In a momentous decision that will certainly garner national attention and be subject to appeal, a district court for the Southern District of California has ruled that Section 1557 of the Affordable Care Act prohibits discrimination on the basis of gender-identity in healthcare. Katherine Prescott v. Rady Children’s Hospital-San Diego, No. 16-CV-02408-BTM-JMA, 2017 WL 4310756 at *4 (S.D. Cal. Sept. 27, 2017) (“Because Title VII, and by extension Title IX, recognize that discrimination on the basis of transgender identity is discrimination on the basis of sex, the Court interprets the ACA to afford the same protections.”).

Importantly, the court drew its conclusion on the basis of the statute itself—as opposed to relying on HHS’s regulatory interpretation. See id. at *3 (“Because the Court does not rely on the HHS's regulation in concluding that the claim survives under the plain language of the ACA . . . .”). This ruling is therefore in direct opposition to an earlier federal court ruling out of the Northern District of Texas that enjoined HHS from enforcing that portion of its regulation which had interpreted Section 1557 as prohibiting gender-identity discrimination. See Franciscan All., Inc. v. Burwell, 227 F. Supp. 3d 660, 688 (N.D. Tex. 2016).

Given the tremendous impact of the California court’s ruling and the district-court split it has created, this legal question may ultimately require review by the U.S. Supreme Court.

It is worth noting that the district court also ruled that, under federal common law, damages for emotional distress are available to a claimant under Section 1557. Katherine Prescott v. Rady Children’s Hospital-San Diego, No. 16-CV-02408-BTM-JMA, 2017 WL 4310756 at *5 (S.D. Cal. Sept. 27, 2017).