Section 1557 Affordable Care Act (ACA) Final Rule

The Department of Health and Human Services (HHS) released a final Rule on Section 1557 of the Affordable Care Act (ACA) intended to advance health equity and reduce disparities in health care. Section 1557 rules address on a broad basis non-discrimination in health care, and health coverage as it pertains to race, color, national origin, sex, age, or disability.

HHS requires entities that receive funding from HHS to comply with the regulations. This directly impacts insurers and administrators of group health plans since they routinely receive payments for services they provide under Medicare or Medicaid.

The potential impact to health plans relates to the coverage and potential costs of services for transgender plan members.

The basic provisions that will apply to health plans are the following:

1) No discrimination in health coverage. In providing health coverage, a covered entity may NOT on the basis of race, color, national origin, sex, age, or disability:

• Deny, cancel, limit or refuse to issue or renew health coverage.
• Deny or limit a claim or impose additional cost-sharing or other limitations or restrictions on coverage.
• Engage in discriminatory marketing practices or adopt or implement discriminatory benefit designs.

2) On the basis of sex. In addition, a covered entity may not:

• Deny or limit coverage or a claim (or impose additional cost-sharing or other limitations or restrictions on coverage) for health services provided to a transgender individual based on the fact that the individual’s sex assigned at birth or gender identity is different from the one to which such services are ordinarily available. (For example, the covered entity may not deny a mammogram or pap smear for a transgender man simply because their recorded gender is male.)
• Categorically exclude coverage for all health services related to gender transition.
• Deny or limit coverage or a claim (or impose additional cost-sharing or other limitations or restrictions on coverage) for specific health services related to gender transition if such denial or limitation results in discrimination against a transgender individual.

There is little question that fully insured plans are required to adopt the new rules. But a self-funded plan has greater latitude to decide how the plan will address the coverage of services related to gender transition or transgender individuals. Even though the claims administrator of the self-funded plan may be a covered entity, an argument can be made that the sponsor of the self-funded plan can decide whether or not to cover these services.

The actuarial cost impact of these rules is small (perhaps 0.1%) but a smaller self-funded health plan could be negatively impacted in the event a member determines that they wish to pursue sexual reassignment surgery. One gender reassignment episode could easily cost more than $100,000.

Entities that provide both “health care” that receives funds from HHS and offer self-funded “health coverage” (for example a hospital with a self-funded health plan) are encouraged to consult their ERISA attorney for further clarification of their obligations.

Self-funded plans will need to coordinate with their administrator and instruct them on how to handle benefits under the Section 1557 rules. Consultation with an ERISA attorney is advised if a plan wishes to not implement the final Section 1557 rules. Appropriate plan amendments will then need to be provided to plan participants and the stop loss carrier.

If applicable, these rules will apply on the first day of the plan year beginning on or after January 1, 2017.