Authors: Joseph P. Yonadi, Jr. and Nancy R. Chawla

On December 31, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction preventing the Department of Health and Human Services Office of Civil Rights (HHS) from enforcing Section 1557 of the Patient Protection and Affordable Care Act (ACA) that prohibits discrimination on the basis of “gender identity” and “termination of pregnancy.” See Franciscan Alliance, Inc. v. Burwell, No. 7:16-cv-00108-O (N.D. Tex. Dec. 31, 2016).

Practical Impact of Injunction
The injunction is limited to blocking the enforcement of gender identity (i.e., transgender services) and termination of pregnancy provisions required under the ACA regulations.  HHS has announced that the rest of the Rule will remain intact, including the Rule’s notice requirements.

Even though HHS enforcement has been temporarily brought to a halt, the injunction is preliminary, and may be appealed.  In addition, group health plan sponsors that are contemplating health plan design changes should keep in mind that the EEOC has taken the position that sex discrimination includes gender identify for purposes of Title VII.  Thus, this injunction has no effect in the event of an EEOC investigation.  Like so many pending regulatory issues, it may be best to wait and see the outcome of the White House transition.

ACA Section 1557 Background
ACA Section 1557 (Rule) sets forth that an individual will not be excluded from participation in, be denied the benefits of, or be subjected to discrimination on the basis of race, color, age, national origin, disability, and sex under any health program or activity, any part of which is receiving federal financial assistance. The HHS defined discrimination “on the basis of sex” to include “gender identity” and “termination of pregnancy.” Although the Rule does not define “termination of pregnancy,” it defined “gender identity” as “an individual’s internal sense of gender, which may be male, female, neither, or a combination of male and female, and which may be different from an individual’s sex assigned at birth.”  The Rule was set to take effect on January 1, 2017.

District Court Injunction
In late August of 2016, many states and entities filed suit in federal court in Texas arguing, among other things, the Rule violated the Administrative Procedures Act and various constitutional and statutory rights.  Plaintiffs argued that the Rule pressured healthcare providers to perform services, such as transition-related services and abortion-related services, against their religious freedom, and would be burdensome for health insurance providers to make changes to their insurance plans.

The Court stated that because ACA Section 1557 incorporated Title IX’s prohibition on sex discrimination, ACA Section 1557 prohibits only biological sex discrimination because the meaning of “sex” in Title IX unambiguously refers to “the biological and anatomical differences between male and female students as determined at their birth.”  In relying on Title IX’s definition of sex, the Court rejected HHS’s reliance on Title VII’s definition of “sex” which includes gender identity.  Moreover, the Court explained that prior to the passage of the ACA, no federal court had concluded sex should be defined to include gender identity and, as a result, HHS inappropriately expanded the definition of sex discrimination within ACA Section 1557.