On May 18, 2016, the Department of Health and Human Services (“HHS”) issued final regulations interpreting the nondiscrimination provisions of Section 1557 of the Affordable Care Act (“ACA”).  The rule mainly impacts insurers and health care providers that receive federal subsidies from HHS.  But certain self-insured employer sponsored group health plans are also subject to the rule, and may need to alter their plan designs to comply with the rule. 

What the Rule Does

Section 1557 of the ACA generally bars discrimination on the basis of race, color, national origin, sex, age, or disability in any health program or activity that receives federal financial assistance.  HHS broadens the definition of sex discrimination to include discrimination on the basis of gender identity, consistent with other recent federal agency guidance in this area.  This means that entities covered by the rule may no longer deny or limit gender specific health care because the person seeking that care identifies with or belongs to another gender. 

Thus, to the extent that an employer’s group health plan is subject to the rule, the plan may no longer include categorical coverage exclusions for services related to gender transitions.  Further, a plan may no longer deny claims, limit coverage, or impose additional cost sharing when such denial or limitation is due to the fact that the individual identifies as transgender. 

Who is Covered by the Rule?

Only health programs or activities that receive federal financial assistance from HHS are covered by the rule.  Federal financial assistance, for purposes of Section 1557, means payments, subsidies or funds provided by or administered through HHS.  This includes premium tax credits for the purchase of insurance coverage on an ACA health insurance marketplace, certain Medicare payments, and Medicare Part D subsidies. 

A group health plan sponsored by an employer that is not principally engaged in providing or administering health services may nevertheless be subject to the rule where either the employer or the plan receives federal financial assistance (e.g., Medicare Part D subsidies) with respect to the plan.  The rule also applies to group health plans sponsored by employers that are principally involved in providing health care (e.g., a hospital system or insurer) that receive federal financial assistance from HHS unrelated to its group health plans.

Additional Requirements

The rule requires covered entities to post a notice of nondiscrimination on its website, and incorporate that notice into hard copies of significant publications issued by the covered entity. The notice should include foreign language taglines addressing the availability of language assistance services in the top 15 languages spoken by individuals with limited English proficiency in the state or states where the covered entity operates.  The rule further requires covered entities to offer language assistance services (translation and interpreters) free of charge, to the extent that such services provide meaningful access to the individual.  Covered entities with 15 or more employees also need to adopt a grievance procedure and designate an individual responsible for compliance with Section 1557. 

What Should Plan Sponsors Do Now?

Most self-insured employer sponsored group health plans are unlikely to be subject to the rule, but it is important that employers determine whether they receive federal financial assistance from HHS with respect to their group health plans, or whether their group health plans receive federal financial assistance.  

Employers and plan sponsors who are subject to the rule should begin to review their health plan designs and eliminate categorical coverage exclusions for gender transition services.  These types of plan design change must be made by the first day of the first plan year starting on or after January 1, 2017.  In addition, covered entities need to comply with the notice requirement by August 16, 2016.  In addition to beginning to review health plan design features, employers with plans subject to the rule should begin to assess how they will comply with notice and language assistance requirements.