United States: Court Orders Claims Reprocessing After Finding TPA Illegally Excluded Gender-Affirming Care In Violation Of ACA Section 1557

A federal district court has awarded injunctive relief, including claims processing, after finding that an insurer acting as a third-party administrator (TPA) for a self-insured plan violated Section 1557 of the Affordable Care Act (ACA). The court ruled that the TPA committed illegal discrimination under the ACA by excluding coverage for gender-affirming care. The case is C.P. v. Blue Cross Blue Shield of Ill., 2023 WL 8777349 (W.D. Wash. 2023).

Section 1557 of the ACA bars discrimination in certain health programs and activities based on race, color, national origin, sex, age, or disability. The 2020 regulations issued by the U.S. Department of Health and Human Services (HHS) repealed and restricted some previous regulations, thus limiting the application of Section 1557 to entities "not principally engaged in the business of providing healthcare" only when they receive federal financial assistance. Therefore, most insurers are not subject to Section 1557 except in limited circumstances.

In this case, the defendant insurer did not receive federal financial assistance to administer self-funded insurance plans. Still, it received federal assistance with other products, such as Medicare supplemental coverage. As a result, the insurer argued that under the 2020 regulations, Section 1557 was inapplicable to its TPA activities as to self-funded plans.

Nonetheless, the court rejected the insurer's arguments, finding that the 2020 regulations were contrary to statute and arbitrary, capricious, and contrary to law. The court accordingly awarded relief to the class under the ACA, including an injunction preventing the insurer from applying the gender-affirming care exclusion in the future and requiring the reprocessing of claims related to that care. Furthermore, the court denied the insurer's request for a stay of enforcement pending appeal.

The HHS proposed regulations concerning Section 1557 of the ACA in 2022, but those regulations have not yet been finalized. This court decision illustrates the continuing uncertainty of Section 1557 as it applies to employer-sponsored health plans.

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