District Court Allows Participant's Gender Dysphoria Claims Involving Facial Feminization Surgery to Proceed | Practical Law

District Court Allows Participant's Gender Dysphoria Claims Involving Facial Feminization Surgery to Proceed | Practical Law

In litigation under Section 1557 of the Affordable Care Act (ACA), a Pennsylvania district court concluded that a health plan participant plausibly alleged that the plan insurer's coverage denial for facial feminization surgery and related procedures was intentionally discriminatory based on sex in violation of Title IX of the Education Amendments of 1972.

District Court Allows Participant's Gender Dysphoria Claims Involving Facial Feminization Surgery to Proceed

by Practical Law Employee Benefits & Executive Compensation
Published on 22 Nov 2023 • USA (National/Federal)
In litigation under Section 1557 of the Affordable Care Act (ACA), a Pennsylvania district court concluded that a health plan participant plausibly alleged that the plan insurer's coverage denial for facial feminization surgery and related procedures was intentionally discriminatory based on sex in violation of Title IX of the Education Amendments of 1972.
In litigation under Section 1557 of the Affordable Care Act (ACA), a Pennsylvania district court concluded that a health plan participant plausibly alleged that the plan insurer's coverage denial for facial feminization surgery and related procedures was intentionally discriminatory based on sex in violation of Title IX of the Education Amendments of 1972 (Title IX) (Doe v. Indep. Blue Cross, (E.D. Penn. Nov. 21, 2023)). However, the court dismissed the participant's other related claims involving the insurer's coverage denial.
ACA Section 1557 is a nondiscrimination rule that prohibits individuals from being excluded from participation in, being denied the benefits of, or being subject to discrimination under a health program or activity that receives federal financial assistance on specified grounds. One of the specified grounds under ACA Section 1557 is Title IX, which prohibits discrimination "on the basis of sex" (20 U.S.C. §§ 1681 to 1688; see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities: Four Civil Rights Laws Cross-Referenced Under Section 1557).

Participant Sought Facial Feminization Surgery for Gender Dysphoria

The participant-plaintiff in this case, a transgender woman diagnosed with gender dysphoria, was covered under an insured, employer-sponsored ERISA health plan. Gender dysphoria refers to a diagnosable medical condition that:
  • Is characterized by feelings of incongruence between the sex that an individual is assigned at birth and the individual's own gender identity.
  • Can result in functional impairment or clinically significant distress.
The participant had experienced difficulties in social/occupational functioning, harassment, and physical and sexual abuse related to her gender identity and transgender status. The participant sought coverage under the plan for facial feminization surgeries (FFS), hair transplants, and related procedures to address gender dysphoria. In denying the participant's requested coverage, the plan's insurer cited relevant plan terms and a medical policy bulletin addressing the scope of covered gender dysphoria treatments under the plan.
Although the plan covered medically necessary health care expenses, it excluded cosmetic surgeries, which it generally defined as procedures to improve one's appearance from which no "improvement in physiologic function" could be expected. The related policy bulletin listed several gender-affirming treatments that the plan viewed as medically necessary and therefore covered (subject to conditions). Examples of these covered treatments included:
  • Hormone treatments.
  • Bilateral mastectomies and breast augmentations.
  • Genital reconstructive surgeries.
  • Penile prostheses.
For more information, see Practice Note, Health Care Provider Considerations for Gender-Affirming Care.
Under the policy bulletin, however, the insurer did not cover certain other gender-affirming treatments that were categorized as cosmetic (or potentially cosmetic) and therefore not medically necessary, unless a functional impairment could be identified. These treatments included FFS and hair reconstruction procedures.
In denying the participant's claims as cosmetic and not medically necessary, the insurer:
  • Stated that the participant must demonstrate a physical or functional impairment in order for the disputed treatments to be covered (which she had failed to do).
  • Reasoned that the participant's facial appearance was not "outside the broad range of normal for the female gender."
In response to photos submitted by the participant in support of the requested gender-affirming procedures, a representative of the insurer stated that the coverage decision was based on a personal impression of whether the participant looked female.
The participant sued the insurer in federal district court, asserting claims under:

Court Permits ACA Section 1557 Claim Based on Sex Discrimination to Proceed

The district court concluded that the participant plausibly alleged a claim of sex discrimination under the ACA (based on Title IX, which is one of the four civil rights statutes upon which Section 1557 claims may be based). However, the court rejected the participant's disability discrimination claims under the ADA and ACA Section 1557 (the latter based on Section 504 of the Rehabilitation Act of 1973—another civil rights statute upon which Section 1557 claims can be premised). The court also rejected the participant's:

Participant Alleged Discrimination Based on Gender Stereotyping

The participant alleged that the insurer's reasons for denying coverage for the gender dysphoria treatments she sought were discriminatory. The participant asserted that the insurer's denial constituted sex discrimination because it was based on:
  • The participant's gender dysphoria and status as a transgender individual.
  • Impermissible gender stereotyping (for example, because the insurer required the participant to demonstrate a facial appearance outside "the broad range of normal for the female gender").
The participant claimed that the insurer applied its policy in a discriminatory manner because:
  • A person who is intersex or had a disfigurement would receive coverage for the procedures at issue.
  • A transgender individual seeking the same procedures to treat gender dysphoria was not covered.

Participant Plausibly Alleged Intentional Discrimination Based on Sex

Title IX bars entities that receive federal financial assistance from denying benefits to individuals on the basis of sex. To recover damages under Title IX, the participant needed to allege facts demonstrating that the insurer's discrimination was intentional.
Citing the Supreme Court's Bostock decision, the district court determined that discrimination based on an individual's transgender status is sex-based discrimination (Bostock v. Clayton County, Georgia, 140 S. Ct. 1731 (2020)). In Bostock, the Supreme Court held that the prohibition on employment discrimination because of sex under Title VII of the Civil Rights Act of 1964 (Title VII) applies to gay and transgender individuals (see Article, August 2022 Re-Proposed Regulations Addressing Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557): Impact of Supreme Court's Bostock Ruling on Sex Discrimination Under Section 1557). According to the district court, the Bostock Court's Title VII ruling also applies to claims under Title IX.
Citing numerous recent district court decisions, the court also concluded that discrimination:
  • Against an individual with gender dysphoria is discrimination based on sex and transgender status.
  • Based on gender stereotyping and an individual's level of conformity with the stereotyping is actionable.
(For more information on these decisions, see Legal Update, Refusal to Perform Transgender Individual's Hysterectomy Violated ACA Nondiscrimination Rules: Hospital Directives Discriminated on the Basis of Sex.)
The court observed that the insurer did not categorically exclude facial reconstructive surgeries or hair transplant procedures for all covered participants. Rather, the plan covered procedures for individuals who could show medical necessity related to functional impairment. The court observed that the plan's standards were gender-neutral on their face. At issue, however, was whether the insurer's conclusions—as the participant alleged—were subjectively tied to gender stereotypes and the participant's ability to conform to those stereotypes (that is, whether the participant met societal standards for a cisgender female). In this regard, the court cited the insurer's view that its coverage determination ultimately depended on its conclusion that she failed to "demonstrate a facial appearance outside the broad range of normal for the female gender.” As a result, the court concluded that if the participant's allegations were correct, then the insurer's decision was necessarily based on considerations of sex, gender, and gender conformity that are prohibited under federal antidiscrimination laws.
Consideration of these gender stereotypes, the court added, had no bearing on whether FFS was medically necessary as a treatment for gender dysphoria. The court reasoned that instead of considering markers of gender expression (how the participant was perceived by others), the insurer should have considered the participant's gender identity (how the participant viewed her appearance as inconsistent with her female gender identity).
The court therefore concluded that the participant stated a plausible claim that the insurer's coverage denial intentionally discriminated against the participant in violation of Title IX and the ACA.

Practical Impact

This decision—though preliminary from a procedural perspective—is but the latest in a line of cases addressing the scope and validity of health plan provisions governing coverage for gender dysphoria. Not all courts agree concerning whether ACA Section 1557 extends to claims of gender identity (for example, see Legal Updates, In Gender Dysphoria Litigation, Texas District Court Sets Aside HHS's Interpretation Under ACA Section 1557 and Title IX and District Court: Health Insurer Must Comply with ACA Section 1557 Nondiscrimination Rules Regarding Its Entire Portfolio). Proposed regulations under Section 1557 issued by the Biden administration in August 2022 would prohibit covered entities from imposing categorical coverage exclusions or limits on all health services related to gender transition or other gender-affirming care. However, those regulations have not been finalized and, even when they are, will likely be the topic of additional litigation.
For more information on Section 1557 compliance, see: