Section 1557 of the Affordable Care Act (“Section 1557”) prohibits discrimination on the basis of race, color, national origin, sex, age or disability by any health program or activity that receives federal financial assistance. In 2016, HHS promulgated a Final Rule (“2016 Rule”) that interpreted discrimination on the “basis of sex” to include discrimination on the basis of: (i) gender identity; (ii) sex stereotyping; and (iii) pregnancy, including termination of pregnancy, childbirth and related medical conditions. However, as we discussed here, the 2016 Rule was successfully challenged by several religiously affiliated health care entities in 2019. In a case in the U.S. District Court for the Northern District of Texas, the plaintiff health care entities argued that the HHS’s interpretation would violate the religious freedom of the entities and impact medical judgment.
Shortly after the issuance of the preliminary injunction, under the Trump Administration, HHS released another Final Rule in 2020 (“2020 Rule”) essentially overriding the 2016 Rule’s expanded view of sex discrimination. With the issuance of the 2020 Rule, the Trump Administration was able to stay the court’s preliminary injunction. Interestingly, as we discussed in a prior blog post, a mere three days after the issuance of the 2020 Rule, the Supreme Court ruled that that sex discrimination in the employment context does include discrimination based on gender identity or sexual orientation in the landmark case Bostock v Clayton County Board of Commissioner.
Following inauguration, President Biden issued an executive order declaring that his administration would apply the ruling in Bostock to all existing orders, regulations, guidance documents, policies and programs that prohibit sex discrimination. As such, HHS announced that once again Section 1557 would be reversed, in order to realign the interpretation of discrimination on the basis of sex in order to include the broader, gender-based protections that were originally in the 2016 Rule and reinforced by Bostock.
Northern District of Texas Case Is Revived
In light of the policy shift, the Fifth Circuit Court of Appeals remanded a case in the U.S. District Court for the Northern District of Texas back to the District Court after the case appealed for a permanent injunction. Judge Reed O’Connor once again decided the case in favor of plaintiffs, issuing a permanent injunction. Specifically, Judge O’Connor found that if HHS was to enforce the definition of sex discrimination as the agency did under the 2016 Rule, the agency would be violating the Religious Freedom Restoration Act of 1993 (“RFRA”). Judge O’Connor noted:
Here, the RFRA violation, the success on the merits, is all but conceded. No party disputes that the current Section 1557 regulatory scheme threatens to burden Christian Plaintiffs’ religious exercise in the same way as the 2016 scheme: namely, by placing substantial pressure on Christian Plaintiffs, in the form of fines and civil liability, to perform and provide insurance coverage for gender‑transition procedures and abortions.
Although the case in the U.S. District Court for the Northern District of Texas is likely to be appealed, the permanent injunction currently prohibits HHS from “interpreting or enforcing” the current law against the Plaintiffs in this lawsuit “in a manner that would require them to perform or provide insurance coverage for gender-transition procedures or abortions, including by denying Federal financial assistance because of their failure to perform or provide insurance coverage for such procedures or by otherwise pursuing, charging, or assessing any penalties, fines, assessments, investigations, or other enforcement actions.” While this decision is informative for operations in the Northern District of Texas, the injunction is applicable only to the plaintiffs named in this lawsuit.
Therefore, health care providers and companies should not change any policies or procedures in reliance on this case and are encouraged to consult legal counsel before making any such changes. Further, health care providers and companies should continue to be cognizant of state and local public accommodation or other laws and rules prohibiting discrimination on the basis of gender identity, gender expression and/or sexual orientation that may apply.
Interestingly, the Northern District of Texas is the second court to block this policy, after a North Dakota District Court issued a similar opinion in Mercy v. Becerra. Since the U.S. District Court for the Northern District of Texas ruling, at least one additional lawsuit challenging the 2016 Rule has been filed in the Eastern District of Tennessee. Moreover, HHS has said that a new proposed rule should be released in early 2022. Hall Render will continue to watch and advise as the challenges continue and the rules evolve.
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Special thanks to Jonathan Tarro, 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.
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