On January 26, 2018, the US District Court for the Northern District of Texas granted an employer's motion for summary judgment concerning a male-to-female transgender participant's claim that the employer's health plan discriminated against the participant based on sex and gender in violation of Title VII of the Civil Rights Act of 1964 (Title VII) (Baker v. Aetna Life Ins. Co., (N.D. Tex. Jan. 26, 2018)). The district court concluded that the plan, which generally excluded coverage for breast augmentation, was not facially discriminatory.

The plaintiff in this case, a participant in an employer's ERISA health and disability plans, suffered from gender dysphoria. To address this condition, the participant transitioned from male to female and received hormone replacement therapy, which was covered under the health plan. The participant later underwent breast augmentation (implant) surgery, but the employer's third-party administrator (TPA) denied coverage for the surgery under the employer's disability plan.

The participant did not apply for benefits regarding the surgery under the employer's health plan. Instead, the participant sued the employer and TPA under Title VII, asserting that the health plan's administrative policy was facially discriminatory based on sex/gender because it:

(42 U.S.C. § 2000e-2(a)(1); see Practice Note, Sex Discrimination Under Title VII and the EPA.)

The participant and employer filed cross-motions for summary judgment.

The district court found that the health plan and administrative policy were not facially discriminatory. The court observed that the policy covered an alternative method for the addition of breasts in male-to-female transgender patients – that is, hormone replacement surgery. The court noted that the participant had in fact used this method as a covered benefit under the plan.

As a result, the court construed the participant's claim as based on the policy's failure to cover a surgical method of creating breasts for male-to-female participants analogous to mastectomies for female-to-male participants. Given the availability of hormone replacement therapy under the plan, the court rejected this claim. The court also suggested that a broad reconstructive surgery provision under the plan may have covered surgical procedures to add breasts in male-to-female transgender participants, at least in some cases (though not for cosmetic reasons).

The court therefore held that the plan did not categorically deny coverage for surgical breast augmentation procedures for male-to-female transgender participants. Rather, the plan's TPA had discretion to determine whether a procedure was cosmetic or medically necessary (in which case it could be covered).

Having concluded that the plan/policy was not discriminatory on its face, the court granted the employer's motion for summary judgment and dismissed the participant's claim with prejudice.

This case is the latest example we've encountered in which an employer was required to defend its health plan and underlying policies against a participant challenge on Title VII grounds. As the court points out, earlier decisions in this litigation addressed claims involving ACA Section 1557 and ERISA (including whether the plan's TPA abused its discretion in denying benefits for gender transition) (see Practice Notes, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557) and ERISA Litigation: Standard of Review, and ERISA Litigation Toolkit). It remains to be seen whether these types of Title VII claims will become more prevalent. However, plan sponsors should keep in mind the potential for claims under Title VII and ACA Section 1557 in designing their plans – particularly with respect to transgender benefits.