The proposal by the Health and Human Services Department, subject to a 60-day public comment period before becoming final, has alarmed advocacy groups that say they are worried transgender patients, in particular, could be denied care, particularly in less populated areas where services can be scarce.
Roger Severino, director of the HHS office for civil rights, said the 2016 rule had to be addressed because of a court injunction. He also cited the cost burden of enforcing the regulations.
He said the new rule wouldn't preempt state regulations and it wouldn't urge medical providers not to treat certain patients.
Other anti-discrimination protections, applied to such groups as race, sex and religion, would remain intact.
"We have a lot of diversity for health care, We have a lot of options for people," Severino told reporters on Friday. "This rule does not go in and tell people how to practice medicine."
The move reflects the Trump administration's position that discrimination on the basis of sex shouldn't include gender identity. The administration has taken several steps to roll back or limit rights for LGBTQ people, including a restriction on transgender people serving in the military.
Most recently a rule announced by Housing and Urban Development Department that would allow federally funded shelters to turn away people citing religious objections and force transgender women to use men's bathrooms. Secretary Ben Carson defended the move Friday in a statement to ABC News: "our intention is to stop treating sex and self-identified gender as the same because I believe Washington shouldn’t be telling the rest of America how to determine whether someone is a man or a woman.”
Overall, the administration has moved to expand protections for businesses, including health care workers, to deny services if they feel it conflict with their religious beliefs. HHS had proposed changing the requirements for family planning clinics that accept federal money; that plan has been put on hold by a federal judge.
Advocacy groups were expected to challenge the proposal in court.
Winnie Stachelberg, executive vice president for external affairs at the Center for American Progress, in a statement, called the proposal an "unfair, targeted attack to marginalize certain patients" and said the administration can't "turn back the clock" on civil rights protections.
"By diluting and weakening protections from discrimination, patients may get turned away or denied medically necessary care simply because of who they are," Stachelberg said.
The latest proposal would alter the government's definition of "Section 1557," which is the non-discrimination of the Affordable Care Act. The Obama administration had issued a 2016 rule that expanded the class of people protected against discrimination to include gender identity.
The Obama rule also prohibited discrimination on the basis of pregnancy, to include "termination of pregnancy, or recovery" from such a procedure.
When asked what problems the administration was trying to fix with the rule, Serevino cited the money spent to enforce the regulation.
"It was clear there was no sufficient evidence for the imposition of $3.2 billion in cost," he told reporters, noting another $400 million that will cost to "lift the regulatory burden."