In litigation involving an exclusion for gender reassignment surgery under a government employer's health plan, a district court held that the exclusion violated Title VII's prohibition against sex discrimination (Lange v. Houston Cty., Ga., (M.D. Ga. June 2, 2022)). The court also concluded that:

The plaintiff in this case, a transgender woman, worked as a sheriff's deputy with a county sheriff's office in Georgia, where she was a covered participant under the government employer's self-funded health plan. After being diagnosed with gender dysphoria, the participant began a gender transition in 2017 that included hormone replacement therapy—followed by both a top surgery and a bottom surgery (genital vaginoplasty).

Under a provision added in 1998, the employer's plan excluded coverage for "drugs for sex change surgery" and "services and supplies for a sex change and/or the reversal of a sex change." Based on the Affordable Care Act's (ACA's) Section 1557 rules, the plan's third-party administrator (TPA) recommended to the government employer in 2016 that it remove the plan's exclusion for gender reassignment and related services (see Article, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557) and Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities). However, the employer opted out of Section 1557 compliance and retained the exclusion.

In November 2018, the participant was denied pre-authorization for gender reassignment surgery based on the plan's exclusion; an appeal of that decision was also denied. After the participant filed charges against the employer with the Equal Employment Opportunity Commission (EEOC), the employer sought information from its TPA about the cost of gender reassignment surgery. However, the employer ultimately decided to keep the plan's exclusion.

The participant sued the employer for violations of Title VII of the Civil Rights Act of 1964, the Equal Protection Clause of the US Constitution, and the ADA. The district court concluded that the plan's exclusion violated Title VII, that the participant's equal protection claim would need to be decided at trial, and that the ADA claim failed.

Based on the Supreme Court's Bostock ruling, the district court ruled in the participant's favor on the Title VII claim—though the question of appropriate relief for this violation remained to be answered (140 S. Ct. 1731 (2020); see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities: Supreme Court Bostock Ruling on Title VII and Transgender Status and Legal Update, SCOTUS: Discrimination Based on Sexual Orientation or Transgender Status Is Sex Discrimination Under Title VII). In Bostock, the Supreme Court held that sex discrimination protections under Title VII include discrimination based on sexual orientation and gender identity.

Applying Bostock, the court concluded that the plan's exclusion was facially discriminatory, in violation of Title VII, because it only applied to transgender participants. The court reasoned that the plan's exclusion denied coverage for procedures and treatment that would be covered if provided regarding a different diagnosis. For example, the plan would cover mastectomies that were medically necessary for cancer treatment but not mastectomies that were medically necessary for gender reassignment.

The court rejected the employer's argument that a plan only discriminates on the basis of transgender status in violation of Title VII if it:

According to the court, neither argument had merit under Bostock.

Regarding the participant's equal protection claim, the court observed that the plan's exclusion was not facially discriminatory because (among other reasons) it applied equally to a man seeking to become a woman or a woman seeking to become a man. However, the court noted that a facially neutral provision could still violate the Equal Protection Clause if it has a disproportionate impact on a certain class and was motivated by discriminatory intent. Applying an eight-factor test, the court concluded that a trial was necessary to determine whether the plan's exclusion was motivated by discriminatory intent. The court cited factors on both sides of the analysis, for example, that:

Title I of the ADA prohibits employers from discriminating against individuals with a disability. However, the court noted that the definition of "disability" excludes gender identity disorders that do not result from physical impairments. (For more information, see Practice Note, Disability Discrimination Under the ADA.)

Rejecting the participant's ADA claim, the court concluded that:

As a result, the participant's gender dysphoria was not a disability for ADA purposes.

Participant challenges to plan exclusions of gender reassignment surgery against private sector employers under ACA Section 1557 have received a fair amount of attention in recent years (for example, see Legal Update, District Court Allows Claims for Transgender Reassignment Benefits Under ACA Section 1557 to Proceed). As this case makes clear, however, plan exclusions for gender-confirming care may also be challenged in the public sector, where employers may be need to defend these exclusions against claims under Title VII, the ADA, and other laws.

Earlier this year, HHS indicated that it had submitted additional proposed regulations under ACA Section 1557 to the Office of Management and Budget (OMB) for review. Those regulations may be issued to the public in the relatively near future. For more information, see Legal Update, Sexual Orientation and Gender Identity (SOGI) Nondiscrimination Proposals Omitted from HHS Final 2023 Benefit and Payment Parameters.