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A Deeper Dive: Employers Receiving Federal Funding May Be Subject to ACA’s Nondiscrimination Rule and Need to Cover Transgender Benefits

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In recent months, we have written a fair amount about providing transgender benefits in light of the nondiscrimination provisions of the Affordable Care Act. Our blogs of March 30, 2016 and June 22, 2016 highlight the key contours of the nondiscrimination rule.  In our June 22 post, we mention in passing that the final nondiscrimination rule applies to any health program or activity, any part of which receives funding from the Department of Health and Human Services (“HHS”).  This blog provides additional clarity on what it means for a group health plan or an employer to receive federal financial assistance (“FFA”) and, by consequence, become subject to the nondiscrimination provisions of the Affordable Care Act.

In general, the final nondiscrimination rule applies to (1) group health plans that receive FFA and (2) employers that both receive FFA and provide employee health benefit programs (i.e. insured or self-funded plans, wellness programs, health clinics, long-term care coverage or insurance).  Employers not principally engaged in providing or administering health services or health insurance coverage would only be liable for discrimination under the rule with respect to an employee benefit program if the primary objective of the FFA is to fund such program.

Most self-funded employer-sponsored group health plans probably do not receive FFA from HHS, but this may occur, for example, if an employer sponsors a retiree prescription drug program or an employer group waiver program (“EGWP”). Other forms of FFA may exist and employers may wish to consider whether they receive funding from HHS that would subject them to the nondiscrimination provisions of the Affordable Care Act.

Being subject to the nondiscrimination rule may mean more than having to provide some level of transgender health coverage. It also subjects covered entities to certain notice requirements.  The Office of Civil Rights, which administers the nondiscrimination rule, has provided a sample notice to facilitate compliance.