Heads Up! All health plans that receive federal financial assistance, including most self-funded plans, should check that their plans don’t discriminate on the basis of sex.

Self-funded plans that contract with Medicare or Medicaid or that use service providers who receive federal financial assistance may be subject to a rule proposed last fall by the Department of Health and Human Services. The proposed rule, Nondiscrimination in Health Programs and Activities (RIN 0945–AA02), issued on Sept. 8, 2015, provides mechanisms for applying and enforcing Section 1557 of the Affordable Care Act, which is the first federal civil rights law to prohibit discrimination on the basis of sex in health care.

Assistant Labor Secretary Phyllis C. Borzi said Feb. 11 at the ABA Section of Labor and Employment law Employee Benefits Committee Midwinter Meeting that self-funded plans should “look carefully” at the proposed rule, because it could have a big impact on plan benefit design. (See related story, Borzi: Health Nondiscrimination Rule Is ‘Trap for the Unwary').

The HHS proposed rule was issued under ACA Section 1557, which prohibits discrimination on the basis of race, color, national origin, sex, age or disability in health programs and activities that among other things, receive federal funding. While Section 1557 references specific statutes that define the discrimination it covers, including sex, federal case law is unsettled as to whether this includes discrimination based on sexual orientation, Kirsten Scott of Renaker Hasselman LLP in San Francisco, told Bloomberg BNA Feb. 25. However, the proposed rule does say that as a matter of policy, HHS is committed to banning discrimination based on sexual orientation, Scott said. “HHS is indicating that it’s committed to banning discrimination based on sexual orientation but is recognizing that it needs to create regulations that are supported by the rulings of the courts,” she added.

While Section 1557 does not explicitly include discrimination based on sexual orientation, it does make clear that sex discrimination includes discrimination based on gender identity, sex stereotyping and pregnancy. The HHS gives the following examples on its website:  

  • Individuals cannot be denied health care or health coverage based on their sex, including their gender identity.
  • Individuals must be treated consistent with their gender identity, including in access to facilities.
  • Sex-specific health care cannot be denied or limited just because the person seeking such services identifies as belonging to another gender. For example, a provider may not deny an individual treatment for ovarian cancer, based on the individual’s identification as a transgender man, where the treatment is medically indicated.
  • Explicit categorical exclusions in coverage for all health care services related to gender transition are facially discriminatory. Other exclusions for gender transition care will be evaluated on a case-by-case basis.

The proposed rule applies to any health program or activity, any part of which receives funding from HHS, such as hospitals that accept Medicare patients or doctors who treat Medicaid patients. It applies to any health program that HHS itself administers. In addition, it applies to state-based marketplaces and to all plans offered by issuers that participate in those marketplaces.

Borzi, at the ABA meeting, cautioned that self-funded plans need to take a close look at these rules. For example, it a self-funded plan has an administrative-services-only contract with an insurer for benefits administration, if that insurer receives any federal funding, such as Medicare payments, that insurer is subject to Section 1557 and so is the plan, Scott said.

Tammy Killion, of Groom Law Group, said “Section 1557 of the ACA is short and deceptively simple.  HHS has interpreted the provision regarding federal financial assistance broadly, so broadly in fact that self-funded plans—plans that are not obviously included in the scope of Section 1557—may be subject to these proposed regulations.  Many self-funded plan sponsors may not be aware that Section 1557 may apply to their self-funded plan either because they receive federal financial assistance or because they use the services of a third-party administrator that is subject to the rule (i.e., a health insurance issuer).” 

Scott said there are a few actions plans can do to make sure they comply with the proposed rule:  

  1. Make sure the plan does not have any categorical exclusions with respect to benefits for transgender individuals.

  2. Make sure the plan has a way to override denials of care based on gender if the person is transgender (for example, if the computerized system automatically denies certain procedures based on sex, such as mammograms, there needs to be a process in place for a case by case determination for transgender individuals).

  3. Modify plan documents and SPDs if necessary.

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