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Supreme Court ruling on sex discrimination issued days after final ACA 1557 regulations

Health and Benefits|Inclusion and Diversity

By Anu Gogna and Benjamin Lupin | June 29, 2020

While the Supreme Court case was about employment discrimination, the same legal interpretation will likely carry over to health care issues.

On June 15, 2020, the U.S. Supreme Court ruled that the firing of employees due to their gender identity or sexual orientation status is unlawful discrimination “on the basis of sex” under Title VII of the Civil Rights Act of 1964. Just three days prior to the ruling, on June 12, 2020, the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) announced the issuance of final regulations (accompanied by a fact sheet) on Section 1557 of the Affordable Care Act (ACA), which prohibits discrimination on the basis of race, color, national origin, sex, age or disability in health programs and activities receiving federal financial assistance (FFA). These final Section 1557 rules remove protections against discrimination based on gender identity, among other changes.

In light of the Supreme Court’s decision, it is unclear whether HHS will withdraw the affected portion of final Section 1557 regulations or clarify that discrimination on the basis of sex includes gender identity.

U.S. Supreme Court Decision

In Bostock v. Clayton County, the Supreme Court held that Title VII, which prohibits discrimination in the workplace on the basis of race, religion, national origin and sex, extends to sexual orientation and gender identity. The court, by a vote of 6 to 3, said “sex” is a distinct characteristic but inseparable from the concepts of sexual orientation and gender identity, and therefore workplace discrimination on that basis is illegal.

Final ACA Section 1557 regulations

The final Section 1557 regulations repeal protections against discrimination based on gender identity, limit the scope of who is a covered entity, and eliminate the notice and tagline requirements in all substantial communications. They make the following changes to the existing regulation, which was finalized in 2016 and was a source of ongoing litigation:

  • Definitions. The definitions in the 2016 regulation are repealed, such as “covered entity” and “on the basis of sex” (which included “gender identity” and “termination of pregnancy”). As a result, the protections in Section 1557 against discrimination based on gender identity and termination of pregnancy are removed.
  • Scope of Section 1557. Section 1557 now applies to 1) entities principally engaged in health care, and 2) health care activities of other entities to the extent those activities are funded by HHS. Section 1557 would not apply to employer-sponsored group health plans, excepted benefits or church plans unless they receive FFA and are principally engaged in the business of providing health care. In addition, employer group waiver plans and Medicare Part D Retiree Drug Subsidy plans would be subject to Section 1557 to the extent they receive FFA.
  • Notice and taglines. The final regulations repeal the previous mandate for covered entities to distribute non-discrimination notices and tagline translation notices in at least 15 languages in all significant communications; however, the final regulations still require covered entities to provide taglines when necessary to ensure meaningful access by individuals with limited English proficiency. The 2016 regulation’s requirement that foreign language translators and interpreters be provided for non-English speakers also remains. The government estimates that eliminating the mandate for entities to send excessive notices and taglines will result in a reduction of administrative costs of $2.9 billion over the next five years.
  • Enforcement. The final regulations provide that Section 1557 must be enforced in a manner consistent with other statutes, such as the Religious Freedom Restoration Act, federal conscience-protection laws and the First Amendment to the Constitution. OCR does not adopt a new explicit definition of “on the basis of sex” but will interpret “sex” solely as “biological sex” (which HHS defines as a person’s genetic sex at birth). As such, portions of the 2016 regulations that are duplicative of, or inconsistent with, the long-standing civil rights regulations are removed.

The final Section 1557 regulations will be effective 60 days following publication (which is scheduled for June 19, 2020).

The intersection of Section 1557 and the Bostock case

While the Bostock case was specifically about employment discrimination, the same legal interpretation will likely carry over to other areas, most notably health care.

The Trump administration argued in the final Section 1557 regulations that the rules set forth in the 2016 regulation were an impermissible overreach and that no civil rights law passed by Congress extended employment protections based on gender identity. The Bostock decision puts this argument in doubt and seems to strongly support those who have and will file legal challenges to the new final regulations.

While the Bostock ruling does not directly impact the final Section 1557 rules (because Section 1557 incorporates the nondiscrimination protections in Title IX of the Education Amendment Act of 1972 [Title IX]), it raises concerns about HHS’s interpretation of the term “on the basis of sex” to exclude gender identity since HHS acknowledges in the preamble that “Title VII case law has often informed Title IX case law with respect to the meaning of discrimination on the basis of sex.”

Future health care discrimination litigation

Due to the changes to the scope of the term “sex” for Title VII purposes set forth in Bostock and the final Section 1557 rules, there remains an open issue on the requirement for employer-sponsored health plans to provide coverage for medically necessary procedures connected to gender identity. The Bostock ruling did not specifically address this issue, which is currently being litigated in lower courts.

This issue will likely need to be litigated and could make its way to the Supreme Court. In the meantime, employers sponsoring group health plans that exclude medically necessary gender identity-related procedures should consult with legal counsel to review the Bostock case and determine if any changes will be needed to the terms of their plan.

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