Blue Cross and Blue Shield of Illinois violated the anti-discrimination provisions of the Affordable Care Act by refusing to pay for a transgender teenager’s gender-affirming care through an employer plan it administers, a federal judge ruled Monday.
The health insurer, owned by Health Care Service Corp., is required to cover this care even though, as a third-party administrator, the company was carrying out its employer client's directives when it denied the lead plaintiff, Judge Robert Bryan of the U.S. District Court for the Western District of Washington decided in a summary judgement. The employer, Catholic Health Initiatives of Englewood, Colorado, objects to these services on religious grounds. The health system, which is part of Chicago-based CommonSpirit Health, is lawfully entitled to refuse to pay for medical care that doesn't accord with its religious beliefs and is not a party to the lawsuit.
In spite of its business relationship with a religious organization, Blue Cross and Blue Shield of Illinois is not excempt from federal laws and regulations prohibiting discrimination on the basis of sex, Bryan ruled. The court will decide later on what is appropriate relief for the family that initiated the case and for the 370 employers included in the class-action lawsuit.
Bryan instructed Blue Cross to reprocess claims, end its categorical denials of gender-affirming care and reimburse the lead plaintiff's family for medical expenses they paid for out-of-pocket.
Bryan's ruling sets a legal precedent that may drastically increase third-party administrators’ potential liability under the Affordable Care Act’s anti-discrimination provisions, said Jenny Pizer, chief legal officer at Lambda Legal, which represented the patients suing the nonprofit insurer.
"Third-party administrators need to follow the law. That shouldn't come as a big surprise to anyone," Pizer said. "It's very clear and straightforward on that point. We're applying the words of the statute in a straightforward way, as Congress intended, and yet we're addressing a longstanding discriminatory practice. This is very much a precedent, and an important precedent at that."
Blue Cross and Blue Shield of Illinois and Catholic Health Initiatives declined to comment.
Patricia and Nolle Pritchard of Washington state initiated the lawsuit two years ago after Blue Cross and Blue Shield of Illinois declined to cover hormone therapy and chest reconstruction surgery for their son, identified as C.P., against the recommendation of his doctor. The family eventually paid more than $12,000 for the procedures out-of-pocket for C.P., who is now 17.
The Pritchards alleged the insurer violated section 1557 of the Affordable Care Act, which states that organizations that receive federal funding may not discriminate on the basis of sex. Last month, Bryan certified a class of transgender people who work at employers that contract with the insurer to administer their health benefits and do not cover gender-affirming care.
In court filings, Blue Cross argued the medical community had not come to a consensus on the appropriateness of gender-affirming care and that, because its third-party administrator division did not directly collect federal funds, it was not subject to the ACA rule. The company's Medicaid, Medicare and exchange operations receive federal payments.
The insurance company also pointed to federal laws and regulations it maintained supported its arguments, such as the Employee Retirement Income Security of 1974, which Blue Cross and Blue Shield of Illinois contended allows insurers to implement policies for religious customers that otherwise would would categorized as discriminatory. The insurer further argued that it was protected by the Religious Freedom Restoration Act of 1993, which permits employers to claim religious exemptions to some federal laws.
Blue Cross also maintained that Health and Human Services Department rules do not protect LGBTQ people from discrimination on the basis of sex. The Supreme Court previously ruled that sex discrimination protections in the Civil Rights Act of 1964 apply to LGBTQ individuals.
President Barack Obama’s administration published a regulation including trans people under the ACA’s anti-discrimination provisions, but President Donald Trump’s administration rescinded it. This August, HHS proposed restoring the Obama-era standard.