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“A Trap for the Unwary” – Does Your Self-Funded Health Plan Provide Transgender Benefits? It Might Need to Soon.

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Assistant Secretary of Labor Phyllis Borzi recently offered informal guidance on the broad scope of nondiscrimination regulations proposed under Section 1557 of the Affordable Care Act. During her remarks at the ABA Labor Section Employee Benefits Committee Meeting in February, Ms. Borzi indicated that the proposed regulations would apply to any health plan that receives federal funds, including a self-funded plan that uses a third party administrator that receives federal funds.  Ms. Borzi characterized the proposed regulations as a “trap for the unwary,” noting that many self-funded plans assume that the nondiscrimination rules will not apply to them.  In light of Ms. Borzi’s comments, self-funded plans that use a third party administrator may wish to review the proposed regulations and consider the extent to which they may be required to cover transgender benefits.

As background, Section 1557 of the Affordable Care Act prohibits discrimination on the basis of gender identity in the provision of health programs. While discrimination claims have been brought under this provision since 2010, the Department of Health and Human Services issued proposed regulations last September defining the scope of this Section of the Affordable Care Act.  In application, the proposed regulations would prohibit the categorical refusal of coverage to transgender participants and would require that individuals be treated consistent with their self-selected gender identity.

Although the proposed regulations would prohibit blanket exclusions of transgender transition benefits as facially discriminatory, the rules shed little light on the scope of services that must (or must not) be offered. For example, the proposed rules do not provide any guidance as to whether an employer must offer hormone therapy, mental health services, genital reassignment surgery, breast augmentation/reduction, puberty blockers, and some of the more cosmetic benefits such as voice coaching, tracheal shaving and hair removal, among others.  Accordingly, employers may wish to evaluate the full array of transgender benefits in the context of their health plans.

The comment period for the proposed regulations closed November 9, 2015 and the rule is currently under evaluation at the Office of Management and Budget. If finalized, the regulations would become effective 60 days after being published in the Federal Register.  For more information, please see the proposed regulations and the related Frequently Asked Questions.