Section 1557 Nondiscrimination Final Rules

Late in April of this year, the Department of Health & Human Services (HHS) finalized rules that expand the requirements previously set forth in agency interpretations of the ACA’s §1557 nondiscrimination requirements, which prohibit covered entities from discriminating against individuals on account of race, color, national origin, sex, age, and disability in providing health programs and activities.

Based on the final rules, the definition of a “covered entity” will now include health insurance carriers receiving any federal financial assistance from HHS as well as third party administrators operated by such carriers. That being the case, most employers other than those in a health-related role will not be covered entities directly subject to these rules.

The rules clarify that employers and plan sponsors are not directly subject to §1557 requirements on behalf of their group health plan offerings unless the group health plan itself receives federal financial assistance from HHS (e.g., Medicare Part D subsidies). This is true for group health plans offered by covered entities or non-covered entities. However, because many employers obtain group health plan coverage from carriers or TPAs who would be covered entities that are required to offer plan designs and/or perform plan administration in accordance with §1557 nondiscrimination requirements, the group health plan offerings available to employers beginning in 2025 may see some changes. Specifically for group health plan offerings, things such as eligibility rules, cost-sharing, and coverage exclusions and limitations, should all be designed and administered in a way that does not discriminate on the basis of race, color, national origin, sex, age, disability, or any combination thereof.

The rules do not provide specific examples of types of exclusions or limitations that might be discriminatory, but there is limited guidance clarifying that the rules do not require coverage of abortions, but that broad exclusions or coverage limitations tied to gender transition or gender-affirming care would be discriminatory based on the broadened definition of sex.

NOTE: There is an exception for compliance with any portion of §1557 requirements that covered entities find would violate their rights under Federal conscience or religious freedom laws.

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