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Will Disparate Impact Claims Be Permitted in ACA Section 1557 Healthcare Cases?

Civil rights act claimants have long sought to use the “disparate impact” theory to prove discrimination. Under this theory, a policy or action that is neutral on its face and is not intentionally discriminatory can still be deemed to violate the law if it has an especially adverse effect on a disability, sex, age or ethnic group. This theory, however, is difficult to apply to healthcare benefits. Unless resources are unlimited, governmental and private sponsors of health plans must make choices on which physical conditions to cover. But any decision not to cover a condition can seemingly be framed as having an adverse impact on a protected group.

ACA Section 1557, the new healthcare discrimination law, is written in a compact manner. Instead of providing its own rules on discrimination, it reapplies four pre-existing race, sex, age and disability discrimination laws to federally-subsidized health programs. Courts interpreting the underlying race and sex statutes have found that private persons can only use them to bring claims to recover damages for intentional, and not disparate impact discrimination. For disability discrimination, the Supreme Court has been unwilling to completely dismiss the viability of the disparate impact theory. But it has also held that for health benefits, a covered entity is only required to provide the disabled with “meaningful access” to whatever package of benefits it provides to the nondisabled. And a covered entity is not required to redesign its package of services to meet the needs of the disabled.

In two recent cases, district courts have denied disparate impact claims in Section 1557 cases, but have not completely foreclosed use of the theory. In a December 2017 decision, insureds sued a health plan, claiming that its alleged failure to cover lactation counseling services had a disparate impact on women.[1] The court rejected the use of disparate impact for this claim. It noted that Section 1557 states that the enforcement mechanisms for the four underlying discrimination laws apply for Section 1557 purposes as well. The case law for Title IX, the underlying sex discrimination statute, permits a private right of action – but only for cases of intentional, not disparate impact discrimination. So, the claim for sex discrimination under Section 1557 also had to be dismissed.

In a January 2018 case, insureds sued a pharmacy benefits manager, alleging that its prices for HIV drugs were above market and violated Section 1557 because they had a disparate impact on persons with HIV – a disability.[2] The plaintiffs argued that the prices disproportionately affected them because drugs treating chronic conditions like theirs were subject to higher coinsurance rates. The court here sidestepped a decision on whether disparate impact could be applied, but nonetheless rejected the claim as not supported by the allegations in the complaint. It found that the complaint did not show that coinsurance rates for HIV medications were higher than those for other conditions. While the complaint alleged that one plaintiff paid a 20% rate for HIV drugs, it also alleged that insureds without HIV had copays that ranged from 25-100%.

The takeaway for now is that the disparate impact theory faces an uphill battle in Section 1557 cases. For questions about the developing law for ACA Section 1557 or other healthcare discrimination law issues, contact David D. Johnson at david.johnson@mrllp.com.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.

[1] Briscoe, ---F.Supp.3d---, 2017 WL 5989727 (N.D.Ill. 2017).

[2] In re Express Scripts., No. 16 Civ. 3399 (ER) 2018 WL 339946 (S.D.N.Y., Jan. 5, 2018).