ACA UPDATE: HHS Issues New Section 1557 Nondiscrimination Rule

Compliance, Employee Benefits

On June 12, 2020, the U.S. Department of Health and Human Services (HHS) issued a new final rule regarding Section 1557 of the Affordable Care Act (ACA).  ACA Section 1557 applies civil rights nondiscrimination requirements to any health programs or activities that receive federal financial assistance and any programs or activities administered by an Executive Agency under Title 1 of the ACA.  The prohibited grounds of discrimination include race, color, national origin, sex, age or disability.  This Section of the ACA has been in effect since 2010 and a previous interpretive rule was issued in 2016.

The new rule eliminates many provisions of the 2016 rule in order to comply with the mandates of Congress and clarify the scope of Section 1557.  HHS felt the new rule was necessary because the 2016 rule was duplicative, confusing and imposed substantial burdens on covered entities.  In addition, two federal district courts determined that the Department exceeded its authority in promulgating parts of the 2016 rule.

The final rule does the following:

  • Removes gender identity (“an individual’s internal sense of gender, which may be male, female, neither or a combination of male and female”) and termination of pregnancy from being included as discrimination on the basis of sex.
  • Clarifies the scope of covered entities and confirms that to the extent employer-sponsored group health plans do not receive Federal financial assistant and are not principally engaged in the business of providing healthcare, they would not be covered entities. This includes ERISA and non-ERISA plans.  Entities that receive federal funding through Medicare Part C, Medicare Part D or Medicaid programs would be subject to Section 1557 as recipients of Federal financial assistance.
  • Eliminates unnecessary or duplicative language on Civil Rights Enforcement and states that deference will be given to relevant existing regulations and relevant case law with respect to each of the underlying civil rights statues as applied to the health care context under Section 1557.
  • Eliminates the regulatory burdens for covered entities to send notices and taglines with all significant communications, clarifies the provision of health insurance, brings meaningful access for persons with limited English proficiency into conforming with current DOJ and HHS guidance and permits English-language interpreting services to be audio-based rather than requiring them to be video-based.

It is important to note that nothing in the final rule prohibits a healthcare provider from offering or performing sex-reassignment treatments and surgeries, or an insurer from covering such treatments and procedures, either as a general matter or on a case-by-case basis.

The HHS fact sheet provides additional information and this rule will be effective as of August 18, 2020.

Key Takeaway

This rule from HHS changes several requirements in the 2016 rule regarding Section 1557 and nondiscrimination, including the requirement to provide coverage for gender transition services and provide expanded communication on their requirements.  It should be noted that the notice and coverage requirements are now optional for organizations who were previously required to expand coverage due to receipt of federal funding in relation to their health programming.  If you have questions or concerns about this new rule, please contact your M3 Account Team.


The information above is a summary of laws and regulations regarding provisions relating to provisions in the Patient Protection and Affordable Care Act (PPACA). The information should not be construed as legal or tax advice. In all cases, employers should be advised to consult with tier accountant or legal counsel for assistance.

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