Federal Court Stays Section 1557 Litigation Pending HHS’s Decision to Revisit Regulation

On July 10, 2017, the Northern District of Texas stayed its much-watched Section 1557 case (known as the Franciscan Alliance case) pending HHS’s decision to revisit or revise its regulation under Section 1557.

At issue in the case are two interpretations issued by HHS in its regulation under Section 1557: first, HHS interpreted Section 1557’s prohibition against sex discrimination in healthcare as prohibiting discrimination on the basis of gender identity; and second, HHS interpreted that same provision as also prohibiting discrimination on the basis of “termination of pregnancy.” On New Year’s Eve 2016, the District Court ruled that the Plaintiffs (several States and religious nonprofits) were likely to succeed on the merits of their claims against these two interpretations—and therefore, the District Court issued a nation-wide injunction against HHS’s enforcement of these two interpretations.

But that did not end the case. Instead, the Plaintiffs and HHS (now led by Secretary Tom Price) have been unable to agree on what remedy is proper given the Court’s ruling. On the one hand, the Plaintiffs urged the Court to rule in their favor on summary judgment and vacate HHS’s challenged interpretations. On the other hand, HHS asked the Court to stay the proceedings and allow HHS an opportunity to reevaluate the regulation and address the issues raised in this case. At the same time, the ACLU of Texas and the River City Gender Alliance sought to intervene in defense of HHS’s interpretations (although the Court has not yet ruled on their request).

With this complicated background in view, the Court decided to stay any further proceedings so that HHS may revisit or revise its Section 1557 regulation. And while it is not clear whether HHS is limited to addressing only the two challenged aspects of the regulation, HHS did state that it desires to “reassess the reasonableness, necessity, and efficacy of the two aspects of the [Rule] that are challenged in this case.” The Court also set a deadline of August 4, 2017 for HHS to identify any rulemaking proceedings it has initiated with respect to Section 1557.