HHS Issues New Version of Final Regulations Interpreting ACA Section 1557’s Anti-Discrimination Rules

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On May 6, 2024, the Department of Health and Human Services (“HHS”) published the third iteration of its final regulations interpreting Section 1557 of the Affordable Care Act (“ACA”). This version of the ACA Section 1557 regulations (the “2024 Regulations”) updates the department’s interpretation of Section 1557’s anti-discrimination requirements to provide greater protections against discriminatory practices in health care on the basis of race, color, national origin, sex, age, and disability.

The 2024 Regulations are set to go into effect on July 5, 2024; however, the enforcement of certain provisions will be delayed. For example, there is a delayed effective date to the extent that the regulations require design changes to coverage that is newly subject to Section 1557 on account of HHS’s latest interpretation. In such cases, the final regulations will not apply until the first day of the first plan year beginning on or after January 1, 2025.

Additionally, it is important to note that numerous lawsuits involving Section 1557’s anti-discrimination requirements continue to make their way through the courts. While the 2024 Regulations likely will become enforceable on July 5, 2024, certain aspects of the 2024 Regulations may be subject to change depending on the outcome of various cases. Plan sponsors (particularly those with self-insured health plans) are encouraged to review the terms of their plans to determine whether their plans contain any exclusions that may be contrary to Section 1557’s anti-discrimination protections (e.g., the exclusion of gender-affirming care) and whether any recent regulatory and/or case law developments may require changes to those exclusions.

Background

ACA Section 1557 generally prohibits discrimination on the basis of race, color, national origin, sex, age, or disability with respect to the administration of any “health program or activity, any part of which is receiving Federal financial assistance.” In 2016, HHS issued the first iteration of its final regulations interpreting ACA Section 1557, which provided express protection against discrimination on the basis of gender identity, sex stereotyping, and termination of pregnancy and stated that health insurance companies were broadly subject to Section 1557’s anti-discrimination rules if they had any plans or activities that received HHS funding (including, for example, if they sold plans through federal or state health insurance marketplaces).

A federal court, however, later vacated the portions of the 2016 final regulations relating to gender identity and termination of pregnancy, and in June of 2020, HHS published the second iteration of its Section 1557 regulations, which were much narrower in scope. Among other things, those 2020 regulations removed gender identity and sex stereotyping from 1557’s anti-discrimination protections and stated that entities not “principally engaged in the business of providing healthcare” (e.g., most insurance companies) are subject to Section 1557 only to the extent of their health care activities that received federal funding. However, again, after numerous lawsuits were filed challenging the 2020 regulations, federal courts blocked HHS from enforcing many provisions therein, including those removing gender identity and sex stereotyping from 1557’s anti-discrimination protections. Two courts also held that an insurer’s activities as a third party administrator (“TPA”) for self-funded medical plans were subject to Section 1557 if any other part of the insurer’s business received federal financial assistance.

Finally, in August of 2022, HHS published the proposed version of its 2024 Regulations, which, among other things, attempted to align the regulations with federal court opinions that expanded the scope of Section 1557’s protections.

2024 Final Regulations

After receiving over 85,000 public comments following the issuance of its 2022 proposed regulations, HHS published the final version of those regulations on May 6, 2024. In addition to restoring, revising, and expanding upon many protections in the 2016 version of the regulations, the 2024 Regulations also included a number of new interpretive mandates. For example, under the 2024 Regulations, HHS stated that it will consider Medicare Part B payments as a form of federal financial assistance for purposes of triggering Section 1557 protections, meaning that health care providers, suppliers, and insurers receiving Part B funds are subject to Section 1557’s anti-discrimination requirements. Additionally, entities that are subject to Section 1557’s requirements generally must let people with limited English proficiency know that language assistance services are available at no cost, and let people with disabilities know that accessibility services are available at no cost.

The 2024 Regulations further clarify Section 1557’s anti-discrimination protections apply to the use of “patient care decision support tools,” which is defined as “any automated or non-automated tool, mechanism, method, technology, or combination thereof used by a Covered Entity to support clinical decision-making in its health programs or activities.” In essence, these provisions are intended to target the use of artificial intelligence (“AI”), clinical algorithms, predictive analytics, and other tools that, purposely or inadvertently, result in discriminatory treatment in the payment or provision of health care on the basis of race, color, national origin, sex, age, or disability. The 2024 Regulations impose obligations on covered entities to conduct reasonable diligence to identify potentially discriminatory output resulting from their uses of clinical algorithms/AI tools.

The 2024 Regulations make clear that “discrimination on the basis of sex” includes discrimination based on sexual orientation and gender identity. In terms of how Section 1557 applies to companies in the health insurance industry, the 2024 Regulations expand the interpretation of “health program or activity” to include not only “healthcare” but also the provisions of “health insurance coverage and other health-related coverage.” Essentially, under the 2024 Regulations, HHS clarifies that Section 1557 applies to all of the operations of a covered entity, including an insurer’s TPA activities if the insurer receives federal financial assistance with respect to other parts of its business. Thus, although self-funded group health plans are not subject to Section 1557 directly (unless they receive federal financial assistance), they will be subject to Section 1557 indirectly to the extent that their TPAs engage in other business activities that are subject to 1557. However, it is important to note that the 2024 Regulations explicitly provide that covered entities may rely upon applicable federal religious freedom laws to dispute the application of Section 1557. HHS stated that, in enforcing Section 1557’s requirements, it would respect federal protections for religious freedom and conscience and that recipients either may simply rely on those protections or may seek written assurance from HHS of those protections.