In Gender-Affirming Care Litigation, District Court Requires Insurer to Reprocess Claims and Tolls Claims Deadlines | Practical Law

In Gender-Affirming Care Litigation, District Court Requires Insurer to Reprocess Claims and Tolls Claims Deadlines | Practical Law

In litigation challenging a health plan's categorical exclusion for gender-affirming care, a Washington State district court required the plan's insurer to reprocess claims that were previously denied under the exclusion (among other relief). The court also equitably tolled the plan's deadlines for affected claimants to make claims, file appeals, and reprocess claims.

In Gender-Affirming Care Litigation, District Court Requires Insurer to Reprocess Claims and Tolls Claims Deadlines

by Practical Law Employee Benefits & Executive Compensation
Published on 25 Jan 2024 • USA (National/Federal)
In litigation challenging a health plan's categorical exclusion for gender-affirming care, a Washington State district court required the plan's insurer to reprocess claims that were previously denied under the exclusion (among other relief). The court also equitably tolled the plan's deadlines for affected claimants to make claims, file appeals, and reprocess claims.
In litigation challenging a health plan's categorical exclusion for gender-affirming care, a Washington State district court has required the plan's insurer to reprocess claims that were previously denied under the exclusion (among other relief) (C.P. v. Blue Cross Blue Shield of Ill., (W.D. Wash. Dec. 19, 2023)). The ruling follows a December 2022 ruling in which the court concluded that the insurer violated the nondiscrimination requirements under Section 1557 of the Affordable Care Act (ACA) in administering the exclusion (42 U.S.C. § 18116; C.P. v. Blue Cross Blue Shield of Ill., (W.D. Wash. Dec. 19, 2022); see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Discrimination Involving Transgender Individuals and Transition-Related Services). Regarding another ruling in this litigation, see Legal Update, District Court Allows Claims for Transgender Reassignment Benefits Under ACA Section 1557 to Proceed.

Participant Challenged Plan's Exclusion of Gender Reassignment Surgery

The lead claimant in this case, a transgender male and covered dependent under a self-funded 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 these procedures were 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 and ACA Section 1557 Compliance for Health Coverage Toolkit).
The plan's insurer, as claims administrator, denied coverage for these procedures, based on the plan's general exclusion for benefits relating to gender reassignment surgery. This exclusion applied to treatment, drugs, medicines, therapy, counseling services, and supplies for gender reassignment surgery.
The dependent sued the insurer, arguing that 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 and ACA Section 1557 Compliance for Health Coverage Toolkit).
In a December 2022 ruling, the district court concluded that the insurer violated ACA Section 1557 in administering the plan's discriminatory exclusions of gender-affirming care ( (W.D. Wash. Dec. 19, 2022); see Meaning of Gender-Affirming Care). Specifically, the court concluded that:
  • The insurer's claims activities as third-party administrator (TPA) were subject to ACA Section 1557 (because they included health programs or activities that received federal financial assistance).
  • The dependent and other claimants were denied benefits or subjected to discrimination in how the plans were administered, solely due to application of the plan's categorical exclusions for gender-affirming health care.
  • The discrimination was based on transgender status that qualified as discrimination on the basis of sex.
The court's ruling applied to a class consisting of individuals who were (or will be):
  • Participants in self-funded plans administered by the insurer that categorically excluded some or all gender-affirming care.
  • Denied preauthorization or coverage for treatment solely based on the gender-affirming care exclusion.
In this latest ruling, the district court addressed the scope of class-wide relief available to the claimants under ACA Section 1557—and then ordered this relief.

Meaning of Gender-Affirming Care

For purposes of this litigation, gender-affirming care referred to:
Health care services (physical, mental, or otherwise) administered or prescribed for the treatment of gender dysphoria; related diagnoses such as gender identity disorder, gender incongruence, or transsexualism; or gender transition.
The definition of gender-affirming care included:
  • The administration of puberty delaying medication (for example, gonadotropin-releasing hormone (GnRH) analogues).
  • Exogenous endocrine agents to induce feminizing or masculinizing changes (that is, hormone replacement therapy).
  • Gender-affirming or sex reassignment surgery or procedures.
  • Other medical services or preventive medical care provided to treat gender dysphoria and/or related diagnoses, as outlined in World Professional Association for Transgender Health, Standards of Care for the Health of Transsexual, Transgender, and Gender Nonconforming People, 7th Version (2012).

Available Relief Under ACA Section 1557

On a threshold issue, the court rejected the insurer's assertion that ERISA (rather than ACA Section 1557) governed the types of relief available for the insurer's violations. (Regarding the remedies available under ERISA, see Practice Note, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502 for Benefit and Fiduciary Breach Claims.) While the insurer argued that ERISA's more limited remedies (including money damages) were available, the claimants asserted that the broader remedies under ACA Section 1557 should be permitted. Reasoning that ERISA should not be interpreted to restrict other federal laws, the court concluded that ERISA's remedies provisions did not trump the relief provided under Section 1557.
The court next considered whether various forms of relief requested by the claimants were available under Section 1557. First, the court issued declaratory relief concluding that the insurer violated ACA Section 1557—and discriminated against the class claimants on the basis of sex—in administering and enforcing the plans' categorical exclusions of gender-affirming care. The court also concluded that the insurer was prohibited from discriminating in any of its activities, including in its role as a TPA.
The court agreed that the claimants were entitled to a prospective injunction prohibiting the insurer from administering or enforcing the plan's discriminatory exclusions in the future.

Equitable Tolling of Claims Deadlines, Reprocessing, and Other Relief

In addition, the court granted the claimants' request to equitably toll the time limits for seeking plan benefits and appealing benefit denials made (and based on) the plan's gender-affirming exclusions (see Practice Note, Internal Claims and Appeals Under the ACA). The class claimants were allowed 90 days to submit claims for gender-affirming care that were formerly denied (either preauthorization or post-service) based solely on the plans' gender-affirming care exclusion. The insurer was instructed to reprocess the claimants' claims under the remaining plan terms, administrative service agreements, and other provisions—but without the prohibited gender-affirming care exclusions.
The court also permitted claimants whose claims were denied under the offending plan exclusions to have those claims reprocessed. Citing a ruling in a long-running claims processing dispute, the district court noted that the Ninth Circuit had recently reaffirmed the availability of reprocessing (also known as a remand) in the claims context (Wit v. United Behav. Health, 79 F.4th 1068 (9th Cir. 2023); regarding a related ruling in the Wit litigation, see Legal Update, Ninth Circuit Once Again Reverses Ruling Requiring Reprocessing of Mental Health Claims). The district court concluded that reprocessing of improperly denied claims was necessary as a "make whole" remedy in this case.
The court also awarded the claimants nominal damages consisting of $1.00 per named class claimant.
Finally, the court declined the insurer's request to stay enforcement of its relief order pending appeal by the insurer. (The insurer has since filed that appeal.) In doing so, the court observed that the claimants would be substantially injured if they continued to be unable to obtain the medical care they sought.

Practical Impact

In an early ruling in this litigation, the health insurer 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 did 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)).
Under re-proposed Section 1557 regulations issued in August 2022 (but not yet finalized), covered entities would be prohibited from having or implementing categorical coverage exclusions or limitations for all health services related to gender transition or other gender-affirming care. For more information, see Article, August 2022 Re-Proposed Regulations Addressing Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557).