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ACA Non-Discrimination Rules May Apply to Certain Healthcare Employers' Benefits Practices

    Client Alerts
  • August 30, 2016

In May, the Department of Health and Human Services (DHHS) issued final regulations implementing Section 1557 of the Affordable Care Act. This legislative provision, which has been in effect since 2010, prohibits health programs or insurance plans that receive DHHS funding from discriminating on the basis of race, color, sex, age, national origin and disability. The majority of the new rules cover prohibitions against patient discrimination by medical facilities or insurers.

However, in the Frequently Asked Questions released with the final rules, DHHS suggests that certain covered employers may be subject to ACA discrimination claims based on their employment practices. The relevant question and answer read as follows:

17.  Does the final rule cover employment discrimination?

The final rule provides limited coverage of employment discrimination. The final rule prohibits an employer that receives Federal financial assistance that is principally engaged in providing health care or health coverage, such as a hospital or nursing home, from discriminating in employee health benefits. The final rule also applies to employee health benefits offered by an entity that is not principally engaged in providing health care or health coverage if the entity receives Federal funding that is specifically for the employee health benefit program itself or for a particular health program. In the latter situation, however, only the employees who work for the health program would be covered by the rule. The final rule’s treatment of employment discrimination under Section 1557 does not change the protections under Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, or the other civil rights statutes referenced in Section 1557.

In other words, an entity that receives DHHS funding could be subject to claims from employees who believe that the company’s group medical plans discriminate based on the prohibited classifications. According to DHHS, these claims would not be preempted by Title VII or the ADA, and the ACA provides an additional means of recovery for such employees.

Discrimination claims based on employee medical plans are relatively uncommon, with the majority of claims relating to alleged disability discrimination. Employers now have another reason to make sure that their plans fully comply with access and coverage requirements for all employees.