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Transitioning to Coverage: Three Things to Know About the New Transgender Healthcare Regulations

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On May 18, 2016, the Department of Health and Human Services (“HHS”) issued final regulations implementing the nondiscrimination provisions of the Affordable Care Act. As we discussed in our March 30, 2016 blog, the rule prohibits discrimination on the basis of sex and gender identity in the provision of health programs.  In application, the final regulations prohibit the categorical refusal of coverage to transgender participants and require that individuals be treated consistent with their self-selected gender identity.

  1. When are the final regulations effective?

The final rule generally is effective July 18, 2016. However, group health plans and health insurance need not be modified to comply with the new nondiscrimination rules until the first day of the first plan year (in the individual market, policy year) beginning on or after January 1, 2017.

  1. Who is subject to the nondiscrimination rule?

The final rule applies to (a) any health program or activity, any part of which receives funding from HHS, (b) any health program or activity administered by HHS and (c) any health program or activity administered by an entity established by Title I of the Affordable Care Act.

Notably, the final rule clarifies that self-funded group health plans administered by third party administrators are not covered by the nondiscrimination rule. Instead, the rule will apply to a self-funded plan only to the extent that the employer is principally engaged in health services or health insurance coverage.  For example, a hospital’s self-funded plan would be subject to the rule, but a grocery store’s self-funded plan would not.  This position marks a significant departure from informal guidance signaled by HHS following publication of the proposed regulations, as detailed in our earlier blog.

While the final nondiscrimination rules are limited in their application to certain employers, the type of discrimination that they target may be prohibited by other federal laws. In particular, at least one lawsuit has already been filed in the Ninth Circuit against a large healthcare provider targeting potentially discriminatory practices in reliance on Title VII in light of the new regulations.  Further, final regulations issued by the Office of Federal Contract Compliance Programs on June 15, 2016, extend similar nondiscrimination principles to employers with federal contracts valued in excess of $10,000 in any 12-month period.  These rules prohibit categorical exclusion of health care coverage related to gender dysphoria or gender transition and become effective August 15, 2016.

  1. What coverage must be offered to transgender participants?

Although the final regulations prohibit blanket exclusions of transgender transition benefits as facially discriminatory, the rules shed little light on the scope of services that must (or are not required to) be offered. For example, the final rules do not provide any guidance as to whether an employer must offer hormone therapy, mental health services, genital reassignment surgery, breast augmentation/reduction, puberty blockers, and some of the more cosmetic benefits such as voice coaching, tracheal shaving and hair removal, among others.  Accordingly, employers may wish to evaluate the full array of transgender benefits in the context of their health plans.

For more information, please see the final regulations, and the related Frequently Asked Questions and Fact Sheet.