Court Holds NC State Health Plan Constitutes “Health Program or Activity,” Granting Summary Judgment for Transgender Plaintiffs With ACA Discrimination Claims

As explained in our previous alert on a similar decision out of the Western District of Washington, the ACA’s anti-discrimination provision prohibits the denial of the benefits of, or discrimination under, a health plan governed by ERISA in a way that would violate the Civil Rights Act of 1964. In 2019, the US Supreme Court held in Bostock v. Clayton County that individuals who are transgender are entitled to protection under the Civil Rights Act. As a result, the ACA effectively prohibits discrimination against individuals who are transgender in the administration of ERISA health plans.

In this case, the plaintiffs are participants in the NCSHP who were denied gender-affirming care because of an NCSHP policy exclusion that refused to cover treatment for “sex changes or modifications and related care.” Previously, the court had ruled, like the Western District of Washington, that the NCSHP’s policy exclusion “facially discriminates on the basis of sex and transgender status” because it was “impossible to determine whether a particular treatment is connected to ‘sex changes or modifications and related care’—and thus, whether the exclusion applies—without comparing the member’s biological sex before the treatment to how it might be impacted by the treatment.”

The only remaining question was whether the NCSHP qualified as a “health program or activity” subject to liability under the ACA, which does not explicitly define “health program or activity.” In 2020, the US Department of Health and Human Services (HHS) issued a rule stating that entities “principally engaged in providing or administering . . . health insurance coverage” are excluded from the ACA’s definition of a “health program or activity.” Earlier this year, HHS issued a proposed rulemaking that would deviate from the prior rule, stating that it will interpret “health program or activity” to apply “to all the operations of a recipient entity principally engaged in the provision or administration of health insurance coverage or other health-related coverage.”

Ultimately, the court held that it need not defer to either the 2020 rule or the 2022 proposed rulemaking because the term “health program or activity” under the ACA plainly and unambiguously “includes health insurance providers and plans.” In support, the court noted that the ACA explicitly states that a “health program or activity” that receives “federal financial assistance” includes “contracts of insurance,” and that the very purpose of the ACA was “to increase the number of Americans covered by health insurance by transforming the health insurance industry.” As a final point, the court added, HHS’s 2022 proposed rulemaking was a more persuasive interpretation of the ACA.

This case is the latest in an increasing number scrutinizing health plans’ coverage for gender-affirming treatment under the ACA. That said, NCSHP has appealed the court’s decision to the US Court of Appeals for the Fourth Circuit. No federal appellate court has addressed whether policy exclusions for gender-affirming treatment violate the ACA.