Courts Begin to Address Transgender Rights Under the ACA



Lines are being drawn regarding the protection of transgender rights by state governments and the federal government, and the courts are now entering the fray through the Affordable Care Act. 

Much press has been given to North Carolina H.B. 2, also known as the “bathroom law,” which requires individuals in public facilities to use bathrooms that match the biologic sex identified on their birth certificate. The Department of Justice told the state to not enforce the law because it violates federal civil right statutes and the governor of North Carolina sued the DOJ in return. 

Federal government agencies have also been active in this area. The Equal Employment Opportunity Commission posted a fact sheet on its website stating that federal employment discrimination law prohibits employers from restricting transgender workers' access to common workplace restrooms. Citing agency administrative rulings in 2012 and 2015, the EEOC said sex discrimination under Title VII of the 1964 Civil Rights Act includes discrimination based on gender identity. Conflicting state law isn't a defense under Title VII, the agency said. 

The Department of Health and Human Services subsequently released on May 13 a final rule implementing an ACA provision that, among other things, bans denial of health care or health coverage based on an individual's sex, including discrimination based on pregnancy, gender identity and sex stereotyping. Section 1557 of the ACA prohibits discrimination on the basis of race, color, national origin, sex, age or disability in certain health programs and activities. The rule takes effect on July 18. (See related story, HHS Issues Final ACA Nondiscrimination Rule.)  

Two days before the ACA nondiscrimination rule was released, the U.S. District Court for the District of Minnesota addressed the issue in Tovar v. Essentia Health, 2016 BL 150504, D. Minn., No. 0:16-cv-00100-RHK-LIB, 5/11/16, barring a woman seeking coverage for her teenage son's gender reassignment surgery from asserting federal and state sex discrimination claims against her employer. (See related story, Gender Reassignment Coverage Dispute Dismissed.)

The court first said the woman wasn't the one personally injured by her employer health plan's former exclusion for gender reassignment benefits. In dismissing her claims under Title VII and the Minnesota Human Rights Act, the court focused on the fact that it was her son—and not the woman herself—who was harmed by the health plan's coverage exclusion.

The judge also dismissed her claim under the ACA's nondiscrimination rule, finding that she sued an entity that was related to, but legally distinct from, the third-party administrator of her health plan.  However, the court went on to say that the ACA claim would fail even if the defendant entity was involved in administering the health plan because TPAs have a legal duty under ERISA to follow the terms created by the health plan sponsor.

There is another case with similar claims pending in the U.S. District Court for the Northern District of Texas, Baker v. Aetna Life Ins. Co. The complaint alleges that Aetna violated the ACA and ERISA by denying the plaintiff breast implant surgery as part of gender reassignment surgery from male to female, even though a mastectomy is covered for female to male gender confirmation. The complaint alleged that Aetna violated ACA Section 1557 by discriminating on the basis of gender identity, violated ERISA for denial of short-term disability benefits and violated Title VII by denying the plaintiff a medically necessary medical procedure based on gender. 

Julie Wilensky, director of the California office of the Civil Rights Education and Enforcement Center, a nonprofit organization, told Bloomberg BNA May 18, “The federal government has recently made clear in many different contexts--including its letters to and lawsuit against North Carolina, its `Dear Colleague’ letter regarding transgender students, and the final rule under Section 1557--that discrimination against transgender people is sex discrimination prohibited by Title IX, Title VII, and Section 1557 of the Affordable Care Act. 

According to the complaint in Tovar, Wilensky said, the EEOC issued a determination letter finding that the employer discriminated against the plaintiff based on sex when the plaintiff `was denied medical-related services for her child, as a beneficiary’ under the employer’s health plan, `based on the child’s gender identity.’ In my view, the Court’s Title VII analysis was flawed. In particular, Ms. Tovar is an `aggrieved person’ well within the zone of interests protected by Title VII and has standing to sue. Her employee benefits, including coverage for dependents, are part of her compensation and the terms of her employment.” 

Lisa deFilippis of the Cleveland office of Jackson Lewis told BNA May 19 that the insured/self-insured issue in Tovar is an important one. In Tovar, the court cites a case for the proposition that a self-insured employer (and not the TPA) bears the risk of paying for the employee's claim. The court said that, therefore, the TPA could not provide relief. A crucial provision in the ACA regulations is that entities are required to comply if they receive federal financial assistance (such as Medicaid), they are on state or federal exchanges, or are insurance issuers who receive federal funds (including premium subsidies) or offer coverage on the exchanges. The regulations do not specifically address self-insured plans, however, they may offer some basis to conclude that a self-insured plan administered by a TPA that issues insurance on the exchanges may also be subject to the ACA because the TPA entity is receiving federal funds, deFilippis said.

Michelle Phillips, of the White Plains office of Jackson Lewis, told BNA May 19 that with the ACA, insurance companies fell into line and started changing their policies, and the self-insured plans followed suit. Insurers have to get their plans approved by their state agencies, and are aware of the great penalties they can face for non-compliance. 

Phillips said we are at a tipping point. While less than half the states have legislation protecting transgender individuals, there is a movement on the part of President Obama and several federal agencies to expand protection within the LGBT community. The EEOC has brought two cases in federal court in jurisdictions where gender identity was not protected on a state level. We will see more of these cases over time, Phillips said. All of this is happening at a time where gender identity and sexual orientation are not covered on a federal level, she added. 

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