In litigation involving a health plan's coverage denial for facial feminization surgeries (FFS), a federal district court denied a health insurer's motion to rule in its favor at the summary judgment stage (that is, without a trial) (Doe v. Indep. Blue Cross, (E.D. Penn. Jan. 22, 2024)). The plaintiff in this case, a transgender woman, alleged that the insurer discriminated against her in denying coverage for FFS to treat her gender dysphoria The participant brought this claim under Title IX of the Education Amendments of 1972 (Title IX), which is one of the four civil rights statutes underlying the nondiscrimination requirements of Affordable Care Act (ACA) Section 1557 (42 U.S.C.§ 18116; see ACA Section 1557 Compliance for Health Coverage Toolkit).

To demonstrate that the insurer engaged in gender stereotyping, the participant cited statements made by two consultants hired by the insurer to evaluate the participant's appeal of the insurer's denial (see Practice Notes, Claims Procedure Requirements for Group Health Plans and Internal Claims and Appeals Under the ACA). In a first-level appeal, for example, a physician-reviewer stated that the participant's file lacked photographs to show "a facial appearance outside the broad range of normal for the female gender." In addition, a physician-reviewer at the final appeal of the participant's claim—in upholding the insurer's denial—stated that submitted documentation failed to "objectively demonstrate facial features outside of the norm of an average adult female variation."

Seeking to have the participant's claim rejected at the summary judgment stage, the insurer asserted that the physician-reviewers' gender-stereotyping statements:

The district court framed the issue as whether the insurer intentionally discriminated against the participant based on her nonconformity to a gender stereotype. The court concluded that a reasonable jury could conclude that the insurer:

The court noted that the insurer's representatives cited the reviewers' gender stereotyping language multiple times during the participant's appeal. For example, in explaining the insurer's denial of the participant's first-level appeal, one of the insurer's representatives cited the first reviewer's "broad range of normal for the female gender" statement. Another of the insurer's representatives, in responding to a question from the participant, referred her to claims documentation addressing "the broad range of female standards" referenced in the first-level appeal. In this documentation, the first physician-reviewer had explained that photographs or facial measurements could be used to demonstrate "objective findings of facial features outside of the normal adult female variation."

As a result, the court denied the insurer's summary judgment motion regarding the participant's claim that the insurer intentionally discriminated against her on the basis of sex (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557).

The participant also alleged that the insurer wrongfully denied her benefits for FFS under the Employee Retirement Income Security Act of 1974 (ERISA). Applying a deferential standard of review, the court determined that the governing plan terms were ambiguous (see Practice Note, ERISA Litigation: Standard of Review). This meant that the court also needed to assess whether the insurer's interpretation was reasonably consistent with the plan's terms. Under the insurer's gender dysphoria treatment policy, FFS was covered if "medical necessity demonstrating a functional impairment can be identified." However, cosmetic procedures were excluded.

In evaluating whether the controlling policy language was ambiguous, the court observed that two of the insurer's consultants concluded (at the first and third levels of appeal, respectively) that FFS was cosmetic and therefore not medically necessary. A reviewer at the second-level appeal, however, determined that FFS was medically necessary and therefore covered. As a result, the court concluded that an issue of fact existed as to whether the insurer's interpretation was reasonably consistent with the policy's exclusion for cosmetic procedures.

In addition, the court noted that the policy's exclusion required medical necessity to be demonstrated by a functional impairment. The insurer's final denial stated that the participant did not satisfy this requirement because there were only psychological impairments, but no actual physical impairments. Under the insurer's gender dysphoria policy, the court observed, the meaning of a functional impairment was not limited to physiological defects. As a result, it was possible that the insurer had:

Because there was an issue of fact concerning the insurer's interpretation, the court could not decide the case on a summary judgment motion without a trial.

This is the second case we've reported on in recent months in which a district court allowed a participant's claims involving facial feminization surgeries to move past the summary judgment stage (see Legal Update, District Court Allows Participant's Gender Dysphoria Claims Involving Facial Feminization Surgery to Proceed). However, not all courts agree regarding whether ACA Section 1557 applies to claims involving gender identity (see Legal Update, In Gender Dysphoria Litigation, Texas District Court Sets Aside HHS's Interpretation Under ACA Section 1557 and Title IX). Proposed regulations under Section 1557 issued by the Biden administration in August 2022 (but not yet finalized) would prohibit covered entities from imposing categorical coverage exclusions or limits on all health services related to gender transition or other gender-affirming care.