United States: Nondiscrimination Protections For Transgender Care Under Section 1557 Of ACA

Introduction

On May 13, 2016, the Department of Health and Human Services (HHS) issued final regulations implementing Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age or disability in health programs or activities that receive federal funds. In order to comply with these regulations, "covered entities" must satisfy a myriad of requirements, similar to existing Federal civil rights laws, that are designed to ensure that individuals have equal and nondiscriminatory access to health programs and activities. The focus of this Troutman Sanders advisory is on three of these requirements:

  • ensuring that individuals are not excluded from participation or denied the benefits of a covered entity's health program on the basis of race, color, national origin, sex, age, or disability;
  • providing transgender individuals with equal access to a covered entity's health programs; and
  • ensuring that any health insurance or health-related coverage provided or administered by the covered entity (including its employee health benefit programs) is not discriminatory.

In particular, this advisory describes the applicability of the Section 1557 regulations (including its required transgender protections) to self-insured group health plans of "covered entities" (e.g., the group health plans offered by hospitals and covered physician practices to their employees).

This advisory also describes the issues that other employers (that are not "covered entities") should address if they sponsor self-insured group health plans. This advisory does not address fully-insured group health plans because health insurance carriers will generally be responsible for Section 1557 compliance with respect to the policies they issue to fully-insured group health plans.

The HHS has also provided a Frequently Asked Questions about Section 1557 of the ACA.

Covered Entities

Generally, an employer will be a "covered entity" subject to Section 1557 if it operates a health program or activity, any part of which receives federal financial assistance from HHS. Health programs and activities include:

  • providing health-related services, health-related insurance coverage or other health-related coverage;
  • administering health-related services, health-related insurance coverage or other health-related coverage; and
  • assisting individuals in obtaining health-related services or health-related insurance coverage.

Accordingly, if an employer is engaged in, and receiving HHS funding for, any of these health programs or activities, it will be a covered entity responsible for complying with the Section 1557 nondiscrimination requirements noted above. In particular, for purposes of this advisory, the employer will be responsible for ensuring that its employee health benefit programs comply with applicable nondiscrimination requirements including certain transgender protections. Employee health benefit programs include:

  • employer sponsored group health plans;
  • employer sponsored wellness programs and health clinics; and
  • long-term care coverage provided for the benefit of an employer's employees.

An employer's Section 1557 responsibilities with respect to its group health plans, wellness programs, health clinics and long-term care coverage will vary depending upon whether or not the employer is "principally engaged" in the operation of the health programs or activities described above.

Principally engaged entities include, for example, hospitals, clinics, physician practices and nursing facilities that receive federal financial assistance in the form of grants, loans, credits subsidies, contracts or other arrangements (including Medicaid and Medicare Part A, but not including Medicare Part B). They also include insurance companies that provide health insurance coverage that receive tax credits under the ACA or that furnish coverage to individuals through Health Insurance Marketplaces for ACA exchange premium tax credits and cost sharing arrangements.

These "principally engaged" covered entities must ensure that all of their group health plans, wellness programs, health clinics and long-term care coverage is nondiscriminatory. Other covered entities (that operate, but are not principally engaged in, a health program or activity) have more limited obligations with respect to their employee health benefit programs. Specifically, these entities need only ensure that (1) any group health plan, wellness program, health clinic or long-term care coverage offered to employees who work in the entity's health program or activity is nondiscriminatory and/or (2) any group health plan, wellness program, health clinic or long-term care coverage for which the entity receives HHS funding is nondiscriminatory. An example of the latter would be an employer that receives a Medicare Part D subsidy in connection with its retiree health coverage but is not otherwise subject to Section 1557. 

Employee Health Benefit Programs Sponsored by Covered Entities

To the extent applicable, Section 1557 requires covered entities to ensure that their employee health benefit programs:

  • do not deny or limit coverage or impose additional cost sharing or restrictions based on the enrollee's race, color, national origin, sex, age, or disability;
  • do not use marketing practices or benefit designs that discriminate on the bases of these protected characteristics; and
  • provide equal access and other protections to transgender individuals.

Although health insurance carriers will bear the brunt of these responsibilities with respect to fully-insured group health plans, covered entities that offer self-insured health coverage will need to work with their TPAs and counsel to review their benefit designs and remove any discriminatory provisions. Particular attention should be paid to coverage issues for transgender individuals, such as the following:

  • Section 1557 requires health coverage offered by a covered entity to provide for medically appropriate health services on the same terms for all individuals, regardless of the sex assigned at birth, gender identity or recorded gender. Thus, a transgender individual may not be denied coverage for medically appropriate sex-specific health care services because of their gender identity or because they are enrolled in their health plans as one gender but the medical service is associated with another gender. Examples of health coverage issues for transgendered individuals where treatment is related to his or her gender identity or transgender status include:

    • When a plan covers medically appropriate pelvic exams, coverage cannot be denied for an individual for whom a pelvic exam is medically appropriate based on the fact that the individual either identifies as a transgender man or is enrolled in the health plan as a man.
    • Where an individual could benefit medically from treatment for ovarian cancer, coverage cannot be denied based on the individual's identification as a transgender male.
    • Where a covered entity provides coverage for a particular treatment or service (e.g., hormone replacement or mental health care, where it is medically necessary), the entity cannot decline to provide coverage for that same treatment to a transgender individual on the basis that it is not medically necessary simply because it relates to his or her gender identity or transgender status.
    • Where an individual could benefit medically from a mammogram (e.g., a transgender woman who has or is taking hormones), coverage should not be denied on the basis that an individual was genetically female.
  • Section 1557 prohibits categorical exclusions or limitations in coverage for all health services associated with gender dysphoria or gender transition (e.g., categorically classifying all gender reassignment surgeries as excluded cosmetic procedures). The final rule provides that such exclusions for all health care services related to gender transition are facially discriminatory because they single out services and treatments for individuals on the basis of their gender identity or transgender status. Accordingly, any such denial of coverage must be based on the nondiscriminatory application of neutral criteria, such as if a service is not medically necessary, a qualified provider is unavailable or inadequate medical documentation has been provided.

The covered entity must provide a general notice to plan beneficiaries and enrollees that satisfies the content, posting and related requirements of the final regulations. Within 90 days of the effective date of the regulation (i.e., the first day of the first plan year that begins on or after January 1, 2017), the covered entity must post notices and include language in small sized communications that contains a non-discrimination statement, among other information about translation services if applicable. Model language for such communications is set forth in the appendices to the final regulations.

Considerations for Other Employers that Sponsor Self-insured Group Health Plans

Section 1557 does not apply to an employer that is not engaged in a health program or activity for which it receives HHS funding. However, the preamble to the final rule reiterates the extensive application of the rule, and specifically states that third-party administrators ("TPAs") for employer group health plans, including self-insured health plans, may be subject to Section 1557 because TPA services involve the administration of health services, making them a health program or activity. Therefore, to the extent that the TPA receives HHS funds, it will be a covered entity – regardless of whether or not the HHS funding supports the covered entity's TPA function. For example, if a health insurance carrier that functions as both an insurer and TPA receives HHS funding, all of the insurance carrier's operations (including its TPA business) will generally be subject to Section 1557 even if the HHS funding pertains only to its insurance business.

The final regulations specifically clarify the relationship between TPAs and the employers whose self-insured group health plans they administer, explaining that an employer is not subject to Section 1557 liability simply because the TPA administering its self-insured health plan is covered. Similarly, the final rule acknowledges that TPAs generally are not subject to Section 1557 liability simply because an employer has adopted a discriminatory design feature with respect to a self-insured health plan that the TPA is administering (since employers control the design of their self-insured health plans and the Employee Retirement Income Security Act [and in most cases the TPA's service agreement with the employer] requires plans to be administered consistent with their terms). Accordingly, for purposes of evaluating liability for discrimination in a self-insured health plan, HHS will engage in a case-by-case analysis to determine whether responsibility for a decision or other action alleged to be discriminatory rests with the employer or with the TPA.

Under Section 1557, the HHS Office for Civil Rights ("OCR") will only process a complaint against a TPA involving alleged discrimination if the TPA is directly responsible for the decision or other action being challenged in the complaint. On the other hand, where the alleged discrimination is in benefit design, OCR will process the complaint against the employer or plan sponsor, assuming the employer is a covered entity over which OCR has jurisdiction (e.g., a federally funded hospital that is covered under the rules as discussed above). Where an employer is not a covered entity over which OCR has jurisdiction, OCR will refer the alleged discriminatory plan benefit design matter to the Equal Employment Opportunity Commission ("EEOC") and allow the agency to address the matter.

Examples of circumstances where a TPA or an employer may be held responsible for discriminatory action in administration or plan benefit design, respectively, include:

  • OCR will proceed against the TPA as the decision making entity under the Section 1557 nondiscrimination regulations if it denies a claim because an individual's last name suggests that she is of a certain national origin or threatens to expose an employee's transgender or disability status to the employer.
  • OCR will proceed against the employer as the decision maker if it has jurisdiction over the employer where the alleged discrimination relates to the benefit design of a self-insured health plan—for example, where a plan excludes coverage for all health services related to gender transition. Where OCR lacks jurisdiction over the employer, it may refer the matter to the EEOC and allow that agency to address the matter.

As a result of this stated aggressive enforcement stance, employers that might not otherwise be subject to the specific provisions of Section 1557 should consider the design of their self-insured group health plans and the implications under other federal anti-discrimination laws such as:

  • Title VI of the Civil Rights Act of 1964 (race, color, national origin),
  • Title IX of the Education Amendments of 1972 (sex),
  • The Age Discrimination Act of 1975 (age), and
  • Section 504 of the Rehabilitation Act of 1973 (disability).

Implications

Employers that receive HHS funding with respect to their health programs or activities will need to take steps to ensure compliance with the final regulations. To the extent that any changes are required to an employer's group health plan benefit design, such changes will need to be made by the first day of the first plan year beginning on or after January 1, 2017 and the required notices must be provided within 90 days thereafter.

Other employers that are not directly impacted by the regulations may nevertheless need to take steps in response to the regulations, as follows:

  • Employers with fully insured health plans should be prepared to field questions from employees regarding changes that health insurers will likely be making to the administration and coverage provisions of the employer's group insurance policy (in order for the carrier to comply with the regulations).
  • Employers with self-insured health plans should consult with TPAs providing administrative services as well as counsel to understand the impact of the final rules on their group health plan design and implementation, especially to verify issues related to coverage of transgender care – keeping in mind that although the regulation only applies to employers that are Section 1557 covered entities, the HHS has made clear that it will typically refer matters involving alleged discriminatory benefit designs in employer sponsored health plans of non-covered entities to the EEOC. The EEOC, in turn, is charged with Title VII enforcement and views any employment discrimination based upon gender identity as a Title VII violation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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