As the temperatures continue to rise, regulations and litigation related to employer-sponsored group health plans have followed suit. As these new rules continue to evolve, we are often asked whether a self-insured group health plan is required to cover gender-affirming medical services. Many state governments have enacted legislation on this topic and it can be confusing for plan administrators to determine which rules do and do not apply.

Fully-insured plans must provide coverage compliant with the coverage mandates of the state in which the insurance policy is issued. Therefore, if your plan is fully-insured and your policy is issued in a state that has a mandate (e.g., California), your plan must cover gender-affirming care services.

On the flip side, self-insured plans covered by ERISA are not subject to state insurance coverage mandates, and there are currently no federal mandates that explicitly require plans to cover gender-affirming care, unless your Plan is subject to Section 1557 of the Affordable Care Act (ACA). However, all plan administrators must continue to track many of the federal laws that can have an impact on their decision to provide these services, as they can create issues for plan design.

In May of this year, the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) issued a final rule under Section 1557 of the ACA that requires coverage of gender-affirming care. Section 1557 only applies to health programs and activities, including group health plans, that receive federal financial assistance from HHS. 

The 1557 regulations were set to become effective in July of this year, however several states and organizations have already filed lawsuits against HHS, arguing that the regulations’ interpretation of “the basis of sex” was overbroad. A court in in Mississippi agreed with these arguments and ultimately issued a nationwide injunction of the regulations, holding back the effective date pending further litigation. Although the case stays the effective date, there is ultimately risk that a higher court may overturn the decision which could require all entities subject to 1557 to comply with the original regulations.

Additionally, earlier this summer a decision was issued in the Eleventh Circuit in the case Lange v. Houston County, Georgia, which involved a transgender individual, employed by the county and covered under its group health plan, who was denied coverage for gender-affirmation surgery. Under the terms of the group health plan, drugs and all other services related to a sex change were excluded from coverage. The plaintiff argued that the plan’s coverage exclusion for “sex change surgery” violated Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), the Equal Protection Clause of the Fourteenth Amendment, and the equal protection guarantee under the Georgia Constitution. 

While the Eleventh Circuit Court ultimately dismissed the claims relating to the ADA and Equal Protection Clauses, the court did rule in favor of the plan participant regarding their Title VII claim. Title VII protects employees and job applicants from employment discrimination based on race, color, religion, sex, and national origin. In their reasoning, the court discussed and applied the Supreme Court’s 2020 decision in Bostock v. Clayton County, where the Justices ruled that an employer’s employment decisions based on sexual orientation or gender identity was discriminatory and prohibited under Title VII. The court found that the group health plan’s coverage exclusion discriminated against the plaintiff by limiting their “compensation, terms, conditions, or privileges of employment” on account of sex, and determined that the exclusion was facially discriminatory. This is only the second decision by a federal appellate court affirming that it is unlawful for an employer to discriminate against transgender people in an employee health plan, and is only immediately binding on employers in Georgia, Florida, and Alabama.

Employers should consider these new interpretations of the law, and other recent regulations and potential litigation on this topic, when deciding whether to cover gender-affirming care under their group health plan. Employers who sponsor self-insured plans that contain exclusions for gender-affirming care should work with legal counsel to understand if they have risk in continuing to include such an exclusion. Religious employers may have some protections if they exclude these services, but this should be discussed with counsel to determine if the relief would be applicable.  

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