Kristen Gray, J.D. is an Employee Health & Benefits Senior Compliance Consultant for Marsh & McLennan Agency’s Compliance Center of Excellence
Christopher Beinecke, J.D., LL.M. is the Employee Health & Benefits National Compliance Leader for Marsh & McLennan Agency.
On May 10, 2021 the Department of Health and Human Services (HHS) announced that it will interpret the nondiscrimination provisions under Section 1557 of the Affordable Care Act (ACA) to include additional sex-based discrimination protections for LGBTQ individuals consistent with the U.S. Supreme Court’s (SCOTUS) decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020) and related litigation.
This Alert summarizes HHS’s recent Notification of Interpretation and Enforcement and its impact on group health coverage.
Civil Rights, Nondiscrimination Rules, and Health Coverage
There are several nondiscrimination rules that directly or indirectly affect employer-provided group health plans based on various personal traits. We will summarize some of these rules below.
Civil Rights Act of 1964
The Civil Rights Act of 1964 (Civil Rights Act) prohibits discrimination based on protected classifications including race, color, religion, sex, or national origin in several contexts. The following Civil Rights Act Titles provide employment-based protections that apply to employer-provided group health coverage:
- Title VI: Title VI prohibits discrimination in federally funded programs.
- Title VII: Title VII prohibits discrimination in employment related decisions. This includes decisions regarding hiring or firing individuals as well as compensation and benefits.
- Title IX: Congress added Title IX in 1972. It prohibits discrimination in education programs and activities.
ACA Section 1557 Nondiscrimination Provisions and Protections
ACA Section 1557 incorporates Titles VI and IX of the Civil Rights Act, the Age Discrimination Act of 1975, and Section 504 of the Rehabilitation Act of 1973 (related to disabilities), and prohibits certain health plans from discriminating based on race, color, national origin, sex, age, and disability.
As of 2020, Section 1557’s application to health coverage is generally limited to the following:
- Group health coverage offered by health care providers to their employees if the health care provider receives federal funding from HHS;
- Other employer-provided group health coverage if the coverage itself receives federal funding from HHS (e.g. Medicare Part D retiree drug subsidies); and
- Medical coverage offered through the public health insurance marketplace (both federal and state-administered).
This means most group health plans are not subject to Section 1557.
Note: Historically, “voluntary” compliance with Section 1557 has been very high. This is largely due to conservative coverage recommendations by insurance carriers and third party administrators (TPAs) intended to help standardize their books of business.
Change in Interpretation and Enforcement of Section 1557 Nondiscrimination Rules and Related Court Decisions
Section 1557 Final Regulations Released in 2020
Section 1557 has been the subject of significant controversy, debate, and change since its inception through the Obama, Trump, and now Biden administrations. More recently, HHS released Final Regulations in June 2020. The Final Regulations narrowed the applicability to health coverage (described earlier under ACA Section 1557 Nondiscrimination Provisions and Protections), eliminated certain notification requirements, and limited the scope of sex-based discrimination protections by removing Section 1557’s prohibition against discrimination due to gender identity or termination of a pregnancy from the regulations’ definition of “discrimination on the basis of sex.”
Bostock Ruling Changes the Meaning of Sex-Based Discrimination
SCOTUS released its Bostock decision within days of the Final Regulations. SCOTUS ruled that discrimination against LGBTQ employees based on their sexual orientation or gender identity is sexual discrimination and prohibited under Title VII of the Civil Rights Act. Although this ruling directly addressed decisions regarding hiring or firing employees, the ruling that sexual discrimination includes discrimination due to an employee’s sexual orientation or gender identity has wider implications for what employment practices Title VII will prohibit, including employee compensation and benefits.
Following Bostock, two federal district courts blocked enforcement of the portion of the Final Regulations that removed gender identity from the definition of “discrimination on the basis of sex” on the basis that the Final Regulations were in conflict with the Bostock ruling. In these cases, the courts ruled that Bostock’s interpretation of sexual discrimination should also apply under Title IX of the Civil Rights Act as incorporated into Section 1557. Several other courts followed with similar opinions.
HHS Announces Enforcement of Section 1557 with New Sex Based Protections
Due to the recent federal court decisions, HHS announced it intends to interpret and enforce Section 1557’s prohibition on sex discrimination to include: 1) sexual orientation, and 2) gender identity. HHS’s notice did not add any new rules or requirements to Section 1557.
What Does This Mean for Employer Group Health Plans?
HHS’s new enforcement policy impacts few group health plans directly since most group health plans are not subject to ACA Section 1557. By contrast, all employers and their group health plans are subject to Title VII of the Civil Rights Act. Although not directly addressed under Bostock, we believe its Title VII ruling also prohibits employer-provided benefit plans from discriminating based upon sexual orientation or gender identity and that it is only a matter of time before courts apply it in this context.
We interpret this to mean that plans must provide any services, procedures, and prescriptions already covered under the plan to all participants for whom the treatment is medically necessary and appropriate, regardless of a participant’s gender identity. Examples include extending hormone replacement therapy and breast cancer screening to transgender women and hysterectomies to transgender men. Gender identity disorder (gender dysphoria) should satisfy any medically necessary requirements in order for transgendered participants to receive these treatments. On a related note, we also interpret this to mean that a plan providing coverage to same-sex domestic partners must also provide coverage to opposite-sex domestic partners, and vice versa.
It appears clear that HHS intends to enforce this interpretation for plans subject to Section 1557, while we wait to see if federal courts will confirm this interpretation applies to all plans through Title VII of the Civil Rights Act because of Bostock. HHS’ new enforcement policy indicates the RFRA will continue to apply to Section 1557. It is important to note that neither Bostock nor HHS’s recent enforcement announcement require group health plans to cover additional benefits for LGBTQ individuals that are not already covered under the plan (e.g. gender transition procedures), although employers are generally free to do so.
Note: Similar state law protections may apply to fully insured and self-insured, non-ERISA coverage.
It should be no surprise that there is significant ongoing litigation related to health coverage discrimination based upon sexual orientation and gender identity. HHS and/or other agencies may also release additional guidance. Employers should work with their insurers, TPAs, legal counsel, and benefits advisors to understand coverage requirements in light of these recent developments.
 This Alert does not address other nondiscrimination rules applicable to employee benefits, such as the Internal Revenue Code or HIPAA.
 This includes health care providers who receive Medicare Part A and/or Medicaid payments.
 Subject to the approval of any applicable insurance carrier (including stop-loss).