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Section 1557 Gender Identity Discrimination Claim Proceeds Against Employer and Health Plan TPA



Tovar v. Essentia Health, 2018 WL 4516949 (D. Minn. 2018)

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On remand from the 8th Circuit (see our Checkpoint article), a trial court has denied a request from an employer and its health plan TPA to dismiss a claim that the plan’s denial of gender transition benefits violated Section 1557 of the Affordable Care Act. As background, Section 1557 incorporates specified federal civil rights laws to prohibit discrimination in certain health programs and activities on the basis of race, color, national origin, sex, age, or disability (see our Checkpoint article). A participant and her beneficiary son claimed that, by categorically excluding coverage for all health services related to gender reassignment, the employer and its health plan TPA designed and enforced a discriminatory plan. The employer and TPA asked the court to dismiss the claim, arguing that Section 1557 does not provide protection against gender identity discrimination.

The court refused to dismiss the lawsuit, citing other courts’ interpretations of the applicable civil rights laws to conclude that a claim for benefits based on gender identity discrimination is within the scope of Section 1557’s prohibition of discrimination based on sex. In denying the TPA’s dismissal request, the court ruled that nothing in Section 1557 suggests that TPAs are exempt from the nondiscrimination requirements. (Although the participant’s claim against the TPA was dismissed because the TPA eventually covered amounts she had paid for her son’s health care expenses under a “one-time exception,” the son’s claim was allowed to proceed against both the employer and the TPA; the participant’s claim against the employer was also allowed.) In addition, the court rejected a request to stay the action until after final resolution of the Franciscan Alliance case (which imposed a nationwide preliminary injunction blocking enforcement of Section 1557 regulations in a gender identity context; see our Checkpoint article), stating that the court’s conclusion was based on the plain, unambiguous language of the statute and would not be changed by the outcome of a case challenging the validity of regulations.

EBIA Comment: The Section 1557 nondiscrimination provisions have a broad reach, potentially affecting group health plan design and TPA services provided to employers. It is unfortunate that this court did not meaningfully address the TPA’s argument that it should not be liable under Section 1557 for merely administering the terms of the employer’s health plan in a nondiscretionary way—a position adopted by HHS in the preamble to the Section 1557 regulations. For more information, see EBIA’s Health Care Reform manual at Section XXXIV.A (“Section 1557 Nondiscrimination Provisions: Grounds Prohibited Under Federal Laws”) and EBIA’s Self-Insured Health Plans manual at Section XIII.D (“Benefits Must Not Be Discriminatory”). See also EBIA’s Group Health Plan Mandates manual at Section XXI.A (“What Is Title VII, as Amended by the PDA, and Who Must Comply?”).

Contributing Editors: EBIA Staff.

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