CRS Report Discusses the Scope of ACA Section 1557

On May 6, 2024, the Congressional Research Service published a report concerning the scope of ACA Section 1557 (the Section). Section 1557 prohibits discrimination on the basis of race, color, national origin, disability, age, and sex in federally funded healthcare programs or activities. It is the source of intense regulatory and legal scrutiny. The report focuses on the federal government’s and the courts’ attempts to define the entities to which the Section applies and provides recommendations to Congress regarding the Section’s implementation.

Three administrations have expanded and contracted the application of this Section through rules. In 2016, the Obama administration issued a rule that applied the Section to entities that provided health-related services, health-related insurance coverage, or other health-related coverage (including group health plans and TPAs) that received any federal financial assistance. If such entities received any federal financial assistance, then all its activities are subject to the Section. In 2020, the Trump administration narrowed the application of the Section through revisions to the 2016 rule, asserting that the administration would not consider health insurance issuers and TPAs to be a “health program or activity” subject to Section 1557’s antidiscrimination requirements. In 2024, the Biden administration issued a rule that expanded the Section’s application back to what it was in 2016, including pharmaceutical care and health research and education for healthcare professionals. That said, the 2024 rule acknowledges that group health plans and their sponsors are distinct from one another and that a fact-specific analysis must be applied to determine which are subject to the Section.

Despite the federal government’s efforts to define which entities are subject to the Section, courts have often disagreed. The paper cites Pritchard v. Blue Cross Blue Shield of Illinois, in which the defendant TPA argued that they were not subject to the Section according to the 2020 rule. The federal district court disagreed, determining that the plain language of the Section extended its application to the TPA, despite what the 2020 rule said. The US Court of Appeals for the Seventh Circuit similarly found that, according to the language in the Section, the statute clearly applied to the group health plan defendant in T.S. v. Heart of CarDon, despite the rule.

The report also noted a case in which a court disagreed with a TPA defendant that it was not subject to the Section because of ERISA. In Tovar v. Essentia Health, the TPA argued that ERISA required it to follow the plan’s terms, which were under the exclusive control of the employer sponsor. The court found nothing in the Section that provided for an exemption under these circumstances.

Ultimately, the report suggests that Congress should amend the Section if it wishes the courts and the federal government to apply it differently. The report notes that courts will disregard the rules in favor of the plain language in the statute, and the cases cited in the report show that the courts are willing to apply the Section to TPAs and group health plans, despite the 2020 rule’s efforts otherwise. Accordingly, the report suggests that if Congress does not want the Section to apply to TPAs and group health plans, then it should make the necessary changes to the statute.

Employers should be aware that, as the law currently stands, they may be subject to the nondiscrimination mandates of Section 1557 if their plans receive any federal financial assistance. Although the 2024 rule makes this clear, it is subject to change with a change in administration. Nevertheless, courts may defer to the Section itself rather than the rule, so employers should keep an eye on the administration of their plans to make sure it complies with the Section. Employers should consult with legal counsel if advice is needed regarding the application of the Section to their specific plans.

The Scope of ACA Section 1557: "Health Program or Activity" »