Fifth Circuit Prevents Enforcement of Certain Section 1557 Nondiscrimination Provisions

On August 26, 2022, in Franciscan Alliance, Inc., et al v. Becerra, et al, the US Court of Appeals for the Fifth Circuit upheld a federal district court injunction against HHS that stopped the agency from interpreting and enforcing Section 1557 of the ACA in a way that would require a Catholic hospital system and other religious institutions to provide coverage for (or to perform) gender-reassignment surgeries or abortions in violation of its sincerely held religious beliefs.

Section 1557 prohibits healthcare programs that receive federal funds from discriminating against patients based on sex, using the definition of prohibited sex discrimination found in Title IX. HHS has the authority to issue regulations implementing and enforcing Section 1557, and this case highlights the agency’s efforts to do so over the course of the last several years. In 2016, the Obama administration promulgated rules that interpreted this section to include discrimination based on gender identity and the termination of pregnancy. The Franciscan Alliance, a group of Catholic hospitals, along with a handful of other plaintiffs, challenged this interpretation by asserting that the agency exceeded its authority by extending the definition of sex discrimination beyond that established in Title IX. The plaintiffs also asserted that the rule violated the Religious Freedom Restoration Act (RFRA) by forcing it to perform abortions and gender-reassignment surgeries inconsistent with its sincerely held religious beliefs.

The district court agreed with Franciscan Alliance and vacated the parts of the 2016 rule that the plaintiffs complained of but declined to issue a permanent injunction against the agency. However, the plaintiffs wanted a permanent injunction, so they appealed.

The litigation was stayed pending the result of a US Supreme Court case, Bostock v. Clayton County, in which the definition of sex discrimination under Title IX was an issue. In the meantime, HHS (now part of the Trump administration) promulgated an amended version of the regulations in 2020 that removed the 2016 definition. Within days of that change, the Supreme Court issued its ruling in the Bostock case, holding that Title IX prohibited discrimination based on gender identity or homosexuality. The Court’s decision became the basis of several other court decisions that resurrected parts of the 2016 rule. We discuss the ramifications of this decision in the May 11, 2021, edition of Compliance Corner.

The Fifth Circuit heard the plaintiff’s appeal in 2021 and, with the changes to the regulatory landscape that had occurred, remanded the case back to the district court. This time, the district court agreed with the plaintiffs and issued the permanent injunction against the agency enforcing both the regulations and Section 1557. The appeal of the permanent injunction serves as the basis for the Fifth Circuit’s recent decision.

Although the Fifth Circuit acknowledged that the recent changes to the regulatory landscape made challenges to the 2016 version of the rules moot, the appellate court did rule that the regulations violated the RFRA and that an injunction against enforcing Section 1557 was appropriate since the agency had made clear that it intended to enforce it (and did not decline to say that it would not enforce it against the plaintiffs).

Employers should be aware of these developments and that the situation concerning Section 1557 continues to develop. Although the Fifth Circuit upheld the permanent injunction against HHS, the agency could appeal that decision. In addition, several cases in other federal appeals courts with implications for Section 1557 are pending.

Franciscan Alliance, Inc., et al v. Becerra, et al »