New York Federal District Court Blocks HHS’s Roll-Back of Certain Sex-Based Discrimination Protections in Health Care; Other Provisions Effective 8/18/2020

On August 17, 2020, just one day before a Health and Human Services (“HHS”) Patient Protection and Affordable Care Act (“ACA”) rule retracting discrimination protections for transgender people and pregnant women (“2020 Rule”)[1] was set to go into effect, Judge Frederic Block of the U.S. District Court in the Eastern District of New York issued a stay and preliminary injunction blocking the 2020 Rule. Pursuant to Judge Block’s order in Walker v. Azar,[2] and pending final disposition of the case, individuals may not be discriminated against in federally funded health programs and activities on the basis of race, color, national origin, sex (including on the basis of pregnancy, sex stereotyping and gender identity), age or disability. As such, Judge Block’s injunction essentially reinstated the protections set forth in an HHS Rule in effect since July 18, 2016 (“2016 Rule”).

In the 2020 Rule, HHS took the position that the 2016 Rule’s definition of what it means to discriminate “on the basis of sex” pursuant to Section 1557 of the ACA, exceeded HHS’s statutory authority and was inconsistent with the underlying framework of civil rights laws incorporated by the ACA, including Title IX of the Education Amendments of 1972. Based on this analysis, the 2020 Rule revised or eliminated select provisions of the 2016 Rule that explicitly protected LGBTQ people and pregnant women. For the time being, the roll-back set forth in the 2020 Rule is blocked and providers and health programs must treat individuals consistent with their gender identity under the 2016 Rule’s more expansive view of what it means not to discriminate on the basis of sex.

Walker v. Azar

In Walker v. Azar, two transgender women with serious medical conditions requiring ongoing care filed a lawsuit alleging discrimination by their health care providers based on their transgender status. Both plaintiffs stated that their past experiences would cause them to avoid necessary medical care for fear of further discrimination. The plaintiffs sought: (i) a declaration that HHS’s 2020 Rule implementing the nondiscrimination provision of Section 1557 of the ACA is invalid under the Administrative Procedure Act; (ii) a vacatur (nullification) of the 2020 Rule; (iii) a stay of the 2020 Rule’s effective date (8/18/20); and (iv) a preliminary injunction enjoining HHS from enforcing the 2020 Rule.

The Court ruled that the plaintiffs had standing to sue, that the 2020 Rule was contrary to the Supreme Court’s recent decision in Bostock v. Clayton County, Georgia[3], and that HHS acted arbitrarily or capriciously in enacting the 2020 Rule. Accordingly, the Court stayed the repeal of the 2016 Rule’s definition of “discrimination on the basis of sex” and preliminarily enjoined HHS from enforcing the 2020 Rule.

Judge Block’s decision in Walker v. Azar relied on the authority of Bostock. In Bostock, the Supreme Court held that discrimination “based on sex” encompasses discrimination based on both sexual orientation and gender identity. The 2020 Rule conflicted with Bostock insofar as it: (i) adopted what HHS considered longstanding statutory interpretations that conform to the plain meaning of the term “sex” as the state of being biologically male or female as determined at birth; and (ii) specifically rejected the idea that sex-based discrimination included discrimination based on gender identity, sex stereotyping and pregnancy.

Judge Block noted that the 2020 Rule was filed three days before the Bostock decision and published four days after the decision; while HHS had an “admittedly brief” opportunity to re-evaluate the 2020 Rule prior to its publication in the Federal Register, it declined to do so even though it might have been “a sensible thing to pause and reflect on the [Bostock] decision’s impact.” Judge Block opined that HHS’s failure to address the impact of the Bostock opinion “whether by design or bureaucratic inertia” made it likely that the plaintiffs in Walker would prevail in their claim that the 2020 Rule is arbitrary and capricious. Accordingly, the Court stayed the repeal of the 2016 Rule and issued the preliminary injunction on enforcement of the [sex discrimination provisions of the] 2020 Rule.

The Walker decision did not address the other revised provisions of the 2020 Rule which became effective on August 18, 2020. Notably, the 2020 Rule:

• Eliminates the requirement that Covered Entities send non-discrimination notices and “taglines” translation notices in at least 15 languages in all significant communications to patients and customers;
• Eliminates the requirement for a Section 1557 Compliance Coordinator and written grievance procedure;
• Interprets Section 1557 as applying to all of the operations of entities principally engaged in the business of providing health care that receive federal financial assistance; and for entities not principally engaged in the business of providing health care, Section 1557 applies to such entities’ operations only to the extent any such operations receive federal financial assistance;
• Removes a single enforcement structure across different types of discrimination claims and returns to the enforcement structure for each civil rights statute identified in Section 1557 of the ACA;
• Adds a provision providing that Section 1557 must be enforced in a manner consistent with other statutes including the Religious Freedom Restoration Act and federal conscience protection laws;
• Retains protections from the 2016 Rule that ensure physical access for disabled individuals to health care facilities and appropriate communication technology to assist visually or hearing impaired individuals;
• Retains the 2016 Rule’s qualifications for translators and interpreters for non-English speakers and adds a “4-factor analysis” to ensure that health care companies and providers subject to the 2020 Rule provide meaningful access for limited English proficiency individuals; and
• Retains the requirement that Covered Entities submit to HHS a binding assurance of compliance with Section 1557.

The 2020 Rule also clarifies the meaning of “Covered Entity” under Section 1557 as it applies to employer-sponsored health plans. Employer-sponsored health plans that do not receive federal financial assistance and are not principally engaged in the business of providing health care are not covered entities under the Section 1557 2020 Rule. Private employer, church employer and governmental employer health plans will not be considered covered entities as these employers do not receive federal financial assistance and they are not principally engaged in the business of providing health care. However, HHS declined to specifically exempt such plans from the covered entity definition as HHS takes the position that private, church and governmental employers can apply a two-pronged test and analysis to determine whether their plans are covered entities within the meaning of Section 1557. In the 2020 Rule, HHS specifically rejected the argument that the tax incentives health plans receive are a form of federal financial assistance.

Practical Takeaways

While Judge Block’s order in Walker can be interpreted to apply nationwide, the order does not explicitly identify its jurisdictional scope. However, given the Bostock decision, the fact that many health care providers and companies are subject to state/local non-discrimination laws which adopt the broader definition of discrimination on the basis of “sex,” as well as the existence of other pending lawsuits objecting to HHS’s retraction of certain nondiscrimination protections[4], health care providers and companies should strongly consider maintaining their current 2016 Rule-compliant policies, procedures and practices which prohibit discrimination and protect the civil rights of individuals seeking access to health care programs or activities pursuant to Section 1557 of the ACA.

As noted above, the 2020 Rule eliminated the requirement that Covered Entities send non-discrimination notices with tagline translation notices in the top 15 languages. However, the Whitman-Walker Clinic v. HHS case pending in the D.C. District Court and the New York v. HHS case pending in the S.D.N.Y. District Court object to this change. It may be worthwhile for health care providers and other Covered Entities to continue distributing their current notices of non-discrimination and take a “wait and see” position before instituting any changes.

If you have any questions, please contact:

• Adele Merenstein at (317) 752-4427 or amerenstein@wp.hallrender.com;
• Jennifer Skeels at (317) 977 -1497 or jskeels@wp.hallrender.com;
• Robin Sheridan at (414) 721-0469 or rsheridan@wp.hallrender.com;
• William Roberts at (502) 568-9364 or ebplans@wp.hallrender.com;
• Mary Kate Liffrig at (720) 282-2033 or mliffrig@wp.hallrender.com; or
• Your regular Hall Render attorney.

Special thanks to Macauley Rybar, law clerk, for his assistance in preparing this article.

Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.