HHS Proposes Sweeping Changes to Section 1557 Nondiscrimination Rules
Earlier this year, the Department of Health and Human Services (HHS) released proposed regulations that “substantially revise” the regulations implementing Section 1557 of the Affordable Care Act (ACA). They prohibit discrimination in certain health care programs and activities based on race, color, national origin, sex, age or disability. Final regulations implementing Sec. 1557 took effect generally in July 2016 and apply to health programs and activities funded or administered by HHS.
This includes federal and state Health Insurance Marketplaces (commonly known as “exchanges”) and insurers that service Health Insurance Marketplaces. It even applies to plans and certain services offered outside of Health Insurance Marketplaces. In addition, the rules apply to employee health benefits of certain employers that receive federal funding and are principally engaged in health care (such as hospitals and nursing homes).
In December 2016, a federal trial court issued a nationwide preliminary injunction blocking enforcement of the portion of the Sec. 1557 nondiscrimination regulations on gender identity and termination of pregnancy. The court stayed the proceedings to allow time for HHS to reconsider the regulations. Here are some highlights of the changes HHS has proposed.
Return to existing civil rights laws
HHS explained that it believes the final regulations exceeded their authority under Sec. 1557 and adopted erroneous and inconsistent interpretations of pre-existing civil rights law. The agency has proposed to repeal and replace significant portions of the regulations that it considers duplicative of, or inconsistent with, regulations implementing Titles VI and IX of the Civil Rights Act of 1964 and other federal nondiscrimination rules.
Notably, the proposals would repeal the final regulations’ definition of discrimination “on the basis of sex,” which includes discrimination based on gender identity or termination of a pregnancy. The proposals would also add a provision stating that Sec. 1557 will be enforced consistent with federal health care conscience protections (for example, the ACA’s protections concerning abortion and assisted suicide) as well as religious freedom protections.
Narrowed scope of enforcement
HHS has proposed to revise the final regulations’ interpretation of Sec. 1557 as applying to all operations of an entity — even if it’s not principally engaged in health care — and, instead, apply it to the health care activities of entities not principally engaged in health care only to the extent the activities are funded by HHS.
Significantly, the proposals clarify that an entity principally engaged in the business of providing health insurance wouldn’t be considered principally engaged in the business of providing health care for purposes of Sec. 1557. Furthermore, the rules wouldn’t apply to self-insured ERISA group health plans so long as (or to the extent) they don’t receive HHS funding, or the entities operating them aren’t principally engaged in the business of providing health care.
Repeal of notices and taglines
The proposed regulations would eliminate the final regulations’ requirement that regulated health companies, including Health Insurance Marketplace insurers, include nondiscrimination notices and “tagline” translation notices in at least 15 languages in all “significant communications.”
These proposals, which would not only remove gender identity discrimination from the purview of Sec. 1557, but also make the nondiscrimination rules inapplicable to most group health plan insurers and self-insured health plans, have already spawned challenges in the courts. While reconsidering the Sec. 1557 regulations through the rulemaking process, HHS continues to abide by the preliminary injunction, which remains in place.
DOL releases annual self-insured health plan report to Congress
In June, the Department of Labor (DOL) released its annual report to Congress on self-insured health plans. The report, required by the ACA, provides general information about the characteristics of private-sector self-insured health plans (including number of participants, benefits offered, funding arrangements, and plan assets), as well as publicly available financial information about their sponsoring employers. It updates the DOL’s 2018 report and is based on 2016 Form 5500 filings.
Approximately 56,200 health plans covering 75 million participants filed a Form 5500 for 2016. The number of plans increased by nearly 3% from 2015. Consistent with 2015:
- About 42 percent of plans were self-insured
- 51 percent were fully insured
- 7 percent were a combination of insured and self-insured
The percentage of self-insured plans decreased slightly, and the number of participants in self-insured plans rose slightly from 34 million (in 2015) to 34.5 million (in 2016). Although just 7 percent of plans were combined insured/self-insured, these plans covered almost 37 percent of participants. The report’s appendices provide further analysis, including information about plan funding. Appendix B notes that there’s no consistent evidence that the financial health of fully insured plan sponsors is better or worse than self-insured or combined insured/self-insured plan sponsors.
The DOL acknowledges incompleteness of the information because of inherent challenges in data collection, including the fact that the Form 5500 data includes only plans with 100 or more participants or assets held in trust, and doesn’t capture data for governmental or church plans. As a result, the report’s usefulness in identifying self-insurance trends is limited — especially among small plans that aren’t required to file Form 5500 because they’re unfunded, insured or a combination of both.