A legal fight between a patient and Blue Cross and Blue Shield of Illinois could drastically increase third-party administrators’ potential liability under the Affordable Care Act's anti-discrimination provisions.
A federal judge this month certified a class-action lawsuit against the nonprofit insurer that alleges its refusal to cover a transgender teenager’s gender-affirming care through a self-funded employee benefits plan it administers for Catholic Health Initiatives violates the ACA. Patricia and Nolle Pritchard of Washington state initiated the lawsuit two years ago after Blue Cross and Blue Shield of Illinois declined to cover gender-affirming care for their son, identified as C.P., in adherence with Englewood, Colorado-based Catholic Health Initiatives' company policy.
If the plaintiffs prevail, the consequences could extend beyond the rights of transgender people to access medical care and substantially alter the relationship between health insurance companies and the employers whose self-funded health benefit plans they administer.
This lawsuit may set a legal precedent that would hold third-party administrators that receive federal funds liable for their employer customers’ coverage policies, said Abigail Coursolle, senior attorney at the National Health Law Program.
“This is an evolving area of law, and it really just speaks to how complicated our healthcare system is and how difficult it is to untangle who's really making decisions about what is covered, how it's covered and who can be held accountable for those decisions,” she said.
Companies like Blue Cross and Blue Shield of Illinois could find themselves in the position of refusing to carry out their clients' policies, declining to do business with employers that have religious objections to certain medical care, paying for such treatments themselves, or forgoing Medicare and Medicaid reimbursements to avoid the anti-discrimination rules.
Blue Cross and Blue Shield of Illinois declined to comment on the litigation. Chicago-based CommonSpirit Health’s Catholic Health Initiatives, which is not a party in the lawsuit, did not respond to an interview request.
Under Section 1557, organizations that receive federal funds—such as Medicare and Medicaid payments—cannot discriminate on the basis of sex, which the Health and Human Services Department determined includes medical discrimination against trans people. Religious employers can receive exemptions, but Blue Cross and Blue Shield of Illinois and its parent company, Health Care Service Corp., are not faith-based organizations.
The Religious Freedom Restoration Act of 1993 was not crafted to allow private businesses to reject payment for workers' healthcare services based on their owners' religious views. That changed in 2014, when the Supreme Court ruled that privately held Hobby Lobby owners' beliefs exempted the retail craft chain from covering birth control for its workers.
The decision paved the way for other employers to claim religious exemptions to federal law. Provider groups including the American Medical Association have called for an end to payer exclusions of gender-affirming care.
More than half of U.S. residents are covered under self-insured plans, and these policyholders have little recourse to appeal their employers' coverage exclusions, said Mark Silberman, vice chair of the healthcare practice group at the law firm Benesch Friedlander Coplan & Aronoff.
“It’s challenging. Most employers who have self-insured plans say, 'This is a benefit we provide and, in the event that you don't want to partake of this benefit, you don't have to,'” Silberman said. “The problem becomes: Most people don't have the luxury to cavalierly and casually choose their employer based upon the insurance coverage it provides.”
In court filings, Blue Cross argues religious exemptions for employers such as Catholic Health Initiatives allows third-party administrators to enforce their self-insured customers' demands, even those the federal government otherwise categorizes as discriminatory.
Judge Robert Bryan of the U.S. District Court for the Western District of Washington wrote in May 2021 that, because Blue Cross is not itself a religious organization, it may be subject to federal anti-discrimination rules. Bryan also noted that the Supreme Court previously ruled that sex discrimination protections in the Civil Rights Act of 1964 apply to LGBTQ workers, and that it would be "logically inconsistent” for federal law not to categorize discrimination against transgender individuals as bias based on sex.
Moreover, Bryan wrote, Blue Cross and Blue Shield of Illinois already works with some self-funded employers that have transgender coverage exclusions to offer workers the opportunity to sign up for alternate plans that cover gender-affirming care. The federal government is in the process of determining third-party administrators’ legal obligations under Section 1557.
“Section 1557 relies on these other civil rights statutes, and courts have consistently been interpreting the civil rights statutes to provide protection, in fairly analogous cases, in circumstances to people who are gay or transgender,” said Christine Monahan, a professor at Georgetown University’s Center on Health Insurance Reforms. “Even if HHS right now might be going back and forth on it, the judge is saying, ‘I'm going to look at what the courts are saying and rule based on that.’”
HHS unveiled a proposal in June to review liability on a “case-by-case basis,” depending on how engaged administrators were in developing coverage exclusions for employer customers. The department's current policy dictates that trans people are protected by the ACA's anti-discrimination rules, which is similar to the stance President Barack Obama's administration took but contrary to the regulations as revised during President Donald Trump's administration.
Bryan's decision to allow the lawsuit to proceed came as LGBTQ individuals increasingly take to the courts to fight coverage denials. “It's an area where we're seeing a lot of litigation and I expect to see more, especially as decisions about what healthcare people should get become more and more political,” Coursolle said.
The Pritchard family
C.P., who is now 16, was diagnosed with gender dysphoria before he and his parents sought gender-affirming care. The Pritchards sued Blue Cross and Blue Shield of Illinois for going against the recommendation of C.P.'s physicians and denying him hormone therapy and chest reconstruction surgery, according to the initial complaint. The family subsequently paid $10,000 for the treatments out of pocket.
The Pritchard family now represents a class of transgender patients who work at more than 370 employers that refuse to cover gender-affirming care and contract with Blue Cross and Blue Shield of Illinois for employee health benefits.
Although the policy language varies among employers, the insurer carries out its exclusions consistently by denying all claims that include “gender dysphoria” and “gender reassignment,” Bryan wrote in his opinion this month. If the Pritchards win their case, the insurer would not be able to reject gender-affirming claims for any patient enrolled in a self-funded health plan, said Omar Gonzalez-Pagan, counsel and healthcare strategist at the Lambda Legal Defense and Education Fund, which is representing the Pritchards.
“This is a question of, ‘Can a customer force Blue Cross and Blue Shield of Illinois to discriminate and do something that is unlawful? I think the answer is no,” Gonzalez-Pagan said. “The law doesn't allow you to skirt legal responsibility because some customer told you to.”
In June, federal courts in Georgia and North Carolina ruled in separate class-action lawsuits that public employers may not exclude or deny coverage for gender-affirming care. In August, the Seventh Circuit Court of Appeals ruled that the parents of a child with autism could sue their employer—assisted living company Heart of CarDon—for denying therapy, which they argued violated Section 1557 of the ACA.
These legal advances contrast with the growing number of enacted and proposed state laws aimed at limiting access to transgender medical care. More than 145 bills related to transgender people have been introduced in 34 states so far this year, the Human Rights Campaign, an LBGTQ advocacy organization, wrote this month in a report that catalogs violence against trans people.
The Human Rights Campaign did not specify how many laws targeted transgender patients' access to healthcare. But one example comes from Florida, where the Agency for Health Care Administration enacted a rule in August that denies Medicaid coverage for gender-affirming care. A federal judge upheld the rule in October after a group of patients sued under Section 1557.
“There's going to be more confusion than clarity in the near future,” Silberman said.