On May 6, 2024, the Department of Health & Human Services (HHS) published final rules that expand several of the requirements previously set forth in agency interpretations of the §1557 nondiscrimination requirements of the Affordable Care Act (ACA). Section 1557 prohibits discrimination in health programs and activities on the basis of race, color, national origin, sex, age, or disability. Previous final rules were issued in 2016 and 2020, with several lawsuits along the way, so it has been a contentious part of the ACA that stakeholders have struggled to normalize. Rules are enforced primarily by HHS’s Office of Civil Rights (OCR).
Most employers and group health plans are not covered entities subject to the final §1557 Nondiscrimination Rules unless the group health plan itself receives federal assistance from HHS (such as a plan receiving a Medicare Retiree Drug Subsidy).
However, insurance carriers, TPAs, and PBMs that accept HHS funding (which is most of them) are subject to the final rules with respect to their entire operations, not just the portion of their business accepting federal funds. This will likely cause most employer group health plans to experience some changes as claims administrators make efforts to comply with the expanded final rules.
Do employers need to take any action?
We anticipate only a small percentage will need to act. Certain employers will need to act if their group health plan itself receives federal funding from HHS (e.g., Medicare Part D subsidies). Employers (even employers who are covered entities, such as health care providers accepting Medicare/Medicaid) are not directly subject to the requirements on behalf of the group health plan offered to their employees UNLESS the group health plan receives funding from HHS.
What will change & when? In addition to requirements outlined below, covered entities will evaluate potential changes in plan design, if any, it must implement to comply with the regulations. If changes are needed to comply, they must be implemented with the plan year beginning on or after January 1, 2025.
In reviewing the list of additional requirements below, please note from a group health plan context, “covered entities” are health insurers, TPAs, and PBMs (and in some cases include group health plans directly receiving federal HHS funding, such as the Medicare Retiree Drug Subsidy).
- Covered entities that employ 15 or more persons: Must designate a coordinator within 120 days of the effective date of the final regulations.
- Covered entities: Required to adopt and implement a written nondiscrimination policy, grievance procedures (for covered entities employing 15 or more persons), language access procedures, auxiliary aids and services procedures, and procedures for reasonable modifications for individuals with disabilities within one year of the effective date of the final regulations.
- Train relevant employees on the covered entity’s policies and procedures. Following a covered entity’s implementation of the policies and procedures set forth above, but no later than 300 days from the effective date of the final rules.
- Covered entities: Must provide two separate notices: (i) a notice of nondiscrimination (within 120 days & annually); and (ii) a notice of availability (within one year of the effective date of the final rules & annually).
Can an employer be held responsible if a covered entity partner (i.e. insurance carrier, TPA or PBM) doesn’t comply? No.
Can employers/plan sponsors opt out of compliance based on religious or conscience objections?
Probably not. A covered entity may be able to avoid compliance with certain aspects of §1557 requirements based on a religious or conscience objection, however, the guidance suggests a covered entity may not make an exception based on an employer’s religious or conscience objection.
Note: If the employer objects to something required under §1557, the employer may be forced to find a different carrier, TPA or PBM; perhaps one that is not a covered entity or is willing to apply for its own religious objection. It is unclear how this applies to members of the Christian Employers Alliance, but the inference seems to be the court order is not violated since OCR enforces these requirements on the insurer/TPA/PBM that is a covered entity and not on the employer or group health plan.
Will insurance carriers, TPAs and PBMs increase their costs to comply?
That remains to be seen and will depend on the changes in plan design, if any, that a covered entity feels it must implement to comply with the regulations.
Group Health Plan Coverage Requirements
The rules deliberately avoid providing specific examples for types of exclusions or limitations that might be discriminatory. They put the onus on the covered entity to be able to demonstrate how a particular plan provision is not discriminatory under §1557 should a complaint lead to an OCR investigation.
It is likely that there will be lawsuits and additional agency guidance over time making it more clear exactly how plans must be designed and administered to comply with §1557 requirements.
Since most health insurance carriers will be covered entities, and TPAs and PBMs owned or operated by carriers will likely be covered entities, employers may indirectly have to comply on behalf of their group health plans because the carrier or TPA will be required to design and administer plans in accordance with §1557 requirements.
To the extent that changes are needed for the group health plan to comply with the latest §1557 guidance, the changes must be in place for plan years beginning in 2025.
Discrimination Based on Sex
The definition of “on the basis of sex” has been in flux since §1557 requirements first went into effect. The final rules expanded the definition to include discrimination based on: (i) sex characteristics, including intersex traits; (ii) pregnancy or related conditions; (iii) sexual orientation; (iv) gender identity; and (v) sex stereotypes. In addition, a covered entity must not take an individual’s sex into account in applying any rule concerning an individual’s current, perceived, potential, or past marital, parental, or family status.
For group health plan coverage, it is not clear exactly what this expanded definition of sex may require, but the guidance makes it clear that nothing in the rules specifically requires coverage for abortion. However, broad exclusions or limitations tied to coverage of treatment or services related to gender identity may violate §1557 nondiscrimination rules.
Summary
Group health plans can expect to see changes as their group health plan vendors comply with the new finalized rules.
A press release, fact sheet, FAQ and the final regulations, can be found here.
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