Court Orders Claims Reprocessing After Finding TPA Illegally Excluded Gender-Affirming Care In Violation Of ACA Section 1557 – Health & Safety

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Department of Health and Human Services (HHS) repealed and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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