Employers and health plans should be aware that two recent federal decisions have recognized that the non-discrimination provision in the Affordable Care Act prohibits discrimination on the basis of gender identity. Plans cannot categorically exclude coverage for procedures to treat gender dysphoria.

In Boyden v. Conlin, the U.S. District Court for the Western District of Wisconsin found that the state’s exclusion of gender reassignment-related procedures from the state employees’ health insurance coverage constitutes sex discrimination in violation of Section 1557 of the Affordable Care Act (the “ACA”) and Title VII of the Civil Rights Act. Section 1557 of the ACA prohibits discrimination and the denial of benefits under a health program or activity, any part of which is in receipt of federal financial assistance, on the basis of race, color, national origin, sex, age or disability. The plaintiffs, two transgender women employed by the State of Wisconsin, also alleged that the exclusion violated the Equal Protection Clause of the Fourteenth Amendment.

This case involved the exclusion of “procedures, services, and supplies related to surgery and sex hormones associated with gender reassignment” from the health insurance coverage. Pursuant to the exclusion, the health plan did not cover hormone therapy involving gender reassignment surgery, or the surgery itself. Defendants argued that the exclusion did not discriminate on the basis of sex because the plan excludes coverage for all cosmetic treatments for psychological conditions, and because the exclusion simply prohibits coverage for gender reassignment procedures, not because plaintiffs are transgender. The court disagreed, finding that the case constituted a “straightforward case of sex discrimination” because the exclusion treated people differently based on their natal sex. The court also found that the exclusion implicated “sex stereotyping by limiting the availability of medical transition … thus requiring transgender individuals to maintain the physical characteristics of their natal sex.”

The court also found liability against the state on plaintiffs’ Equal Protection Clause claim. In applying heightened scrutiny review, the court concluded that the state failed to show that the exclusion was the product of cost concerns or concerns about the safety and efficacy of gender reassignment surgery and hormone therapy. Because the state could not put forth evidence of a genuine reason for the exclusion, the court found in favor of plaintiffs on the Equal Protection Claim.

Two days after the decision in Boyden, in Tovar v. Essentia Health, the District Court for the District of Minnesota held that Section 1557 prohibits discrimination on the basis of gender identity. In that case, plaintiffs alleged that Essentia Health and HealthPartners Inc. violated Section 1557 by sponsoring or administering a plan that categorically excluded coverage for all health services and surgery related to gender reassignment. Section 1557 incorporates four federal civil rights statutes that prohibit discrimination on the basis of: race, color and national origin (Title VI); sex (Title IX); age (ADEA); and disability (Rehabilitation Act). Concluding that Title IX’s prohibition against sex discrimination should be read as coextensive with Title VII, and noting that courts have recognized a cause of action under Title VII for sex discrimination based on gender identity and gender-transition status, the court determined that “sex discrimination encompasses gender-identity discrimination.” The court thus concluded that Section 1557 prohibits gender identity discrimination and denied defendants’ motion to dismiss.

The court also declined to stay the action pending resolution of Franciscan Alliance, Inc. v. Burwell, in which the Northern District of Texas issued a nationwide injunction enjoining enforcement of the Department of Health and Human Services (HHS) regulations providing that Section 1557’s prohibition of sex discrimination encompasses gender identity discrimination. The Minnesota court concluded that a stay was not warranted because its conclusion that Section 1557 prevents discrimination based on gender identity is based on the plain reading of the statute and does not rely on the Franciscan Alliance decision.

Employer Takeaways

These two cases are the latest in a series in which plaintiffs allege that their employer sponsored health plans are designed in a manner that discriminates based on gender identify in violation of Section 1557 of the ACA and Title VII of the Civil Rights Act. While an earlier decision (Baker v. Aetna Life Insurance Co., 228 F. Supp. 3d 764 (N.D. Tex. 2017)) by the Northern District of Texas declined to find a cause of action for gender identity discrimination under Section 1557, these decisions are in line with the current trend to allow gender identity discrimination claims to be pursued under Section 1557. Therefore, while HHS continues its current policy of non-enforcement of allegations of gender identity discrimination under Section 1557, employers should be aware of provisions in their group health plans that exclude coverage for transgender benefits and litigation risks that these provisions may pose.

Notably, the plans in both Boyden and Tovar included categorical exclusions for services and/or surgeries related to gender reassignment or transition. These categorical exclusions often are a red flag. By contrast, in Baker, the plan did not categorically exclude gender reassignment procedures; there, the insurance company denied the plaintiff’s request for breast augmentation surgery as not medically necessary. The Baker court found in favor of defendants on both the Section 1557 and Title VII claims. Thus, employers are advised to review their plans to ensure that services to treat gender dysphoria and related conditions are made available to their covered employees.

On December 31, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction that prohibits the U.S. Department of Health and Human Services (HHS) from enforcing certain provisions of its regulations implementing Section 1557 of the Affordable Care Act that prohibit discrimination on the basis of gender identity or termination of pregnancy. This ruling, in Franciscan Alliance v. Burwell (Case No. 7:16-cv-00108-O), a case filed by the Franciscan Alliance (a Catholic hospital system), a Catholic medical group, a Christian medical association, and eight states in which the plaintiffs allege, among other allegations, that the Section 1557 regulations force them to provide gender transition services and abortion services against their religious beliefs and medical judgment in violation of the Religious Freedom Restoration Act (“RFRA”).

By way of background, the Section 1557 regulations prohibit discrimination on the basis of gender identify, which regulations define to mean “an internal sense of gender, which may be male, female, neither, or a combination of male and female, and which may be different from an individual’s sex assigned at birth.”[i]  The regulations prohibit a categorical insurance coverage exclusion or limitation for all health services related to gender transition and requires providers to provide transition-related procedures if the provider performs an analogous service in a different context.  The plaintiffs also alleged that because they perform certain procedures for miscarriages, the Section 1557 regulations will require them to perform such procedures for abortions to avoid discriminating on the basis of termination of pregnancy.

The court held that the Section 1557 regulations failed to incorporate the exceptions for religious institutions and abortions services that Congress provided in Title IX. The court also found that Title IX, which is incorporated by Section 1557 statute, only prohibits discrimination on the basis of biological sex. The court further noted that “the government’s own health insurance programs, Medicare and Medicaid, do not mandate coverage for transition surgeries; the military’s health insurance program, TRICARE, specifically excludes coverage for transition surgeries. . .”[ii]

Specifically, the court concluded that “the regulation violates the Administrative Procedure Act (“APA”) by contradicting existing law and exceeding statutory authority, and the regulation likely violates the [RFRA] as applied to Private Plaintiffs.” The court also agreed that the plaintiffs would likely suffer irreparable harm without the injunction as “one of the State Plaintiffs is already undergoing investigation by the HHS’s OCR, and entities similarly situated to Private Plaintiffs have already been sued under the Rule since it took partial effect on May 18, 2016” (emphasis added).  Conversely, the court found that HHS will not suffer any harm by delaying implementation of this portion of the Section 1557 regulations.  It should be noted that this is a ruling granting a preliminary injunction and a final ruling on the merits of a permanent injunction is still to come.

While an HHS appeal of this order would normally be expected, the impending change of Administration—including new leadership at HHS and an expected early Congressional push to repeal and replace the Affordable Care Act—makes it very uncertain whether an appeal will be filed, or ruled upon, prior to any possible changes in the regulatory scheme or underlying statute.

Health care entities should take note, however, that the remaining provisions of the Section 1557 regulations, including those that prohibit discrimination on the basis of disability, race, color, age, national origin, or sex (other than gender identity), are not impacted by the nationwide injunction and HHS can still enforce such provisions.  Indeed, HHS has issued a broadcast email specifically stating that:

“[OCR] will continue to enforce the law—including its important protections against discrimination on the basis of race, color, national origin, age, or disability and its provisions aimed at enhancing language assistance for people with limited English proficiency, as well as other sex discrimination provisions—to the full extent consistent with the Court’s order.”

Health care entities should closely monitor this area of law for further developments and ensure that their operations are compliant with the remaining provisions of the Section 1557 regulations.

Further information regarding Section 1557 and its accompanying regulations can be found in EBG Client Alerts and Webinars.

[i] 45 C.F.R. § 92.4

[ii] The court cited Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 2780 (2014).  The Supreme Court will consider whether Title IX covers gender identity in Gloucester Cty. School Bd. V. G.G., Sup. Ct. No. 16-273, during the current term.

On November 4, 2016, the Western District of Pennsylvania held that the “because of sex” provision in Title VII of the Civil Rights Act prohibits discrimination on the basis of sexual orientation. In doing so, the court broke from the recent trend of federal courts that have felt compelled by prior precedent to dismiss sexual orientation discrimination claims.

In EEOC v. Scott Medical Health Center, P.C., the plaintiff (a gay male) alleged that he was subjected to repeated and unwelcome offensive comments regarding his sexual orientation and his relationship with a male partner, creating a hostile and offensive work environment that resulted in the plaintiff’s constructive discharge.  Relying on the Supreme Court’s decision in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), which held that discrimination on the basis of sex stereotyping is prohibited, the court concluded that “discrimination on the basis of sexual orientation is, at its very core, sex stereotyping plain and simple; there is no line separating the two.”

This conclusion contradicts recent decisions in the Seventh Circuit and Southern District of New York, both of which have held that gender discrimination can be “disentangled” from sexual orientation discrimination, and have dismissed claims premised solely on sexual orientation discrimination allegations.  The Western District of Pennsylvania’s departure from prior precedent could signal the beginning of a split in authority that could eventually end up with this issue being considered by the Supreme Court.

This area of law is ripe for further litigation. In the short term, employers should continue to monitor the changing legal landscape and be mindful that other courts could also conclude the discrimination based on sexual orientation is prohibited under Title VII, as well as anti-discrimination provisions in other laws and regulations, such as Executive Order 13672 expressly barring federal contractors from discriminating on the basis of sexual orientation or gender identity.  Regardless of the federal court pronouncements, employers should be aware that various federal agencies are taking the same expansive view of the definition of discrimination on the basis of “sex.”  In the Final Rule implementing Section 1557 of the Affordable Care Act, for example, the Department of Health and Human Services expressly defines discrimination on the basis of sex to include sex stereotyping (and gender identity). Numerous states also expressly prohibit sexual orientation discrimination under their employment law.  Thus, employers seeking to comply with applicable state law and seeking to avoid scrutiny from the EEOC and other federal agencies should train their workforce to eliminate discriminatory or harassing behavior premised on sexual orientation, and review their policies to ensure that such discrimination is prohibited.

Kyler Prescott was a 14 year old transgender boy who was receiving puberty-delaying medication to help him transition.  Shortly before Kyler’s death he had “suicidal ideation” and was taken to Rady Children’s Hospital – San Diego in April 2015.  The hospital has a Gender Management Clinic to provide services to children with gender dysphoria and related issues.  A lawsuit under the ACA’s non-discrimination provision, § 1557, alleges that after admission, despite assurances that he would be referred to with masculine pronouns, hospital employees referred to Kyler as a girl.  The suit claims that the hospital’s actions discriminated against Prescott “resulting in his inability to access necessary services and treatment during a dire medical crisis.” The federal lawsuit, filed in the Southern District of California, further alleges that the use of female references exacerbated his condition and that he thereafter had further difficulties and ultimately committed suicide.

As discussed in our recent October 6, 2016 webinar and in our Client Advisory, HHS’s Office of Civil Rights (“OCR”) final § 1557 regulations explicitly include coverage for gender identity and sexual stereotypes.  They also state that covered entities must “treat individuals consistent with their gender identity . . . .” 45 C.F.R. § 92.206.  This lawsuit appears to be one of the first under § 1557 for gender identity discrimination.  It will surely not be the last.

The suit focuses on claims that nurses and other staff repeatedly used feminine pronouns in referring to Kyler despite assertions in the court pleadings of multiple calls by his mother to the hospital to explain his distress at this alleged conduct.  Hospital staff failed to use Kyler’s preferred pronouns despite hospital records showing Kyler’s legal name and gender change from female to male, according to the suit.

The results of the lawsuit, which at this time are only unproven allegations, will await further court proceedings. What the suit clearly shows, however, is that compliance with § 1557’s notice and policy requirements, effective October 16, was only the beginning of § 1557 compliance needs for covered health care entities.  Among the necessary next steps in compliance with which we are assisting clients are developing appropriate training of all staff interacting with patients and companions on the requirements of § 1557 in providing services, proper categorization of gender in health care records and in-patient references, as well as the need for training and visibility on provider non-discrimination and grievance policies.  This lawsuit dramatically emphasizes the urgency for continuing efforts to achieve full compliance with § 1557 and the OCR final regulations to avoid § 1557 discrimination claims on the expansive grounds covered by § 1557 as interpreted in OCR’s final regulations.

In less than three weeks, health care providers covered by the Affordable Care Act must meet various posting obligations required by the recently issued Section 1557 regulations. Epstein Becker & Green, P.C. has written extensively about the Final Rule, including the expansive nondiscrimination standards and the upcoming October 16 deadlines. While we encourage you to review these publications for more detail, covered entities urgently need to prepare by October 16, 2016, nondiscrimination notices and taglines to be posted (1) in significant publications or communications; (2) in conspicuous physical locations where they interact with the public; and (3) in a conspicuous location on their website.

Nondiscrimination notices must include, among other things, a statement of nondiscrimination, the availability of interpretive services for patients with limited English proficiency (LEP), the availability of auxiliary aids and services for individuals with disabilities, and the availability of a grievance procedure for discrimination complaints. In small-sized publications, such as postcards and pamphlets, the notice may be shortened to include only the nondiscrimination policy.

Taglines, which are statements of the availability of language assistance services, must be posted in the same locations. In large-format publications, taglines must be posted in at least the top 15 languages for the relevant state.  In small-sized publications, taglines must be posted in the top two languages.

With the October 16th deadline quickly approaching, in addition to complying with Section 1557’s notice requirements, covered entities should develop a plan to ensure they are able to provide the services and procedures promised in the required notices. On Thursday, October 6, join us as we host a webinar to discuss these topics, address practical considerations, and recommend best practices for compliance.

My colleagues Frank C. Morris, Jr., Adam C. Solander, and August Emil Huelle co-authored a Health Care and Life Sciences Client Alert concerning the EEOC’s proposed amendments to its ADA regulations and it is a topic of interest to many of our readers.

Following is an excerpt:

On April 16, 2015, the Equal Employment Opportunity Commission (“EEOC”) released its highly anticipated proposed regulations (to be published in the Federal Register on April 20, 2015, for notice and comment) setting forth the EEOC’s interpretation of the term “voluntary” as to the disability-related inquiries and medical examination provisions of the American with Disabilities Act (“ADA”). Under the ADA, employers are generally barred from making disability-related inquiries to employees or requiring employees to undergo medical examinations. There is an exception to this prohibition, however, for disability-related inquiries and medical examinations that are “voluntary.”

Click here to read the full Health Care and Life Sciences Client Alert.

Regarding the Affordable Care Act, our colleague August Emil Huelle at Epstein Becker Green has posted “Legislation Introduced to Change Full-Time Employee Definition under the Affordable Care Act” on one of our sister blogs, Employee Benefits Insight.  Following is an excerpt:

On January 7, 2015, U.S. Senators Susan Collins (R-ME) and Joe Donnelly (D–IN) along with Lisa Murkowski (R-AK) and Joe Manchin (D-WV) introduced the Forty Hours is Full Time Act, legislation that would amend the definition of a “full-time employee” under the Affordable Care Act to an employee who works an average of 40 hours per week.  In the coming days, the House is expected to vote on its own version of this legislation, the Save American Workers Act.

The teeth of the Affordable Care Act have the ability to sink excise taxes on employers who do not offer affordable healthcare coverage to full-time employees, which the Affordable Care Act defines as employees who work an average of 30 hours per week.  In announcing the introduction of the legislation, Senator Collins argued that the current definition “creates a perverse incentive for businesses to cut their employees’ hours so they are no longer considered full time.”  The implication being that the Forty Hours is Full Time Act will increase employee wages because the employers who reportedly reduced employee hours below 30 per week in an effort to avoid costs associated with providing healthcare coverage to employees (or the tax for not providing coverage to employees) are the same employers who will raise employee hours above 30 per week if they are not faced with such costs.  

Read the full blog post here.

Our Epstein Becker Green colleagues have released a new Take 5 newsletter: “Five ACA Issues that Employers Should Be Following” by David W. Garland, Adam C. Solander, and Brandon C. Ge. Below is an excerpt:

Employers have about three months to finalize their employer mandate compliance plans under the Affordable Care Act (“ACA”). While most employers are in the final stages of planning, this month’s Take 5 will address five ACA issues that employers should be aware of as they move forward:

  1. ACA-related litigation
  2. Employer mandate reporting
  3. Section 510 liability
  4. Alternatives to traditional plan offerings
  5. The looming Cadillac tax

Read the full newsletter here.

 

Epstein Becker Green and EBG Advisors, as part of the Thought Leaders in Population Health Speaker Series, will host a complimentary webinar in August on emerging trends in value-based purchasing in health care. The session, Population Health Strategies for Employer-Based Coverage, will assess how employers and other health plan sponsors are developing new programs to promote enhanced clinical and financial outcomes for the groups and populations they manage. In particular, speakers will highlight how the Affordable Care Act (ACA) is influencing population health management strategies for employer-based coverage.

The webinar, scheduled for August 26, 2014, at 12:00 p.m. ET, will be led by two thought leaders from the Health Care Incentives Improvement Institute (HCI3): Francois de Brantes, MS, MBA, Executive Director; and Douglas Emery, MS, Program Implementation Leader, Western Region. Gretchen K. Young, Senior Vice President, Health Policy, The ERISA Industry Committee (ERIC), will also serve as a panelist and Adam Solander, Associate, Epstein Becker Green, will moderate the session. To register, click here.

During the webinar, the panelists will discuss:

  • How ACA’s Cadillac tax on health benefits is changing the way employers pay for insurance coverage and how employees access and use insurance and wellness benefits.
  • How employers are creating and implementing new incentive programs to align prudent purchasing with proper care management techniques.
  • Emerging legal and reporting requirements based upon ACA and state requirements.

The Thought Leaders in Population Health Speaker Series offers participants informative and insightful guidance on how population health strategies are transforming the health care paradigm as the industry moves towards measurement and management of integrated delivery systems such as accountable care organizations (ACOs). All previous webinar programs can be viewed online. To register for this session, please click here.

“The Population Health Webinar Series attempts to find some common ground for health care professionals and other health care stakeholders by identifying best practices and creating a call to action for collaboration and outcomes improvement nationwide,” says Mark Lutes, Chair of Epstein Becker Green’s Board of Directors. “From the Affordable Care Act and data analytics to advancement in health IT systems, a number of factors are having a significant impact on the health care delivery system.”

Our colleague Stuart Gerson of Epstein Becker Green has a new post on the Supreme Court’s recent decisions: “Divided Supreme Court Issues Decisions on Harris and Hobby Lobby.”

Following is an excerpt:

As expected, the last day of the Supreme Court’s term proved to be an incendiary one with the recent spirit of Court unanimity broken by two 5-4 decisions in highly-controversial cases. The media and various interest groups already are reporting the results and, as often is the case in cause-oriented litigation, they are not entirely accurate in their analyses of either opinion.

In Harris v. Quinn, the conservative majority of the Court, in an opinion written by Justice Alito, held that an Illinois regulatory program that required quasi-public health care workers to pay fees to a labor union to cover the costs of wage bargaining violated the First Amendment. The union entered into collective-bargaining agreements with the State that contained an agency-fee provision, which requires all bargaining unit members who do not wish to join the union to pay the union a fee for the cost of certain activities, including those tied to the collective-bargaining process. …

An even more controversial decision is the long-awaited holding in Burwell v. Hobby Lobby Stores, Inc. Headlines already are blasting out the breaking news that “Justices Say For-Profits Can Avoid ACA Contraception Mandate.” Well, not exactly. …

Both sides of the discussion are hailing Hobby Lobby as a landmark in the long standing public debate over abortion rights. It is not EBG’s role to enter that debate or here to render legal advice, but we respectfully suggest that the decision’s reach is already being overstated by both sides. In the first place, the decision does not allow very many employers to opt out of birth control coverage – only closely-held for-profit companies that have a good-faith ideological core, as clearly was the case for Hobby Lobby. That renders such companies functionally the same as non-profits that are exempted from the mandate by the government. Publicly-held companies are not affected by the decision (though some are likely to argue that Citizens United might require such an extension. Nor are privately-held companies that can’t demonstrate an ingrained belief system.

Read the full post here.