Health Services Litigation Alert

Groom Law Group’s Health Services practice is partnering with the firm’s Litigation practice to provide our clients with a Health Services Litigation Alert. The service provides periodic updates on litigation and enforcement issues that impact self-insured plans, group and individual health insurance, and government health care programs.  This latest issue addresses the latest significant ruling on the ACA’s non discrimination provision (section 1557).

Section 1557 of the Patient Protection and Affordable Care Act (“ACA”) provides that individuals may not be excluded on the basis of race, sex, age or disability from participation in, be denied the benefits of, or be subjected to discrimination under any health program or activity that receives federal financial assistance.  The Department of Health and Human Services (“HHS”), Office of Civil Rights (“OCR”), issued final rules implementing section’s 1557 antidiscrimination provisions in May 2016 (the “2016 Rule”).[1]  The 2016 Rule defined discrimination “on the basis of sex” to cover, among other things, discrimination on the basis of sex stereotyping, gender identity, and termination of pregnancy.[2]

Shortly after it was effective, in August of 2016, the 2016 Rule was challenged in district court in Texas.[3]  Among the complaints, the plaintiffs argued that the 2016 Rule’s definition of “sex” to include gender identity and termination of pregnancy was impermissible and that the 2016 Rule failed to incorporate religious exemptions.  On December 31, 2016, the district court issued a nationwide preliminary injunction against HHS, barring it from enforcing the 2016 Rule’s prohibition against discrimination on the basis of “gender identity” and “termination of pregnancy.”[4] The court stayed further proceedings in the case while HHS reconsidered the 2016 Rule.

Fast forward to February 2019.  The Department of Justice, responding to plaintiffs’ motion for summary judgment, agreed with the district court that the 2016 Rule’s “definition of sex discrimination is contrary to law” and that “[s]ince the [2016] Rule was issued, the United States has returned to its longstanding position that the term ‘sex’ in Title VII does not refer to gender identity, and there is no reason why Section 1557, which incorporates Title IX’s analogous prohibition on ‘sex’ discrimination, should be treated differently.”[5]

In June 2019, OCR proposed a new rule for section 1557.  For purposes of this update, the proposed rule reinterpreted “on the basis of sex” so that “gender identity” would no longer be protected from discrimination on the basis of sex.[6]

What’s New?

Despite the new proposed rule (which has not yet been finalized), the Texas litigation continued.  On October 15, 2019, the district court issued its opinion and order, noting that:

The Court granted HHS two years to complete its review and amend the Rule at issue. Despite HHS’s better efforts, the rule remains on the books. … Accordingly, the Court finds that principles of equity and judicial economy favor ruling on the pending motions, allowing the other parties in this case to conclude two years of litigation on these issues.[7]

What did the court hold?

The court allowed the American Civil Liberties Union (“ACLU”) and the River City Gender Alliance to intervene in the case, but concluded there was no need for further briefing before moving to its opinion on the summary judgment motions.  After review, the court concluded that the proper remedy was to vacate the “unlawful portions” of the 2016 Rule and remand those portions to HHS for reconsideration.  The court declined to issue a national, permanent injunction.

What does this mean?

As a practical matter for most, probably little.  The 2016 Rule is still effective, but the unlawful portions of the rule—e.g. the prohibition against discrimination on the basis of gender identity and termination of pregnancy—are now vacated, so HHS cannot enforce those provisions.  However, the court enjoined HHS from enforcing those parts of the rule in December 2016.

There continues to be a private right of action under section 1557, so covered entities could still be sued.  Some courts have already found discrimination against transgender individuals violated the section 1557 statute, without relying on the 2016 Rule.[8]

Now that the ACLU and River City Gender Alliance are parties, they may appeal.  However, by vacating the rule and remanding to HHS, the district court may have made any appeal more complicated.  For example, the D.C. Circuit has noted that “[i]t is black letter law that a district court’s remand order is not normally “final” for purposes of appeal under 28 U.S.C. § 1291.”[9]  There are exceptions, however, and the court in this case issued what it styled as a “final judgment” on the intervention and summary judgment motions.

What else may affect the rule or the judgment?

The Supreme Court is considering the scope of Title IX (the basis of 1557’s sex nondiscrimination provision) this term.  We expect a decision by the end of term (roughly June 2020).

If you would like to discuss this case or how section 1557 might apply to your company or health plan, please contact the authors or your Groom attorney.

[1] Department of Health and Human Services, Nondiscrimination in Health Program and Activities, 81 Fed. Reg. 31375 (May 18, 2016).

[2] See our Groom alert for additional information on the 2016 Rule.

[3] See our Groom alert on the 1557 litigation.  Fun fact!  This is the same court—the United States District Court for the Northern District of Texas—that heard the ACA constitutionality challenge (Groom alert) and other ACA cases.

[4] Franciscan Alliance, Inc., et al. v. Burwell, et al., 227 F. Supp. 3d 660 at 696 (N.D. Tex. 2016).

[5] Defendant’s Memorandum in Response to Plaintiffs’ Motions for Summary Judgment, Franciscan Alliance, No. 7:16-cv-00108-O (N.D. Tex. filed April 5, 2019) at 1.

[6] See our Groom alert for a summary of the 2019 proposed rule, including significant proposed changes to the notice requirements.

[7]Memorandum Opinion and Order, Franciscan Alliance, No. 7:16-cv-00108-O (N.D. Tex. Filed Oct. 15, 2019) at 3.

[8] See, e.g., Flack v. Wis. Dept. Of Health Servs., 328 F. Supp. 3d 931, 948 (W.D. Wisc. 2018)(concluding that denying transgender individuals medically necessary surgery “appears to be a straightforward case of sex discrimination” because “if plaintiffs’ natally assigned sexes had matched their gender identities, their requested, medically necessary surgeries to reconstruct their genitalia or breasts would be covered by Wisconsin Medicaid.  Here, plaintiffs have instead been denied coverage because of their natal sex …”).

[9] N. Carolina Fisheries Ass’n., Inc. v. Gutierrez, 550 F.3d 16, 19 (D.C. Cir. 2008).


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