Court: Denying coverage for gender-affirming care to transgender employees is sex discrimination

If your business provides a self-funded health insurance plan to its employees, that health plan covers “medically necessary” services, and you’re not keen on defending sex discrimination claims, then keep reading.

Yesterday, the Eleventh Circuit Court of Appeals affirmed a lower court ruling that an employer cannot exclude coverage for gender-affirming care under its employee health insurance plan.

That health plan covered “medically necessary” services, such as surgery, when a “significant functional impairment and the procedure can be reasonably expected to improve the functional impairment.” The employer sets the benefit terms, decides changes to the health plan, determines member deductibles and premiums, and provides services to all enrollees.

One of those enrolled was a transgender woman assigned a male sex at birth. She was diagnosed with gender dysphoria, which is a condition that causes feelings of discomfort and distress because of the incongruence between one’s gender identity and the sex assigned at birth. If left untreated, people with gender dysphoria are more vulnerable to developing other health concerns like anxiety, depression, and suicidality.

Following her formal diagnosis, the plaintiff’s healthcare providers determined that a vaginoplasty—a surgical procedure to feminize her genitals—was medically necessary. However, the defendant and its third-party administrator denied the plaintiff’s request for coverage based on an 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.”

So, the plaintiff sued the defendant under Title VII of the Civil Rights Act of 1964, which bans sex discrimination “against any individual with respect to his [or her] compensation, terms, conditions, or privileges of employment.”

You won’t find “transgender” anywhere in Title VII. However, in Bostock v. Clayton County, the Supreme Court concluded that “discrimination based on . . . transgender status necessarily entails discrimination based on sex” because transgender discrimination intentionally treats transgender employees differently “because of their sex.”

More recently, the EEOC updated its Enforcement Guidance on Harassment in the Workplace and noted that “sex-based harassment includes harassment based on … gender identity, including how that identity is expressed.”

Against this backdrop, two out of three Eleventh Circuit judges deciding the case did not doubt that the health plan exclusion, “a blanket denial of coverage for gender-affirming surgery,” violated Title VII because “participants who are transgender are the only participants who would seek gender-affirming surgery” and, therefore, “the plan denies health care coverage based on transgender status.”

The dissenting judge reasoned that the plan did not discriminate because “it does not draw a line between procedures transgender people need and procedures that other people need.” “But,” according to the majority, “this kind of line drawing is precisely what makes the plan discriminatory. By drawing a line between gender-affirming surgery and other operations, the plan intentionally carves out an exclusion based on one’s transgender status.”

While this decision only binds employers within the court’s limited jurisdiction, it’s a warning shot to employers across the country that attempt to single out and deny gender-affirming health care.