy. The court found that OCR’s interpretation of sex to include gender identity and termination of pregnancy violated the Administrative Procedure Act and Religious Freedom Restoration Act (RFRA). The ACLU of Texas and River City Gender Alliance had asked Judge O’Connor to allow them to intervene in the case to protect their interests in prohibiting gender identity discrimination; however, this request was denied. 

Although Judge O’Connor enjoined HHS from enforcing parts of the 2016 rule, this decision was limited to the agency itself. The injunction did not, for instance, vacate the rule itself or otherwise excuse covered entities from complying with the rule. Because Section 1557 includes a private right of action, covered entities—such as hospitals and state Medicaid programs—that failed to comply with the rule could be sued by someone who has faced discrimination and makes a claim under Section 1557.

Instead of appealing the decision, the government asked for a stay and for the rule to be remanded back to HHS to be revisited. In July 2017, this request was granted and the rule was remanded to HHS for reconsideration. For almost two years, HHS reported to the court that it was preparing a draft proposed rule. This proposed rule was under review by the Office of Management and Budget for more than one year before being released on May 24, 2019 and published in the Federal Register on June 14.

Frustrated by the delay, the plaintiffs asked, and Judge O’Connor agreed, to let the litigation resume. Wisconsin (with a new attorney general) was allowed to withdraw from the lawsuit, and the ACLU and the River City Gender Alliance renewed their request to intervene in the lawsuit. The DOJ soon agreed, in court, with the plaintiffs that the challenged parts of the Section 1557 regulation were unlawful. The Trump administration then asked the court to postpone any ruling until after the rule is amended because a proposed rule, if finalized, could moot the lawsuit. This request notwithstanding, briefing on the merits was completed in fall 2019 and a hearing was held in September 2019.

In October 2019, Judge O’Connor vacated major parts of the Obama-era rule and granted the request of the ACLU and River City Gender Alliance to intervene in the litigation. He adopted the same reasoning outlined in his 2016 decision and vacated and remanded the parts of the 2016 rule related to gender identity and termination of pregnancy to HHS for revision. Citing the rule’s severability clause, Judge O’Connor vacated only these parts of the rule; the rest of the Obama-era regulation remained in place.

The plaintiffs had asked that the challenged provisions of the rule be vacated and permanently enjoined on a nationwide basis. Judge O’Connor agreed that parts of the rule must be vacated but did not issue a permanent injunction. He concluded that an injunction is not necessary in light of vacatur.

Despite succeeding in having parts of the Obama-era rule vacated, the private plaintiffs—led by Franciscan Alliance—appealed Judge O’Connor’s decision to the Fifth Circuit. Those plaintiffs initially asked for an extension of the briefing schedule to early June and then, on May 28, asked the Fifth Circuit to stay the case until after the Supreme Court issues an opinion on whether sex discrimination under Title VII of the Civil Rights Act includes discrimination based on sexual orientation (Bostock v. Clayton County, Ga. and Altitude Express Inc. v. Zarda) or gender identity (R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission). This stay was granted on June 2.

Other Lawsuits

Outside of Franciscan Alliance, other district courts that have considered this issue over the past two years has concluded that discrimination against transgender individuals is prohibited by Section 1557 itself (rather than the regulation).These courts have concluded that discrimination based on transgender status is a form of sex stereotyping that constitutes discrimination on the basis of sex under Price Waterhouse v. Hopkins, a Supreme Court decision from 1989.

A federal judge concluded that Wisconsin’s use of transgender exclusions in its state employee health plan and Medicaid plan violated Section 1557. This was followed by a decision in Minnesota in which the court concluded that an employer’s health insurance plan discriminated on the basis of gender identity by having a transgender exclusion. In September 2017, a federal district court in the southern district of California allowed a mother’s claim on behalf of herself and her transgender son to proceed based on the statutory language of Section 1557, not the regulation. And a federal district court in Minnesota found that the statutory language of Section 1557 prohibited discrimination on the basis of gender identity in 2015, long before OCR even issued its original proposed rule.

Scope Of The Final Rule

The final rule eliminates the definitions section of the prior rule. OCR will no longer define key terms like “on the basis of sex” or “covered entity.” Because many of these terms were defined broadly, eliminating these definitions removes explicit references to protected classes or specific protections and benefits. For instance, the 2016 rule defined “on the basis of sex” to include discrimination based on pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, and gender identity. The rule further defined some of these terms, including “sex stereotypes” and “gender identity.” These definitions are now gone.

Commenters raised concerns that the narrowed scope of the rule will lead to “more discrimination, lack of care, and adverse health outcomes,” which is contrary to Congress’s intent in adopting the ACA. State and local officials—in comments filed long before the coronavirus crisis—commented even then that the proposed rule would negatively affect public health and increase state costs as more people are forced to seek public benefits, such as Medicaid.

OCR argues that it eliminated the definition of “on the basis of sex” to comply with the injunction in Franciscan Alliance. But the rule goes further by eliminating other definitions in a way that is likely to increase confusion and raise questions for covered entities and consumers alike. OCR asserts that the rule will be clear without definitions and incorporated definitions into the substantive part of the rules where feasible. (This contrasts with the approach that OCR took in other regulations, such as its provider conscience rule, which was filled with extensive new definitions in the name of clarity.)

Covered Entities

In the new final rule, OCR dramatically reduces the scope of the rule itself. Under the 2016 rule, Section 1557’s protections applied to all health programs and activities that received federal financial assistance through HHS (including Medicaid, most Medicare, student health plans, and insurers that receive advance premium tax credits); health programs and activities administered by HHS; and health programs and activities administered by entities established under Title I of the ACA (such as state-based marketplaces and navigator programs). The previous regulatory analysis estimated that the rule would cover about 900,000 physicians, 133,343 facilities (such as hospitals and nursing homes), 445,657 clinical laboratories; 1,300 community health centers; 40 health professional training programs; Medicaid and public health agencies in each state and the territories; and at least 180 insurers.

In the final rule, OCR interprets Section 1557 far more narrowly. The rule now applies to 1) any health program or activity, any part of which receives federal financial assistance, provided by HHS; and 2) any program or activity administered (whether by HHS or any other entity) under Title I of the ACA. The rule will continue to include state-based and federal marketplaces, state advisory councils on community health insurance, and certain reinsurance entities.

This change in scope first carves out HHS’s health care programs and activities unless they are administered under Title I of the ACA. This means the rule will no longer apply to other HHS programs—such as those administered by the Centers for Disease Control and Prevention, the Indian Health Service, and the Substance Abuse and Mental Health Services Administration—or the Department itself except in the context of ACA programs. Commenters noted that this approach is inconsistent with the underlying civil rights protections, such as Section 504, that Section 1557 incorporates. OCR disagrees, noting that Section 504 is a statute of general applicability while Section 1557 is more limited as a nondiscrimination statute under the ACA that applies uniquely to health care.

Second, OCR will no longer automatically apply Section 1557 to ACA marketplace plans because HHS does not technically administer advance premium tax credits to insurers (this is done by the Internal Revenue Service). The 2016 rule applied to programs where HHS “plays a role” in administering a health program, including marketplace plans; OCR eliminates this language. OCR suggests that marketplace plans are still subject to Section 1557 because they are sold on the marketplace (which is a program or activity administered by an entity established under Title I of the ACA), but it would no longer be because HHS “plays a role” in administering premium tax credits.

The change in scope appears contrary to the text of the Section 1557 statute (despite OCR’s stated desire in revising the rule to align it more closely to the text of Section 1557). The statute itself applies far more broadly to “any health program or activity, any part of which is receiving Federal financial assistance,” “any program or activity that is administered by an executive agency,” and “any entity established under this title.” Thus, Section 1557 additionally extends to health programs or activities receiving federal financial assistance, including programs not funded through HHS, which are administered by an executive agency. Despite receiving comments on this point, OCR maintains this interpretation while noting that its final rule offers a “technical reading” of the Section 1557 statute that is “at least as reasonable” as the interpretation made in the 2016 rule.

As examples of recipients of federal financial assistance from HHS for health programs or activities, OCR cites laboratories, medical schools, and nursing schools. Recipients of HHS assistance for contracts of insurance include insurers that participate in the Medicare Advantage program. The final rule does not apply to Medicare Part B, self-funded group health plans, the Federal Employees Health Benefits Program, church plans, excepted benefits, or short-term plans. As discussed more below, this is because these programs do not receive federal financial assistance from HHS or because the entities operating these programs are not principally engaged in the business of providing health care.

Health Entities Versus Health Insurers

The final rule no longer specifically defines a “health program or activity,” to which Section 1557 would apply. Under the 2016 rule, this term was defined broadly to include the provision or administration of health-related services, health-related insurance coverage, or other health-related coverage and assistance to individuals in obtaining these services or coverage. The 2016 rule also applied to at least some employee health benefit programs (when, for instance, offered by health providers or insurers).

Under the new final rule, OCR no longer defines “health program or activity” to include employee health benefit programs under Section 1557. Rather, “health program or activity” includes only health care entities—an entity that is principally engaged in the business of providing health care—that receive federal financial assistance. For those entities, Section 1557 applies to their entire operation. OCR believes this is more consistent with the Civil Rights Restoration Act, which is not incorporated by Section 1557. Examples of health care entities include hospitals, nursing facilities, hospices, community health centers, and physical therapists.

The final rule does apply to non-health care entities that receive federal financial assistance. But for these entities, Section 1557 will not apply to their entire operation. Instead, the rule applies only to the part of their operation that receives the federal financial assistance. Here, OCR explicitly defines health insurers—presumably both private health insurers and Medicaid programs—as non-health care entities (meaning, in OCR’s view, that health insurers are not “principally engaged in the business of providing health care”). This change dramatically limits the scope of nondiscrimination protections for health insurance products.

Under the 2016 rule, Section 1557 applied to any insurer that receives federal financial assistance—through, say, advance premium tax credits, Medicaid or CHIP managed care payments, or the Medicare Advantage program. Section 1557 applied to the insurer itself, meaning any product sold by that insurer could not discriminate based on race, color, national origin, age, disability, or sex. Thus, under the 2016 rule, an insurer that offered a qualified health plan could not discriminate in its marketplace business, in its individual market business outside the marketplace, in the group market, or even when it serves as a third-party administrator for a self-insured group plan. In other words, insurers had to comply with Section 1557 across their various lines of business (not just for the products for which they receive federal financial assistance).

In contrast, under the new final rule, Section 1557 applies only to the specific operations and lines of business for which insurers receive federal financial assistance. The other parts of an insurer’s business, such as their sale of non-ACA products or their service as a third-party administrator for a group health plan, no longer have to comply with Section 1557. Said another way, Section 1557 no longer applies to the insurer and its entire operations; this federal nondiscrimination requirement only applies to the specific operations that are federally funded or supported.

Insurers that receive federal funding for Medicare Advantage plans, Medicare Part D, or Medicaid programs will be subject to Section 1557, but only for those federally funded functions. This also includes employer group waiver plans and Medicare Part D Retiree Drug Subsidy plans to the extent these plans receive federal financial assistance. On-marketplace plans, stand-alone dental plans, and catastrophic plans will be subject to Section 1557, but Section 1557 will not apply to ACA-compliant plans that are sold off-marketplace.

The final rule also generally exempts employer-sponsored group health plans, excepted benefits, and church plans from Section 1557. If these plans do not receive federal financial assistance and are not principally engaged in the business of providing health care, they are not covered entities.

Implications For Short-Term Plans And Non-ACA Products

This issue has been raised by insurers and stakeholders like the National Association of Insurance Commissioners, who asked for clarity about the scope of Section 1557 as it applies to non-major medical policies such as short-term plans. Most short-term policies discriminate based on sex, age, and disability due to experience rating and benefit limitations (like not covering maternity benefits). Stakeholders asked OCR to confirm that insurers that participate in the marketplaces, Medicare, or Medicaid could in fact offer short-term plans without running afoul of Section 1557.

Although federal regulators declined to weigh in on this issue in the short-term plan rule, the preamble of the final rule confirms that Section 1557 does not apply to short-term plans and that insurers can offer plans that receive federal financial assistance (like marketplace plans) while also offering other plans that would otherwise run afoul of Section 1557. In OCR’s view, Section 1557 does not apply because the insurers that offer short-term plans are 1) not principally engaged in the business of health care and 2) not receiving federal financial assistance with respect to short-term plans specifically.

The General Discrimination Prohibition

The final rule includes a general prohibition against discrimination based on race, color, national origin, sex, age, and disability. This is consistent with the statute and the 2016 rule. However, the 2016 rule also included more detailed prohibitions against specific forms of discrimination (such as health insurance nondiscrimination). Those provisions spelled out what covered entities must do to comply with protections for the specific forms of discrimination covered by the rule.

The final rule eliminates many of those more specific prohibitions. This is particularly true with respect to the 2016 rule’s protections based on sex discrimination but extends to other provisions as well. For instance, the final rule eliminates a provision that prohibited insurance marketing practices or benefit designs that discriminate on the grounds covered by Section 1557. Commenters raised concerns that repealing this provision would allow insurers to use benefit design to discriminate against people with chronic conditions or disabilities.

OCR rejected concerns raised that the repeal of these more specific prohibitions would cause confusion and lead to discrimination. State regulators, for example, noted the importance of specific federal provisions to aid their nondiscrimination enforcement. OCR noted simply that it had already included clear, strong language to prohibit discrimination and it will issue further guidance if needed.

Discrimination On The Basis Of Sex, Gender Identity, And Sexual Orientation

The final rule entirely eliminates specific protections on the basis of sex, including the 2016 rule’s significant, specific provisions related to gender identity nondiscrimination. Under the 2016 rule, covered entities were required to treat individuals consistent with their gender identity and could not deny access to health services or facilities based on gender identity. This meant, for instance, that a hospital could not assign a transgender woman to a male ward, which is an example where OCR previously took enforcement action against a hospital in Brooklyn. (OCR now “disavows” the views expressed in the voluntary resolution agreement with that hospital.)

Under the 2016 rule, insurers were also prohibited from categorically excluding health services related to gender transition or for denying claims or imposing additional benefit restrictions or limitations because someone is transgender. Transgender-specific exclusions have historically been used to deny transgender people coverage for medically necessary care—including hormone therapy, mental health counseling, and surgeries—even though the same services are routinely covered for non-transgender individuals. These protections save lives: a May 2020 study published in JAMA Psychiatry found that the rate of suicidality among transgender and gender nonconforming people dropped by as much as 50 percent in states that prohibited gender identity discrimination in private health insurance (relative to states that had not). These state-level protections are akin to those in the 2016 rule.

Relying largely on Franciscan Alliance, OCR eliminates all these protections. As noted above, OCR does not formally adopt a new definition of “sex” but makes clear that it interprets “sex” to be limited to its view of “biological sex,” which it defines to mean a person’s genetic sex at birth.

OCR also points to the position that the DOJ has taken in other litigation on sex discrimination. Although commenters urged OCR to wait on issuing a final rule until after the Supreme Court’s decision and to solicit comment again once the cases had been decided, OCR declined to do so. OCR asserts that it can issue a rule based on the statute, its own understanding of the law, and the DOJ’s position. OCR notes that it eliminated the definition of “sex,” which means that the rule is flexible enough to accommodate a future Supreme Court decision. From there, OCR attempts to more clearly distinguish Section 1557’s health care protections from Title VII’s employment protections, noting that OCR’s view of “sex” has “special importance in the health context.”

OCR believes that states and localities are better equipped than it to address issues related to LGBT nondiscrimination. OCR will not interfere with state laws that provide additional protections (for sexual orientation, gender identity, or termination of pregnancy). However, OCR suggests that some federal laws could conflict with, and thus override, additional state-level protections. The preamble notes that covered entities can grant protections for LGBT people but are not required to do so; OCR is quick to say that these optional protections cannot conflict with other federal laws.

“Reliance Interest”

In its regulatory impact analysis, OCR notes that it cannot estimate the effects of the part of the 2016 rule that prohibited insurers from using categorical transgender-specific exclusions or otherwise denying medically necessary care based on transgender status. But OCR asserts that consumers could not have developed what it referred to in the preamble to the proposed rule as a “reliance interest” on that part of the rule because these provisions were set to go into effect on January 1, 2017 but were enjoined by Judge O’Connor on December 31, 2016.

But this misunderstands the nature of health insurance regulation. Insurers had to file their products for 2017 far in advance of New Year’s Eve, and analysis of individual market plans from Out2Enroll (a project I work on) for 2017, 2018, 2019, and 2020 shows that the vast majority of insurers in the individual market in federal marketplace states complied with Section 1557. For each of these years, less than 10 percent of plans that were reviewed included transgender-specific exclusions. For 2020, Out2Enroll reviewed more than 1,050 plans offered by 161 insurers in 38 states and found that only three percent of insurers (i.e., five insurers total) included transgender exclusions. Of the 38 states in Out2Enroll’s most recent study, only 10 states had their own state-level gender identity nondiscrimination protections in place for January 1, 2020.

OCR notes Out2Enroll’s data in the preamble but dismisses its import and the role of the 2016 rule in reducing the use of discriminatory exclusions. Instead, OCR suggests that a decrease in transgender exclusions is seemingly coincidental: the decline is “more likely to be attributable to health insurance issuer or plan sponsor choice,” state requirements, or court orders, rather than the 2016 rule. Finally, even if the 2016 rule pressured insurers to cover services on the basis of gender identity that they would not have otherwise, OCR imposed that requirement without statutory authority to do so.

“Conforming Amendments”

Setting aside Section 1557, the final rule goes even further by eliminating explicit nondiscrimination protections on the basis of sexual orientation and gender identity in ten additional regulations under the Centers for Medicare and Medicaid Services (CMS). These regulations include nondiscrimination requirements for states, marketplaces, agents and brokers, insurers, organizations that operate Programs for All-Inclusive Care of the Elderly (PACE) under Medicare, and state contracts with Medicaid managed care organizations and other entities. (Neither the PACE program nor the Medicaid managed care standards fall under Title I of the ACA, although HHS notes that PACE is a health program receiving HHS federal financial assistance so it is subject to Section 1557.)

The preamble refers to these changes as “conforming amendments,” despite the fact that this results in substantive changes to interpretations made by CMS before OCR issued its regulations on Section 1557. Commenters also noted that it was arbitrary for the rule to “single out” existing protections for sexual orientation and gender identity even though some of these regulations refer to other, additional characteristics not expressly enumerated by statute.

HHS argues that these regulations fall under Title I of the ACA and do not have an independent statutory basis that expressly prohibits discrimination against LGBT people. HHS also now takes issue with the way these prior regulations were promulgated. Finally, HHS apparently views OCR’s interpretation as a ceiling, rather than a floor, in weighing in on how (and whether) a separate operating division (CMS) can offer additional civil rights protections to vulnerable communities.

New Religious Exemptions

The 2016 rule did not include a new religious exemption for covered entities. However, it had a provision stating that Section 1557 does not apply to the extent that the rule would violate a federal statutory protection for religious freedom and conscience. Thus, covered entities could claim an exemption under existing federal laws, such as RFRA and existing conscience protections.

OCR takes issue with the fact that the prior rule did not explicitly incorporate the abortion and religious exemptions included in Title IX. This was a point of criticism in Franciscan Alliance, and OCR cites the court’s holding as part of its reason to incorporate exemptions into its Title IX and Section 1557 rules.

But the final rule again goes further by stating that the Section 1557 rule will not apply if any part of the rule would “violate, depart from, or contradict definitions, exemptions, affirmative rights, or protections” under a wide range of federal civil rights laws (such as the Americans with Disabilities Act) and provider conscience provisions. The latter includes RFRA, the Weldon Amendment, the Coats-Snowe Amendment, the Church Amendments, Section 1303 of the ACA, and various appropriations riders like the Hyde Amendment and the Helms Amendment. Most of these laws or riders were included in OCR’s conscience rule, which has been put on hold by three courts. OCR drafted this provision broadly to include any similar federal conscience law or rule adopted in the future even as it insists in the preamble that it has not crafted a religious exemption to Section 1557.

Some commenters had argued that OCR should instead adopt a narrower religious exemption. Others noted that OCR does not have the authority to interpret these statutes in a way that limits or supersedes Section 1557 and that provider conscience exemptions apply to individuals, not health care entities. Similar to comments on the provider conscience rule, commenters raised concerns about how OCR will reconcile laws like EMTALA with the provider conscience provisions. OCR responds that it sees no conflict between Section 1557 and these provider conscience provisions and believes that the final rule helps clarify this issue.

Notice And Taglines Requirements

The final rule eliminates the 2016 rule’s notice and “taglines” requirement. Under the 2016 rule, covered entities must notify beneficiaries, applicants, and the public of key information. This includes the fact that the entity does not discriminate on bases prohibited by Section 1557, that appropriate aids and services (such as interpreters) and language assistance (such as translated documents) are available without charge and in a timely manner, and how to contact OCR to file a complaint. Covered entities must also include taglines in the top 15 non-English languages in the entity’s state.

To satisfy this “notice” requirement, covered entities physically post this information at their facilities and on their website. This information must also be included in significant publications and communications sent to or targeted at enrollees, applicants, and members of the public. Smaller publications, such as postcards, must include an abbreviated nondiscrimination statement and taglines in the top two non-English languages in the state.

The new final rule eliminates these notice requirements. Covered entities are no longer required to include taglines (at least not under Section 1557). OCR believes that most people—80 percent—who receive taglines are proficient English speakers who have no need for translation services. OCR also cites data from HealthCare.gov that about 90 percent of enrollees select English as their written language preference while only 8 percent of enrollees select Spanish. OCR officials are instead concerned that individuals are receiving excessive amounts of paperwork because of the taglines and failing to read the most important information sent to them. On this point, however, OCR exclusively cites the views of industry stakeholders—covered entities including insurers and pharmacy benefit managers.

Much of the rule’s regulatory impact analysis is devoted to estimating the savings associated with eliminating the notice and taglines requirements. Instead of eliminating the requirements altogether, OCR considered requiring notifications only once per year but decided that even the $63 million per year price tag for doing so was too costly for covered entities. OCR also declined to simply define or give more guidance on what constitutes a significant communication for purposes of the tagline requirement: instead, it eliminates this requirement altogether.

This change was finalized over the objection of commenters who argued that civil rights protections cannot be outweighed by compliance costs for covered entities. If certain protections are deemed too costly or burdensome, commenters argued, then OCR should adopt more limited protections, not entirely eliminate protections. OCR responds that the notice and tagline requirements were simply not required by the statute and are thus excessive and unnecessary.

Taglines must be provided when necessary to ensure meaningful access by LEP individuals to a covered program or activity. Entities must also comply with certain tagline requirements unrelated to Section 1557. These requirements are undisturbed under the final rule. One example is the requirement that Summaries of Benefits and Coverage and other notices be provided in a culturally and linguistically appropriate manner. The preamble identifies additional provisions that remain in effect and identify additional conforming amendments that HHS will make to other CMS notice requirements in the future.

Discrimination Against Persons With Limited English Proficiency

Failing to take reasonable steps to provide meaningful access to language assistance services is a form of national origin discrimination. An estimated 25 million people in the United States have LEP, which can be a major barrier to accessing and receiving health care services. The 2016 rule included protections for individuals with LEP (an individual whose primary language for communication is not English and who has limited ability to read, speak, write, or understand English even if they have some capacity to do so).

The final rule weakens current requirements for serving individuals with LEP. Under the final rule, covered entities must take reasonable steps to ensure meaningful access to programs or activities by individuals with LEP. This, critics argue, shifts the rule’s emphasis from protections for each individual with LEP to requirements for covered entities.

To assess compliance with this requirement, OCR will apply a flexible, fact-specific standard that considers the following four factors: 1) the number or proportion of LEP individuals eligible to be served or likely to be encountered; 2) the frequency with which LEP individuals are in contact with the entity’s covered program; 3) the nature and importance of the entity’s program; and 4) the resources available to the entity and costs. OCR believes this approach is more consistent with its LEP guidance from 2003 and harmonizes the factors that already apply to HHS’s human services programs.

This four-factor balancing test is a departure from the two-factor test under the 2016 rule. In evaluating whether a covered entity has met its LEP obligations under the 2016 rule, OCR focused on the nature and importance of the health program or activity and the particular communication for the individual with LEP. OCR also considered whether a covered entity has developed and implemented an effective and appropriate written language access plan. The new final rule eliminates any reference to a language access plan and estimates that covered entities will save $14.7 million per year because of this change.

The final rule also replaces the requirements for video interpreting services with audio-based services. The 2016 rule allowed video interpreting services and required these services to be clear and audible, provided in real-time over a high-speed connection so there is no choppiness, and crisp enough to show the interpreter’s face. (Readers who newly spend their days on Zoom likely have a new appreciation for these standards.) The final rule moves away from requiring video interpreting services by applying many of these same standards to audio interpreting services (instead of video).

High-quality video interpreting services will still be required if necessary to provide meaningful access to LEP individuals. But whether video interpreting services are necessary will be assessed based on the four-factor analysis noted above.

OCR generally maintains other rules regarding the provision of language assistance services. These services may include written translation or oral interpretation and must be provided free of charge, accurately, and in a timely manner in a way that protects the privacy and independence of the LEP individual. Language assistance services must be provided by qualified interpreters or translators.

Discrimination Against Persons With Disabilities

The final rule does not disturb the current rule’s requirements with respect to individuals with disabilities. First, the rule requires effective communications with individuals with disabilities, incorporating longstanding DOJ interpretations of the requirements of federal law. Even though OCR repeals the definitions section, it incorporates current definitions of terms such as “auxiliary aids and services” and “disability,” which themselves were incorporated from the Americans with Disabilities Act. While OCR takes this view, commenters noted that the rule’s definition omits items from the list of examples of aids and services that appear in the Americans with Disabilities Act; OCR finds it unnecessary to incorporate all of the statue’s examples into the regulatory text.

Covered entities must provide auxiliary aids and services to individuals with impaired sensory, manual, or speaking skills regardless of the number of people the entity employs. OCR had solicited comment on whether to adopt an exemption from this requirement for covered entities with fewer than 15 employees. The final rule does not include this exemption: all employers that receive federal financial assistance from HHS should be held to this requirement, regardless of their size.  

Second, the final rule maintains current accessibility standards for buildings and facilities. The 2016 rule requires facilities where health activities are conducted to conform to ADA 2010 accessible design standards if they are constructed or altered by or on behalf of federal fund recipients or state-based marketplaces and the construction or alteration was commenced on or after a certain date.

Similar to the 2016 rule, the new final rule requires covered entities to ensure that their health programs and activities provided through information and communication technology are accessible to individuals with disabilities unless doing so would impose undue financial or administrative burdens and would result in a fundamental alteration in the nature of the program or activity. OCR adopts a new definition of “information and communication technology” as defined in separate regulations implementing Section 508 of the Rehabilitation Act. The final rule also maintains the 2016 rule’s requirement that covered entities make reasonable modifications to their policies, practices, and procedures when necessary to avoid discrimination based on disability unless doing so would demonstrably and fundamentally alter the nature of the health program or activity.  

Commenters raised concern about the rule’s impact on people with disabilities and noted that other changes to the 2016 rule, such as the elimination of protections based on association, will create uncertainty and inconsistency. OCR does not believe the rule will affect access to care for people with disabilities and notes that discrimination based on association can still be addressed with respect to Section 1557’s underlying statutes.

Assurances And Grievance Procedures

The final rule maintains the requirement that covered entities submit an assurance of compliance with Section 1557 while repealing the prior requirement that each covered entity with 15 or more employees have a compliance coordinator and written grievance procedure to handle complaints about alleged violations of Section 1557. This change does not affect independent obligations that require covered entities to have written process in place to handle grievances regarding certain disability and sex discrimination claims under existing regulations.

Enforcement And Severability Clause

The final rule shifts enforcement mechanisms for Section 1557. As with the 2016 rule, the final rule incorporates the existing enforcement mechanisms for each of the covered bases (such as Title IX and Title VI) for purposes of a violation of Section 1557. The final rule, however, delegates full enforcement authority to the director of OCR to handle complaints, conduct compliance reviews, initiate investigations, and make referrals to the DOJ, among other enforcement efforts.

The final rule then otherwise eliminates existing enforcement procedures. Current rules spell out the procedures to be used with respect to administrative enforcement actions under Section 1557, prohibit intimidation or retaliation, and include an assurance that compensatory damages are available in 1557 actions, among other provisions. All these specific provisions are eliminated under the final rule.

As soon as the proposed rule was published, OCR suspended all sub-regulatory guidance that is inconsistent with the final rule or its new interpretations of Section 1557 and Title IX. OCR will now withdraw all conflicting sub-regulatory guidance upon publication of the final rule. As examples, OCR cites guidance documents on tagline requirements and the 2012 letter from OCR that included sexual orientation and gender identity under Section 1557.

OCR also eliminates a current provision that allows individuals or entities to sue directly in federal court under Section 1557. OCR “no longer intends to take a position” on whether Section 1557 includes a private right of action, leaving this issue for the courts to decide. This is a dramatic departure from the Obama-era rules. The Obama administration had concluded, consistent with the decision of Rumble v. Fairview Health Services, that Section 1557 provides a new, health-specific, anti-discrimination cause of action subject to a single standard, regardless of the plaintiff’s protected class status. OCR had also concluded that an individual can bring a private action based on disparate impact discrimination even though a disparate impact claim would not be available for the specific form of discrimination under the underlying statutory prohibition.

Finally, OCR had proposed to eliminate the 2016 rule’s severability clause. In response to comments, OCR decided to instead retain the severability clause from the 2016 rule.