First off, I really wish government agencies would stop using the same term for a multitude of things. The term "covered entity" as used here bears no relation whatsoever to the exact same term HHS uses in its HIPAA privacy, security and breach regulations. To distinguish between the two I'll use "Section 1557 covered entity."
 
There's been much ado lately over Section 1557 nondiscrimination. If you recall, Section 1557 of the ACA prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs or activities. HHS recently issued some rather onerous regulations and gave Section 1557 covered entities very little lead time to implement them.

The first and most important point to take away from the Section 1557 final regulations is this: If you're not in the healthcare industry and you don't take Retiree Drug Subsidy, it's extremely unlikely that the nondiscrimination rules HHS issued under Section 1557 of the ACA apply to you. (And even if you are in the healthcare industry, Section 1557 may not apply to your benefit plan.) But judging by the self-insured renewal and new business paperwork produced by a number of pharmacy benefit managers (PBMs) and third-party administrators (TPAs, including insurance carriers acting as TPA), you'd think every employer is subject to Section 1557 nondiscrimination, and these materials have generated a lot of questions and confusion. 

Many of these renewal and new business documents explain the purpose of Section 1557 in the context of plan design and gives self-funded plan sponsors the opportunity to make some recommended plan design changes specific to gender transition procedures and gender identity disorder. The problem with some of these carrier- and PBM-produced documents is that their explanations of Section 1557 nondiscrimination are poorly written and in some cases factually inaccurate. All across the country, employers with self-insured plans are getting the false impression that they are directly subject to Section 1557 when they in fact may not be. 

PBMs and TPAs Cast Too Wide a Net

In some cases PBMs and TPAs (including insurance carriers acting as TPAs) have sent documents to plan sponsors stating broadly, "If an employer is federally funded or receives federal financial assistance, then it is covered by the Final Rule.” While it is true that some employers receiving federal funding or financial assistance are indeed subject to Section 1557, not true of every employer receiving federal funding or financial assistance. Contrary to general statements like this, the nondiscrimination protections found in the Section 1557 final rule only apply to health programs and activities that are administered or receive federal funding from HHS or one of its subordinate agencies such as CMS. This would include:

• Healthcare providers that accept Medicare and Medicaid payments such as hospitals, medical and dental practices, labs, nursing homes, assisted living facilities, hospice providers, and home health care agencies;
• Research institutions that receive NIH grants;
• Health plans that participate in the Retiree Drug Subsidy program administered by CMS;
• Academic institutions that receive HHS funding toward their student health programs; and
• Health-oriented community outreach programs that receive HHS funds.
  

This would not include:

• Healthcare providers that do not take Medicare or Medicaid (and that do not receive other money from HHS or CMS); or
• Any other type of employer that does not receive money from HHS or a subordinate agency.

Even if some portion of the employer's activities falls into the first category (that is, it received HHS money for certain activities), it is not always the case that their group health plans provided to their employees would be subject to these rules. In many cases, only the health program or activity actually receiving HHS funds would be affected.

If You Think You Might Be a Section 1557 Covered Entity...

The Section 1557 final rule is complicated and dense. If you think there's a chance you could be a Section 1557 covered entity, ask your ERISA attorney to be sure. For self-insured employers that in fact are Section 1557 covered entities, the final rule affords very little choice in the matter (i.e., there is apparently no pathway for religious objections) and the plan design changes urged by TPA insurance carriers and PBMs are very likely necessary in order to remain compliant. Section 1557 covered entities will also have to comply with some new requirements to provide notices to employees and translation/accessibility accommodations for individuals with disabilities and/or who do not speak English proficiently. 

You'll also need to asses the extent to which Section 1557 applies to your organization. In some cases, the nondiscrimination requirements of Section 1557 don't apply just to a health plan; they apply to an employer's other activities as well. In other cases, the nondiscrimination requirements of Section 1557 apply just to certain activities and not to the health plan at all.

If You're Sure You're Not a Section 1557 Covered Entity...

PMBs and TPAs are requiring a firm up-or-down declaration from employers on whether Section 1557 applies. If it doesn't apply but because of your company's culture you want to make the plan design changes (which is your prerogative as a self-insured plan sponsor), I don't recommend checking the box indicating yes, Section 1557 applies. As mentioned above, there are additional regulatory requirements beyond just the plan design changes. Instead of making a written declaration to your PBM or TPA that Section 1557 applies to you when it in fact doesn't, consider instead requesting the plan design changes outside of the poorly written renewal document.