In April 2024, the Department of Health and Human Services’ (“HHS”) Office of Civil Rights (“OCR”) issued a final rule under §1557 of the Affordable Care Act (“ACA”) that expanded the scope of prior regulations by providing, among other things, that sex discrimination includes discrimination on the basis of sexual orientation and gender identity, as well as sex stereotypes, sex characteristics, and pregnancy or related conditions. The final rule was to become effective July 5, 2024, with varied applicability dates for certain provisions, but federal courts have blocked portions of the rule from going into effect, including a nationwide injunction issued by a federal district court judge in Mississippi. The final rule was to become effective July 5, 2024, with varied applicability dates for certain provisions.
Employer Action Items
- For employers that wish to claim a religious freedom and conscience exemption, there is an administrative process for recipients to seek an assurance of exemption in writing from the application of a provision of §1557 under existing federal religious freedom and conscience laws. The recipient will receive a temporary exemption while OCR issues a determination upon the request. If the request is denied, the recipient can file an administrative appeal of that decision with HHS.
- Employers that purchase employer-sponsored health plans on the federal and/or state-based marketplaces should be aware that §1557 applies to these marketplace plans.
- Employers subject to §1557 are those that receive HHS funding, through health programs or activities administered by HHS (such as the Medicare Part D program), and the health insurance marketplace (and all plans offered by issuers that participate in those marketplaces that receive federal financial assistance). Those covered by the rule may include hospitals, health clinics, health insurance issuers, state Medicaid agencies, community health centers, physicians’ practices, home health care agencies, and others
- A third-party administrator for a self-funded group health play may be considered a covered entity where it is affiliated with a health insurance issuer that receives federal funding.
- Whether §1557 applies to a particular entity is a fact-specific analysis and should be examined working closely with qualified advisors. Employers covered by §1557 should coordinate with their legal counsel, benefits advisors, and third-party advisors to devise a qualifying compliance assuredness plan of action, including, assignment of a §1557 Coordinator, employees training, and satisfying new federal nondiscrimination employee notice requirements.
Summary
The BRCC issued an Alert about the final rule in May. Following the Rule’s publication, several states sued HHS, and in recent weeks, two separate federal appeals courts (the 4th and 5th Federal District Courts of Appeals) and states like AL, FL and TN have heard private causes of action relating to the rulemaking. On July 3, a federal judge in MS issued a preliminary nationwide injunction suspending all enforcement of the mandate respecting eligible medical plans. Additionally, a Florida federal district court judge blocked enforcement of OCR’s interpretation of discrimination “on the basis of sex” as it relates to gender identity, also postponing the effective date of the rule regarding certain other provisions (limited exclusively to jurisdictions in Florida). A Texas federal district court judge postponed the effective date of the rule in its entirety, but only as to Texas and Montana.
The Supreme Court is not likely to provide guidance on the enforcement status of the rulemaking until sometime in 2025. In the interim, employer plan sponsors should consider their future obligations under the existing rule, as well as actions that might be required under future iterations of the rulemaking, as may be defined by supplemental agency guidance, or even by the federal court, directly.
Additional Resources
Sample §1557 Employee Notices:
https://www.hhs.gov/civil-rights/for-individuals/section-1557/translated-resources/index.html
OCR’s Information Page on §1557 (includes links to a Fact Sheet and FAQs):
https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html.
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