Transgender protections and rights in the workplace are currently the subject of much confusion.  This issue extends to employer-sponsored health plans.  Whether an employer-sponsored health plan must cover gender-affirming care is complicated and depends, in part, on whether the employer’s health plan is fully-insured or self-insured. 

Fully-Insured Plans

Fully-insured employer-sponsored health plans are subject to state insurance law and applicable federal law.  A fully-insured plan must provide coverage compliant with the coverage mandates of the state in which the insurance policy is issued.  At the time of this post, 24 states plus the District of Columbia have passed laws prohibiting transgender exclusions in insurance coverage.  An employer-sponsored health plan with a fully-insured policy written out of those states (or D.C.) should provide coverage for transgender services and gender-affirming care to the extent required under the applicable local insurance laws.

Self-Insured Plans

Unlike fully-insured plans, self-insured plans are not subject to state insurance laws.  Self-insured plans are subject to certain Federal laws that prohibit discrimination based on certain protected factors, including race, color, national origin, sex, and disability.  Over the last several years, the question of whether “gender identity” is a protected factor has been the subject of much debate and litigation. 

Section 1557 of the Affordable Care Act

Section 1557 of the Affordable Care Act (Section 1557) generally prohibits any health plan that receives certain types of Federal funding from discriminating based on race, color, national origin, sex, or disability.  In July 2022, the U.S. Department of Health and Human Services issued proposed guidance under Section 1557 (Proposed Rule).  The Proposed Rule specifies that Section 1557’s protections extend to discrimination based on gender identity.  Under the Proposed Rule, applicable health plans would be prohibited from categorically excluding coverage for transgender services.  Section 1557 and the Proposed Rule apply only to insurers and third-party administrators that receive Federal financial assistance, such as Medicare Part D subsidies for retiree coverage or as a result of marketing policies on a healthcare marketplace or exchange.  If finalized, the Proposed Rule could affect the design and administration of a fully-insured group health plan if the insurer or third-party administrator receives Federal funding. 

Title VII of the Civil Rights Act

Title VII of the Civil Rights Act (Title VII) prohibits an employer from discriminating against an employee on the basis of race, color, religion, sex, or national origin.  In Bostock v. Clayton County, the Supreme Court held that an employer who terminates an employee because of sexual orientation or gender identity impermissibly discriminates against that employee “on the basis of sex” under Title VII.  The Bostock case focuses on employment termination.  However, Title VII also prohibits employment discrimination “on the basis of sex” regarding “compensation, terms, conditions, or privileges of employment,” including employer-provided benefits. 

In recent years plan participants who have been denied gender-affirming services under their employer-provided group health plans have, generally successfully, brought claims in Federal court alleging that the Bostock ruling prohibits employer-provided group health plans from categorically excluding coverage for gender-affirming care.  For example:

• In Lange v. Houston County, the U.S. District for the Middle District of Georgia held that, under Bostock, Title VII prohibits the County’s health plan from categorically excluding gender-affirming care.  Lange is currently under appeal in the U.S. Court of Appeals for the Eleventh Circuit.  

• In Kadel v. Folwell, the U.S. District Court for the Middle District of North Carolina, relying heavily on the Bostock ruling, found that the State of North Carolina violated Title VII’s anti-discrimination requirements by providing a health insurance plan for state employees and their dependents that categorically excluded coverage for treatments “leading to or in connection with sex changes or modifications.”

The law on categorical exclusions for gender-affirming care in self-insured employer-sponsored health plans continues to develop.  We expect the Supreme Court or Congress to issue definitive guidance soon.       

Action Items for Employers

Employers are facing conflicting information about coverage of transgender services.  Employers with fully-insured plans should contact their carrier to confirm the plan complies with local law.  For employers with self-insured plans, the path forward is less clear.  Still, those employers should continue to monitor the issue and work with the plan’s administrator and legal counsel to ensure the plan complies with the evolving law. 

Thank you to Jackson Lewis summer associate, Jackie C. Graves for her help in developing this article.