District Courts Issue Temporary Stay on Section 1557 Final Rule

In May 2024, we discussed the final rule modifying §1557 non-discrimination requirements applicable to health care providers and health plan issuers, TPAs, and PBMs who accept federal funds for any part of their business.

Lawsuits were filed with respect to “the Rule’s interpretation of § 1557’s prohibition on sex discrimination to include discrimination on the basis of gender identity.” This expansion was essentially going to force virtually all health plans nationwide to remove broad limitations or exclusions on gender affirming care, including in Medicaid and in States with laws prohibiting certain types of gender affirming care for minors.

Three US district courts have now issued preliminary injunctions that prohibit taking §1557 enforcement action against health plan issuers, TPAs, or PBMs that administer group health plans which impose limitations or exclusions on gender affirming care.

These courts have concluded that federal agencies exceeded their authority in expanding Title IX to define discrimination on the basis of sex as including gender identity. Title VII prohibits employment discrimination because of an individual’s sex, and Bostock made it clear that includes gender identity. However, the courts contend Title IX (which §1557 relies on to define discrimination) uses different language and Bostock does not carry over.

• The Florida decision limits the injunction to just Florida and to just the portions that extend discrimination on the basis of sex to include gender identity.
• The Texas decision limits the injunction to Texas and Montana but delays the effective date of the entire final §1557 rule, not just the portion being challenged. The court in this decision specifically mentions how “HHS itself previously recognized that Title IX does not “encompass gender identity.” See 85 Fed. Reg. at 37,167–68.”
• The Tennessee decision limits the injunction to just the portions that extend discrimination on the basis of sex to include gender identity, but applies the injunction nationwide (probably because the plaintiffs included 15 States and Commonwealths).

Employers hoping to categorically limit or exclude care related to gender identity will still face potential lawsuits under Title VII, as we’ve discussed before here and a 2022 court decision here. Members of the Christian Employers Alliance remain protected from such Title VII lawsuits with respect to broadly excluding gender affirming care from coverage, and these new injunctions will likely enable them to remain with their current health insurance issuers, TPAs, and PBMs (for now).

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.