By Fisher, JD, CHC, CCEP
Section 1557 Final Rule: Implications for Covered Entities and Employer-Sponsored Health Plans
April 2024
Executive Summary
The U.S. Department of Health and Human Services (“HHS”) finalized regulations implementing Section 1557 of the Affordable Care Act (“ACA”), significantly expanding the scope and compliance obligations for many healthcare organizations and certain employer-sponsored health plans. The Final Rule reinforces federal nondiscrimination requirements and clarifies when health plans, plan sponsors, and healthcare providers are subject to Section 1557.
Healthcare providers, hospitals, health systems, insurers, and employers that sponsor health plans receiving federal financial assistance should assess whether they qualify as “covered entities” and evaluate their compliance obligations under the revised regulations.
Background
Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities receiving federal financial assistance. HHS issued comprehensive final regulations in 2024 that restored and expanded many protections previously adopted under earlier administrations.
The Final Rule generally applies to:
- Health programs and activities receiving federal financial assistance;
- Health insurance issuers and certain health coverage programs;
- HHS-administered health programs; and
- Healthcare providers and organizations that receive federal funding, directly or indirectly.
Which Healthcare Providers Are Covered?
For many healthcare providers, Section 1557 coverage will not come as a surprise. Hospitals, health systems, physician groups, clinics, and other organizations that participate in federally funded healthcare programs often qualify as covered entities. The Final Rule also adopts HHS’s revised interpretation that Medicare Part B payments constitute federal financial assistance for civil rights enforcement purposes, potentially expanding the number of providers subject to Section 1557 requirements.
As a result, many provider organizations should assume that their operations are subject to Section 1557 and ensure that applicable policies, procedures, and patient-facing communications reflect current regulatory requirements.
Impact on Employer-Sponsored Health Plans
One of the most significant aspects of the Final Rule is its application to certain employer-sponsored group health plans. HHS clarified that Section 1557 may apply where a health plan itself receives federal financial assistance, including certain Medicare-related arrangements and plans receiving federal subsidies.
Importantly, merely sponsoring a group health plan does not automatically make an employer subject to Section 1557. Rather, the analysis depends on whether:
- The employer or plan sponsor is itself a covered entity; or
- The health plan receives federal financial assistance sufficient to trigger Section 1557 obligations.
Examples identified in commentary regarding the Final Rule include Medicare Advantage arrangements, Employer Group Waiver Plans (“EGWPs”), and certain Medicare Part D-related programs.
Healthcare provider employers should pay particular attention because many hospitals, health systems, and other healthcare organizations are already covered entities by virtue of their healthcare operations. Accordingly, their employee health plans may face increased scrutiny under Section 1557’s nondiscrimination framework.
Key Compliance Requirements
Covered entities may be required to implement a range of administrative and operational measures, including:
- Designating a Section 1557 coordinator in certain circumstances;
- Adopting written nondiscrimination policies and grievance procedures;
- Providing required notices of nondiscrimination and language assistance services;
- Ensuring meaningful access for individuals with limited English proficiency;
- Ensuring effective communication with individuals with disabilities; and
- Reviewing policies and practices for discriminatory effects.
The Final Rule also addresses the use of clinical algorithms, automated decision-making tools, and other technologies that could result in discriminatory outcomes. Covered entities should evaluate existing systems to identify and mitigate potential bias risks.
Nondiscrimination Based on Sex
Among the most closely watched aspects of the Final Rule are its provisions concerning discrimination on the basis of sex. HHS interprets Section 1557’s prohibition on sex discrimination broadly and includes protections related to gender identity and certain pregnancy-related conditions. These provisions have already generated litigation and are likely to remain an active area of regulatory and judicial development.
Employers and healthcare providers should closely monitor ongoing legal challenges and future agency guidance affecting these requirements.
Action Items for Healthcare Providers and Plan Sponsors
Healthcare organizations should consider taking the following steps:
- Determine whether the organization or any affiliated health plan qualifies as a covered entity under Section 1557.
- Review group health plan funding sources and Medicare-related arrangements.
- Assess nondiscrimination policies, grievance procedures, and participant communications.
- Evaluate language access and disability accommodation programs.
- Review benefit design, coverage exclusions, and utilization management practices for potential nondiscrimination concerns.
- Inventory the use of artificial intelligence, algorithms, and automated decision-making tools in healthcare delivery and coverage determinations.
- Monitor ongoing litigation and future HHS guidance affecting implementation of the Final Rule.
Conclusion
The Section 1557 Final Rule represents a significant expansion of federal nondiscrimination compliance expectations for healthcare providers and certain employer-sponsored health plans. Organizations that receive federal financial assistance—or that sponsor plans tied to federally funded healthcare programs—should carefully evaluate their status under the Final Rule and implement appropriate governance, compliance, and operational safeguards. Early assessment and remediation efforts may reduce regulatory risk and position organizations to respond effectively as Section 1557 enforcement continues to evolve.
