HHS has issued final regulations to implement ACA Section 1557, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557)). The regulations finalize proposed regulations addressing Section 1557 that were issued in September 2015 and were the topic of nearly 25,000 comments (see Legal Update, ACA Nondiscrimination Rules Would Impact Health Plan Insurers) (45 C.F.R. § Part 92).

ACA Section 1557 prohibits individuals from being excluded from participation in, being denied the benefits of, or being subject to discrimination under any "health program or activity" that receives federal financial assistance (including grants, loans, credits, and subsidies) on certain grounds. Specifically, Section 1557 incorporates grounds for discrimination that are prohibited under:

Collectively, these provisions prohibit discrimination on the basis of race, color, national origin, sex, age, or disability. The enforcement provisions available under Title VI, Title IX, the Age Act, and Section 504 apply regarding Section 1557 violations. Entities that are subject to these rules also are likely subject to the Genetic Information Nondiscrimination Act of 2008 (GINA), Family and Medical Leave Act of 1993 (FMLA), Americans with Disabilities Act of 1990 (ADA), Title VII of the Civil Rights Act of 1964, and state laws (see Practice Notes, GINA Compliance for Health and Welfare Plans, Discrimination: Overview, and Family and Medical Leave Act (FMLA) Basics).

For a discussion of the types of discrimination that are prohibited under Section 1557, see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557).

The final regulations are effective July 18, 2016. However, in finalizing the Section 1557 regulations, HHS acknowledged that health plans and coverage may need to be amended for compliance with Section 1557, including plan design features that involve:

Acknowledging the difficulty of making midyear plan design changes, HHS included a delayed applicability date for certain provisions. Specifically, to the extent the Section 1557 final regulations require changes to plan design and coverage, the provision's applicability date is the first day of the first plan year beginning on or after January 1, 2017.

In finalizing the Section 1557 rules, HHS addressed how the rules apply to health insurers and third-party administrators (TPAs) (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Applicability to Insurers and Employer-Sponsored Group Health Plans).

HHS clarified that Section 1557, because it is part of Title I of the ACA, does not apply, under the Expatriate Health Coverage Clarification Act of 2014 (EHCCA), to expatriate health plans, expatriate health insurers, or employer plan sponsors of expatriate plans, as defined under EHCCA (see Practice Note, Expatriate Health Plans Under EHCCA and the ACA and the Affordable Care Act (ACA) Overview).

In finalizing the Section 1557 regulations, HHS declined to include a blanket religious exemption. However, under a change from the proposed regulations, application of the final regulations is not required if doing so would violate applicable federal statutory protections for religious freedom and conscience.

HHS declined to exempt benefits that are excepted from the ACA's market reforms and portability requirements under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (for example, limited scope dental and vision plans) from the Section 1557 final regulations. (Regarding excepted benefits, see Legal Update, Final Excepted Benefit Rules Address Limited Wraparound Coverage.) As a result, if an insurer providing these benefits receives federal financial assistance and:

According to HHS, many excepted benefits are a "health program and activity" for Section 1557 purposes (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Health Program or Activity).

HHS notes that the definition of disability for Section 1557 purposes:

Also, in addressing the scope of an "employee health benefit program" under Section 1557, HHS clarified that a wellness program that is separate from a benefit plan nonetheless falls within the definition of an employee health benefit program (see Practice Note, Wellness Programs). According to HHS, an arrangement under which an employer provides a gift card to each employee who receives a flu shot is a wellness program under the Section 1557 regulations, regardless of whether the wellness program is part of the employer's group health plan. An evidence-based insurance design or wellness program offered by an entity that is subject to Section 1557 (for example, a health insurer or a group health plan that receives federal financial assistance), is a health program or activity that is subject to the Section 1557 final regulations (see Practice Note, Preventive Health Services Under the ACA, Other Than Contraceptives).

Also, a change to the definition of "gender identity" clarifies that the Section 1557 rules apply to individuals with non-binary gender identities (see generally Legal Update, Restricting Transgender Employee's Access to Gender-Identity-Appropriate Restroom is Sex Discrimination: EEOC). HHS also clarified that it interprets references to the term "gender identity" in the final Section 1557 rules to include "gender expression" and "transgender status." Finalizing a position it took under the proposed regulations, HHS interprets discrimination on the basis of sex for Section 1557 purposes to include discrimination on the basis of gender identity. HHS acknowledged that some insurers have computer systems that accommodate only binary gender billing codes that flag a gender mismatch for coverage of certain sex-specific services, but questioned whether such systems could continue to be used going forward.

HHS agreed with commenters that the Children's Health Insurance Program (CHIP) and other health programs operated by state and local governments are subject to the Section 1557.

Reiterating a position it took under the proposed regulations, HHS interprets the term "health program or activity" to uniformly cover all operations of an entity that receives federal financial assistance and that is principally engaged in health services, health insurance coverage, or other health coverage. This rule applies even if only part of the health program or activity receives this assistance.

Some changes under the final regulations address the Section 1557 notice requirements. For example, HHS clarified that a notice required under Section 1557 may be combined with the content of other notices as long as the combined notice clearly informs individuals of their civil rights under Section 1557.

In other notice-related changes, HHS:

In finalizing the Section 1557 regulations, HHS clarified that Section 1557 discrimination includes "intersectional" discrimination that might affect individuals who are part of multiple protected classes.

Regarding the meaningful access requirement for individuals with limited English proficiency, HHS:

(See Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Meaningful Access for Individuals with Limited English Proficiency.)

Regarding a requirement to provide a qualified interpreter, HHS indicated that the qualified interpreter would typically be a business associate (BA) or a workforce member of a covered entity (see Standard Document, HIPAA Business Associate Agreement). According to HHS, if a qualified interpreter is a BA, a covered entity may disclose protected health information to the interpreter if it obtains satisfactory assurances that the interpreter will:

HHS also made changes to provisions addressing:

In enforcing Section 1557, HHS will assess whether:

HHS illustrated this approach with the example of a plan that limits or denies coverage for certain services or treatment for a specific condition. In this case, HHS will evaluate:

Covered entities will be expected to provide a neutral, nondiscriminatory, and nonpretextual reason for the denial or limit.

HHS noted, however, that the Section 1557 final regulations do not:

For entities that are subject to Section 1557, including most health insurers and many TPAs, the scope of the discrimination requirements under Section 1557 is broad – though HHS takes the view that some of the requirements should be familiar to Section 1557 covered entities. Notably, the lead enforcement agency for Section 1557 is HHS's Office for Civil Rights (OCR), which has taken a very aggressive approach in enforcing HIPAA's privacy and security rules (see, for example, Legal Updates, HHS Nets Over $5 Million in HIPAA Settlements Involving Stolen Laptops (March 2016) and For the Second Time Ever, HIPAA Privacy Violations Result in Civil Money Penalties (February 2016), and the Practice Note, HIPAA Enforcement: Penalties and Investigations).

Employers that are not otherwise subject to Section 1557 liability will nonetheless want to note HHS's intent to transfer matters to the EEOC and the coordinated complaint dates to be used by the two agencies.

On the topic of coordinated enforcement efforts, it should be noted that at least one of the enforcement initiatives on the Section 1557 webpage resulted from an OCR investigation of a related HIPAA Privacy complaint (see Practice Note, HIPAA Privacy Rule).