In litigation involving a health plan's categorical exclusion of coverage of transgender reassignment surgery, a Washington State district court held that the plaintiffs, a transgender teenager and the teenager's parents, stated a plausible claim of sex discrimination under Section 1557 of the Affordable Care Act (ACA) (42 U.S.C. § 18116; Pritchard v. Blue Cross Blue Shield of Illinois, (W.D. Wash. May 4, 2021); see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Discrimination Involving Transgender Individuals and Transition-Related Services).

The plaintiff in this case, a transgender male and covered dependent under an insured health plan sponsored by his parent's employer, sought coverage under the plan for hormone therapy and certain female-to-male surgical procedures. The dependent's doctors determined that a Vantas implant (a surgically implanted device that distributes hormones to delay the start of puberty), mastectomy, and chest reconstruction surgery were all medically necessary to address the dependent's gender dysphoria. (Regarding gender dysphoria, see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Litigation Involving Health Plan Categorical Exclusion Allowed to Proceed.)

The plan's insurer, as claims administrator, denied coverage for these procedures, based on the plan's general exclusion for benefits relating to transgender reassignment surgery. This exclusion applies to treatment, drugs, medicines, therapy, counseling services, and supplies for gender reassignment surgery.

However, the plan's medical policies also provided that gender reassignment surgery and related services could be considered medically necessary (and therefore covered) if certain criteria involving gender dysphoria were met. Specifically, regarding the treatment of gender dysphoria in minors, the plan provided that services for hormone therapy, psychological services, and chest surgery for FtM individuals "may be considered medically necessary." (In a footnote, the court wrote that it was unclear whether these medical policies were binding plan terms, but the court assumed they were for purposes of its preliminary ruling.)

The dependent sued the insurer, arguing the plan's exclusion violated ACA Section 1557—a nondiscrimination provision that applies protections under Title VI of the Civil Rights Acts of 1964, Title IX of the Education Amendments of 1972, the Age Discrimination Act of 1975, and Section 504 of the Rehabilitation Act to the health care context (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Overview of Section 1557).

Denying the insurer's motion to dismiss, the district court found that the dependent's allegations that he was denied coverage under an insured plan because he is transgender stated a claim for sex discrimination under ACA Section 1557.

Notably, the health insurer in this case relied on HHS implementing regulations under ACA Section 1557 in arguing that the dependent could not prove discrimination because—under HHS's regulations—categorical exclusions for gender dysphoria are not discrimination (see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities: Franciscan Alliance Litigation). The district court had little difficulty disposing of this argument. In the district court's view, an ACA Section 1557 discrimination claim does not depend on HHS's regulations. Rather, the court cited a 2018 district court decision in concluding that its conclusion that Section 1557 prohibits discrimination on gender identity relied solely on the statute's plain, unambiguous language (see Tovar v. Essentia Health, 342 F. Supp. 3d 947, 957 (D. Minn. 2018)). The court also disagreed with the insurer that recent case law supported the proposition that exclusions such as the one in this plan were not discrimination based on sex. According to the court, the decisions cited by the insurer involved challenges under the Administrative Procedure Act (APA).

In a related development, the Biden administration's HHS issued notice this week of an updated enforcement position intended to be consistent with the Supreme Court's Bostock ruling and Title IX. Under the notice, HHS will interpret and enforce Section 1557's prohibition on discrimination on the basis of sex to include discrimination on the basis of:

(Notification of Interpretation and Enforcement (May 10, 2021).)

HHS indicated that this interpretation will guide the agency in processing complaints and conducting investigations.

It seems likely, then, that HHS will also revisit the Trump administration's June 2020 final regulations—which repealed certain provisions under the Obama-era rules.