In Robinson v. Dignity Health (Robinson), the US Federal District Court for the Northern District of California granted an employer's motion to stay a sex discrimination action brought under Section 1557 of the Affordable Care Act (ACA Section 1557), pending the US Supreme Court's decision in Gloucester County School Board v. G.G (Gloucester). The Gloucester case, which the Supreme Court agreed to hear this past October, may decide the issue of whether sex discrimination under Title IX of the Education Amendments of 1972 (Title IX) includes discrimination on the basis of gender identity (No. 16-cv-3035 YGR, (N.D. Cal. Dec. 6, 2016)). Because ACA Section 1557 expressly incorporates Title IX's sex discrimination provision, the Supreme Court's decision also could determine the meaning of ACA Section 1557's sex discrimination provision.

ACA Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities, and incorporates grounds for discrimination that are prohibited under various statutes, including the sex discrimination provisions of Title IX (see Practice Note, Nondiscrimination in Health Programs and Activities Under the ACA (Section 1557)).

The transgender employee in Robinson filed suit claiming that the employer violated ACA Section 1557 because its health plan included a categorical coverage exclusion for "sex transformation" surgery from its health plan. The employee alleged that as a result of the plan's exclusion the employee was required to:

The employer, however, sought to stay the action pending the Supreme Court's ruling in Gloucester. In the Gloucester litigation, a transgender high school student sued a school board under Title IX, alleging that the board's proposed transgender restroom policy, which requires that male and female restroom and locker room facilities be limited to the corresponding biological genders, impermissibly discriminated against the student on the basis of sex under Title IX (see Legal Update, Fourth Circuit Holds that School Violated Title IX by Denying Transgender Student Access to Gender-Identity-Appropriate Restroom). Reversing a district court ruling, the Fourth Circuit held that a Department of Education opinion letter stating that school districts generally must treat transgender students consistent with their gender identity was entitled to deference. The school board asked the Supreme Court to review the case, and the Supreme Court granted certiorari in October 2016 ().

The district court in Robinson granted the employer's motion to stay, reasoning that the employee's ACA Section 1557 claim would be "directly affected" by an interpretation of Title IX addressed to the meaning of "on the basis of sex" (that is, one of the questions on which the Supreme Court granted certiorari in Gloucester). According to the district court, the central issue in both cases is whether "sex" includes gender identity for purposes of the Title IX nondiscrimination provision. The district court recognized, however, that the Supreme Court could decide the questions before it in Gloucester more narrowly, reaching only issues of administrative law and deference.

The district court also concluded that granting a stay would result in only minimal harm (or no harm at all) to the employee, because the employer had eliminated the plan exclusion at issue in this litigation, effective January 1, 2017.

This case, one of the first we've come across involving the ACA Section 1557 nondiscrimination rules, reflects some of the significant questions that remain regarding Section 1557's scope and applicability. Section 1557 was the topic of final implementing regulations issued by the Department of Health and Human Services (HHS) earlier this year as well as FAQ guidance issued this fall (see Legal Updates, ACA Nondiscrimination Rules, Now Final, Target Insurers and TPAs, ACA Nondiscrimination Rules Would Impact Health Plan Insurers, and ACA Nondiscrimination Guidance Addresses Tagline Language Standards). HHS's final regulations take the position that a Section 1557 covered entity may not categorically or automatically exclude from coverage (or limit coverage for) all health services related to gender transition.

Reflecting the impact of these regulations, the employer in Robinson acknowledged that it would no longer exclude from coverage treatment, drugs, services, and supplies for or leading to sex transformation surgeries. This would include hormone therapy, chest surgery, and phalloplasty –for which the employee in this litigation had sought coverage. The employer indicated that it made these changes, effective January 1, 2017, to comply with ACA Section 1557's final regulations. It remains to be decided, however, whether the employer's prior coverage denials violated the ACA.