Section 1557 of the Affordable Care Act (“ACA”) contains anti-discrimination provisions, which include prohibitions on sex discrimination, that apply to certain health care providers and insurers receiving federal funding. On June 13, 2020, the Department of Health and Human Services (“HHS”) published a final rule walking back protections for transgender patients, among other changes (“2020 Rule”).
The previous Section 1557 regulations, from 2016 (“2016 Rule”), defined sex 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.” Based on that definition, the 2016 Rule required covered entities (1) not discriminate on the basis of sex in providing access to health programs and activities; (2) “treat individuals consistent with their gender identity”; and (3) prohibited “deny[ing] or limit[ing] health services that are ordinarily or exclusively available to individuals of one sex, to a transgender individual based on the fact that the individual’s sex assigned at birth, gender identity, or gender otherwise recorded is different from the one to which such health services are ordinarily or exclusively available.”
The 2020 Rule eliminated that definition and the above requirements. HHS stated that it
disagrees … that Section 1557 or Title IX encompass gender identity discrimination within their prohibition on sex discrimination…. The biological differences between men and women are not irrelevant to employment law and education, and they are in many ways even more relevant in the health setting…. The Department believes that, unlike stereotypes, reasonable distinctions on the basis of sex, as the biological binary of male and female, may, and often must, play a part in the decision making process – especially in the field of health services. A covered entity such as a healthcare provider is not impermissibly stereotyping biological males (notwithstanding their internal sense of gender) on the basis of sex if it uses pronouns such as “him”; limits access to lactation rooms and gynecological practices to female users and patients; or lists a male’s sex as “male” on medical forms. Similarly, a covered health care entity is not impermissibly stereotyping biological females (notwithstanding their internal sense of gender) on the basis of sex if it uses pronouns such as “her”; warns females that heart-attack symptoms are likely to be quite different than those a man may experience; advises women that certain medications tend to affect women differently than men; or lists a female’s sex as “female” on medical forms. Finally, it is not stereotyping for covered entities to have bathrooms or changing rooms designated by reference to sex, or to group patients in shared hospital rooms by sex. Such practices and actions are not rooted in stereotypes, but in real biological and physiological differences between the sexes. Moreover, none of these examples disadvantages one sex over another, and in fact the failure to take sex into account may in some cases have a disadvantageous effect…. Distinctions based on real differences between men and women do not turn into discrimination merely because an individual objects to those distinctions…. The Department will vigorously enforce Section 1557’s prohibition on sex-based discrimination, but that prohibition cannot be construed as a prohibition on reasonable sex-based distinctions in the health field…. Unprofessional conduct such as inappropriate jokes or questions, excessive precautions, or concealment of treatment options, may be covered under State medical malpractice, tort, or battery laws [but not Section 1557].
Finally, although noting that “[n]othing in this  [R]ule prohibits a healthcare provider from offering or performing sex-reassignment treatments and surgeries, or an insurer from covering such treatments and procedures, either as a general matter or on a case-by-case basis,” (emphasis added), HHS states there is no legal requirement to do so under Section 1557.
The 2020 Rule noted that some comments had urged HHS to defer issuing this Final Rule until the Supreme Court decided a trio of cases and resolved whether Title VII’s sex-discrimination prohibition also prohibits discrimination based on transgender status. HHS explained it opted not to wait because the administration had taken the position in those cases Title VII does not prohibit discrimination based on transgender status, Section 1557 encompasses Title IX’s sex-discrimination provisions (not Title VII), and there are unique medical issues related to “biological” sex implicated in ACA discrimination that would not matter in employment discrimination cases. On June 15, 2020, the Supreme Court decided that Title VII does protect transgender employees. In doing so, the Supreme Court rejected arguments similar to the HHS statements quoted above. However, because the Supreme Court’s decision interpreted Title VII and not Title IX, it is unclear what, if any, impact that decision will have on courts’ interpretation of the new HHS rule regarding transgender patients.