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Tenth Circuit Affirms Self-Insured Health Plan’s Denial of Surrogacy Expenses



Moon v. Tall Tree Adm’rs, LLC, 2020 WL 2535692 (10th Cir. 2020)

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The Tenth Circuit has ruled against a plan participant who sued her employer (as plan administrator), its self-insured health plan, and its claims administrator after her pregnancy-related claims were denied because she was acting as a surrogate. Despite having been told by the claims administrator that surrogate maternity expenses were not covered, the participant twice acted as a surrogate. The first time, the plan paid her claims, but evidence suggested that the claims administrator did not know she was acting as a surrogate. The second time, the claims administrator denied the claims, citing the plan’s exclusion of surrogate pregnancy expenses. The trial court agreed with the plan administrator that the plan specifically excluded “[n]on-traditional medical services, treatments and supplies which are not specified as covered under [the] Plan, including, but not limited to pregnancy charges acting as a surrogate mother.” The participant argued on appeal that the provision could be interpreted as excluding only non-traditional medical services related to surrogacy, as opposed to all related medical services. The plan administrator countered that surrogacy is a subtype of “non-traditional medical services” and that all medical expenses related to surrogacy are non-traditional medical services excluded by the plan.

The Tenth Circuit affirmed the trial court’s decision, concluding that a reasonable person in the participant’s position would view “pregnancy charges acting as a surrogate mother” as an example of a non-traditional medical expense and, therefore, excluded from coverage. The participant’s reading would require that words be added to the phrase to specify that only non-traditional medical expenses related to surrogacy were excluded, rather than all expenses related to surrogacy. The court declined to add such language and held the provision to be unambiguous in excluding coverage of all surrogacy expenses.

EBIA Comment: Plan sponsors should proceed with caution when considering and drafting surrogacy exclusions. Although the court did not address the issue (and the participant apparently did not make the argument), the Pregnancy Discrimination Act (PDA) may prohibit enforcement of a health plan’s exclusion for the pregnancy and birth-related medical expenses of a participant acting as a surrogate mother. Since the PDA mandates that a plan cover pregnancy in the same manner as other medical conditions, it could be difficult for a plan to maintain that excluding pregnancy expenses based on the circumstances of conception would be permitted under the PDA. Further complicating matters, health care reform may require plans to cover surrogacy medical expenses as preventive health services or essential health benefits, and plans may be subject to a patchwork of conflicting state laws and regulations on surrogacy. For more information, see EBIA’s Group Health Plan Mandates manual at Section XXI.E (“The PDA and Health Coverage”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.E (“Coverage Limitations and Exclusions”) and EBIA’s Health Care Reform manual at Sections XII.C (“Coverage of Preventive Health Services”) and XIV.F (“Comprehensive Health Coverage Requirement (Essential Health Benefits Package)—Applicable Only in the Individual and Small Group Markets”).

Contributing Editors: EBIA Staff.

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