Last month, the U.S. Department of Health and Human Services (“HHS”) issued its final rule under Section 1557 of the Affordable Care Act that rescinded certain protections afforded to LGBTQ individuals and persons with limited English proficiency. In the same rule, HHS also removed burdensome disclosure requirements for health plans. Only a few days after the final rule was issued, the Supreme Court ruled in Bostock v. Clayton County that gender identity and sexual orientation protected under Title VII of the Civil Rights Act of 1964. It is anticipated the Bostock decision will lead to court challenges which could impact the final rule.
In 2016, HHS issued regulations under Section 1557 that defined sex discrimination to include gender identity, which it defined as “one’s internal sense of gender.” Later that year, the federal courts issued a nationwide injunction on the regulation. In 2019, the regulation was vacated and became unenforceable. With this new final rule, HHS has returned to its pre-2016 interpretation of sex discrimination with “sex” defined as male or female and as determined by biology. While the Bostock decision discusses Title VII and Section 1557 applies to Title IX for purposes of sex discrimination, the rules are quite similar and the removal of "gender identity" from Section 1557 will likely bring legal challenges to the final rule.
While the final rule muddied the waters over sexual identity and discrimination, it did provide some good news for employers. The prior regulation required that most employer sponsored health plans and insurers provide “notice and taglines” regarding discrimination in English and the 15 non-English languages most commonly spoken in the applicable state. The note and taglines had to be posted to the entity’s website, in its physical offices, and included with most significant publications. This requirement was seen as burdensome by most entities and was expensive to administer adding pages to required mailings.
The final rule eliminated the requirement to post the discrimination notice and taglines. The final rule also eliminated the requirement that the discrimination notice and taglines be included with all significant publications sent by the organization. This change will be a significant cost and administrative time saver for most entities.
In addition, the final rule narrowed the definition of a “covered entity” to apply only to the entities principally engaged in the business of providing health care that receive federal financial assistance. For entities not principally engaged in the business of providing health care, Section 1557 applies only to their operations to the extent they receive federal financial assistance. This moves most employer sponsored health plans out from under the requirement.
The 2020 Final Rule is effective August 18, 2020, however, legal challenges as a result of the Supreme Court’s decision in Bostock could postpone the effective date at least as it relates to the sex discrimination portion. Employers offering employee benefit plans that were subject to the prior rule should review any notice and disclosure obligations and may begin revising their disclosures to remove the nondiscrimination statement and required taglines.
If you have any questions regarding 1557 and the final rule, or any other benefits related questions, please contact any of Graydon’s employee benefits team.
