Gender-affirming care for minors and adults has become a hot topic in the benefits world. Employers are now faced with deciding whether to cover these costs, particularly for minors. Employers' flexibility really depends on whether their group health plans are fully insured or self-funded. Let's first dive into the recent rules issued by the Department of Health and Human Services (HHS) on May 6, 2024.
In October 2022, HHS issued a strong policy statement supporting transgender care for minors, emphasizing that this care, when medically appropriate and necessary, significantly improves the physical and mental health of transgender and gender-nonconforming youth. The department warned against attempts to restrict or mischaracterize this care as harmful.
Following an executive order by President Biden, HHS released new rules under Section 1557 of the Affordable Care Act (ACA) in May 2024 to mandate gender-affirming care for adults and minors. Section 1557 is the nondiscrimination provision of the ACA that prohibits discrimination based on race, color, national origin, sex, age, or disability in specified health activities, including those that receive federal funding, like State Medicaid, Medicare Part B, many health insurance plans, and most hospitals and providers.
Impact on Group Health Plans
Although group health plans are not directly covered under Section 1557, they are indirectly affected. Starting in 2025, fully insured carriers with Marketplace plans or Medicare Advantage Plans must include gender-affirming care in their policies for group health plans. Self-funded plans could also be impacted depending on their third-party administrators (TPAs). So, by the first day of the plan year in 2025, HHS expects most employer-sponsored health plans to offer gender-affirming care to employees and their families, with exceptions for those with a proven religious exemption.
State Responses and Legal Challenges
Despite the federal mandate, 26 states have passed laws banning or restricting gender-affirming care for minors. This has created a conflict between state and federal laws, putting health plans in a difficult position of choosing which law to comply with.
Several lawsuits have been filed by State Attorney Generals challenging the HHS mandate. Courts have issued stays on enforcement of Section 1557 for States such as Florida, Texas, and Montana, and one court issued a nationwide injunction from enforcement. These cases highlight the instability and frequent changes in HHS rules, which have been revised four times in the last eight years. The courts also recognized that HHS no longer had a deference to interpret the law since the Supreme Court decided the Loper Bright case on June 28, 2024. In short, HHS could not extend the interpretation of Title IX to include gender identity. This new interpretation would require a Congressional Act.
Currently, there is no federal mandate requiring group health plans to cover gender-affirming care for minors. While employers can offer this coverage voluntarily in states that permit it, ongoing litigation is expected and may eventually reach the Supreme Court. As the legal landscape continues to evolve, brokers, employers, and health plans must stay informed about both federal and state regulations to ensure compliance and effectively support their plan participants.
