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December 15, 2020

Recent Changes to the Definition of Sex Discrimination Under Section 1557 of the Patient Protection and Affordable Care Act

By Ima E. Nsien, Esq., Manatt, Phelps & Phillips LLP, Los Angeles, CA

Section 1557 of the Patient Protection and Affordable Care Act (PPACA) prohibits covered health programs from discriminating against individuals based on any of the grounds prohibited in various federal civil rights statutes.1 Those federal statutes include Title VI of the Civil Rights Act of 19642 (race, color and national origin), Title IX of the Education Amendments of 1972 (Title IX)3 (sex), the Age Discrimination Act of 1975,4 or Section 794 of Title 29 (disability). Section 1557 authorizes the Secretary of Health and Human Services to promulgate regulations to implement this Section. On June 19, 2020, the Department of Health and Human Services (HHS) issued a final rule (2020 Final Rule) implementing Section 1557,5 representing a significant departure from the regulations issued by the previous administration in 2016 (2016 Final Rule). The key changes span from the adoption of blanket abortion and religious freedom exemptions for healthcare providers6 to reducing protections for individuals with limited English proficiency.7

This article will focus primarily on the changes incorporated into the 2020 Final Rule that impact the definition of sex discrimination under Section 1557. HHS made these changes “to better comply with the mandates of Congress, [relieve] approximately $2.9 billion in undue regulatory burdens (over five years), [further] substantive compliance, reduce confusion, and [clarify] the scope of Section 1557.”8 Specifically, HHS determined the 2016 Final Rule was “duplicative or confusing” and noted that two federal district courts ruled HHS had “exceeded its authority” in promulgating the 2016 Final Rule.9

The 2016 Final Rule Broadly Defined Covered Entities Under Section 1557

Covered entities under Section 1557 include “any health program or activity, any part of which is receiving Federal financial assistance, including credits, subsidies, or contracts of insurance, or . . . any program or activity that is administered by an Executive Agency or any entity established under [Title I].”10

The 2016 Final Rule clarified that Section 1557 applied to “every health program or activity, any part of which receives Federal financial assistance provided or made available by the Department; every health program or activity administered by the Department; and every health program or activity administered by a Title I entity.”11

The 2016 Final Rule defined a “health program or activity” as follows:

[T]he provision or administration of health related services, health-related insurance coverage, or other health related coverage, and the provision of assistance to individuals in obtaining health-related services or health-related insurance coverage. For an entity principally engaged in providing or administering health services or health insurance coverage or other health coverage, all of its operations are considered part of the health program or activity, except as specifically set forth otherwise in this part. Such entities include a hospital, health clinic, group health plan, health insurance issuer, physician’s practice, community health center, nursing facility, residential or community-based treatment facility, or other similar entity. A health program or activity also includes all of the operations of a State Medicaid program, a Children’s Health Insurance Program, and the Basic Health Program.12

The 2016 Final Rule Set an Expansive Definition of Discrimination on the Basis of Sex

Title IX provides that “[n]o person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance . . . .”13 The 2016 Final Rule interpreted on the basis of sex to include “discrimination on the basis of pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, and gender identity.”14 In addition, covered entities were prohibited from utilizing methods of administration that had the effect of subjecting an individual to discrimination on the basis of sex.15 In selecting the site or location of a facility, covered entities were restricted from making selections that would result in excluding individuals from health programs, denying them benefits or discriminating against these individuals, on the basis of sex.16 Finally, a covered entity was prohibited from operating a sex-specific (restricted to one sex) health program unless it could demonstrate “an exceedingly persuasive justification . . . .”17

The 2016 Final Rule’s broad interpretation of on the basis of sex was influenced by a number of authorities. First, the HHS Title IX regulation includes pregnancy as a form of discrimination on the basis of sex and drafters of the 2016 Final Rule sought to mirror this regulation.18 Next, the Supreme Court in Price Waterhouse v. Hopkins analyzed sex discrimination in the context of Title VII of the Civil Rights Act of 1964, noting that in prohibiting discrimination on the basis of sex “Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.”19 Thus, sex stereotypes, defined as “stereotypical notions of masculinity or femininity” including expectations about gender identity and those “related to the appropriate roles of a certain sex,” were incorporated into the 2016 Final Rule.20 Finally, the drafters noted that a number of federal courts had recognized discrimination based on gender identity as a basis for sex discrimination, and the 2016 Final Rule sought to incorporate this “well-accepted interpretation of discrimination ‘on the basis of sex.’”21

Gender Identity and Termination of Pregnancy Protections Were Vacated from the 2016 Final Rule’s Interpretation of Discrimination on the Basis of Sex

In August 2016, several plaintiffs, including private healthcare providers and eight states, sued HHS to challenge enforcement of Section 1557 regulations related to the prohibition of discrimination on the basis of gender identity and termination of pregnancy.22 The court found that under the Administrative Procedure Act (APA) the gender identity and termination of pregnancy provisions conflicted with Title IX’s prohibition of sex discrimination, because “Congress intended to prohibit sex discrimination on the basis of the biological differences between males and females.”23 The court also took issue with HHS’ failure to incorporate into Section 1557 Title IX’s religious exemptions, which exempt covered entities controlled by a religious organization if their compliance would be contrary to the religious values of the organization.24 The court additionally found that the plaintiffs had a reasonable probability of success on an alternate claim under the Religious Freedom Restoration Act (RFRA).25 Based on these findings, on December 31, 2016 the court granted a nationwide preliminary injunction enjoining HHS from enforcing the 2016 Final Rule’s prohibition against discrimination on the basis of gender identity or termination of pregnancy.

In October 2019, the court issued its final order, holding that Section 1557 “substantially burdens Private Plaintiffs’ religious exercise in violation of RFRA.”26 The court determined the appropriate remedy under the APA was to vacate the 2016 Final Rule’s inclusion of gender identity and termination of pregnancy in the definition of sex discrimination: “Since the Court concludes that ‘the Rule’s conflict with its incorporated statute—Title IX—renders it contrary to law under the APA,’ the appropriate remedy is vacatur.”27 Vacatur redressed both the APA violation and the RFRA violation.

In January 2020, the religiously affiliated healthcare providers appealed to the Fifth Circuit in an effort to have the entire 2016 Final Rule vacated.28 The appeal is still pending. As discussed further below, the 2020 Final Rule has not yet gone into effect.

The 2020 Final Rule Limits the Scope of Section 1557 and Eliminates “Overbroad Provisions” Related to Sex and Gender Identity

The 2020 Final Rule limits the scope of Section 1557. As mentioned above, the 2016 Final Rule applied broadly to health programs and activities. For an entity principally engaged in providing or administering health services, health insurance coverage or other health coverage, all of its operations were considered part of the health program or activity, even if certain parts of the operation did not receive federal financial assistance.29 The 2020 Final Rule does not apply as broadly. For those entities not primarily engaged in the business of healthcare “the requirements applicable to a ‘health program or activity’ under [the 2020 Final Rule] shall apply to such entity’s operation only to the extent any such operation receives Federal financial assistance.”30 In addition, “an entity principally or otherwise engaged in the business of providing health insurance shall not … be considered to be principally engaged in the business of providing healthcare.”31 These changes have the effect of reducing the number and types of entities required to comply with Section 1557’s non-discrimination provisions. For example, short term limited duration insurance, employer-sponsored group health plans, self-insured church plans, the Federal Employees Health Benefits Program, or non-federal governmental plans do not have to comply with Section 1557 if they are offered by an entity that is not principally engaged in the business of providing healthcare and does not receive federal financial assistance.32

Relying on the order in Franciscan Alliance, the 2020 Final Rule also repeals the 2016 Final Rule’s definition of on the basis of sex and does not provide a new regulatory definition. Instead, the 2020 Final Rule defines sex based on “its original and ordinary public meaning,” and refers to “the biological binary of male and female that human beings share with other mammals.”33 This has the effect of eliminating gender identity and sex stereotyping as a basis for sex discrimination. HHS noted that Supreme Court case law on Title IX had “consistently presupposed the biological and binary meaning of ‘sex.’”34 HHS also dismissed lower court rulings that “caused confusion” by interpreting discrimination on the basis of sex in a way that includes gender identity even when sex is defined in its “ordinary, biological, and binary sense.”35 Under the 2020 Final Rule, a covered healthcare provider who discriminates against an individual due to that person’s gender identity, or because that individual is transgender, would not be in violation of Section 1557.

The 2020 Final Rule repealed Section 92.207 from the 2016 Final Rule which, among other things, prohibited covered healthcare providers from denying or limiting coverage for services ordinarily available to individuals of one sex, to transgender people based on the fact “that an individual’s sex assigned at birth, gender identity, or gender otherwise recorded” differs from the one to which such services are ordinarily or exclusively available.36 HHS determined Section 92.207 to be among those provisions in the 2016 Final Rule that were “duplicative of, inconsistent with, or may be confusing in relation to … preexisting … Title IX … regulations.”37 Section 92.207 also prohibited covered providers from implementing a categorical exclusion of healthcare services related to gender transition.38 In deciding to repeal this provision, HHS noted that there was not a consensus in the medical community regarding issues related to gender identity.39 HHS believed the prohibitions “inappropriately interfered with the ethical and medical judgment of health professionals.”40 HHS considered the circumstance where a “medical provider may rightly judge a hysterectomy due to the presence of malignant tumors to be different in kind from the removal of properly functioning and healthy reproduction tissue for psychological reasons.”41 The critical question, according to HHS, was whether Title IX and Section 1557 required healthcare professionals to perform such procedures or provide treatment “as a matter of nondiscrimination.”42 In 2020, HHS said the answer is no. But HHS went beyond Section 1557, and also eliminated specific nondiscrimination protections related to gender identity and sexual orientation from several other existing regulations, including those governing Medicaid managed care entities, state Medicaid programs, PACE organizations, group and individual health insurance issuers, Marketplaces, qualified health plan issuers, agents and brokers that assist with Marketplace applications and enrollment, and education programs that receive federal financial assistance.43

Finally, HHS noted that the Franciscan Alliance court opined that HHS had not shown a compelling interest in requiring providers with “sincerely held religious objections to gender transition services,” to provide these services despite their objections.44 In that vein, the 2020 Final Rule includes provisions that provide covered healthcare providers broad abortion and religious objection exemptions from Section 1557’s prohibition on sex discrimination.45 This change may create insurmountable challenges for those whose choice of healthcare provider is limited.

Enforcement of the 2020 Final Rule is Stayed in Light of Subsequent United States Supreme Court Ruling

Days after the 2020 Final Rule was issued, a U.S. Supreme Court ruling in Bostock v. Clayton County, Georgia held that an employer that fires an individual for being “gay or transgender violates Title VII.”46 Title VII prohibits employers from discriminating against an individual on the basis of sex, among other things.47 Relying on this decision, two federal district courts in New York and Washington, D.C. issued nationwide preliminary injunctions against the Administration’s enforcement of certain provisions of the 2020 Final Rule.48 The federal district court in New York stayed the 2020 Final Rule’s repeal of Section 92.4 of the 2016 Final Rule.49 As a result, the broad definition of on the basis of sex, including the controversial definitions of gender identity and sex stereotyping, remain in effect.50 In addition, HHS is enjoined from enforcing the repeal of Section 92.4. The federal district court in D.C. enjoined HHS from repealing the 2016 Final Rule’s definition of on the basis of sex insofar as it included sex stereotyping.51 The court also enjoined HHS from “enforcing its incorporation of the religious exemption contained in Title IX.”52

Other lawsuits filed to limit implementation of the 2020 Final Rule are pending throughout the country.53 This signals that the debate regarding the nature and limits of discrimination on the basis of sex is far from being resolved and is an issue that will be litigated over the next several years. It also remains to be seen whether the 2020 Final Rule will survive at all in light of the Supreme Court’s critical Title VII ruling in Bostock. Further, President-Elect Joseph Biden has indicated his support for LGBTQ causes and has promised a bold agenda to specifically address protections for LGBTQ people. Thus, it is likely that HHS will revert back to the 2016 Final Rule under the Biden-Harris Administration.

  1. 42 U.S.C. § 18116.
  2. 42 U.S.C. § 2000d et seq.
  3. 20 U.S.C. § 1681 et seq.
  4. 42 U.S.C. § 6101 et seq.
  5. Nondiscrimination in health and Health Education Programs or Activities, Delegation of Authority, 85 Fed. Reg. 37160 (June 19, 2020) (codified at 45 C.F.R. part 92 (2020), .
  6. 85 Fed. Reg. at 37162.
  7. Compare 45 C.F.R. § 92.4 (2016) (definitions for language assistance services, qualified bilingual/multilingual staff, qualified interpreter, and qualified translator), and 45 C.F.R. § 92.201 (2016) (access for individuals with limited English proficiency), with 45 C.F.R. § 92.101 (2020) (access for individuals with limited English proficiency).
  8. 85 Fed. Reg. at 37161.
  9. Id. See Franciscan Alliance, Inc. v. Burwell, 227 F.Supp.3d 660 (N.D. Tex 2016) (granting nationwide preliminary injunction against enforcement of gender identity and pregnancy termination provisions in 2016 Final Rule); Franciscan Alliance, Inc. v. Azar, 414 F.Supp.3d 928 (N.D. Tex. 2019) (vacating gender identity and pregnancy termination provisions in 2016 Final Rule).
  10. 42 U.S.C. § 18116(a).
  11. 81 Fed. Reg. at 31466.
  12. 81 Fed. Reg. at 31467.
  13. 20 U.S.C. § 1681(a) (emphasis added).
  14. 81 Fed. Reg. at 31467.
  15. Id. at 31470.
  16. Id.
  17. Id. (The sex-specific health program must be “substantially related to the achievement of an important health related or scientific objective.”). See id. at 31409 (Examples include “sex-specific clinical trials…that test treatments for sex-specific conditions or that evaluate differences in responses to treatment regimens among the sexes.”).
  18. 81 Fed. Reg. at 31387. See 45 C.F.R. § 86.40(b) (prohibits discrimination on the basis of “pregnancy, childbirth, false pregnancy, termination of pregnancy or recovery therefrom”).
  19. Price Waterhouse v. Hopkins, 490 U.S. 228, 250-51 (1989), superseded by statute on other grounds, Civil Rights Act of 1991, as recognized in Comcast Corp. v. Nat’l Ass. Of African American-Owned Media, 140 S.Ct. 1009 (2020).
  20. 45 C.F.R. § 92.4 (2016).
  21. 81 Fed. Reg. at 31387-88.
  22. Franciscan Alliance, Inc. v. Burwell, supra, 227 F.Supp.3d 660.
  23. Id. at p.687.
  24. Id. at p.689-691.
  25. Id. at p. 691-693. Congress enacted the RFRA in 1993. The RFRA prohibits the federal government from substantially burdening a person’s free exercise of religion, even with respect to laws that appear to be neutral toward religion. The government may substantially burden an individual’s exercise of religion only where the government demonstrates that the burden “(1) is in furtherance of a compelling government interest; and (2) is the least restrictive means of furthering that compelling governmental interest.” The RFRA provides individuals whose religious exercise has been burdened with a private right of action to assert any such claim or defense in a judicial proceeding. 42 U.S.C. § 2000bb et seq.
  26. Franciscan Alliance, Inc. v. Azar, supra, 414 F.Supp.3d at p. 944.
  27. Id. at p. 945.
  28. See Franciscan Alliance, Inc., et al v. Alex Azar, II, Secretary, et al., Case No. 20-10093 (5th Cir. Jan. 24, 2020).
  29. 81 Fed. Reg. at 31467.
  30. 85 Fed. Reg. at 37244.
  31. Id. at 37244-37245 (emphasis added).
  32. 85 Fed. Reg. at 37173-37174.
  33. 85 Fed. Reg. at 37178.
  34. 85 Fed. Reg. at 37180.
  35. Id.
  36. 81 Fed. Reg. at 31472.
  37. 85 Fed. Reg. at 37201.
  38. 81 Fed. Reg. at 31472.
  39. 85 Fed. Reg. at 37187.
  40. Id.
  41. Id.
  42. Id. at p. 37188.
  43. See 84 Fed. Reg. at 27870-71 (B. Proposed Conforming Amendments); 85 Fed. Reg. 37218-37222 (E. Conforming Amendments to CMS Regulations).
  44. Id.
  45. 85 Fed. Reg. at 37245 (§ 92.6(b)).
  46. 140 S.Ct. 1731 (2020).
  47. 42 U.S.C. § 2000e.
  48. See Walker v. Azar, Case No. 20-cv-2834, 2020 WL 4749850 (E.D. NY Aug. 17, 2020); Whitman-Walker Clinic, Inc. v. U.S. Dept. of Health and Human Servs., Case No. 20-1630, 2020 WL 5232076 (D.D.C. Sept. 2, 2020).
  49. Walker, 2020 WL 4749850, at *10. Plaintiffs are two transgendered individuals who have experienced discrimination as consumers of healthcare services.
  50. Id.
  51. Whitman-Walker Clinic, Inc., 2020 WL 5232076, *45. Plaintiffs are healthcare facilities, providers and interest groups who lacked standing to challenge the previously vacated provision regarding the definition of gender identity.
  52. Id. See 45 C.F.R. § 92.6 (2020).
  53. See Boston Alliance of Gay, Lesbian, Bisexual and Transgender Youth, et al. v. U.S. Dept. of Health and Human Servs., No. 1:20-cv-11297, 2020 WL 3891426 (D. Mass. July 9, 2020); New York, et al. v. U.S. Dept. of Health and Human Servs., No. 1:20-cv-5583, 2020 WL 4059929 (S.D.N.Y. July 20, 2020).
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Ima E. Nsien


Ima E. Nsien is a healthcare litigation associate in the Los Angeles office of Manatt, Phelps & Phillips, LLP. She represents managed care entities in a variety of legal disputes in state and federal court, including bad faith, breach of contract, ERISA and mental health parity claims. She may be reached at [email protected].