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Northwest OH Legal Blog

Friday, August 5, 2016

Final ACA Nondiscrimination Rules Effective July 18, 2016

On July 18, 2016, the final Department of Health and Human Services (HHS) regulations under Section 1557 of the Affordable Care Act (ACA) officially went into effect. However, many of the standards included under those rules have a delayed effective date. Section 1557 generally prohibits “covered entities”, which includes certain health plans, health plan administrators, providers and insurers, from discriminating on the basis of race, color, national origin, sex, age, or disability. Despite the fact that these rules are final, many questions remain unanswered. This leaves health plans and other entities unable to determine whether they are subject to the rule, and what that means.

Who is Subject to Section 1557?

Covered entities include the following entities and programs:

An entity operating a health program or activity, any part of which receives funding from HHS.

a) “Health program or activity” means the provision or administration of health-related services, health-related insurance coverage, or other health-related coverage, and the provision of assistance to individuals in obtaining health-related services or health-related insurance coverage.

b) If an organization is “principally engaged” in providing or administering health services or health insurance or health coverage, the law applies to the entire organization, not just the health program or activity receiving HHS funding. The rules specifically provide that this includes hospitals, health clinics, group health plans, health insurance issuers, physician’s practices, community health centers, nursing facilities, residential or community-based treatment facilities, or other similar entities. (For example, all health plans offered by a hospital employer would be covered.)

Federal and State Health Insurance Marketplaces

Employee Health Benefit Programs that receive HHS funding, including:

a) Health coverage provided to employees and/or their dependents;

b) An employer- sponsored wellness program;

c) An employer-provided health clinic; or

d) Long-term care coverage.

For many employer-sponsored plans, Section 1557 will be triggered by receipt of a Medicare Part D subsidy, the HHS subsidy provided to plans covering Medicare-equivalent prescription drug coverage. Because the final rules apply to “an entity that operates a health program”, it is not clear whether the rules allow disaggregation of health plans offered by an employer. For example, if an employer maintains a separate retiree-only plan that offers prescription drug coverage and receives a Part D subsidy under the retiree plan, but does not receive a Part D subsidy under the active plan, there is a a strong argument that only the retiree plan would be subject to Section 1557 final rules. (This argument may not apply if one trust fund covers both active employees and retirees, or in other cases where a multiemployer plan is involved.)

The final rules do not include an exemption based on religious beliefs. However, the rule notes that where application of Section 1557 would result in a violation of applicable Federal statutory protections for religious freedom, HHS will not enforce the standards. In addition, the rules do not exempt benefits excepted from the ACA market reforms and HIPAA portability rules.

What does Section 1557 Require?

A covered entity may not discriminate in health coverage. In providing health coverage, a covered entity may not on the basis of race, color, national origin, sex, age, or disability do any of the following::

Deny, cancel, limit or refuse to issue or renew health coverage.

Deny or limit a claim or impose additional cost-sharing or other limitations or restrictions on coverage.

Engage in discriminatory marketing practices or adopt or implement discriminatory benefit designs on the basis of sex.

Also, a covered entity may not:

Deny or limit coverage or a claim (or impose additional cost-sharing or other limitations or restrictions on coverage) for health services provided to a transgender individual based on the fact that the individual’s sex assigned at birth or gender identity is different from the one to which such services are ordinarily available. (For example, the covered entity may not deny a mammogram or pap smear for a transgender man simply because their recorded gender is male.)

Categorically exclude coverage for all health services related to gender transition.

Deny or limit coverage or a claim (or impose additional cost-sharing or other limitations or restrictions on coverage) for specific health services related to gender transition if such denial or limitation results in discrimination against a transgender individual.

Although the rules prohibit discrimination on the basis of sex stereotyping and gender identity, the final rules do not go so far as to prohibit discrimination on the basis of sexual orientation. The final rules state that case law on this issue is evolving and HHS will continue to monitor those developments.

These prohibitions may cause many plans that are subject to Section 1557 to revisit their plan design and/or exclusions, as many third-party administrators routinely exclude services relating to gender dysphoria or gender reassignment. It should be noted that the rules do not mandate coverage for gender transition related surgery. However, if the plan intends to cover those types of procedures for other purposes (e.g., corrective surgery for a child born with under-developed genitalia or a hysterectomy for cancer treatment), then it would be difficult to exclude coverage for such service for a transgender individual with gender dysphoria.

It should be noted that many plans not subject to Section 1557 may nonetheless use a third-party administrator (TPA) that is subject to Section 1557. HHS notes that use of a Section 1557-governed TPA alone will not render a plan subject to Section 1557. When determining whether there is a Section 1557 violation, HHS will attempt to ascertain whether the discrimination is in operation (in which case the liable entity would be the TPA), or in design (in which case the liable entity might be the plan sponsor, to the extent the plan is subject to Section 1557).

Finally, the rule provides that plans may not circumvent these standards based on a medical necessity standard. HHS notes that medical evidence does not support the argument that treatments related to gender dysphoria are, by their very nature, not medically necessary.

Can a Plan Exclude Coverage for Transgender Services if it is not Subject to Section 1557?

Courts continue to scrutinize whether Title VII prohibits employers from discriminating on the basis of gender identity. It is the position of the EEOC and the Obama administration generally that Title VII prohibits employers from discriminating on the basis of gender identity. Further, Federal contractors are subject to a separate but similar set of nondiscrimination requirements under OFCCP rules. As such, employers should carefully consider whether gender identity- exclusions could give rise to liability under applicable federal and state laws.

No discrimination based on disability.

This standard requires covered entities to make reasonable changes to policies, practices and procedures to accommodate persons with disabilities. Also, covered entities must make any electronically-provided services or systems (such as an online enrollment platform) accessible to persons with disabilities. (See our blog on accessible technology requirements here http://www.adatitleiii.com /2016/06/new-healthcare-regulations-impose-accessible-technology-requirements/) Newly constructed or altered facilities must be made accessible, and covered entities must make auxiliary aids and services (e.g., sign language interpreters, TTY, captioning, etc.) for disabled persons, free of charge.

Language Assistance.

The final rule requires covered entities to take various steps to provide persons with limited English proficiency (LEP) meaningful access to health programs. These steps include:

Providing oral language assistance through a qualified interpreter (free of charge) or written translations.

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