CMS Finalizes Section 1557 Rules and Supreme Court Rules on LGBTQ Rights

Over the course of a few days in June, the executive branch and the judicial branch asserted two potentially conflicting positions regarding discrimination against persons on the basis of sexual orientation or gender identity.

On June 12, 2020, the HHS Office for Civil Rights (OCR), issued a final rule that amended the agency’s prior regulation concerning Section 1557 of the ACA. This rule scaled back explicit protections based upon gender identity introduced by the previous administration, relying instead on broader protections against discrimination on the basis of sex provided for in the ACA.

Section 1557 prohibits healthcare providers, health plans and insurers from discriminating on the basis of race, color, national origin, sex, age and disability. OCR’s prior regulation, referred to as the “2016 Rule,” expanded the scope of these prohibitions by including discrimination based upon gender identity, as well as requiring health plans and insurers to cover gender reassignment surgery. The 2016 Rule also required entities covered by the rule to distribute nondiscrimination notices with foreign language taglines, and required them to have compliance coordinators and written grievance procedures to handle complaints concerning possible violations of Section 1557.

Stating that the 2016 Rule exceeded the scope of the authority granted under Section 1557, the OCR’s new final rule eliminates those requirements. The new final rule also removed the definition section, which included broad definitions of gender identity, and narrows the application of the regulations to just HHS programs administered under Title I of the ACA (which does not include Marketplace plans). Specific protections from discrimination based upon sexual orientation and pregnancy termination were also removed.

Although several commenters wanted the agency to wait until the U.S. Supreme Court issued an anticipated ruling regarding gender identity and sexual orientation protections under Title VII of the Civil Rights Act of 1964 before committing to these changes, the agency opted not to wait. The agency’s position was that, even assuming that the Court ruled that Title VII protections extended that far, gender identity and sexual orientation create special issues in the healthcare context that the Court would not address. Accordingly, the agency asserted that the changes to the final rule addressed those issues directly and the agency did not need to wait for the Court.

However, on June 15, 2020, the U.S. Supreme Court ruled in Bostock v. Clayton Cty., Ga that discrimination based upon sexual orientation or sexual identity is prohibited under Title VII of the Civil Rights Act of 1964. The majority opinion resolved three cases involving homosexual and transgender plaintiffs alleging that they were fired from their jobs based upon their sexual orientation or sexual identity. The Court reasoned that Title VII’s prohibition against discrimination based on sex was broad enough to include sexual orientation and sexual identity because those things are inextricably linked to sex. Accordingly, employers cannot rely upon traditional notions of gender when considering terminating someone’s employment.

Although this ruling is primarily focused on employment law issues, it signals a potential conflict between the judicial branch and the executive branch of the federal government over how best to deal with this type of discrimination in other areas, such as benefits. While the administration’s new final rule concerning Section 1557 purports to rely upon the broad protections provided under the ACA, the fact that specific protections for gender identity were removed indicates a narrower approach to these issues than that espoused by the Court. Accordingly, challenges to this new rule may create additional uncertainty in this area of benefits law.

We will keep an eye on developments in this area to see how they may affect the benefits employers provide to their employees.

Final Rule »
Bostock v. Clayton Cty., Ga »