ACA UPDATE: Section 1557 Nondiscrimination Rules

Compliance, Employee Benefits

The Affordable Care Act (ACA) includes Section 1557, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability. On May 18, 2016, the Department of Health and Human Services (HHS) published final
which serve to fully implement these nondiscrimination rules. The final regulations were effective July 16, 2016.

Final Rules Only Applicable to Certain Entities

Not all employers that sponsor health insurance plans are required to comply with Section 1557. Only employers that are considered a “Covered Entity” as defined within Section 1557 must comply. A “Covered Entity” includes:

  • An entity that operates a health program or activity, any part of which receives funding from HHS.
  • An entity established under Title I of the ACA that administers a health program or activity, such a state-based exchange.
  •  HHS and the programs it administers, such as the federal marketplace.

Employers that accept federal funding in relation to their health plan, including Medicare Part D reimbursements be considered a “covered entity” and therefore subject to these rules. Employers that are also health care providers and accept Medicare Parts A, C, or D reimbursements may need to comply both in its capacity as a health care provider as well as a plan sponsor if it offers health insurance benefits to its employees.

The term “Covered Entity” under HIPAA should not be confused with the definition used within Section 1557.

Prohibited Discrimination

If an employer is considered a covered entity, there are several applicable compliance provisions:

  • Every covered entity that employs 15 or more employees must designate one employee to coordinate and carry out responsibilities under Section 1557, including the investigation of any grievance alleging non-compliance.
  • Grievance procedures must be adopted to allow for the prompt and equitable resolution of grievances alleging any action prohibited by Section 1557.
  • Covered entities must notify beneficiaries, enrollees, applicants and members of the public that the covered entity:
    • Does not discriminate on the basis of race, color, national origin, sex, age or disability in its health programs and activities
    • Provides appropriate auxiliary aids and services, including qualified interpreters for individuals with disabilities and information in alternate formats free of charge and in a timely manner when necessary to ensure an equal opportunity to participate to individuals with disabilities
    • Provides language assistance services, including translated documents and oral interpretation, free of charge and in a timely manner, when necessary for individuals with limited English proficiency

In addition, covered entities much describe how to obtain services, identify the designated employee, describe the grievance procedure and how to file a complaint with the OCR. This information must be posted.

  • Covered entities must post a statement as well as taglines.
  • Covered entities must provide equal access to its health programs or activities without discrimination on the basis of sex.
  • Covered entities must remove any denial or limitation of services due to gender transition and cannot deny services based upon the birth sex of an individual.

Notice Requirements

Covered Entities are required to take initial and continuing steps to notify beneficiaries, enrollees, applicants, or members of the public of its rights under Section 1557. HHS has released model notices that Covered Entities may choose to
implement. To view these notices, please click here.

The notice requirements allow use of shorter statements on smaller communications where it is not practical to include the full Notice of Nondiscrimination.

The full Notice of Nondiscrimination and Nondiscrimination Statement are not required to be posted in non-English languages. However, the tagline is intended to inform limited English proficient (LEP) individuals of language assistance services. Covered Entities must include taglines for the top two languages spoken by LEP individuals on publications likely to access services in that State.

Covered Entities must comply with these new notice obligations within 90 days of July 18, 2016. (i.e. October 16, 2016)

Key Takeaway

Employers should determine if they are in fact a Covered Entity. The term Covered Entity is defined differently under Section 1557 than it is under HIPAA. If the employer is a Covered Entity, they must begin taking steps to make sure they comply in all respects, including the impact it has on the health insurance plan it offers to its employees. Employers should work with their health insurance carrier (fully insured) or third party administrator (self-funded) and also legal counsel to determine their compliance obligations.

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