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Alaska Federal Court Says Employer’s Denial of Insurance Coverage for Sex-Reassignment Surgery Violates Federal Law

Posted on: March 10th, 2020 by Art Leonard No Comments

A federal district court in Anchorage, Alaska, has ruled that a public employer’s health benefits plan violates Title VII of the Civil Rights Act of 1964 because it categorically denies to employees, whether male or female, coverage for the surgical procedures used to effect gender transition.  According to the March 6 opinion by Senior U.S. District Judge H. Russel Holland, the employer’s exclusion of this coverage is “discriminatory on its face and is direct evidence of sex discrimination.”  The ruling does not require all employers to provide coverage for gender reassignment surgery, but it requires that they not discriminate because of an employee’s sex in deciding which procedures are covered.

Judge Holland’s decision has potentially wide application because Title VII applies to all employers with 15 or more employees, including both businesses and government employers at the federal, state and local levels.  Although a trial court ruling is not a precedent binding on other courts, Judge Holland’s explanation for his ruling may provide a persuasive precedent both for courts confronting similar claims and for employers deciding how to respond to employees seeking such coverage under their employee benefit plans.

Lambda Legal filed suit on behalf of Jennifer Fletcher, who works as a legislative librarian for the State of Alaska.  Fletcher is enrolled in AlaskaCare, a self-funded employee health care plan that is administered by Aetna Life Insurance Company.  The Plan “provides benefits for medical services and procedures that are medically necessary and not otherwise excluded from the Plan,” according to the State’s written responses to discovery questions posed by Fletcher’s attorney from Lambda Legal, Tara L. Borelli.

During discovery in this case, the State conceded that for “some” transgender individuals, surgical procedures for gender transition may be “medically necessary,” but the plan formally excludes performance of the procedures in question for that purpose.  The procedures in question are covered for employees if they are necessary to address a medical issue other than gender transition.  None of the procedures at issue in this case are used solely in connection with gender transition.

Fletcher was diagnosed with gender dysphoria in 2014 and began the process of social, legal, and medical transition under professional care, starting hormone therapy that year.  By 2016, she and her health care provider agreed that gender transition-related surgery was necessary for her transition.  In her complaint, Fletcher claimed that such treatment was “essential” for her “well-being.”

In November 2016, Fletcher contacted Aetna to discuss coverage for her surgical treatment, but was told that the Plan did not cover it, and would not in 2017.  Although the Plan has since been modified to allow coverage for some aspects of gender transition, hormones and counseling, the express exclusion of surgery continues.

Fletcher’s request for coverage spurred the State to study the cost of eliminating this exclusion, for which it engaged a consultant, who advised that the annual increase in claims on the Plan would be $60,000.  Although there was internal discussion about this within the State government, no further action was taken to change the Plan to cover surgical transition procedures.

Because AlaskaCare would not cover her surgery, Fletcher obtained her surgery in Thailand, where the procedure is less expensive than if it were performed without insurance coverage in the Unites States.  She filed a discrimination charge with the Equal Employment Opportunity Commission (EEOC), alleging that the Plan’s exclusion violates Title VII’s ban on discrimination in “terms and conditions of employment” because of an individual’s sex.  The State’s simplistic response was that because the Plan excludes coverage for any surgical procedure for purposes of gender transition, whether the employee involved was identified as male or female at birth, there was no discrimination “because of sex.”  The EEOC rejected this argument, and issued a finding that the State’s policy violates Title VII.  On May 17, 2019, the EEOC notified Fletcher that its attempt to “conciliate in this matter” with the State was unsuccessful, authorizing her to file a lawsuit.

Fletcher’s complaint alleged that the State discriminated against her because of her “sex” which, she alleged, includes “discrimination on the basis of gender nonconformity, gender identity, transgender status, and gender transition.”  This list covered all the bases of different theories that federal courts have used at various times to evaluate Title VII claims by transgender plaintiffs.  After discovery, Fletcher moved for summary judgment on the question whether the Plan exclusion violates Title VII, while the State moved for summary judgment to dismiss the entire lawsuit on the merits.

As it turned out, the list of alternative coverage theories in Fletcher’s complaint was unnecessary, because Judge Holland concluded that the exclusion was, on its face, discrimination “because of sex.”He based this conclusion on the State’s concession that all the surgical procedures involved in Fletcher’s transition would be covered if they were performed for reasons other than gender transition.

Thus, if Fletcher was identified as female at birth but needed the vaginoplasty procedure for some reason other than transition, she would be covered, and indeed that procedure is employed to deal with some medical conditions experienced by women.  Because she was identified as male at birth, however, coverage for the the procedure was denied, because its only purpose for somebody identified as male at birth would be for gender transition.  To Judge Holland, this was clearly an exclusion specifically because of the sex of the employee, and one had to go no further into theories of gender nonconformity, gender identity or transgender status in order to bring her claim within the coverage of the statute.

Under Title VII, any “disparate treatment” between men and women regarding a particular term or benefit of employment is illegal unless it can be justified as a “bona fide occupational qualification” (BFOQ) that is “reasonably necessary to the normal operation or essence of an employer’s business.”  In this case, Holland commented, “Defendant has not argued, nor could it, that there is any BFOQ for the disparate treatment at issue here.  As such, plaintiff is entitled to summary judgment that defendant violated her rights under Title VII.”

While granting Fletcher’s motion, the court simultaneously denied the State’s summary judgment motion.  Still to be determined is the remedy for the violation.  As Fletcher has already had the surgical treatment, the court needs to decide what to award for compensation for violation of the statute.  In light of the court’s decision on the merits of Fletcher’s claim, it is likely that the parties will negotiate a settlement on damages.

Judge Holland was appointed to the District Court by President Ronald Reagan and took senior status in 2001.