Courts Hold That Discriminatory Health Coverage Provisions Violate Title VII and Section 1557

Courts are beginning to address how the nondiscrimination provisions of Title VII and Affordable Care Act (ACA) Section 1557 apply to health plan claims that raise issues relating to sexual orientation or gender identity. In Doe v. Catholic Relief Services, an employee sued his employer under Title VII because the employer dropped health plan coverage for the employee’s same-sex spouse (see our Checkpoint article). The employer—an organization affiliated with the Catholic Church—did not dispute that it revoked the employee’s dependent coverage because of his sex (i.e., the employee was a man married to another man). Rather, it argued that Title VII should not apply because (1) Title VII exempts religious organizations that discriminate based on religious beliefs; (2) the Religious Freedom Restoration Act (RFRA) precludes enforcement of Title VII under these circumstances; and (3) Title VII enforcement would burden the employer’s religious activities in violation of the Free Exercise Clause of the U.S. Constitution’s First Amendment. The court rejected all arguments, concluding that (1) Title VII’s religious exemption applies only with respect to discrimination based on religion—not on sex, race, or national origin; (2) the RFRA protects against government action but does not apply to disputes between private parties; and (3) because Title VII is a neutral and generally applicable law, Free Exercise analysis is inappropriate. The court ruled in the employee’s favor without a trial, sending the case to the jury to determine damages.

In Fain v. Crouch, a group of covered individuals alleged that the exclusion of coverage for gender affirming care by a state employees’ health plan and the state’s Medicaid program violated ACA Section 1557. The court had previously allowed the case to proceed against the health plan (see our Checkpoint article), but case history indicates that the plan settled the claims by removing the exclusion and covering the disputed expenses. The court has now determined that the state’s Medicaid program—a “health program or activity” under the ACA—violated Section 1557 because the exclusion of surgical care for gender dysphoria “invidiously discriminates on the basis of sex and transgender status.” The court held that the state could no longer enforce or apply the exclusion.

EBIA Comment: Lawsuits alleging group health plan discrimination under Title VII and Section 1557 are becoming increasingly common (see our Checkpoint article). In addition, the Biden administration has indicated that prohibiting discrimination in health care based on sexual orientation and gender identity is a priority (see, for example, our Checkpoint article on recently proposed regulations under Section 1557). Plan sponsors may wish to avoid eligibility provisions and coverage exclusions that could invite costly legal challenges. For more information, see EBIA’s Group Health Plan Mandates manual at Sections XXI.C (“EEOC’s Position on Title VII and Health Coverage”), XXI.D (“Court Decisions Applying Title VII to Health Coverage”), and XXI.M.1 (“Interaction of Title VII and Section 1557”) and EBIA’s Health Care Reform manual at Section XXXIV.A (“Section 1557 Nondiscrimination: Grounds Prohibited Under Federal Laws”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.D (“Benefits Must Not Be Discriminatory”).

Contributing Editors: EBIA Staff.