On July 16, 2016, the Department of Health and Human Services (HHS) regulations under Section 1557 of the Affordable Care Act (ACA) went into effect with an official effective date for plan years beginning on or after January 1, 2017.  

Background

Section 1557 doesn't allow for certain “covered entities,” meaning certain health plans, health plan administrators or providers or insurers, from discriminating based on race, color, national origin, sex, age or disability. Not all health plans are considered a “covered entity” for this purpose¹. The final regulations apply only to health programs and activities funded or administered by HHS, including Exchanges. It also applies to the insurers on the Exchange with respect to the plans and services they offer outside of the Exchange, including acting as a third party administrator for employer self-funded group health plans. Section 1557 also applies to certain employers who receive federal assistance and are engaged in healthcare, such as hospitals and nursing homes. 

Requirements

Section 1557 doesn't allow for a health policy to deny or limit a health policy based on race, color, national origin, sex, age or disability. Additionally, they cannot change any of the benefit offerings or implement discriminatory benefit designs. 

Covered entities cannot discriminate based on disability and must provide language assistance to individuals with limited English and meaningful access to health programs, such as offering a free qualified interpreter or written translations. 

Perhaps most importantly, a covered entity cannot take into consideration or deny or limit coverage for health services provided to a transgender individual based on the sex that individual was assigned at birth. For example, if a covered entity has a transgender individual listed as male, it couldn't deny a claim for a mammogram simply because it wouldn't be a standard service for the individual’s gender on file. A covered entity also may not exclude coverage for all health service related to gender transition. Lastly, a covered entity can't deny or limit coverage for health services related to gender transition if such a denial or limit can be considered discrimination towards the individual. 

What that Means for Employers

Although Section 1557 doesn't require coverage for gender transition related surgery for individuals with gender dysphoria or gender reassignment, they can't be discriminatory in not offering such procedures. Excluding those types of surgeries and procedures, for instance, would also mean that health plans would have to deny coverage for corrective surgery for newborns that are born with under-developed genitalia or a hysterectomy for a cancer patient. Because of that, it would be difficult for a plan to exclude those services. It's important to note that the regulations allow for gender reassignment to only be allowed based on medical necessity and other clinical criteria, so long as the criteria is neutral and non-discriminatory. 

For fully-insured plans, these regulations will go into effect as of the beginning of the plan year beginning on or after January 1, 2017.  

For self-funded plans that are sponsored by an entity that operates within the healthcare field, such as nursing homes, these rules will need to be incorporated into your plan on your first renewal on or after January 1, 2017.

For all other self-funded plans, the regulations aren't quite as clear. While they don't apply directly to the employer sponsoring the plan in most cases, they will apply to most TPAs that self-funded plans use. HHS has stated that they won't process a complaint against a TPA if the alleged discrimination is related to the TPAs administration of the plan, not if the discrimination related to the plan design itself. However, if HHS doesn't have jurisdiction of the employer that's sponsoring the plan, they'll likely refer the case to the EEOC, which could view the case discriminatory under Title IX².  

BCBSIL has already stated that all of their self-funded plans that they act as a TPA for will need to comply with Section 1557 on or after January 1, 2017. If a self-funded plan doesn't wish to comply with the requirements under Section 1557, they'll need to consult with their own legal counsel to determine appropriate plan design and inform BCBSIL in writing of the decision. These plan designs will be subject to internal review.     

¹ Additionally, the use of the term “covered entity” for purposes of §1557 should not be confused with the use of that term with respect to HIPAA privacy and security requirements – the definition of a “covered entity” for HIPAA purposes is different than for §1557 purposes.

² See https://www.eeoc.gov/eeoc/newsroom/wysk/enforcement_protections_lgbt_workers.cfm for more information.

Information contained herein is not intended to constitute tax or legal advice and should not be used for purposes of evading or avoiding otherwise applicable regulatory responsibilities as issued by the federal or state government(s) and/or taxes owed under the Internal Revenue Code. You are encouraged to seek advice from your legal or tax advisor based on your circumstances.