By: Emily Miller, Ben Conley, and Sam Schwartz-Fenwick

Seyfarth Synopsis: A Federal Court has temporarily enjoined the Trump administration from putting into effect its recent rule that strips the Affordable Care Act of its gender identity protections.

The section of the final rule on Section 1557 of the Affordable Care Act that stripped the regulations of their gender identity protections was slated to take effect yesterday. But it did not.

Rather, on Monday, a federal judge in the Eastern District of New York issued a stay that blocked that portion of the U.S. Department of Health and Human Services’ final rule from taking effect.  The Court only addressed the final rule’s interpretation of “discrimination on the basis of sex” in its stay and did not address the other changes ushered in under the Department’s final rule.  Those other changes took effect yesterday.

Section 1557 of the ACA prohibits health programs and activities that receive federal financial assistance from discriminating on the basis of race, color, national origin, disability, age, or sex. Section 1557 takes its prohibition against discrimination on the basis of sex from its reference to Title IX of the Education Amendments of 1972 (Title IX). Since its inception, Section 1557 has prohibited discrimination on the basis of gender identity in healthcare through its prohibition against discrimination on the basis of sex.

On Friday, June 12, 2020, the Department issued its final rule on Section 1557 – explicitly removing protection from discrimination on the basis of gender identity from its prohibition against discrimination on the basis of sex. This meant that, once the final rule took effect, covered entities could discriminate against transgender patients without violating Section 1557.

On Monday, June 15, 2020, in Bostock v. Clayton County, the Supreme Court held that Title VII’s prohibition against discrimination on the basis of sex captures within it a prohibition against discrimination on the bases of sexual orientation and gender identity. Specifically, the Court held that “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”

And so, as we wrote in June, we found ourselves in an accordion-like quagmire where “on the basis of sex” included gender identity under Title VII and but was still interpreted by at least one executive branch agency to exclude gender identity under Section 1557 vis-à-vis Title IX.

Monday’s injunction signals that a resolution to this quagmire may be on the horizon.

In his ruling, Judge Frederic Block found the Department knew that the then-forthcoming decision in Bostock could have “ramifications” for its final rule given that both Title VII and Title IX prohibit discrimination “on the basis of sex” but “was apparently confident that the Supreme Court would endorse the Administration’s interpretation of sex discrimination…” The Court wryly noted that the Department’s “confidence was misplaced” and held that once the Supreme Court issued Bostock, the Department had to consider its implications for its final rule.  As Judge Block stated: “Instead it did nothing….  Since [the Department] has been unwilling to take that path voluntarily, the Court now imposes it.” The final rule cannot take effect until a court decides what the decision in Bostock means for Section 1557.

And so, the portion of the final rule that would have allowed for discrimination on the basis of gender identity in health programs and activities did not take effect yesterday, and transgender patients remain protected while the litigation challenging the final rule continues. We will continue to follow this case with interest.