ACA § 1557(a) (42 U.S.C. § 18116(a)) says:

Except as otherwise provided for in this title (or an amendment made by this title), an individual shall not, on the ground prohibited under title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.), title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), or section 794 of title 29, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving Federal financial assistance, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an Executive Agency or any entity established under this title (or amendments). The enforcement mechanisms provided for and available under such title VI, title IX, section 794, or such Age Discrimination Act shall apply for purposes of violations of this subsection.

Sub-section (b) emphasizes that subsection (a) does not limit the previous application of the statutes referenced in subsection (a). Subsection (c) authorizes the HHS Secretary to “promulgate regulations to implement this section.” All of this has been in effect since March 2010. So, why did HHS need over five years to propose the set of rules published September 8? Here are a few highlights. For brevity’s sake, we omit foreign language service requirements, disability accommodation, compliance certification, grievance procedure and notice posting rules, among others.

Marketplace Insurers Are Covered Comprehensively

Receipt of non-procurement federal financial assistance, including ACA Marketplace subsidies, directly or indirectly, subjects a health insurer to § 1557 coverage, for all its health plans, not just those sold through the Marketplace. See preamble footnote 73 and accompanying text and see 45 C.F.R. § 92.4. Entities legally separate from those insurers might be able to serve as third party plan administrators for otherwise uncovered, self-funded group health plans, subject to “case-by-case inquiry” into § 1557 coverage.  No guidance is given about how that call will be made.

But wait, there’s more! “A health program or activity also includes all the operations of a State Medicaid program,” we learn in preamble footnote 16.

Insurer and Medicaid program exposure matter to the extent that HHS reads § 1557 to forbid otherwise lawful plan designs or practices or to mandate practices or coverages that had been optional. Surprise! According the proposed rules, § 1557 does both.

Gender Transition (Absolutely) and Sexual Orientation (Probably) Are Protected

The proposed rules say –

The term “on the basis of sex is defined to include, but is not limited to, discrimination on the basis of pregnancy, termination of pregnancy, recovery therefrom, childbirth or related medical conditions, sex stereotyping, or gender identity.

Consequently, “discrimination on the basis of sex includes discrimination in the basis of gender identity.” So, “failure to treat individuals in accordance with their gender identity may constitute prohibited discrimination.” Thus, a covered plan may not exclude services related to gender transition. HHS also announces its support for “banning discrimination in health programs and activities . . . also on the basis of sexual orientation,” while requesting comments about the legal authority to do so.

This new protection is augmented by HHS’ decision to forbid a covered entity to discriminate against an individual because he or she, though not in a protected group, is “associated with” someone in a protected group. See 45 C.F.R. § 92.209.

Permitted Discrimination: Age Rating? Dependent Pregnancy Exclusion?

In fifty pages of preamble and rules, HHS references § 1557’s limiting, introductory clause – i.e., “[e]xcept as otherwise provided for in this title” – just four times, saying only once, in preamble footnote 38, what it might mean. See 80 Fed. Reg. 54,181 (Sept. 8, 2015). We learn there that HHS considers the age rating permitted by 45 C.F.R. § 147.102(1)(1)(iii) to be beyond § 1557’s reach. Those rules implemented ACA § 1201(4), which enacted new PHS Act § 2701 (42 U.S.C. 300gg), limiting the age rating spread for individual and non-grandfathered small group plans to a 3:1 ratio. That limit was not imposed on grandfathered or large group plans. Should we infer from footnote 38 that § 1557 bans all age-rating except the 3:1 spread permitted for individual and non-grandfathered small group plans, effectively extending that limit to large group and grandfathered, plans? Or should we infer that age rating, up to 3:1 by individual and small group plans, and all age rating by large group and grandfathered plans is unregulated by § 1557?

Consider also dependent pregnancy coverage. Pregnancy coverage for all is among the “Essential Health Benefits” required of individual and non-grandfathered, small group plans, but EHB are not mandated for grandfathered or for large group health plans. See ACA § 1302(b)(1)(d) (42 U.S.C. 18022) and ACA-added PHS Act § 2707 (42 U.S.C. § 300gg-6). Consequently, grandfathered and large group plans (like state Medicaid plans) typically exclude dependent pregnancy coverage. Does ACA Tile I “otherwise provide for” that exclusion? If not, does the exclusion violate § 1557’s prohibition of discrimination on the basis of sex?

The most obvious place for the rules to explain what “otherwise provided for” means is at 45 C.F.R. § 92.2(b)(2), titled “Limitations.” Here’s the complete text of that subsection: “[Reserved.]” Is HHS reserving its option to tell us later that § 1557 compels what was allowed elsewhere in Title I? That seems contrary to the limiting function of the opening clause. But if so, what specific discrimination, otherwise outlawed by § 1557, does Title I “provide for”? Is 3:1 age rating the sole example? Then why didn’t § 1557 reference only that section, as was done in § 1251, which distinguished the PHS Act amendments that would and would not apply to grandfathered plans?

A Broad Employee Health Plan Exemption

But for § 92.208 of the proposed rules, employer recipients of federal financial assistance might be exposed to significant new health plan mandates. However, that section seems to take back much, maybe all, of what may have been given to employees elsewhere. Here’s the entire section.

 §92.208 Employer liability for discrimination in employee health benefit programs.

A covered entity that provides an employee health benefit program to its employees and/or their dependents shall be liable for violations of this part in that employee health benefit program only when:

(a) The entity is principally engaged in providing or administering health services or health insurance coverage;

(b) The entity receives Federal financial assistance a primary objective of which is to fund the entity’s employee health benefit program; or

(c) The entity is not principally engaged in providing or administering health services or health insurance coverage but operates a health program or activity, which is not an employee health benefit program, that receives Federal financial assistance; except that the entity is liable under this part with regard to the provision or administration of employee health benefits only to the employees in that health program or activity.

The preamble summarizes that section helpfully, twice.

[W]here an entity that receives Federal financial assistance provides an employee health benefit program to its employees, it will be liable for discrimination in that employee health benefit program under this part only in the following circumstances [thereafter stating subs-sections (a) through (c) above].

[U]nless the primary purpose of the Federal financial assistance is to fund employee health benefits, we propose to not apply Section 1557 to an employer’s provision of employee health benefits where the provision of those benefits is the only health program or activity operated by the employer.

This seems to us to undercut any contention that § 1557 mandates dependent pregnancy coverage for employee health plans sponsored by recipients of federal financial assistance. Perhaps HHS did this to avoid having to specify the discrimination that is permitted by § 1557 because it is “otherwise provided for” in ACA Title I.

Note, however, that § 92.208 speaks only to employer liability. HHS sees the employer’s insurer as independently subject to § 1557 if it is a Marketplace participant. Therefore, in order to exclude coverages deemed mandated by § 1557, the employer’s plan might need to be self-funded and administered by a TPA that is not a Marketplace participant.

Comment Period

Comments on the proposed nondiscrimination rules must be received by November 9, 2015.