In April 2024, the Department of Health and Human Services (HHS) finalized revised regulations implementing Section 1557 of the Patient Protection and Affordable Care Act (ACA). The new, final Section 1557 regulations (2024 Rule) have staggered effective dates—beginning as early as November 2, 2024—and the 2024 Rule now applies to recipients of Medicare Part B payments. In this article, we discuss some notable changes in the 2024 Rule and provide a chart summarizing key requirements and compliance deadlines.
Background
Section 1557 prohibits discrimination based on race, color, national origin, age, disability, or sex and applies to health programs and activities receiving Federal financial assistance (referred to as covered entities). Section 1557 has been in effect since the enactment of the ACA in 2010, and HHS’ Office of Civil Rights (OCR) has been enforcing the statute since then. However, much of the law’s reach has been determined by implementing regulations issued by different presidential administrations. Across the Obama, Trump, and Biden administrations, the Section 1557 implementing regulations have oscillated in their interpretations and priorities, particularly with respect to the scope of entities covered by the law and nondiscrimination protections based on sexual orientation, gender identity, and pregnancy-related conditions. Federal court decisions have also impacted application of Section 1557 on similar grounds.
Notable Changes in the 2024 Rule
The 2024 Rule reinstates and expands upon much of the 2016 Obama-era regulations and is a reversal from much of the 2020 Trump-era regulations. Compared to prior versions of the final regulations, notable changes in the 2024 Rule include, but are not limited to, the following:
- Clarifies the types of entities subject to Section 1557 and changes the HHS interpretation to include recipients of Medicare Part B payments.
- Explicitly provides for nondiscrimination protections based on sex characteristics (including intersex traits), pregnancy or related conditions including pregnancy termination, sexual orientation, gender identity, and sex stereotypes.
- Applies nondiscrimination protections to the use of patient care decision support tools, including in the use of clinical algorithms and other artificial intelligence (AI).
- Expands protections and requirements for auxiliary aids and services (for individuals with disabilities) and language assistance services (for individuals with limited English proficiency), including in telehealth.
- Imposes new requirements related to: (1) written policies and procedures; (2) customer/patient notices; and (3) training of relevant employees.
Types of Entities Subject to 1557
Section 1557 applies to the following:
- Health programs or activities that receive direct or indirect Federal financial assistance from HHS.
- Health programs or activities administered by HHS.
- The health insurance marketplace and all health plans offered by issuers that participate in those marketplaces that receive Federal financial assistance from HHS.
Section 1557 also applies to all of the operations of any entity “principally engaged in” the provision or administration of health projects, enterprises, ventures, or undertakings to: (1) provide or administer health-related services, health insurance coverage, or other health-related coverage; (2) provide assistance to persons in obtaining health-related services, health insurance coverage, or other health-related coverage; (3) provide clinical, pharmaceutical, or medical care; (4) engage in health or clinical research; or (5) provide health education for healthcare professionals or others. Many hospitals, health clinics, nursing homes, and other clinical entities were subject to Section 1557 under prior versions of the regulations and continue to be subject to Section 1557 under the 2024 Rule.
New Application to Medicare Part B Recipients
Notably, the 2024 Rule expands the types of entities subject to Section 1557 by treating recipients of Medicare Part B payments as covered entities subject to Section 1557. Despite HHS’ longstanding position that Part B funding does not constitute Federal financial assistance, the preamble to the 2024 Rule states explicitly that HHS is changing its interpretation to include Part B recipients, and any providers who accept Part B patients are now subject to Section 1557. HHS’ stated rationale behind the change in interpretation is that the federal government covers half the cost of Part B, and although Part B enrollees may pay premiums for a portion of coverage, providers still receive Federal financial assistance through the program. HHS further explained that through Part B, the government assists healthcare providers by making available to them a segment of the patient population that would otherwise not have been able to afford these specific providers or the offered medical services in general.
We anticipate that HHS’ change in interpretation to include Part B as Federal financial assistance will result in many physician practices now being treated as subject to Section 1557. For recipients that do not receive any Federal financial assistance other than Part B funds and are newly required to comply with Section 1557, the deadline for compliance with the 2024 Rule is July 5, 2025.
Employer Activities No Longer Subject to 2024 Rule
In contrast to expanding the 2024 Rule’s application, HHS clarified in the 2024 Rule that Section 1557 no longer applies to activities of entities when acting in their capacities as employers, including the provision of employee health benefits. This is a departure from prior versions of the regulations, which treated employee health benefits as subject to Section 1557 for entities principally engaged in providing healthcare services. Thus, the 2024 Rule now pertains entirely to patient- and public-facing health programs and activities.
Discrimination Based on Sex
Much of the ongoing litigation surrounding Section 1557 relates to the interpretation of discrimination “based on sex.” The 2024 Rule explicitly provides for nondiscrimination protections based on: (1) sex characteristics (including intersex traits); (2) pregnancy or related conditions including pregnancy termination; (3) sexual orientation; (4) gender identity; and (5) sex stereotypes. This is a slight expansion as compared to Obama-era regulations and a complete change compared to Trump-era regulations. As of the date of this alert, various federal district courts have stayed or enjoined provisions in the 2024 Rule regarding the interpretation of sex discrimination and one district court in Texas has stayed the 2024 Rule in its entirety in Texas and Montana. These debates and ensuing litigation are likely to continue and will undoubtedly be influenced by the outcome of the 2024 presidential election.
Discrimination Arising from Decision Support Tools and AI
The 2024 Rule reflects HHS’ position that discrimination through the use of patient care decision support tools, including the use of clinical algorithms and other AI tools also violates Section 1557. HHS had already zeroed in on clinical algorithms prior to the 2024 Rule during Section 1557 audits and investigations. Because many of the decision support tools use input variables or factors that measure race, color, national origin, sex, or disability, covered entities must take reasonable steps to mitigate discrimination once made aware of the potential for discriminatory results from the use of these tools. The 2024 Rule does not apply to tools used to support decision-making unrelated to clinical decision-making affecting patient care or that are outside of a covered entity’s health programs or activities.
Expanded Protections for Effective Communication and Language Assistance in Telehealth
HHS generally recognizes that effective communication is paramount to ensuring that individuals with disabilities or limited English proficiency (LEP) have meaningful access to health programs and activities. The 2024 Rule provides that covered entities must take reasonable steps to identify those individuals likely to be directly affected or served by the health program or activity, and it obligates covered entities to provide appropriate auxiliary aids and services, as well as language assistance services, in a timely manner and free of charge. The 2024 Rule further expands these protections by applying these requirements to telehealth.
Written Policies and Procedures; Customer/Patient Notices; Training
The 2024 Rule imposes several new requirements related to: (1) written policies and procedures; (2) customer/patient notices; and (3) training of employees that differ from requirements under the prior Section 1557 regulations. These new requirements, including new compliance deadlines, are summarized in the linked chart. Note that the chart is only a summary of the main requirements and does not contain a detailed explanation of all the nondiscrimination protections required under the 2024 Rule.
Action Steps
Covered entities should analyze the specific nondiscrimination requirements under the 2024 Rule to ensure their operational compliance, particularly the expanded protections related to auxiliary aids and services, language assistance, and the use of patient care decision support tools, including clinical algorithms and AI. Covered entities should also take steps to review and/or implement their written policies, procedures, and training requirements. Failure to do so may result in inadvertently discriminating against patients or customers in violation of Section 1557.
We are monitoring the ongoing litigation and other developments regarding Section 1557.
