With only one day left before the final rule scaling back nondiscrimination regulations took effect, the U.S. District Court for the Eastern District of New York (EDNY) issued an order staying the repeal of certain parts of the former regulations. On June 19, 2020, the Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) and the Centers for Medicare & Medicaid Services (CMS) published a final rule scaling back nondiscrimination regulations first released in 2016 to implement Section 1557 of the Affordable Care Act (ACA). The 2016 regulations had imposed significant requirements on health care providers to ensure that all individuals were provided “meaningful access” to care. As part of the 2016 regulations, OCR banned discrimination “on the basis of sex,” which was defined broadly as “on the basis of pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, or gender identity.” The 2020 final rule revised the 2016 regulations significantly, however. In one of its most controversial changes, OCR removed the definition of “on the basis of sex” contending that “on the basis of sex” shall revert to the “plain meaning” of the term “sex” in Title IX of the Civil Rights Act – meaning not to encompass discrimination on the basis of sexual orientation or gender identity. OCR’s decision came on the heels of a Supreme Court ruling in Bostock v. Clayton County, Ga. four days prior which concluded that discrimination “on the basis of sex” encompasses claims based on gender identity and sexual orientation under Title VII of the Civil Rights Act. Accordingly, within the course of less than a week, the Supreme Court broadly interpreted the same term that OCR severely limited.

Shortly after OCR announced its reversal of the nondiscrimination requirement based on gender identity and sexual orientation, various interest groups began mounting legal challenges. With the order issued by EDNY on August 17, 2020, we are already seeing evidence of the legal battles likely to ensue over the definition of “on the basis of sex,” placing certain parts of OCR’s final rule in legal limbo.

   1.  EDNY order halts the implementation and enforcement of OCR’s changes to discrimination “on the basis of sex.”

On August 17, the EDNY issued a significant order that halted the implementation and enforcement of OCR’s repeal of the 2016 definition of “on the basis of sex.”[1] The court assailed OCR’s underlying rationale behind the rule change, finding the agency’s actions as arbitrary and capricious and violating the Administrative Procedure Act (APA) because OCR failed to appropriately consider the effect of the Bostock ruling on its proposed changes. In particular, the court took issue with OCR’s failure to address the countervailing ruling despite having several days before publication of the rule in the Federal Register to do so and despite previously recognizing that a ruling in Bostock would have “ramifications” on the proposed rule. The court went on to say that the fact OCR announced the forthcoming publication of the final rule a few days before the Bostock ruling “might even suggest to a cynic that the agency pushed ahead specifically to avoid having to address an adverse decision.” While the order is not dispositive of the legal validity of OCR’s rollback of nondiscrimination protections based on gender and sexual identity (as it only stays the repeal), it leads the way to the inevitable legal battles to come for OCR regarding the Section 1557 rule changes.[2]

   2.  Other litigation developments related to Bostock and the final rule.

There are four additional lawsuits pending in federal court challenging the rule (and potentially more to come), each of which seeks to abandon all or parts of the rule and preclude OCR from instituting or enforcing its revised regulations. Below is a short description of each case:

  • State of Washington v. United States Department of Health and Human Services:[3]

The Attorney General for Washington State contends the final rule is “contrary to federal law and the Constitution because the final rule permits unlawful discrimination and contravenes the fundamental premise of the ACA to increase the number of people who have healthcare insurance.” In particular, the complaint challenges the legality of OCR’s decision to: (1) remove definitions for sexual orientation, gender identity, and sex stereotyping from the definition of “sex”; (2) eliminate notice and tagline requirements for significant communications; (3) narrow the scope of covered entities under the law; and (4) extend Title IX religious exemptions. The complaint argues these changes violate the APA, exceed OCR’s authority under Sections 1554 and 1557 of the ACA, and violate the Equal Protection and Due Process requirements of the Fifth Amendment.

  • Whitman-Walker Clinic v. United States Department of Health and Human Services:[4]

The case was filed by a coalition of health care facilities, advocacy groups and individual physicians. The complaint takes aim at a number of the final rule’s changes, including the elimination of notice and tagline requirements and other protections afforded to individuals with limited English proficiency (LEP). The complaint alleges the final rule: (1) is arbitrary and capricious and violates the APA; (2) is not in accordance with law in light of the Bostock ruling and based on “the well-established understanding of ‘sex’ under longstanding civil rights laws”; (3) exceeds the agency’s statutory authority, alleging Congress did not confer upon OCR authority to alter Section 1557’s statutory terms; (4) violates Equal Protection and substantive Due Process protections under the Fifth Amendment; (5) violates LGBTQ individuals’ right to free speech; and (6) violates the Establishment Clause under the First Amendment.

  • Boston Alliance of Gay, Lesbian, Bisexual and Transgender Youth United States Department of Health and Human Services:[5]

The complaint raises claims similar to those brought in Whitman-Walker. The complaint, among other things, alleges that rolling back definitions of discrimination “on the basis of sex” is contrary to law and inconsistent with the APA standards. The complaint also challenges the final rule’s interpretation of “health program or entity” and its elimination of protections against discrimination on the basis of association.

  • New York v. United States Department of Health and Human Services:[6]

The complaint broadly critiques OCR, alleging that the 2020 rulemaking was implemented with the purpose of undermining the ACA’s Section 1557 nondiscrimination protections, and that OCR pushed the revised regulations forward despite “the outpouring of comments opposing the massive rewrite.” In addition, the complaint contends that various aspects of the final rule are arbitrary and capricious and contrary to law, including the rule’s elimination of critical access provisions and protections based on gender identity and sexual orientation.

   3.  What the current landscape means for covered entities.

Collectively, current litigation efforts pose a legitimate hurdle to the implementation and enforcement of the final rule, at least as originally written by OCR. Given the uncertainty sowed by the pending litigation, covered entities should avoid overhauling current nondiscrimination policies and procedures until the litigation dust settles. This advice is underscored by the recent injunctive order from the EDNY, which behooves covered entities to maintain policies that forbid discrimination on the basis of sexual identity and gender orientation. As such, we recommend that covered entities monitor developments regarding ongoing litigation to best assess the force and validity of changes under the final rule and determine their respective legal obligations.

[1] Walker v. Azar, No. 20-CV-2834-FB-SMG (E.D.N.Y. Aug. 17, 2020).

[2] See, e.g., New York v. U.S. Dep’t of Health & Human Servs., No. 1:20-cv-05583 (S.D.N.Y. July 20 2020).

[3] No. 2:20-cv-01105 (W.D. Wash. July 16, 2020).

[4] No. 1:20-cv-01630 (D.D.C. June 22, 2020).

[5] No. 1:20-cv-11297 (D. Mass. July 09, 2020)

[6] No. 1:20-cv-05583 (S.D.N.Y. July 20 2020).