By: Kendall Jackson, Esq.

Gender-affirming care was a particularly popular topic throughout 2023. As we enter the new year, the prevalent discussion concerning plan coverage of such care will certainly continue.

For self-funded health plans, the decision of whether to cover or exclude gender-affirming care is quite multilayered. Specifically for plans that exclude gender-affirming care within their plan documents, there are several potential discrimination concerns. An important element when evaluating these concerns is what law applies to the plan. For instance, certain state laws may not apply to a self-funded plan governed by the Employee Retirement Income Security Act (ERISA) due to ERISA preemption. ERISA preemption operates to preempt state insurance laws as they relate to employee benefit plans. Accordingly, any state laws that may require coverage or ban coverage for gender-affirming care would not apply to an ERISA plan. This is noteworthy as ERISA affords an employer the broad discretion to construct and design the coverage and benefits for its employees. As there is no federal requirement for plans to cover gender-affirming care, an ERISA plan may choose to cover or exclude benefits for gender-affirming care. Alternatively, non-ERISA plans, such as self-funded church plans or non-federal governmental plans, have slightly less flexibility and must adhere to both state and federal law.

Federal protections against discrimination have been, and will continue to be, integral to filling the gaps in health coverage for marginalized groups. Consequently, the potential compliance concerns outlined below apply particularly to plans that elect to exclude gender-affirming care. The first consideration is whether the plan is subject to Section 1557 of the Affordable Care Act (ACA), which hinges on whether the plan sponsor receives any federal financial assistance through the Department of Health and Human Services (HHS). Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability. HHS provided guidance in a notice in March 2022 that clarified the extent of Section 1557’s protections.[1] HHS opined that Section 1557’s protection against sex discrimination encompassed an individual’s right to access health programs that are free from discrimination based on gender identity. HHS stated that a plan categorically excluding benefits due to an individual’s gender identity was discrimination and prohibited by Section 1557. At the time, this guidance had a significant impact because if a plan was subject to Section 1557, generally, any exclusion of benefits or services related to, for example, transgender care, would be deemed a categorical exclusion and would be prohibited. Although HHS’s viewpoint was contested, nevertheless, it demonstrates the movement to protect against the exclusion of benefits based on gender identity. Accordingly, to avoid allegations of discrimination, self-funded plans subject to Section 1557 should consider removing gender-affirming care exclusions.

Even if a plan is not subject to ACA Section 1557, there are still significant discrimination concerns for plans with gender-affirming care exclusions if they create a disparity in coverage for certain individuals. These concerns stem from scrutiny from the Equal Employment Opportunity Commission and the protection against discrimination based on gender identity under Title VII of the Civil Rights Act of 1964. There have been several lawsuits brought forth by transgender individuals under these laws and Section 1557 about gender-affirming care exclusions, and courts have ruled in their favor on some occasions. An example of an exclusion that could create a disparity in coverage is a sex reassignment exclusion. In this case, while it does not exclude care for transgender individuals specifically, it is possible it could be viewed as discriminatory because it functions to categorically exclude services which will overwhelmingly be needed only by transgender individuals. As a result, while self-funded health plans are not mandated to cover gender-affirming care, the compliant approach with regard to all applicable laws would be to remove exclusions for gender-affirming care from the plan.

Pivoting to a different perspective, for self-funded non-ERISA plans subject to state law, there have been many changes surrounding gender-affirming care over the past year. For example, in Texas, on September 1, 2023, a law banning gender-affirming care, such as treatments for gender dysphoria, transitioning, and reassignment for minors took effect. The law prohibits health plans from covering services “that are intended to transition a child’s biological sex as determined by the child’s sex organs, chromosomes, and endogenous profiles.”[2] In Ohio, governor Mike DeWine signed an executive order on January 5, 2024, that banned hospitals and ambulatory surgical facilities from performing gender-affirming surgeries on minors.[3] In New Hampshire, the New Hampshire House recently passed a bill that will now be sent to the New Hampshire Senate. This bill proposes to ban gender-affirming procedures for minors.[4] The bill also proposes to prohibit health care workers from referring minors to out-of-state facilities that may perform gender-affirming procedures. These are only a few examples of the recent developments in state legislation that concern gender-affirming care. As of November 2023, 22 states had a law or policy banning gender-affirming care.[5] There will likely be more development in state legislation in the new year and plans subject to state law should be mindful of how these laws and policies may influence their plan structure.

The decision of whether to cover or exclude gender-affirming care is a multilayered matter and will likely depend on the intent of the employer. There are varying considerations depending on the type of plan and applicable law. As the landscape is constantly changing in regard to gender-affirming care laws, it is essential that plans consider plan document compliance, the potential for discrimination allegations, and, if applicable, what is mandated or banned by relevant states.