In litigation under Section 1557 of the Affordable Care Act (ACA), a Maryland district court concluded that a university health system and its hospital subsidiary violated Section 1557 by refusing to allow a patient's hysterectomy to be performed at the hospital because it was for a gender transition (Hammons v. Univ. of Md. Med. Sys. Corp., (D. Md. Jan. 6, 2023)). The court concluded that the hospital discriminated on the basis for sex because it allowed patients to obtain medically necessary hysterectomies unless they were for treating gender dysphoria.

The plaintiff in this case was a transgender man who was scheduled to receive a hysterectomy (that is, a surgery to remove a person's uterus) at the defendant-religious hospital as part of his treatment for gender dysphoria. As a condition of its acquisition by the university health system, the religious hospital was to be operated consistent with ethical and religious directives that prohibited gender transition surgeries (including the administration of cross-sex hormones and pubertal blockers). One of the hospital's doctors initially agreed to perform the hysterectomy and allowed the patient to undergo pre-operative procedures. However, the doctor was later informed that transgender surgery could not be performed at the hospital if it was intended to treat gender dysphoria. The doctor therefore cancelled the surgery the night before it was to be performed.

The patient sued the health system and hospital, asserting claims that included violations of ACA Section 1557 (see ACA Section 1557 Compliance for Health Coverage Toolkit). The parties asked the court to rule on the Section 1557 claim without a trial.

The district court concluded that the hospital, by cancelling the patient's hysterectomy because it was for treating gender dysphoria, discriminated against him on the basis of sex in violation of Section 1557. The court rejected the hospital's argument that its religious directives applied neutrally because they prohibited hysterectomies for all individuals who did not have a medical need for the procedure, regardless of sex. However, the court reasoned that the patient did have a medical need for the requested surgery—specifically, a doctor-recommended hysterectomy to treat the individual's gender dysphoria. The district court concluded that:

The court therefore concluded that the hospital's directives were not a neutrally applied prohibition on hysterectomies but a prohibition on hysterectomies (and other gender-affirming surgeries) sought by transgender individuals to treat gender dysphoria.

The court also held that the hospital's directives against gender-affirming care discriminated on the basis of sex under Title IX (one of the four statutes referenced in Section 1557) (see Article, August 2022 Re-Proposed Regulations Addressing Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557).

In reaching this conclusion, the court relied on the Supreme Court's decisions in:

The district court observed that the Fourth Circuit had extended the Supreme Court's analysis to apply to Title IX's sex discrimination provision, which is incorporated into Section 1557. Although the Supreme Court and Fourth Circuit opinions addressed employment and educational settings, the court noted that other district court rulings had applied these principles in the Section 1557 context (see Fain v. Crouch, (S.D.W.V. Aug. 2, 2022) and Kadel v. Folwell, (M.D.N.C. Dec. 5, 2022); see Legal Update, State Group Health Plan Is Subject to ACA Nondiscrimination Rules). In Fain and Kadel, the district courts held that coverage denials for gender-affirming care were discrimination on the basis of sex, and therefore violated Section 1557.

The district court rejected several defenses raised by the hospitals. For example, the hospital argued that it was shielded by an injunction entered by a North Dakota district court involving HHS's enforcement of Section 1557 (Religious Sisters of Mercy v. Azar, 513 F. Supp. 3d 1113 (D.N.D. 2021)). The district court in the North Dakota case permanently enjoined HHS from interpreting or enforcing Section 1557 in a way that would require a Catholic benefits association, related association members, and other unnamed members to perform gender-transition procedures (see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities: Post-Bostock Litigation Affecting June 2020 Final Regulations). The hospital argued that it was covered by this injunction because it had recently joined the association.

Rejecting this argument, the district court noted that the Eighth Circuit had later held that the association lacked standing to sue on behalf of its unnamed members, which raised questions regarding whether the injunction covered the hospital. In addition, the district court concluded that the patient—a private litigant who was not a party to the prior litigation—was not bound by the North Dakota injunction. In reaching this conclusion, the court distinguished an enforcement action by HHS from a private lawsuit and highlighted the different statuses of the parties.

Although this case does not involve a group health plan, it is another victory by an individual seeking to invoke Section 1557's protections in the context of gender dysphoria treatments—an issue that has become heavily litigated in recent years. As the district court recognizes in this decision, however, religious entities also have scored victories in challenging the government's efforts to implement Section 1557. This litigation is not likely to stop when the Biden administration finalizes its re-proposed regulations under Section 1557 (which were issued in proposed form in August 2022). For now, plan sponsors, health insurers, and service providers should assess their litigation exposure under Section 1557—including with regard to categorical plan exclusions regarding benefits for gender dysphoria (see Legal Update, TPA's Benefits Denial of Gender Affirming Care Violated ACA's Nondiscrimination Rules).