An employer's guide to gender-affirming care: A multi-layered approach to coverage is key

There are several ways that a beneficiary can challenge a health care plan’s denial of coverage for gender-affirming care. First, denials might run afoul of federal and state civil rights laws prohibiting workplace discrimination on the basis of sex. Second, ambiguous or vague denial criteria might be challenged under ERISA, where applicable. This article will focus mainly on the Affordable Care Act (ACA), which prohibits health insurance plans from discriminating against beneficiaries on the bases of race, sex, age and disability.

ACA’s gender identity protections

The ACA explicitly references Title IX in providing sex-based protection from discrimination. Health insurance plans which receive any federal funds are subject to this law. In recent years, courts have grappled with whether the ACA’s anti-discrimination provision encompasses gender identity.

Importantly, the U.S. Supreme Court held in Bostock v. Clayton County that Title VII—not Title IX—protects individuals from workplace discrimination on the basis of gender identity. This has resulted in a circuit split, with more conservative circuits concluding that the gender-identity protections of Title VII cannot be imposed on Title IX, and therefore, do not apply in the context of the ACA. More liberal circuits have come to the opposite conclusion: Since Titles VII and IX are typically analyzed the same way, the gender identity protections of Title VII also apply under Title IX, and thus, under ACA Section 1557.

Since the Supreme Court’s decision in Bostock, courts applying that case to the ACA have found anti-transgender discrimination where a benefit is covered for some medical purposes; but is denied for the treatment of gender dysphoria.

In one such case, Fain v. Crouch, a court found that West Virginia violated the ACA when it denied coverage for gender-affirming surgeries to transgender Medicaid participants. Among other things, the Fain court determined that the Medicaid exclusion for “transsexual surgery” was discriminatory because:

• there was no material difference between the excluded surgical procedures to treat gender dysphoria and the covered surgeries to treat other medical conditions;
• there was no evidence that gender-affirming surgeries were significantly more costly than comparable surgeries covered for cisgender participants; and
• the billing and documentation codes for the excluded and covered procedures were the same.

In another case, C.P. v. Blue Cross Blue Shield, a minor prevailed on a ACA claim after being denied coverage for hormone therapy to treat his gender dysphoria, when his private insurance covered the same hormone therapy for medical issues other than gender dysphoria.

Then, in Hammons v. University of Maryland Medical System, a transgender patient prevailed on an ACA claim against a hospital that refused to perform a hysterectomy as a gender-affirming surgery. The court determined that the hospital routinely performed hysterectomies, and that its refusal to do so in this case was the consequence of the plaintiff’s transgender status. Accordingly, the hospital violated the ACA because it denied the plaintiff a medically necessary procedure on the basis of gender identity.

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The Department of Health and Human Services (HHS) issued a notice of proposed rulemaking in August 2022 which, among other things, would explicitly apply Section 1557 of the ACA to gender identity discrimination. Assuming this rule is promulgated and survives a legal challenge, it would effectively apply Bostock to Section 1557 nationwide.

A similar rule proposed during President Barack Obama’s administration was permanently enjoined in 2021 by a Texas district court and affirmed on appeal to the U.S. Court of Appeals for the Fifth Circuit. In all likelihood, a similar challenge will be levied against the pending HHS rule.

State or other federal laws

Even in those circuits where the ACA does not protect against anti-transgender discrimination, beneficiaries may be able to challenge the denial of gender-affirming care under other federal and state laws, as mentioned above. ERISA requires health plans to have unambiguous rules for coverage and exclusion of benefits. Many health plans deny gender-affirming care under otherwise valid exclusions, for example, cosmetic procedures.

The problem arises when certain medical treatment might fall under a plan’s coverage provisions and an exclusion. For example, a health care plan might explicitly cover treatments relating to “gender transition,” but also exclude cosmetic surgeries. Under these circumstances, a beneficiary could seek cosmetic surgery as part of a course of treatment for gender dysphoria and be denied. This type of ambiguity could violate ERISA.

Some insurers have responded to this risk by amending their medical policies and procedures to permit coverage of certain cosmetic procedures once a beneficiary is diagnosed with gender dysphoria—namely facial/neck feminization or masculinization surgeries. This is a significant development as most plans denied these procedures because they are not afforded to other plan participants under any circumstances. Where a health plan generally relies on an insurance carrier or external source for medical protocols, a conflict could arise where the health plan retains the exclusion for these services, continuing to deny them as cosmetic.

State civil rights statutes may also provide anti-discrimination protections for transgender individuals in the health care context. For example, the Pennsylvania Human Relations Commission has released guidance that it will interpret the state’s workplace discrimination statute to protect individuals on the basis of gender identity. In another case, Vroegh v. Iowa Department of Corrections, a plaintiff successfully sued his employer under the state civil rights statute for emotional distress damages resulting, among other things, from administering his health insurance benefits as to deny coverage for gender confirmation surgery.

State and federal bans on gender-affirming care

Meanwhile, state and federal lawmakers are seeking to restrict access to gender-affirming care throughout the country, with varying degrees of success. As of January 2024, 21 states have limited gender-affirming care for minors, 12 states prohibit Medicaid funds for gender-affirming care, and at least five states are considering legislation which would impose similar limitations.

Currently, the U.S. House of Representatives is considering an appropriations bill for the Departments of Labor, Health and Human Services, and Education, which would prohibit the use of federal funds on gender-affirming care. Effectively, this law would nationalize state policies which prohibit Medicaid recipients from obtaining covered gender-affirming care.

Joseph B. Salamon is an attorney at Willig, Williams & Davidson. He focuses his practice on labor law and is committed to advocating for workers’ dignity and respect in the workplace.