Lawsuits Address Discrimination In Employer-Sponsored Group Health Plans Based On Sexual Orientation And Gender Identity

CATEGORY: Client Update for Public Agencies, Private Education Matters, Public Education Matters
CLIENT TYPE: Private Education, Public Education, Public Employers
DATE: Oct 06, 2022

A number of recent court decisions addressing whether the nondiscrimination provisions of Title VII, the Affordable Care Act (ACA) Section 1557, the Equal Protection Clause of the Fourteenth Amendment, and the Federal Equal Pay Act apply to health plan claims alleging discrimination based on sexual orientation and gender identity.

In Doe v. Catholic Relief Services, a data analyst employee, John Doe, sued his employer Catholic Relief Services (CRS) when CRS terminated spousal health insurance benefits for Doe’s husband.  CRS is a Catholic Church social services agency, which administers its employee benefits programs consistent with Catholic values.  CRS hired Doe in June 2016 and Doe enrolled his husband through CRS’s spousal benefits enrollment system.  CRS approved the enrollment but two months later, notified Doe that CRS had mistakenly approved the enrollment and CRS would be dropping coverage because CRS does not provide spousal health benefits to employees’ same-sex spouses.  CRS eventually terminated Doe’s husband’s health insurance.

One of Doe’s claims is that CRS’s actions violated the Federal Equal Pay Act (EPA).  The EPA prohibits discrimination on the basis of sex by paying wages to employees at a rate less than the rate paid to employees of the opposite sex for equal work.  Under the EPA, the level of pay takes into account the failure to provide equal health insurance benefits.  The court assessed that CRS provides spousal benefits for the male spouses of female employees who performed equal work as Doe, a male employee with a male spouse.  After finding that CRS did not challenge Doe’s EPA claims (instead, CRS focused on defending the Title VII claim), the court awarded Doe summary judgment on his EPA claim.

Doe also brought a Title VII claim in his lawsuit.  Title VII makes it an unlawful employment practice for an employer to discriminate against any individual with respect to his compensation, conditions, or privileges of employment because of the individual’s sex.  In the lawsuit, there was no dispute that CRS terminated Doe’s husband’s health insurance because of Doe’s sex and because Doe was a man married to another man.  CRS’s defense was that it was exempt from Title VII as a religious organization that was making a decision based on beliefs motivated by its religion.  However, the court found that Title VII’s exemption allows religious entities to make employment decisions based on religion but not based on race, sex, or national origin.  The court held that CRS was not exempt from Title VII and allowed Doe’s claim to move forward.

In two other lawsuits, Fain v. Crouch and Kadel v. Folwell, groups of covered individuals brought lawsuits against employer-provided health insurance plans challenging the exclusion of coverage for gender-conforming care.  In Fain v. Crouch, the court granted summary judgment for the plaintiffs, finding that the West Virginia State Medicaid Program did not allow coverage for gender-conforming surgical care as a treatment for gender dysphoria but allowed similar surgical treatments for diagnoses unrelated to gender dysphoria.  The court found the treatment was precluded based on one’s gender identity, which “invidiously discriminates” on the basis of sex and transgender status in violation of the Equal Protection Clause and Section 1557 of the ACA.  This case has been appealed to the Fourth Circuit.

In Kadel v. Folwell, the court found that the North Carolina State Health Plan for Teachers and State Employees’ categorical exclusion of coverage for treatments “leading to or in connection with sex changes or modifications” discriminated against transgender plan members on the basis of sex and transgender status.  The court held that this health plan, which was offered to public employees, violated the Equal Protection Clause.

Public agencies should be aware of their health plan’s enrollment requirements and coverage exclusions.  Should any enrollment or coverage exclusions raise concerns about having a discriminatory impact on a protected class of employees or their dependents, the agency should assess the risk.  These three recent lawsuits demonstrate an increase in discrimination claims made against employer-sponsored health insurance plans based on sexual orientation, sex, gender, and gender identity.  Additionally, the Biden administration has stated that prohibiting discrimination in health care based on sexual orientation and gender identity is a priority of the administration.  (See Executive Order 14075, dated June 15, 2022.)

Doe v. Catholic Relief Services, — F.Supp.3d —- (D. Md., Aug. 3, 2022), 2022 WL 3083439; Fain v. Crouch, — F.Supp.3d —- (S.D.W. Va., Aug. 2, 2022), 2022 WL 3051015; Kadel v. Folwell, — F.Supp.3d —- (M.D.N.C., Aug. 10, 2022), 2022 WL 3226731.

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