CP v. Blue Cross Blue Shield of Ill., 2022 WL 17788148 (WD Wash. 2022)
In a class action lawsuit brought by a transgender person and his father, a federal trial court held that an insurer, acting as a third-party claims administrator (TPA) for self-insured health plans, violated Section of the Health Care Act at Low Price (ACA). 1557 when she administered discriminatory exclusions from the coverage plan for gender-affirming care. By way of background, Section 1557 prohibits discrimination in certain health care programs and activities on the basis of race, color, national origin, sex, age, or disability. HHS regulations issued in 2016 interpreted Section 1557 as applicable to all operations of health insurers that receive federal financial assistance. However, the regulations issued in 2020 repealed significant parts of the 2016 regulations and narrowed their scope so that entities that are not “principally engaged in the business of providing health care” (such as most health insurers) are regulated.” only to the extent” they receive federal financial assistance (see our Checkpoint Article). The insurer in this case does not receive federal financial assistance for the administration of self-insured plans, but does receive such assistance in connection with other products (eg, Medicare supplemental coverage).
The court held that, under the plain language of Section 1557, the insurer’s TPA activities constitute the operation of a health program or activity. He explained that the phrase in Section 1557 “any health program or activity, any part of which receives federal financial assistance” includes “all operations of a business” primarily engaged in providing health programs and activities. The court concluded that the insurer’s administration of the gender-affirming care exclusions was discrimination “on the basis of sex” contrary to Section 1557. The insurer argued that under the 2020 regulations, Section 1557 does not apply. applies to his TPA activities because those actions are not “health activities” and because he does not receive any federal financial assistance for them, but the court rejected those arguments, explaining that the 2020 regulations are clearly contrary to the statute and appear to be arbitrary, capricious and contrary to the law. Other arguments were also rejected, including that the insurer was required under ERISA to administer the exclusion as written and that it was not subject to Section 1557 when administering a plan for a religious organization exempt from the rules of the Nursing Restoration Act. Religious freedom.
EBIA Comment: Court decisions continue to demonstrate the uncertainty surrounding the application of Section 1557 to employer-sponsored health plans. While we wait for the proposed regulations to be finalized in 2022 (see our Checkpoint Article), it is interesting that this court has already rejected the 2020 regulations based on a flat reading of the text of the law. For more information, see EBIA’s health care reform manual at Section XXXIV.A (“Section 1557 Nondiscrimination: Grounds Prohibited by Federal Law”) and EBIA’s Group Health Plan Mandates manual at Section XXI.M.1 (“Interaction of Title VII and Section 1557”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.D.5 (“Section 1557 Nondiscrimination: Nondiscrimination in Programs and health activities).
Contributing Editors: EBIA staff
