Is Your Health Plan Covered Under the New Section 1557 Nondiscrimination Rules?

Section 1557 is a new anti-discrimination section added by the ACA that prohibits in certain health programs and activities discrimination on the basis of race, color, national origin, sex, age or disability.   At first, the new provision did not receive much attention because we believe some companies saw it and thought “of course we can’t discriminate based on those things and we don’t.”    Others saw the new provision and may have thought “I don’t need to worry about that because we aren’t a health provider and that only applies to providers.”     Earlier this year, we finally received regulations under this provision and the rules pick up many more companies than most people anticipated.    This blog post is going to be the first in a series of posts about the new Section 1557 rules and is only intended to address who must comply with Section 1557.

In the final regulations, HHS outlined who is considered a “covered entity” under Section 1557.    If your organization or plan is not a covered entity, HHS does not have the authority to enforce Section 1557 over you (but on a side note HHS has said if they investigate you and determine that don’t have enforcement authority, they will turn you over to the EEOC if they suspect any discriminatory practices).   There are three different ways an organization can be a covered entity and two of the three are intended to pick up health insurance providers and health programs administered by HHS (e.g., Medicare).   The other category of covered entities is very broadly defined to include any health program or activity that receives Federal financial assistance from HHS.  A health program or activity is broadly defined to mean “the 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.”     Federal financial assistance is also broadly defined to include items such as grants, loans, credits, property, Medicaid, and Medicare Parts A, C and D payments.

Unless you are in the insurance business, you only need to worry about the third category when determining whether  you are a covered entity.  At first blush, you may still be thinking that the third category doesn’t pick your organization up.   And maybe it doesn’t.    But our experience with these new rules so far is that it picks up far more of our clients than we anticipated.  We anticipated that it would apply to hospitals, health clinics, physicians’ practices, long-term care facilities and rehabilitation centers because almost all of them receive either Medicare or Medicaid dollars.   However, we didn’t anticipate that it would also apply to some of our manufacturing, education, and financial institution clients (among others).   If you sponsor a self-funded plan that applies for Retiree Drug Subsidy money under Medicare Part D, then you are a covered entity because you have a health program (i.e., self-funded medical plan) that receives federal financial assistance (i.e., Retiree Drug Subsidy).   If you do not receive RDS money,  we recommend that you take a survey of your organization to determine if you have any other programs that may be considered a health program or activity that receives federal funding.    If you sponsor a fully-insured health plan, while you may not be a covered entity, your insurer likely is a covered entity which means that there will likely be some plan design changes in your plan.

Please stay tuned for additional blog posts on what it means if you are a covered entity under Section 1557.

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