May 08, 2024

The Department of Health and Human Services (HHS) and the Office for Civil Rights (OCR) published a final rule – modifying Section 1557 of the Affordable Care Act (ACA) – on May 6, 2024.

Background on Section 1557 and New/Resumed Requirements

Section 1557 of the ACA prohibits discrimination based on race, color, national origin, sex, age, or disability in certain health programs or activities and is one of the government’s most powerful tools to ensure nondiscriminatory access to health care. In early 2020, HHS issued Section 1557 regulations that limited the law’s scope and removed certain provisions that addressed actions based on sex stereotyping and gender identity; the new rule issued this week restores those provisions.

In addition to explicitly restoring certain terms for LGBTQ+ patients and others, the final rule broadens the scope of the law to apply to health insurance issuers and all HHS-administered health programs. In the 2020 rule, the Trump administration believed that too many insurance products were subjected to nondiscrimination protections and narrowed the scope. The new rule released by the Biden administration this week reverts and extends the standard to a broader cross-section of insurance activities.

In general, the 1557 rule applies to “covered entities” including recipients of “Federal financial assistance” (FFA), the definition of which is highly specific and includes grants, loans, credits, subsidies, some contracts, and any other direct or indirect assistance of funds, services of federal personnel, and other forms of value/assistance. While many employers do not receive FFA and thus would not be a “covered entity,” for employers that themselves or with respect to their benefit programs receive FFA (or are otherwise covered), they may directly be subject to these requirements (and not excluded per the exception for employers described below).

Among other requirements, the latest rule also generally requires covered entities to provide and post notice informing individuals of their civil rights under Section 1557. Those covered by the rule must also provide a notice informing individuals that free language assistance services and auxiliary aids and services are available to protect individuals with limited English proficiency (LEP) and individuals with disabilities. The notice must be provided in the top 15 languages spoken by individuals with LEP in the relevant State or States where the entity operates. HHS/OCR included sample notices in English and 47 other languages that can be used if entities choose to do so. Certain covered entities may have additional requirements, such as those with 15 or more employees needing to implement grievance procedure-related provisions.

Exception for Employer Plan Sponsors of Group Health Plans (with a Caveat)

The final rule specifically excludes employer plan sponsors from these requirements. The rule provides that it:

shall not apply to any employer or other plan sponsor of a group health plan, including but not limited to, a board of trustees (or similar body), association or other group, with regard to its employment practices, including the provision of employee health benefits.

Caveat – HHS/OCR makes clear in the rule’s preamble discussion that there may be certain circumstances where a self-insured plan’s service provider that is itself separately covered by these rules could be found to have exercised influence or control over the design or plan elements to an extent that it would be responsible for ensuring compliance with the requirements for the otherwise exempt plan. This would most likely occur with a third-party administrator/administrative services only (TPA/ASO) vendor whose insured business or other lines of business are subject to the 1557 rules directly, and whose services for the self-insured employer sponsored plan falls within the parameters described by the rule and the preamble.

More specifically, the Department clearly sets forth two paths for potential indirect impact/investigation/enforcement of which employer plan sponsors should be mindful.

When OCR investigates a potentially discriminatory action or plan design related to a self-insured group health plan coverage administered by a covered entity acting as a TPA/ASO, OCR will take into account the party responsible for the alleged discriminatory conduct.

• 1 | Where the alleged discrimination originated with or was operationalized by the action of the covered TPA/ASO rather than with the plan sponsor, the third-party administrator could be liable for discrimination under section 1557.
• 2 | Where the alleged discrimination relates to self-insured group health plan coverage that did not originate with the covered TPA/ASO, but rather with the employer plan sponsor or the employer’s group health plan, and where the TPA/ASO played no role, OCR will refer the complaint to the Department of Labor/Equal Employment Opportunity Commission (EEOC) or Department of Justice (DOJ) for potential investigation.

With this context, it is important for self-insured plans to be aware of these 1557 requirements and work with counsel and consultants to review existing and anticipated arrangements and determine the direct and indirect exposure and appropriate health plan and TPA/ASO actions.

If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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