Rolling Back Civil Rights Protections in Health Insurance: The Proposed 1557 Rule
A new proposal from the Trump administration would roll back civil rights rules governing federally assisted health programs. Issued by the Obama administration in 2016, these rules implement Section 1557 of the Affordable Care Act, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability. The proposed revision to roll back this protection has garnered considerable public attention because of its implications for transgender people. But the proposed rule could affect health care access more generally, especially for people with disabilities and those with extensive health needs.
A Civil Rights Watershed
Section 1557 contains three distinct features. First, like previous civil rights laws, 1557 applies to health programs and activities that receive federal financial assistance. But 1557 also broadens the concept of federal financial assistance to include “contracts of insurance,” such as health insurance policies purchased with federal subsidies. This change clarifies that 1557 applies to insurers that participate in Medicaid, Medicare, the Children’s Health Insurance Plan (CHIP), and marketplace plans purchased with refundable tax credits. The express inclusion of this seemingly obscure legal term resolves previous uncertainty about the circumstances under which civil rights laws could apply to health insurance coverage itself.
Second, 1557 makes discrimination on the basis of sex a specific type of prohibited activity under federally assisted health programs. Preventing sex discrimination in federally assisted health programs thus becomes an express civil rights protection, just as it is under previous laws barring discrimination in federal health programs on the basis of race and national origin, disability, and age.
Third, 1557 follows a core civil rights principle by applying its prohibitions to “any health program or activity, any part of which is receiving federal financial assistance.” This principle bars private entities participating in public programs from limiting their compliance only to certain areas or services. Legislation enacted by a bipartisan Congress in 1987 and signed into law by President Reagan reaffirmed this principle. It overturned a 1984 United States Supreme Court decision that allowed federally funded programs to comply with civil rights rules on a piecemeal basis — that is, not for an entire institution or program.
Removing Key Protections
The proposed rule would remove several key protections from the 2016 regulations. In addition to excluding discrimination based on gender identity, the rule also would draw a distinction between health care and health insurance, despite the express addition of “contracts of insurance.” Thus, the administration proposes to continue to apply rules barring discrimination to entire “entities principally engaged in the business of providing health care.” But it would exempt entities that are “principally or otherwise engaged in the business of providing health insurance” from this standard. If this distinction becomes law, it would mean that 1557 protections would apply only to people insured through plans purchased through Medicaid, CHIP, Medicare, or marketplace subsidies. Those insured through nonsubsidized individual or employer-sponsored plans would lose these protections. Put another way, the revised 1557 would protect someone living with HIV when insured through Medicaid but not when he or she has job-based insurance.
Putting aside civil rights enforcement principles, the proposed rollback does not make sense from a health policy perspective. It ignores the fact that, like hospitals, health insurance corporations depend on government business. It would allow health insurers to benefit financially from hundreds of billions of dollars annually in government payments without expecting full civil rights compliance in return. The proposal also ignores the fact that outside of Medicare and Medicaid, the nation’s largest investment in health care financing is the favorable tax treatment given to employer-sponsored plans, worth an estimated $146 billion in 2018. The entire business model of health insurance is based on government financing policy, both direct and indirect.
It seems irrational to vary insurers’ civil rights obligations depending on whether the government directly pays the bill or provides large, indirect tax benefits. It also ignores the fact that Americans constantly move across insurance markets depending on their social and economic circumstances. Moreover, the proposal overlooks the fact that modern insurance products effectively determine not only what will be covered but also access to care by stipulating provider networks. You can no longer practically distinguish between health care and health insurance.
Withdrawing civil rights protections from private insurance plans is not an abstract legal problem. Prior to the ACA, there were numerous cases against insurers that used benefit design and coverage decision-making to limit and exclude treatment for the highest-need patients. Other cases focused on the denial of physical and speech therapy for children with developmental disabilities on the grounds that a full recovery from their conditions was not possible. There were also arbitrary restrictions on covered treatment for people living with conditions that have been the subject of severe stigma, such as HIV/AIDS. This continued even with passage of mental health parity protections and the Americans with Disabilities Act (ADA), since ambiguities in the ADA led to judicial tolerance of insurer discrimination. Without protections, these practices and others could continue. Insurers could put all HIV drugs, including generics, in the highest cost-sharing tier, while not doing so for other conditions. In exempt markets (i.e., employer plans and individual policies purchased without government subsidies), insurers could use provider networks that exclude health care professionals or institutions with special expertise in treating conditions like HIV/AIDS. The ACA’s essential health benefit rules might curb some of these practices, but only in the individual and small-group markets.
These practices are discriminatory in any insurance market. Turning back the clock on protections invites precisely the types of insurer conduct that 1557 was enacted to prevent.