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ACA Non-discrimination rules will effectively mandate coverage for "gender transition" services

The Section 1557 Non-discrimination regulations for the ACA were released in May, and the carriers are releasing their notices and interpretations of the regulations.  I guess this is one of those "hidden easter eggs" in Obamacare that no one discussed, voted on, or even thought about WAY WAY back in 2010 when the law passed.  You remember 2010, right?  That was two years after 2008 when every candidate for President articulated their view of marriage as being between a man and woman.  It is probably not surprising that the definition of marriage has changed in the eight years since then.  But, did anyone expect that the definitions of what is a man or woman become so . . . subjective.  But, let's not discuss politics.  

The non-discrimination rules prohibit discrimination in the administration of health insurance based on race, color, national origin, age, gender or disability. In addition to this general prohibition, the Final Rule outlines specific underwriting practices, plan designs and marketing activities that are prohibited forms of discrimination.  Section 1557 does not mandate any coverage of benefits, but prohibits discriminatory exclusions or limitations from being placed on benefits. Thus, groups may not exclude gender reassignment surgery (or other benefits) based on a discriminatory factor. This means that a group health plan may exclude or limit gender reassignment surgery (or any other benefit) based on neutral, non-discriminatory factors, such as clinical criteria; however, a group health plan may not exclude or limit gender transition surgery (or any other benefit) because of a discriminatory factor (i.e., age, gender, gender identity, sexual orientation, disability, etc.).

But, in response to this new rule every carrier has determined that all blanket exclusions for gender transition surgery when medically necessary shall be removed.  Thus, the effect of this rule is to mandate the coverage of gender transition surgery.  The key language here is "medically necessary."  When is gender transition surgery medically necessary?  This is "to be determined," but my guess would be that it is whenever a doctor says so.  This is how Blue Cross Blue Shield is handling it:

Our insured plans will cover gender reassignment surgery when medically necessary.
Example 1: Acme chooses to not cover gender reassignment surgery because the owner does not want to employ transgendered persons. Such an exclusion would likely violate 1557, as it is based on a discriminatory factor.
Example 2: Acme chooses to cover gender reassignment surgery, subject to medical necessity and other clinical criteria. Such a limitation may be permissible under 1557, provided those criteria are neutral and non-discriminatory.
 
Of course, fully insured groups will have no say in whether their plan covers gender reassignment surgery.  Starting in 2017, it will . . . end of story.  Surprise!
 
Self-insured groups may have some say in the decision.  For example, Blue Cross's default position for self-insured plans will be the same as their fully-insured approach.  "Self-insured plans that do not wish to take the insured approach will need to work with their counsel to determine appropriate plan design and inform us in writing. Non-standard benefit requests will be subject to customary internal review."  Thus, they will entertain an alternative approach, but it better not violate the non-discrimination rule.  Self-insured plans that do not wish to cover these types of services will have come up with a non-discriminatory way to limit coverage for gender reassignment surgery.  Good luck!  Even if your counsel comes up with a plan that satisfies the rule, you will have to have your carrier's blessing as well.
 
No exemption was offered for employers or carriers that might object to paying for such services based on religious or moral grounds.  I suspect those exceptions will have to be fought for and won (if they are to be won) in the courts.
 
My guess is that whether or not the surgery is "medically necessary" is where the battle will be fought between plans that want to limit these services and the carriers and government that want to extend them.  What exactly does "medically necessary" mean?  I guess we will find out.
 

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