United States: New HHS Interpretation Of Section 1557 Expands Plan Sponsor Obligations

Background: Bostock and Its Impact

On June 10, 2020, the United States Supreme Court issued a decision in Bostock v. Clayton County, GA (2020) and held that Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on sex, encompasses discrimination based on sexual orientation and gender identity.

The Bostock opinion firmly concluded that it "is impossible to discriminate [against] a person for being homosexual or transgender without discriminating against that individual based on sex." Consequently, the plain language of Title VII's phrase "because of sex" must include discrimination because of sexual orientation. Soon after the Supreme Court's ruling in Bostock, the Fourth and Eleventh Circuits ruled that similar reasoning could be applied to Title IX, which prohibits discrimination on the basis of sex in any school or other federally funded educational activity. Further, the Federal Agency Civil Rights Directors and General Counsels issued a memorandum in March 2021 stating that the "best reading" of Title IX's prohibition on discrimination "on the basis of sex" includes discrimination on the basis of gender identity and sexual orientation.

Section 1557 and Title IX

To further address the aims of the Affordable Care Act's goal of expanding health care access and coverage, Section 1557 of the Affordable Care Act ("ACA") prohibits discrimination on the basis of race, color, national origin, sex, age, or disability. However, Section 1557 has no enforcement mechanisms in and of itself. Instead, Section 1557 finds its enforcement mechanisms provided for and available under Title VI of the Civil Rights Act, Section 504 of the Rehabilitation Act, the Age Discrimination Act, and Title IX of the Education Amendments of 1972. Consequently, determining that gender identity and sexual orientation are encompassed by Title IX necessarily means that discrimination based on gender identity and sexual orientation are also prohibited by the ACA.

Almost a year after Bostock, on May 10, 2021, the Department of Health and Human Services ("HHS") announced that, in light of Bostock and ensuing opinions, it would be interpreting and enforcing Section 1557 of the ACA's prohibition on discrimination on the basis of sex to similarly encompass discrimination on the basis of sexual orientation and gender identity.

Notably, the May 2021 announcement effectively repealed an HHS Office for Civil Rights Final Rule issued June 12, 2020 that narrowed Section 1557's reading of "on the basis of sex" to exclude gender identity, effectively removing any previous protections for transgender individuals. These protections were initially challenged in 2016 before the notice of proposed rulemaking in 2019. As a result, HHS Office for Civil Rights has not investigated any claims of discrimination based on gender identity for approximately five years.

The Department of Health and Human Services is expected to initiate official rulemaking proceedings in 2022.

Challenges to Interpretation

The May 10, 2021 announcement affirmed that the Office for Civil Rights will comply with the Religious Freedom Restoration Act ("RFRA") and all other legal requirements. Soon after the announcement, district courts in North Dakota and Texas granted permanent injunctive relief from the provisions of or coverage of "gender transition" procedures to religious organizations. The religious organizations (including a Catholic hospital association, a Christian health care professional association, and a Catholic nonprofit providing health care) contended that were they made to comply with the new Section 1557 scheme, they would suffer "irreparable injury." Further, the religious organizations asked only for a permanent injunction, meaning that the HHS could continue to interpret the rule as it applies to others, but the religious organizations would not be made to suffer. The district courts agreed that to subject the religious organizations to the new Section 1557 scheme would force them to perform gender transition processes contrary to their religious beliefs — "a quintessential irreparable injury." See Franciscan Alliance v. Becerra (N.D. Tex. 2021).

Next Steps

The new Section 1557 interpretation requires that individuals be treated equally—regardless of gender—not only in the health care they receive but also in the health care they have access to. This means that the ACA effectively prohibits the denial of health care or health coverage based on an individual's gender, gender identity, and sexuality. Health programs and activities must also treat individuals consistent with their gender identity. Recent Section 1557 claims brought include allegations that an insurer's policy that fertility treatments be covered after one year of "trying" to get pregnant discriminates against same sex couples as well as allegations that a health care provider refused to use the correct pronouns and otherwise treat an individual in accordance with their gender identity.

While Section 1557 applies only to "covered entities," e.g., entities that operate a health program or activity that receives federal financial assistance (including credits, subsidies, or contracts of insurance), Section 1557 cases may still be referred to the Equal Employment and Opportunity Commission ("EEOC"). Practically, sponsors of health and welfare plans should:

• Review written policies and procedures to ensure that they comply with Section 1557 and do not specifically exclude benefits based on a participant's sex.
• Provide notice to plan participants informing them of their rights, including their rights under the new Section 1557
• Ensure that individuals are properly trained and educated on Section 1557.
• Work with service providers to ensure that plans are properly interpreted and applied to comply with Section 1557.

For more on Section 1557, including whether your health and welfare program qualifies as a covered entity, review of your current plan and policies, and guidance on actions to take to ensure compliance with Section 1557, do not hesitate to reach out to our Health and Welfare experts.

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.