Health and Human Services Issues New Rule Promising More Litigation Under — Surprise! — The Affordable Care Act

By Michael Cork, Esq.

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What is the New Rule?
The U.S. Department of Health and Human Services (HHS) recently published its Final Rule implementing Section 1557 of the Patient Protection and Affordable Care Act (PPACA). As relevant to this discussion, the PPACA prohibits discrimination on the basis of sex in certain health programs. HHS bills Section 1557 as the first federal civil rights law to explicitly prohibit sex discrimination in federally–funded health programs. And the HHS's Final Rule establishes that Section 1557 prohibits the denial of health care or coverage based on gender identity and sex stereotyping. ​

​This is What Happens When the "Separation of Powers" Doctrine is Ignored.
Similar to the United States Supreme Court legislating and setting policy from the bench instead of interpreting laws, federal agencies are now interpreting laws and establishing new legal positions. The doctrine known as the "separation of powers" is losing its identity. For example, the federal agency known as the Equal Employment Opportunity Commission (EEOC) is charged with the enforcement of federal discrimination laws. But since 2012, it has actively pursued a strategic enforcement plan designed, in part, to include sexual orientation and gender identity in the definition of sex discrimination under Title VII of the Civil Rights Act of 1964. This followed many unsuccessful attempts by the legislative branch to pass the "Employment Nondiscrimination Act" or ENDA, which would have accomplished that goal by new law.

Here, HHS is furthering the Obama administration's goal of normalizing gender identity and transgender issues. Section 1557 provides that no one may be excluded from participation in, denied the benefits of, or subjected to discrimination under: any health program or activity, any part of which is receiving federal financial assistance; any program or activity that is administered by an Executive Agency; or any entity established under Title I of the Act or its amendments. Section 1557 also incorporates Title VII of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972, two federal laws that explicitly preclude discrimination based on sex. Any violations of Section 1557 will be redressed using enforcement mechanisms under Title VII or Title IX. Since the EEOC is charged with the enforcement of Title VII, Section 1557 empowers that agency to bring sex discrimination actions against employers on the basis of alleged discrimination in the provision of transgender–and gender transition–related medical treatment.

The Effective Date is July 18, 2016.
The Final Rule goes into effect in less than three weeks—July 18, 2016—unless changes to a health insurance plan or group health plan benefit design are required. If so, the effective date is the first day of the first plan year beginning on or after January 1, 2017.

Employer-Provided Health-Care is Covered.
The nondiscrimination provisions outlined in the Final Rule and Section 1557 of the ACA apply to "every health program or activity, any part of which receives Federal financial assistance provided or made available by [HHS]," as well as "every health program or activity administered by [HHS] and every health program or activity administered by Title I" of the PPACA.  Those health programs and activities include all entities engaged in the provision or administration of health-related services, health-related insurance coverage, and other health-related coverage. 

Specifically included are the health benefits and health insurance provided to employees or their dependents that have been "established, operated, sponsored or administered by, for, or on behalf of one or more employers, whether provided or administered by entities including but not limited to an employer, group health plan, third party administrator, or health insurance issuer," as well as employer-provided or sponsored wellness programs, health clinics, and long-term care coverage.  If employers use third parties, they will still be subject to the Final Rule and Section 1557.

There Is No Religious Exemption; application of the Religious Freedom Restoration Act (RFRA) Is Required. (Read: More Federal Litigation)
HHS did not include any religious exemption in the Final Rule and none exists in Section 1557.  To the extent religious beliefs conflict with the nondiscrimination provisions of Section 1557, covered entities will need to seek protection under provider conscience laws, RFRA, or other ACA regulations.  HHS states that RFRA is the proper means to evaluate any religious concerns about Section 1557's requirements. RFRA requires an individualized and fact-specific inquiry of whether a legal requirement substantially burdens the exercise of religion and, if so, whether that requirement furthers a compelling government interest, and is the least–restrictive means to further that interest. That inquiry is performed judicially.

Based on the massive litigation surrounding the HHS's "contraceptive mandate" under the PPACA, that agency is more than casually acquainted with RFRA's requirements. This author was involved with RFRA litigation on behalf of a privately-held Indiana corporation with religious objections to the provision of contraceptive and abortifacient coverage as part of its health plan. After lengthy litigation, the client prevailed, based on the U.S. Supreme Court's rulings in Hobby Lobby and Conestoga Wood.
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It is entirely foreseeable that the same entities that objected to providing contraceptive and abortifacient coverage under their health plans—based on sincerely-held religious beliefs—will have the same objections to providing transgender- and gender transition- related medical treatment.