In litigation under Section 1557 of the Affordable Care Act (ACA), a Texas district court concluded that Section 1557 (and Title IX of the Education Amendments of 1972) do not prohibit discrimination based on sexual orientation or gender identity (Neese v. Becerra, (N.D. Tex. Nov. 11, 2022)). The court therefore set aside a contrary HHS enforcement position—based on the Supreme Court's Bostock ruling addressing Title VII of the Civil Rights Act of 1964 (Title VII)—that Section 1557's prohibition "on the basis of sex" also includes discrimination on the basis of sexual orientation and gender identity.

In 2020, as background, the Supreme Court ruled in Bostock v. Clayton County, GA that the phrase "because of sex" for Title VII purposes prohibits employers from terminating employees on the basis of their sexual orientation or gender identity (140 S. Ct. 1731 (2020)). For more information, see:

ACA Section 1557 is a nondiscrimination rule that prohibits individuals from being excluded from participation in, being denied the benefits of, or being subject to discrimination under a health program or activity that receives federal financial assistance on specified grounds—one of which is Title IX's prohibition of discrimination "on the basis of sex" (see ACA Section 1557 Compliance for Health Coverage Toolkit).

In May 2021, the Biden Administration's HHS issued an updated enforcement position regarding Section 1557 that was intended to be consistent with Bostock and Title IX (Bostock Notification) (see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities: Biden Administration's Expanded Interpretation of Discrimination "On the Basis of Sex"). Under its Bostock Notification, HHS took the position that—effective May 10, 2021—the agency would interpret and enforce Section 1557's prohibition on discrimination on the basis of sex to include discrimination on the basis of sexual orientation and gender identity.

The plaintiffs in this case—two Texas-based health providers whose patients include individuals with gender dysphoria—sued HHS under the Administrative Procedure Act (APA) and the Declaratory Judgment Act (DJA). The providers asked the court to:

The providers and HHS asked the court to rule on their dispute without a trial.

In addressing HHS's Bostock Notification, the district court noted that Bostock interpreted Title VII's prohibition of sex discrimination and expressly stated that its Title VII holding did not extend to other laws. The district court was not persuaded by caselaw cited by HHS that, according to the agency, supported exporting Bostock's reasoning into Section 1557 or Title IX. For example, the court observed that some of the cases cited by HHS addressed only how Title IX applied to biological sex (as opposed to sexual orientation or gender identity). The court added that while the Fourth and Ninth Circuits might look to Title VII law in construing Title IX, the Fifth Circuit has expressly declined to apply all Title VII caselaw to Title IX.

In particular, the district court reasoned that Title VII's prohibition of discrimination "because of … sex" (which applies in the employment context) is not the same as Title IX's prohibition of discrimination "on the basis of sex" (which applies in the education context). From here, the court observed that HHS's interpretation of Title IX would jeopardize opportunities for women in education that Title IX was specifically designed to protect. In the court's view, for example, HHS's Bostock Notification:

Title IX, the court added, does not expressly address sexual orientation and gender identity—underscoring the statute's emphasis on biological-based distinctions in the education context. For example, the court noted, if "on the basis of sex" under Title IX included gender identity, schools could not use biology-based distinctions to separate physical education classes for sports such as boxing or rugby.

These contractions, the court further reasoned, also arise in the health care context under Section 1557. Under HHS's Bostock Notification, the court stated, a hospital could not tailor care to the biological differences between men and women. In this regard, one of the plaintiff-providers described a situation where:

As a result, the district court held that HHS's Bostock Notification was unlawful. The court also granted the providers' request for a declaration that Section 1557 does not prohibit discrimination on account of account of sexual orientation or gender identity.

As the district court acknowledged, other courts have reached the opposite conclusion on the central question in this case—and held that Section 1557 does extend to claims of gender identity based on the statute's plain language. For health plans, as a result, this could mean that litigation challenging plan exclusions for transgender care may have different outcomes depending on the jurisdiction in which the litigation is brought. Such a result obviously undercuts ERISA's goal of nationwide uniformity in plan administration. If the existing split over how Section 1557 and Title IX are interpreted deepens and reaches the circuit court level, it is possible that the Supreme Court could ultimately be asked to review the question.

Against this litigation backdrop, the Biden administration's HHS is currently finalizing its version of implementing regulations under Section 1557. Those regulations, once issued in final, will likely be the topic of even more litigation (see Article, August 2022 Re-Proposed Regulations Addressing Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557) and ACA Section 1557 Compliance for Health Coverage Toolkit).