Last month, the Department of Health and Human Services Office of Civil Rights (OCR) issued the much anticipated final rule for Section 1557 of the Affordable Care Act (ACA). This marks the last major final ACA-related rule expected from this Administration and completes the suite of non-discrimination rules that constitute some of the most dramatic recent changes in health insurance regulation. With hand-wringing about insurers coming and going from marketplaces and endless lawsuits challenging the ACA, it’s easy to lose sight of the new world ushered in by the ACA for people with pre-existing health conditions – a world that provides peace of mind that they can get enrolled and gain access to the health services and financial protection that real insurance is supposed to provide.

The ACA bans discriminatory benefit design (called the essential health benefits, or “EHB” rule) and discriminatory marketing by individual and small-group market insurers; Section 1557 takes these nondiscrimination protections even further. Specifically, Section 1557 prohibits individuals from being subjected to discrimination, excluded from participation, or denied benefits on the basis of race, color, national origin, sex, age, or disability, and applies to any health program or activity that receives federal funding or is administered by an Executive agency, and to entities created under Title I of the ACA, including health insurance marketplaces.

There are detailed summaries of the final rule – two here and here are particularly helpful – and more analyses of the rule’s impact and implementation are sure to come. The rule covers a number of issues, including access to translations and notices in languages other than English. But with this post, I offer some thoughts on the provisions relating to discrimination in health insurance, and how they stack up to the EHB nondiscrimination rules.

Which plans are covered by the rule?

The Section 1557 rules reach a broader swath of health plans than are covered by the EHB rule. That’s because “covered entities” under Section 1557 includes insurers who get federal funds in the form of premium tax credits or cost-sharing reductions, or funding under Medicare, Medicaid, CHIP and other federal programs. If covered, even the insurers’ activities outside the program or activity directly funded are subject to the provisions of 1557. So an insurer participating in an exchange, Medicare, or Medicaid would be liable when selling insurance outside of an exchange, providing coverage to a large employer, or administering a self-funded employer plan. In contrast, the EHB provisions apply only to non-grandfathered plans in the individual and small group markets.

Some commenters have read the proposed rule to reach self-insured employer plans through a covered third party administrator (TPA), but the final rule clarifies that the reach is not so clear. Self-funded employer plans will be subject to the nondiscrimination rule if the employer, itself, is a covered entity, for example, a hospital that receives Medicare funding must comply with the rule in administering its own employee health plan. A TPA that is a covered entity will be liable for administering benefits in a nondiscriminatory way, that is, in processing and paying claims. However, if the sponsoring employer is not a covered entity, the liability for a discriminatory action or benefit design will depend on an OCR determination of whether the employer or the TPA is responsible for the action or benefit design.

Which health conditions are covered?

The rules apply different bases for the health conditions that should be protected from discrimination. Section 1557 prohibits discrimination based on disability, among other factors. Disability, as defined under the Americans with Disabilities Act (ADA), is “a physical or mental impairment that substantially limits one or more major life activities; a record (or past history) of such an impairment; or being regarded as having a disability.” Federal rules provide examples of health conditions that fall under this definition, including epilepsy, diabetes, cancer, HIV infection, and bipolar disorder. But “disability” does not necessarily include all health conditions. On the other hand, the EHB rule applies to health conditions more broadly and bars discrimination based on “expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions.”

On the face of it, it seems the health-related protection afforded by Section 1557 may be narrower than under the EHB rules, or at least potentially harder to demonstrate as a disability that warrants the protection of 1557. It will be worth watching if this difference will actually result in a different scope of protection under the two nondiscrimination rules, based on whether a health condition rises to the level of disability.

How will the rules be enforced?

Despite commenters requesting clearer guidance on what would constitute discriminatory benefit design, HHS declined to provide any, noting instead that determining whether a particular benefit design results in discrimination will be a fact-specific inquiry to be conducted by OCR. In contrast, the Notice of Benefit and Payment Parameters rule and the Letter to Issuers for 2016 both provide examples of discriminatory benefit design for state regulators reviewing whether individual and small group plans meet EHB standards. But even these examples are limited and capture only a small number of the more obvious examples of discriminatory benefit design, for example, placing all the drugs to treat an illness on the highest cost sharing tier.

Looking ahead

The nondiscrimination rules of the ACA provide landmark protections for individuals routinely shut out of our pre-ACA health insurance system. But will oversight and enforcement of these rules be sufficient to ensure the protections are fully realized? There’s no small number of consumer advocates closely watching how these rules are implemented and enforced on behalf of the many health consumers who stand to benefit.