May 28, 2019

HHS Proposes to Revise ACA Section 1557 Rule: Impacts Transgender Benefits and Group Health Plan Notices

Affordable Care Act Photograph

On May 24, the U.S. Department of Health and Human Services (HHS) issued a proposed rule to revise regulations implementing and enforcing Section 1557 of the Affordable Care Act (ACA). Section 1557 is a civil rights provision in the ACA that prohibits discrimination on the basis of race, color, national origin, sex, age or disability in any health program or activity that receives federal funding. According to Office of Civil Rights Director, Robert Severino, the proposed rule would remove $3.6 billion in regulatory burdens that are ultimately being passed down to patients.

Employer-Sponsored Plans Subject to Section 1557.  The HHS regulations issued under Section 1557 generally apply to self-insured employer-sponsored group health plans if either the employer or plan receives funding from HHS. Two common examples are (i) a group health plan sponsored by a hospital or nursing home that accepts Medicare or Medicaid, and (ii) a retiree health plan that receives Medicare Part D subsidies. The regulations also apply to fully-insured group health plans if the underlying insurance carrier is subject to Section 1557.

Initial Interpretation of Section 1557.  In 2016, HHS issued regulations reinterpreting Section 1557’s prohibition of discrimination “on the basis of sex” to include termination of pregnancy and gender identity, and prohibiting categorical coverage exclusions for services related to gender transition services (defined as one’s internal sense of being “male, female, neither, or a combination of male and female”).

Proposed Revisions to Section 1557 Nondiscrimination Requirements.  This definition of sex discrimination in the 2016 regulations was challenged by several states and health care entities, which resulted in a federal court enjoining enforcement of the Section 1557 termination of pregnancy and gender identity provisions. As a result, HHS has now issued proposed revisions to the Section 1557 regulations, removing pregnancy termination and gender identity from the definition of sex discrimination. Under the revised rule, group health plans will no longer be required by Section 1557 to cover gender transition services, including both prescription drugs and medical procedures.

Proposed Revisions to Section 1557 Notice Requirements.  The proposed revisions also remove the requirement that covered group health plans include notice of their nondiscrimination policies and taglines informing individuals that language assistance services are available in significant publications. This change would allow group health plans subject to Section 1557 to remove nondiscrimination notices and taglines from plan communications, including summary plan descriptions, enrollment materials, summaries of material modifications, summaries of benefits and coverage, COBRA notices, benefit claim forms, explanations of benefits and claim denial letters, summary annual reports, and IRS Form 1095-C employee statements.

Proposed Effective Date.  Due to the cost savings that will result, HHS has proposed making the changes effective 60 days after publication of the final rule.

If you have questions about the impact of the proposed revised Section 1557 rule on your group health plan, please contact your Executive Compensation and Employee Benefits Counsel at Smith, Gambrell & Russell, LLP.

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