On May 18, 2016, the Office of Civil Rights (OCR) of the US Department of Health and Human Services (HHS) published final regulations implementing section 1557 of the Affordable Care Act (ACA). Section 1557 prohibits discrimination based on race, color, national origin, sex, or disability in health activities and programs that receive federal funding or assistance. The reach of the final regulations is fairly broad and covers health insurance issuers, health care providers (including pharmacies and health clinics), and some group health plans. Following are three key takeaways for employer’s sponsoring group health plans.
1. The regulations prohibit discrimination in both health plan design and administration. A health plan subject to the regulations may not:
- deny or limit health coverage;
- deny a claim;
- employ discriminatory marketing or benefit designs; or
- impose additional cost sharing
on the basis of an individual’s race, color, national origin, sex, age, or disability.
Much of the attention in the wake of this publication has focused on the prohibition on discrimination on the basis of sex stereotyping and gender identity. Specifically, the final regulations provide that a health plan subject to the regulations may not:
- deny benefits to a participant based on the participant’s sex or gender identity;
- categorically exclude or limit health services related to gender transition (“health services related to gender transition” is not defined in the regulations but OCR stated its intention to interpret these services broadly);
- deny or limit benefits for medically appropriate sex-specific health care based on the covered individual’s gender identity (e.g., medically appropriate ovarian cancer treatment cannot be denied for a transgender individual identifying as a male);
- deny treatment that is consistent with the individual’s gender identity, including access to facilities.
In sum, coverage for medically appropriate health services must be made available on the same terms and conditions for all individuals, regardless of sex assigned at birth, gender identity, or recorded gender. In addition, categorical exclusion of coverage for all health services or care related to gender dysphoria or associated with a gender transition is prohibited. That said, the final regulations explicitly state that the nondiscrimination rule does not require coverage for all medically necessary health services related to gender transition regardless of the scope of coverage for other conditions. Furthermore, group health plans may use reasonable medical-management techniques for covered services related to gender transition. However, health plans are expected to provide a neutral, nondiscriminatory reason for any denial or limitation that is not a pretext for discrimination. In the end, the requirements related to transgender coverage may effectively create a benefit mandate for health services related to gender transition. OCR predicts that providing transgender individuals with nondiscriminatory coverage and treatment will have little financial impact on carriers and covered group health plans as utilization is expected to be low.
2. What do the nondiscrimination regulations mean for employer-sponsored group health plans?
If the employer is a health care provider that receives federal financial assistance from HHS for any purpose (e.g., Medicare Parts A, C, or D, and Medicaid), the nondiscrimination rules apply to the employer in both its business as a health care provider and to its employer-sponsored group health plan regardless of funding. In short, the group health plan sponsored by an employer in the business of providing health care is required to comply regardless of whether the plan is fully insured or self-insured.
If the employer (non-health care provider) sponsors a fully insured health plan, the regulations will apply to the plan by way of the insurer. Any health insurance issuer receiving federal financial assistance from HHS via Medicare Advantage, Medicaid, or participation in the Marketplaces (federal or state-based) is subject to the regulations. Accordingly, the plans sold by any such issuer must conform with the nondiscrimination provision in both plan design and administration.
If the employer (non-health care provider) sponsors a self-insured health plan, the regulations do not apply directly to the group health plan. If the self-insured employer uses a third-party administrator (TPA) or administrative-services-only (ASO) provider that is also an insurance company, the TPA/ASO is subject to the regulations and must administer the employer’s plan in a nondiscriminatory manner or risk enforcement action by OCR. This is so because where the rules apply to a health insurance issuer, they apply to the issuer’s entire operations, including TPA/ASO operations. If, however, the TPA/ASO is administering a self-insured group health plan in accordance with the plan’s discriminatory design terms, OCR will refer the matter to the EEOC for investigation of the employer for transgender discrimination. Keep in mind – with OCR promising scrutiny of plan administration, TPAs and ASOs that are also insurance issuers may be unwilling to administer discriminatorily designed employer plans in the future.
Finally, employers should take note that under these regulations, individuals have the right to bring a legal action against – and seek compensatory damages from – a non-compliant plan, issuer or health care provider.
3. When do group health plans have to comply?
The final regulations are generally effective July 18, 2016. However, if the regulations require changes to health plan design (e.g., cost sharing, covered benefits, benefit limitations or restrictions) they are not effective until the first day of the first plan year beginning on or after January 1, 2017. For further information on how these regulations impact your employer-sponsored group health plan, please contact your benefits consultant.
The final regulations (found here) were accompanied by a press release, summary, and a fact sheet. Additional information about the final regulations and their impact for employer-sponsored group health plans can be found in this Benefits Brief from the Groom Law Group and this publication from McDermott Will & Emery.