United States: Changing Legal Landscape In Transgender Health Coverage

Last Updated: September 13 2016
Article by Mary Claire S. Blythe

Gender identity and transgender rights have come to the forefront in the news over the past few years. While the case law is more settled with respect to transgender discrimination in the workplace, not much guidance is available for transgender health coverage and its impact on welfare plans, in particular employer-provided health insurance. Employers should not only consider workplace policies with respect to transgender issues, but should also review and update employee benefits plans to minimize the risk of litigation or compliance issues in this changing area of the law.

Certain medical conditions that primarily affecting transgender individuals have historically been excluded from employer-provided health insurance. For example, individuals who are transgender are more likely to suffer from gender dysphoria. Gender dysphoria is feeling that one's emotional and psychological identity is opposite of one's biological sex. Treatment for gender dysphoria may include sex reassignment or gender affirmation. Sex reassignment does not only involve reassignment surgery, but also other services such as counseling, hormone therapy and plastic surgery. Without proper treatment, individuals suffering from gender dysphoria can experience severe depression, stress, isolation and anxiety. These services were often classified as cosmetic, not medically necessary, or experimental or specifically excluded from health coverage.

Laws Prohibiting Discrimination in Transgender Healthcare

As is often the case, the law is slow to adapt to societal changes. Specifically, insurance and employee benefits laws are still in the process of addressing healthcare issues unique to the transgender community. Issues may arise when employer health insurance does not cover services specific to sex reassignment or when an individual seeks medical care that is gender specific (such as a person who identifies as a male requesting coverage for treatment for ovarian cancer).

Title VII of the Civil Rights Act prohibits sex discrimination in the workplace. The Equal Employment Opportunity Commission (EEOC) has issued guidance that the Title VII prohibition extends to transgender healthcare services. Currently, the EEOC has also filed lawsuits and amicus briefs related to transgender and gender identity discrimination.

The Department of Health and Human Services (HHS) has issued final regulations, under Section 1557 of the Affordable Care Act (ACA), pertaining to transgender discrimination for plan years beginning in 2017. Section 1557 of the ACA prohibits discrimination in federally funded health programs based on race, national origin, age, disability and sex. In May 2016, HHS clarified that this prohibition included all gender-transition-related healthcare.

In addition to HHS, Maryland, the District of Columbia and 16 other states, prohibit health insurers from denying or limiting health coverage for transgender individuals. While some employer-provided health plans are subject to state insurance regulation with respect to transgender healthcare, overall compliance and regulation will depend on a number of factors, as described below. It is important for employers to determine which regulations their health plans must abide by and be aware of how coverage and exclusions are currently structured in their plan design and administration.

Plan Sponsor

The HHS regulations apply to any employer considered a "covered entity." The definition of covered entity includes any entity that operates a health program or activity that receives federal funding. Examples include hospitals that receive Medicare reimbursements and health insurers that offer Medicare coverage. While an employer may not fall into one of these categories, its insurer or administrator may receive federal financial assistance, which would require the employer health plan to still comply with the HHS guidance. Further, insurers and administrators are often subject to state law which may have separate requirements for transgender healthcare coverage.

Plan Funding

The HHS regulations do not directly impact self-insured health plans sponsored by employers that are not health providers and do not receive federal funding. Self-insured health plans are governed by the Employee Retirement Income Security Act or 1974 (ERISA) and not generally subject to state insurance laws. As stated previously, the HHS regulations could extend to self-insured plans indirectly through service providers and administrators. Fully insured health plans must comply with both ERISA and state insurance laws. Each state will differ with respect to laws prohibiting transgender discrimination, and employers need to determine which state laws apply for their workforce.

Plan Design & Administration

Employers should be aware that there are two ways in which plans can discriminate: either (i) explicitly excluding certain transgender-related health services through the terms of the plan or (ii) through plan administration even though plan terms do not categorically exclude transgender healthcare.

Discrimination through administration often occurs when the plan terms exclude cosmetic surgery and/or services that are "not medically necessary." Employers who delegate the administration of benefits and claims to a third party may not be aware of transgender healthcare discrimination. Further, while the HHS regulations prohibit categorical exclusions of transgender services, it does not provide guidance regarding which specific services are considered related to gender transition. Given the EEOC efforts in this area of the law, future guidance may be issued and case law might develop to further clarify limitations for exclusion of specific transgender healthcare, if any; however, such guidance does not currently exist.

What Should Employers Do?

  • Review your health plan to determine whether transgender healthcare services are categorically excluded.
  • If your health plan excludes transgender healthcare services, consider whether the exclusions are permitted by law.
  • Discuss with your insurance carrier and administrators, either now or during the next renewal meeting, how the health plan design and administration would affect transgender healthcare coverage.
  • Consult with ERISA counsel to determine which regulations apply to your health plans and raise any questions or concerns about your current health plan coverage with respect to treatment and services affecting transgender individuals.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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