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Further Court Action Affects Enforcement of Section 1557 Regulations

11.23.2020

A second federal trial court recently blocked the U.S. Department of Health and Human Services (HHS) from enforcing certain provisions of its 2020 final regulations under Section 1557 of the Affordable Care Act (ACA). Sec. 1557 prohibits discrimination in certain health programs and activities on the basis of race, color, national origin, sex, age and disability.

The 2020 regulations were scheduled to take effect August 18, 2020. They narrowed the agency’s previous interpretation of Sec.1557 by repealing preceding regulatory provisions that the HHS considered duplicative of, or inconsistent with, regulations implementing Titles VI and IX of the Civil Rights Act of 1964 and other federal nondiscrimination rules.

However, in August, a federal trial court in another case, Asapansa-Johnson Walker v. Azar, blocked portions of the 2020 regulations that removed nondiscrimination protections for gender identity and sex stereotyping. The court left in effect the previous regulations’ more expansive definitions of “on the basis of sex,” “gender identity” and “sex stereotyping” while litigation in that case continues. In September, a second decision was handed down by another federal trial court: Whitman-Walker Clinic, Inc. v. HHS.

Injunction issued

The court in Whitman-Walker has issued a separate nationwide preliminary injunction blocking the HHS from enforcing its repeal of the regulatory definition of discrimination “on the basis of sex” insofar as it includes discrimination on the basis of sex stereotyping.

In addition, the court blocked enforcement of the religious exemption in Title IX, which was added to the 2020 regulations. (The exemption excuses certain religious organizations from Title IX’s nondiscrimination mandate if the mandate’s application would be inconsistent with the organization’s religious tenets.) However, the court denied requests to block other portions of the 2020 regulations, including provisions narrowing the scope of covered entities and eliminating the notice and tagline requirements.

Awareness imperative

As challenges to the Sec. 1557 nondiscrimination regulations continue through the courts, employers should be aware that other nondiscrimination requirements may apply. For instance, Title VII of the Civil Rights Act prohibits gender-based discrimination in connection with the employment relationship. Thus, plan sponsors are potentially subject to Title VII challenges over plan provisions that allegedly discriminate on the basis of gender.

In light of the U.S. Supreme Court’s decision in Bostock v. Clayton Cnty., Ga., such challenges could potentially include claims that a plan provision discriminates based on sexual orientation (for example, by limiting eligibility to opposite-sex spouses) or transgender status (for instance, by including a blanket exclusion of coverage for gender dysphoria). Work closely with your benefits advisor, including a qualified attorney, to ensure your organization protects itself from legal exposure.

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