Section 1557 Of the ACA, Association Discrimination, and Health Insurance Coverage For an Employee’s Dependent With Gender Dysphoria

By Joseph S. Murray IV

The regulations implementing Section 1557 of the Affordable Care Act (“ACA”) prohibit covered health insurance providers from discriminating against individuals based on gender identity (which is defined as sex discrimination) and require covered entities to treat individuals in accordance with their gender identity. 42 U.S.C. § 18116 & 45 C.F.R. § 92 et seq. Based on these requirements, covered health benefit plans cannot limit or exclude medical services related to gender dysphoria and gender transition. Employees and their covered dependents can directly sue employers and benefit plans to enforce the Section 1557 non-discrimination provisions.[1]

But what if Section 1557 does not apply to an employee’s health benefit plan? Can employees use association discrimination claims to require their employers’ health benefit plans to cover gender transition surgery and related medical treatments for the employees’ dependents?[2] In a recent case, the 8th Circuit Court of Appeals upheld the dismissal of an employee’s Title VII association discrimination claim since such claims are based on the employee’s own protected status.

In Tovar v. Essentia Health, No. 16-3186 (8th Cir. May 24, 2017), Brittany Tovar worked for Essentia Health and obtained health insurance coverage for her son through the Essentia Health Employee Medical Plan. After Tovar’s son was diagnosed with gender dysphoria, she sought coverage for medical services related to her son’s gender dysphoria. The plan denied her requests for coverage due to an exclusion in the insurance plan for “[s]ervices and/or surgery for gender reassignment.” Tovar filed suit under not only the ACA, but also under Title VII, alleging sex discrimination based on the gender identity (sex) of her son.

The 8th Circuit Court of Appeals upheld the district court’s dismissal of the Title VII claim since Tovar’s complaint that her employer refused to cover treatment for her son did not allege discrimination against Tovar—it alleged discrimination against her son, who was not an employee. Specifically, the 8th Circuit emphasized that Title VII states “[i]t shall be an unlawful employment practice for an employer . . . to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a) (emphasis in opinion). Since Tovar’s claim was based on her son’s sex, her claim failed.

Tovar relied heavily on Newport News Shipbuilding and Dry Dock Co. v. EEOC, 462 U.S. 669 (1983), for the proposition that an employee could bring suit under Title VII for discrimination against another individual. In Newport News, the employer-provided health plan provided better benefits for pregnant female employees than the pregnant spouses of male employees. While Tovar tried to frame the issue in Newport News as whether the male employees could claim discrimination on behalf of their spouses, the Supreme Court concluded that the discrimination in Newport News was because of the male employees’ sex. Based on Newport News and other cases’ holding that association discrimination under Title VII is based on the employee’s status in a protected category, the court concluded that Tovar’s claim must fail.

Would Tovar have been more successful asserting a claim of association discrimination under the Americans with Disabilities Act? At first blush, no: the ADA specifically excludes gender identity conditions as a disability. 42 U.S.C. § 12211. But the ADA’s blanket prohibition was recently called into question by the U.S. District Court for the Eastern District of Pennsylvania. In Blatt v. Cabela’s Retail, Inc., No.. 5:14-cv-04822 (E.D. Pa. May 18, 2017), Blatt was diagnosed with gender dysphoria and alleged that this condition substantially limited one or more major life activities, such as interacting with others, reproducing, and social and occupational functions. Blatt sued Cabela’s under the ADA for discrimination when Cabela’s refused to make the accommodations of allowing Blatt to use a female uniform, a name tag bearing her female name, and the female restroom.

Cabela’s moved to dismiss Blatt’s ADA claims based on the ADA’s exclusion of gender identity disorder under Section 12211. Blatt responded by arguing that excluding gender identity disorders from the protections of the ADA violated her equal protection rights. The court agreed with Blatt and used the constitutional-avoidance canon to rule in Blatt’s favor while avoiding finding the ADA violated the Constitution. The court ultimately held that the condition of only identifying with a different gender is excluded by Section 12211 but the ADA provides coverage for “disabling conditions that persons who identify with a different gender have,” such as gender dysphoria, “which goes beyond merely identifying with a different gender and is characterized by clinically significant stress and other impairments that may be disabling.” Since Blatt alleged she had been diagnosed with gender dysphoria that resulted in several disabling conditions, the court denied Cabela’s motion to dismiss.

If more courts follow the Blatt court’s position that the ADA covers individuals with gender dysphoria, then would an ADA association discrimination claim prove more successful? Unlike Title VII, the ADA specifically prohibits employers from excluding or denying employment benefits to an employee because of “the known disability of an individual with whom [the employee] is known to have a relationship or association.” 42 U.S.C. § 12112(b)(4).  ADA association discrimination cases are rare, and virtually every case has dealt with the situation where the employer takes a direct adverse action against an employee or applicant based on that employee or applicant’s association with an individual with a disability. See, e.g., Larimer v. IBM Corp., 370 F.3d 698 (7th Cir. 2004) (noting three types of ADA association discrimination claims: expense, disability by association, and distraction). To the extent there are cases dealing with claims that facially neutral insurance provisions create an ADA association discrimination cause of action, those cases are from the district courts, at the motion to dismiss stage, and inconsistent. Compare Morgenthal v. AT&T, 97 Civ. 6443, 1999 U.S. Dist. LEXIS 4294 (S.D.N.Y. Apr. 5, 1999) (allowing claim to proceed when employer denied health insurance coverage for treatment of developmental disorders); with Niemeier v. Tri-State Fire Prot. Dist., No. 99 C 7391, 2000 U.S. Dist. LEXIS 12621 (N.D. Ill. Aug. 24, 2000) (dismissing ADA association discrimination claim based on denial of infertility treatments).

Ultimately, an ADA association discrimination claim based on an employer’s denial of coverage of gender identity treatments for the employees’ dependents is a longshot since the employee will need to convince a court that Section 12211 of the ADA does not apply to gender dysphoria and an exclusion in an insurance policy is discriminatory. It may, however, be the only claim an employee can raise since Section 1557 does not apply to all employer-provided health benefit plans and the regulations protecting gender identity may be reversed in the Franciscan Alliance case.

[1] The Department of Health and Human Services’ regulations defining sex discrimination to include gender identity are currently in question in Franciscan Alliance, Inc. v. Burwell, 7:16-cv-00108-O, 2016 U.S. Dist. LEXIS 183116, at *3 (N.D. Tex. Dec. 31, 2016).

[2] The EEOC takes the position that the Title VII sex discrimination framework applies when the employee seeks employment benefits to cover their own status as transgendered. See, e.g., Deluxe Financial to Settle Sex Discrimination Suit on Behalf of Transgender Employee, Jan. 21, 2016 ( (“The consent decree also provides that . . . Deluxe’s national health benefits plan will not include any partial or categorical exclusion for otherwise medically necessary care based on transgender status.”).