Key Section 1557 Nondiscrimination Provisions Permanently Vacated Following Court Rulings

Key provisions of the 2024 final rule under Section 1557 of the Affordable Care Act (ACA) have been permanently vacated following federal court rulings, with the U.S. Department of Health and Human Services (HHS) formally confirming the vacatur in the Federal Register on June 2, 2026. Section 1557 prohibits discrimination based on race, color, national origin, sex, age or disability in certain health programs and activities.

Regulatory Background

HHS’s Office for Civil Rights (OCR) issued the latest Section 1557 final rule in 2024, which expanded the scope of the previous Section 1557 regulations by providing, among other things, that sex discrimination includes discrimination on the basis of sexual orientation and gender identity, as well as sex stereotypes, sex characteristics, and pregnancy or related conditions. Litigation concerning Section 1557 regulations has been ongoing since initial regulations were issued in 2016, primarily focusing on which health programs and activities are subject to Section 1557’s nondiscrimination requirements and whether sex discrimination includes discrimination based on gender identity, sexual orientation and termination of pregnancy.

Initial Legal Challenges

Before the final rule took effect, federal district court judges blocked enforcement of certain provisions, including the following:

• Nationwide Preliminary Injunction: A federal district court judge in Mississippi issued a nationwide preliminary injunction, temporarily preventing enforcement of the rule “in so far as [it is] intended to extend discrimination on the basis of sex to include discrimination on the basis of gender identity[.]”
• Florida Preliminary Injunction: A Florida federal district court judge blocked enforcement of OCR’s interpretation of discrimination “on the basis of sex” as it relates to gender identity and postponed the effective date of the rule regarding certain other provisions, but within Florida only.
• Texas and Montana Postponement: A Texas federal district court judge postponed the effective date of the rule in its entirety, but only as to Texas and Montana.

Subsequent Developments

On October 22, 2025, the Mississippi district court, after a full review, permanently vacated the portions of the Section 1557 regulations that interpreted sex discrimination to include gender identity. The court concluded that HHS exceeded its statutory authority by implementing regulations that redefined sex discrimination and prohibited gender-identity discrimination. While enforcement of the gender-identity discrimination provisions had already been suspended, this ruling formally vacates them and narrows the scope of Section 1557’s protections. On June 2, 2026, OCR published a formal notification in the Federal Register, making clear that the vacated provisions are legally void and that OCR cannot and will not enforce compliance with those provisions to the extent they expanded the definition of sex discrimination to include gender-identity discrimination. The other provisions of the 2024 final rule remain in force.

Employer Takeaway

While most employer health plans will not be considered covered entities, to the extent a group health plan receives federal financial assistance, it would be subject to Section 1557. A third-party administrator for a self-funded group health plan may be considered a covered entity where it is affiliated with a health insurance issuer that receives funding.

Whether Section 1557 applies to a particular entity is a fact-specific analysis.

Plan administrators and issuers should review their Section 1557 compliance in light of the formal vacatur and continue to consult with benefits counsel regarding their ongoing obligations under the remaining provisions of the rule.

If you have questions, please reach out to your Hylant representative for further information. Don’t have one? Contact us here.

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.