In a coverage dispute involving expenses related to a surrogate pregnancy, the Tenth Circuit held that a health plan unambiguously excluded coverage for a participant's pregnancy-related expenses (Moon v. Tall Tree Adm'rs, LLC, (10th Cir. May 19, 2020)).

The plaintiff in this case was a participant in her employer's self-funded ERISA group health plan. Despite being informed in 2011 by the plan's claims administrator that the plan did not cover surrogate maternity, the participant acted as a surrogate in 2013 and 2015. The plan covered the participant's pregnancy expenses for the 2013 surrogacy, apparently because it was unaware that the participant was acting as a surrogate. The plan denied coverage for the participant's 2015 pregnancy-related claims, however, citing the plan's exclusion for surrogate pregnancy. Specifically, the plan excluded coverage for "[n]on-traditional medical services, treatments and supplies which are not specified as covered under [the plan], including, but not limited to pregnancy charges acting as a surrogate mother."

The participant appealed the benefits denial and, after receiving no response, sued her employer, the plan, and the plan's claims administrator under the Employee Retirement Income Security Act of 1974 (ERISA) (see Practice Note, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502: Claims for Benefits Under the Plan Terms (ERISA Section 502(a)(1)(B)) and ERISA Litigation Toolkit). The district court granted summary judgment in favor of the defendants, and the participant appealed.

Applying a nondeferential (de novo) standard of review, the Tenth Circuit affirmed the district court on appeal (see Practice Note, ERISA Litigation: Standard of Review: De Novo Standard of Review). The Tenth Circuit held that the plan unambiguously excluded coverage for expenses related to surrogate pregnancy. In reaching this conclusion, the court rejected the participant's argument that the plan excluded non-traditional medical services during surrogate pregnancy, but covered traditional medical services related to surrogate pregnancy. In the court's view:

The court concluded that a reasonable person in the participant's position would read the phrase "pregnancy charges acting as a surrogate mother" as an example of non-traditional medical expenses.

As this case illustrates, health plan exclusions involving surrogacy expenses must be drafted carefully to withstand a participant's challenge in litigation following a benefits denial. The facts of this case also underscore a practical difficulty for plan administrators in enforcing a plan's surrogacy exclusion – namely, that the plan may not always know that a surrogate pregnancy is occurring. Health plans with surrogacy exclusions should also note the potential for challenges to these exclusions under federal laws such as the Pregnancy Discrimination Act of 1978 (PDA) and the Affordable Care Act (ACA) (see Practice Note, Preventive Health Services Under the ACA, Other Than Contraceptives).