By: HUB’s EB Compliance Team

In addition to the recently released final rules under Affordable Care Act (“ACA”) Section 1557, an Eleventh Circuit case also tackles the topic of health plan discrimination. As discussed several times, including here, here and here, this is a topic that continues to evolve.

The Group Health Plan

Houston County, Georgia (the “County”) provides a group health insurance plan (the “Health Plan”) to its own employees and to the employees of the Houston County Sheriff’s Office (the “Sheriff”). The Sheriff manages all other aspects of the employment relationship with its employees including payroll and issuing W-2’s. Likewise, the County manages and pays its own employees. The Sheriff relies entirely on the County for its employee benefits program, but the County determines the Health Plan benefit terms such as deductibles, premiums, and the costs of the Health Plan to the Sheriff’s employees. In fact, the majority of the Health Plan participants are employed by the Sheriff. The Health Plan covers all “medically necessary” services which are defined as “significant functional impairment and the procedure can be reasonably expected to improve the functional impairment.”

Anna Lange and The Insurance Exclusion

Anna Lange is a transgender woman who began working for the Sheriff in 2006. Lange was assigned a male sex at birth, and in 2017 was formally diagnosed with gender dysphoria by a healthcare provider. Gender dysphoria is a condition that causes feelings of discomfort and distress because of the incongruence between one’s gender identity and their sex assigned at birth.

Following her 2017 formal diagnosis, Lange’s healthcare providers started her on a treatment plan to align her physical characteristics with her gender identity. When Lange applied to the Health Plan to cover her medically necessary gender transition services it denied her claims based on the Health Plan’s exclusion of “[d]rugs for sex change surgery” and “[s]ervices and supplies for a sex change and/or the reversal of a sex change”. Lange appealed to the Health Plan and to the Houston County Board of Commissioners to no avail.

Lange’s Legal Claims and the Court’s Reasoning

Lange subsequently filed a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) for sex discrimination under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Americans with Disabilities Act (Title I) (the “ADA”), and the Equal Protection Clause of the United States Constitution (the “EPA”). The District Court for the Middle District of Georgia granted Summary Judgement for Lange only on the Title VII claim.

Houston County appealed the District Court’s finding for Lange under Title VII to the 11th Circuit Court of Appeals (the “11th Circuit”), covering Florida, Georgia, and Alabama, who also found in favor of Lange. In finding that the Health Plan violated Title VII by denying coverage for her gender transition surgery, the court stated, “Houston County deprived Lange of a benefit or privilege of her employment by reason of her nonconforming traits, thereby un-lawfully punishing her for her gender nonconformity.”

The court also stated,

“The Exclusion is a blanket denial of coverage for gender-affirming surgery. Health Plan participants who are transgender are the only participants who would seek gender-affirming surgery. Because transgender persons are the only plan participants who qualify for gender-affirming surgery, the plan denies health care coverage based on transgender status. . . By drawing a line between gender-affirming surgery and other operations, the plan intentionally carves out an exclusion based on one’s transgender status. Lange’s sex is inextricably tied to the denial of coverage for gender-affirming surgery.”

The Defense Failures and Lessons for Clients

Houston County made a number of failing arguments that are important lessons for employers with similar exclusions under their health plans:

  1. Lange was able to get coverage elsewhere – The defense attempted to argue that since Lange obtained coverage elsewhere there was “no harm/no foul”. The 11th Circuit disagreed. The Court made it clear that group health insurance falls squarely within Title VII’s “compensation, terms, conditions, or privileges of employment.” Insurance coverage conditioned upon one’s protected status therefore violates Title VII (regardless of the employee’s ability to obtain coverage elsewhere).

    Employers frequently fail to consider Title VII when it comes to their employee benefits. Houston County reminds us that Title VII applies equally to employer sponsored benefits like any other term or condition of employment (raises, promotions, workplace harassment etc.). Employers should review the coverage and exclusions in their group health plans with respect to transgender services to ensure they are not offering a discriminatory plan.
  1. Houston County was not Lange’s employer –The defense argued that Houston County was not actually Lange’s employer. However, the Sheriff delegated the provision and administration of the Health Plan to Houston County. By delegating the Health Plan to the County, it placed County’s administration of the health plan within Title VII (even though the Sheriff paid and managed Lange). The courts instruct that the definition of “employer” should be construed liberally and the courts consider the “totality of the employment relationship” in determining whether an entity is an employer. By offering the County’s health plan to the Sheriff’s employees the County was obligated to comply with Title VII and was liable for the violations.

    Multiple employer plans and groups that offer coverage to other non-employees (such as independent contractors and board members) must be cautious to ensure that their programs are designed and administered in a non-discriminatory way. The reasoning in Houston County also reminds employers that offering benefits to non-employees can destroy the non-employee status, as discussed here, among other compliance considerations.
  1. The Health Plan was “just a cheap plan” – The County finally argued that the plan was intended to be inexpensive and that covering this service would make the plan too expensive. The 11th Circuit stated, cost savings cannot justify discrimination or used to circumvent liability under Title VII. This means that regardless of the nature or value of the plan, employers must be sure that their employee benefits are designed and administered in a non-discriminatory way.

Employers who currently have similar exclusions under their health plans or are considering such exclusions are urged to consult with their own counsel on the risks of these exclusions.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.