August 8, 2016

Attention Self-funded Plan Sponsors: Be Aware of Potential Discriminatory Benefits (article)

Several laws and regulations raise many questions with regard to health coverage and related matters based on gender identity disorder or gender dysphoria.  Unfortunately, there are no clear guidelines.  In a nutshell, categorical exclusions of coverage for individuals based on gender identity disorder or gender dysphoria will not withstand scrutiny.  Neutral nondiscriminatory limitations may, on the other hand, survive scrutiny.


As background, three federal laws currently addressing these matters are as follows:

  • Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, national origin, sex, pregnancy, religion, age, disability, or genetic information. This law is regulated by Equal Employment Opportunity Commission (EEOC).  Employers employing 15 or more employees, whether private or public sector, are subject to Title VII.  No new EEOC regulations have been issued specifically addressing gender identity disorder or gender dysphoria; although the EEOC has indicated that it is including transgender matters under the category of sex discrimination and it is making it a priority.  The EEOC does provide employment protections for lesbian, gay, bisexual and transgender workers; following are some EEOC publications addressing employment–based matters:
  •  Section 1557 of the Affordable Care Act addresses nondiscrimination based on health status.  A summary of these rules is discussed in CBIZ Health Reform Bulletin 118, Final HHS Rules on Nondiscrimination in Health Plans (6/1/16).  Generally, these regulations apply to insurers and third party administrators receiving federal funding, as well as self-funded employers receiving federal funding such as hospitals and nursing homes.  These rules do not apply to employers sponsoring self-funded plans as long as the employer does not receive federal funding, which may include Medicare Part D retiree drug subsidies.
  • The DOL’s Office of Federal Contract Compliance Programs (OFCCP) enforces Executive Order 11246 prohibiting sex discrimination in employment by covered contractors.  To this end, the OFCCP released final regulations on June 14, 2016 addressing these matters.  These rules, which take effect on August 15, 2016, require equal employment and fair pay treatment without discrimination based on sex, pregnancy, childbirth or related medical conditions or gender identity.  Employers subject to OFCCP regulations are those who have at least one federal contract equaling or exceeding $10,000, or have several contracts that together equal or exceed $10,000.  Additional information including fact sheets and FAQs about these rules can be accessed on the OFCCP’s website.

In addition, the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) may also come into play as it relates to mental health services and counseling.


It should also be noted that several states including California, Colorado, Connecticut, Delaware, District of Columbia, Illinois, Maine, Nevada, Oregon, Vermont and Washington provide for certain insurance protections against discrimination based on gender identity or sexual orientation.  In addition, an increasing number of states have been amending their civil rights and fair employment practices laws to prohibit discrimination on the basis of gender identity or sexual orientation.  These states include:




New York






Rhode Island




District of Columbia




New Hampshire



New Jersey



New Mexico



In summary, these matters for insured plans will generally be resolved by the insurer in that they have to comply with the ACA Section 1557 rules.   Employers sponsoring self-funded plans will want to review self-funded plans carefully, with an eye toward any categorical exclusions.  If the plan has a categorical exclusion of services, it will want to consider eliminating or modifying such exclusions so that it is nondiscriminatory and gender-neutral.  Again, there is no clear guidance on what this means.  But, an example might be an exclusion of hormone therapy for an individual going through gender transition whereas allowing hormone therapy for other reasons would not likely withstand scrutiny.  Certainly, this is an area of the law that will evolve over time and as information becomes available, we will share it with you. 


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.  

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