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Nondiscrimination and Chronic Conditions -- The Final Section 1557 Regulation
July 25, 2016
Source: Health Affairs Blog
Before the Affordable Care Act (ACA), those with serious or chronic health conditions were often denied health insurance coverage or paid high prices for substandard plans with coverage exclusions. Many went uninsured and untreated. For them, the ACAs new coverage opportunities and protections against discriminatory practices by health insurers serve as an essential lifeline.
Under the ACA, insurers can no longer charge higher premiums or deny coverage for people with pre-existing conditions. However, some insurers have tried to circumvent ACA protections by designing benefits that discourage enrollment by persons with significant health needs.
NHeLP [National Health Law Program] and The AIDS Institute filed a landmark complaint with the Department of Health and Human Services Office for Civil Rights after four Florida insurers placed all HIV medicines, including generic drugs, on the highest cost sharing tiers. Researchers found that this practice—called “adverse tiering”—is widespread. A New England Journal of Medicine study found that one-in-four insurers placed all drugs to treat HIV in the highest tiers. Another study in Journal of the American Medical Association found that up to 15 percent of plans in the federal marketplace lack in-network physicians for at least one specialty, making access to care significantly more expensive for those with specialized care needs.
The Department of Health and Human Services (HHS) recently finalized regulations for the cornerstone non-discrimination provision of the ACA — Section 1557. For the first time, the provision applies civil rights protections against discrimination on the basis of race, ethnicity, national origin, sex, age, and disability specifically to health programs and activities administered by or receiving federal funding.
Health advocates and patient advocacy organizations lauded the final regulations for Section 1557, which expressly prohibit insurers from employing plan benefit designs or marketing practices that discriminate.
Protection from discrimination on the basis of disability
While not explicitly prohibiting discrimination on the basis of chronic conditions, the regulation does prohibit discrimination on the basis of disability. As outlined previously, if persons with chronic conditions qualify as “disabled” under the law, they are protected under Section 1557. Congress clarified the definition of disability under the Americans with Disabilities Act Amendments (ADAAA) of 2008. The amendments broadly define disability as an impairment of:
- Major life activities (e.g., manual tasks, seeing, hearing, eating, sleeping, walking, standing, speaking, learning, concentrating); or,
- Major bodily functions (e.g., immune system, normal cell growth, digestive, bladder, neurological, respiratory, circulatory, endocrine).
In the final rule, HHS affirmed that “disability” is defined broadly and inclusively, according to the ADAAA. Thus, under Section 1557, persons with chronic conditions are covered as long as they show they can meet the criteria for disability outlined in the ADAAA.
Furthermore, the final rules elsewhere provide that the relevant ADAAA provisions are Title II, as opposed to Title I standards. Title I, which applies to employment situations, requires that an individual first meet certain essential job functions. Title II, which is more inclusive and in keeping with the ACA, requires full access for programs and services for those who qualify.
The broad disability definition is a positive development for those with serious or chronic conditions, because Section 1557 provides robust enforcement mechanisms, including a private cause of action. In other words, persons with conditions that qualify as a “disability,” or other protected classes, can challenge discriminatory insurance practices in court. Rather than face the risk of costly litigation, entities will have to proactively ensure that their programs are broadly inclusive of those with chronic conditions. Going forward, the justice system could provide timely restraints upon any entity that tries to restrict care to those who need it the most.
Health Insurance Discrimination
Section 1557 protections apply to the federal and state-based ACA marketplaces, the health plans sold through the marketplaces, as well as other private health plans, such as employer sponsored coverage, provided or administered by health insurers that receive any form of federal financial assistance.
This is important because the original Americans with Disabilities Act provided a safe harbor for insurance companies allowing them to consider health factors, including disability, as part of risk assessment, underwriting, and exclusions as part of their business model. Not anymore — Section 1557 prohibits the provision or administration of discriminatory health insurance. This includes not only eligibility-based discrimination (with the prohibition of denying, canceling, limiting, or refusing to issue or renew a health-related insurance plan or coverage) but also other aspects of insurance design, such as:
- Denying or limiting coverage of a claim or imposing additional cost-sharing or other limitations or restrictions on coverage; and,
- Having or implementing discriminatory marketing practices or benefit designs.
In the final rule, HHS declined to precisely define “benefit design” and “marketing practices,” saying that establishing a definition for these terms would be “overly prescriptive.” Rather than establishing a bright line test, HHS will consider benefit design discrimination on a fact-based, case-by-case basis.
HHS provides examples of potentially discriminatory benefit designs that would run afoul of Section 1557, citing federal guidance establishing requirements for health plans subject to the Essential Health Benefits (EHB) and Qualified Health Plans (QHPs) available in the marketplaces.
HHS examples of potentially discriminatory plan designs and its own review process to identify unlawful practices include: adverse tiering of HIV prescription drugs, formularies or services that fail to meet recognized treatment guidelines or the standard of care for a certain condition, applying age limits to services found to be effective at all ages, requiring prior authorization for all medications in certain classes, and whether limitations and exclusions are based on clinical guidelines and medical evidence.
In the preamble to the final rule, HHS notes that network adequacy and access to specialists are generally issues outside the purview of OCR. However, HHS notes that OCR does have authority to address instances when “a covered entity has discriminated on a basis prohibited by Section 1557.” Thus, plans that exclude certain specialists may be subject to sanctions under Section 1557, upon a showing that such practices discriminate on the basis of race, ethnicity, national origin, sex, age, or disability.
A framework for analyzing plan benefit design discrimination
The Presidents budget request for HHS acknowledges the challenges facing OCR as it implements Section 1557:
[“]Cases involving insurance present new issues. Examples include how to evaluate whether health plans practices of setting specialty prices for drugs used to treat HIV/AIDS, discriminate based on disability; [and] how to determine which conditions should be treated as comparators in evaluating whether a plans exclusion of particular services for a medical condition is discriminatory;[“]
The final rule Preamble lays out factors OCR will consider when assessing whether a plan benefit design is discriminatory:
- whether a covered entity utilized, in a nondiscriminatory manner, a neutral rule or principle when deciding to adopt the design feature or take the challenged action;
- whether the reason for its coverage decision is a pretext for discrimination;
- whether coverage for the same or a similar service or treatment is available to individuals outside of that protected class or those with different health conditions; and,
- by evaluating the reasons for any differences in coverage.
These factors should be considered in conjunction with the examples of insurance discrimination in the 2017 Letter to Insurers (including adverse tiering, inappropriate age limits, not covering single-tablet regimens). This is important because these factors and discrimination examples bring us more towards the utilization of recognized treatment guidelines and standards of care when assessing whether a discriminatory activity has occurred. Evaluating for discrimination against people with HIV necessarily involves comparing plan formularies and prior authorization requirements with treatment guidelines issued by the National Institute of Health. When insurers decided not to cover single pill HIV regimens, they had difficulty finding reasons for this “difference in coverage” because it ran counter to treatment guidelines that improved adherence.
Currently, HHS performs outlier analyses to assess for discriminatory plan behavior prior to certification for the marketplace. However, it is conceivable that if certain discriminatory insurance practices are especially widespread, they would not register as outliers. These Section 1557 factors offer a valuable way to address discriminatory practices that slip through HHS initial review. With the standard of care and outlier analyses in mind, health advocates should utilize this framework to track compliance with non-discrimination requirements.
A Step Forward
Both the verification of Section 1557s broad applicability to those with chronic conditions as protected on the basis of disability and the specific provisions related to eligibility and cost-based discrimination in health insurance represent important protections for those with serious and chronic conditions. Through the administrative complaints process and the courts, the scope of Section 1557 will continue to take shape.
But one thing is clear: those with serious or chronic conditions have an enforceable right to nondiscriminatory health coverage across a broad spectrum of programs and health plans. With the finalization of Section 1557, we have begun to realize one of the ACAs core visions where people who need health coverage the most can actually access the care they need.
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