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Trans Employee Can Sue If Surgery Benefits Refused

A federal judge in Texas has given Charlize Marie Baker the go-ahead to pursue a discrimination claim against her employer for denying her coverage for her breast augmentation surgery and her after-surgery recovery. | COURTESY: CHARLIZE MARIE BAKER

A federal judge in Texas has given Charlize Marie Baker the go-ahead to pursue a discrimination claim against her employer for denying her coverage for her breast augmentation surgery and her after-surgery recovery. | COURTESY: CHARLIZE MARIE BAKER

BY ARTHUR S. LEONARD | Does a transgender employee who seeks coverage under her employer’s benefit plans for breast augmentation surgery have a legal remedy if her claims are denied? US District Judge Sidney A. Fitzwater ruled on January 13 that a trans woman employed by L-3 Communications Integrated Systems may pursue a sex discrimination claim under Title VII of the 1964 Civil Rights Act, having alleged she was denied such benefits because of her gender.

She cannot, however, pursue an anti-discrimination claim under the Affordable Care Act.

Judge Fitzwater rejected discrimination claims against the insurance company that provides the coverage and administers the plans on L-3’s behalf, finding that neither the ACA nor President Barack Obama’s executive order governing gender identity discrimination by federal contractors applies in this situation. Nor can the insurance company be sued under Title VII because it is not the plaintiff’s employer.

US judge says denying breast augmentation coverage could be sex discrimination

Fitzwater declined to grant summary judgment motions from either the employee or the insurer regarding her claim that denying health and short-term disability benefits violates her rights under L-3’s employee benefit plans, setting that claim down for further legal proceedings.

According to Charlize Marie Baker’s complaint filed in the Northern District of Texas federal court in Dallas, she is an L-3 employee participating in the company’s health and short-term disability programs, both administered by Aetna Life Insurance Company. Baker began transitioning in 2011, obtained a legal name change, and had her gender designation changed to female on all government-issued documents. She scheduled breast implant surgery in 2015 after her doctor determined that it was medically necessary to treat her gender dysphoria.

Baker filed claims for coverage of the surgery and her recovery period under the company’s two benefit programs. She alleges that coverage for the surgery was denied because “the plan does not cover breast implants for individuals with a male birth gender designation who are transitioning to the female gender, although the plan covers individuals with a female birth designation who are transitioning to the male gender and seeking a mastectomy.” Her claim for short-term disability was denied because surgery to treat gender dysphoria does not qualify as “treatment of an illness” under the company’s plan.

In his ruling, Fitzwater focused on motions by L-3 and Aetna to dismiss discrimination claims brought under the ACA, the Employee Retirement Income Security Act (ERISA), and Title VII. The ACA incorporates by reference Title IX of the Education Amendments Act of 1972, which prohibits discrimination “because of sex.” ERISA does not specifically ban discrimination “because of sex,” but broadly prohibits discriminating against an employee to prevent them from getting benefits to which they are entitled under a company benefit plan.

None of the statutes under which Baker filed her claims explicitly prohibits discrimination because of gender identity.

Responding to L-3 and Aetna’s motions to dismiss, Baker relied heavily on a regulation published by the Department of Health and Human Services last spring stating that the ACA bans discrimination because of gender identity by insurers and health care providers. HHS’s regulation tracked interpretations of Title IX by the Department of Education and the Justice Department, which in turn looked to the view of Title VII adopted by some federal courts as well as the Equal Employment Opportunity Commission.

Baker also relied on the specific terms of Obama’s 2014 executive order that bans gender identity discrimination by federal contractors. Her attorneys, Michael J. Hindman and Kasey Cathryn Krummel of Hindman/ Bynum PC, noting that L-3 is a federal contractor, urged the court to make “a good faith extension of existing law” that the discrimination is “also discrimination in violation of ERISA in this context.”

Fitzwater, however, concluded that Baker failed “to point to any controlling precedent” that the ACA gave her a cause for action and noted that the HHS regulation only took effect this January 1, long after she was denied benefits. As well, one of Fitzwater’s colleagues on the Northern District of Texas bench, Judge Reed O’Connor, has issued two rulings – on August 21 and December 31 of last year – rejecting the argument that Title IX, the source of the ACA non-discrimination policy regarding sex, should be “construed broadly to protect any person, including transgendered persons, from discrimination.” It’s unclear if the incoming Trump administration will pursue the appeals of O’Connor’s rulings that have been announced by Attorney General Loretta Lynch’s Justice Department.

While federal courts grapple with the question whether laws and regulations banning discrimination “because of sex” should apply to gender identity or sexual orientation discrimination, there is no consensus yet among the appellate courts. The Supreme Court has a case pending on the gender identity issue under Title IX – in transgender high school student Gavin Grimm’s effort to use the bathroom appropriate to his gender identity in his Virginia high school – but it has yet to be scheduled for argument.

The closest the appeals courts have come are decisions finding that “sex stereotyping” violates Title VII and perhaps by extension other sex discrimination laws, based on a 1989 ruling by the Supreme Court in Price Waterhouse v. Hopkins, where the high court ruled for a female employee denied a partnership because she was deemed insufficiently feminine. Some courts have used the “sex stereotyping” theory to protect transgender employees in Title VII cases.

Fitzwater was correct, however, in observing that as of now there is no “controlling precedent” – from the Fifth Circuit Court of Appeals that has jurisdiction over federal trial courts in Texas – supporting Baker’s claim that gender identity discrimination violates the ACA.

Aetna also moved to dismiss Baker’s discrimination claim under ERISA, contending the law does not ban gender identity discrimination in the administration of employee benefit plans. Fitzwater agreed with Aetna, finding that “as Baker acknowledges, this claim is not currently recognized. It is for the Congress, not this court, to decide whether to create in ERISA a protection that the statute does not already provide.”

The judge made no finding on Baker’s claim that she was denied benefits due her under L-3’s benefit plan, leaving the question of Aetna’s ERISA liability for later.

On the Title VII claim, which ultimately preserved Baker’s right to sue, Fitzwater rejected her argument that Aetna should be liable to suit for sex discrimination under Title VII as an L-3’s “agent” in administering the benefit plans, noting that the Fifth Circuit has found that Title VII does not apply in the absence of an employer-employee relationship.

Still, the judge refused to dismiss Baker’s allegation that denying her coverage for her surgery and recovery period under her employer’s benefit plans constituted sex discrimination under Title VII by L-3 itself.

“Baker plausibly alleges that she was denied employment benefits based on her sex,” he wrote. “She asserts that L-3 ‘engaged in intentional gender discrimination in the terms and conditions of employment by denying her a medically necessary procedure based solely on her gender,’ that the company’s ‘conduct constitutes a deliberate and intentional violation of Title VII,’ and that this conduct ‘has caused [her] to suffer the loss of pay, benefits, and prestige.’”

Interestingly, Fitzwater’s opinion does not explore explicitly whether Title VII applies to gender identity discrimination claims as such – making no mention of the EEOC’s 2012 decision to that effect – choosing instead to treat this as purely a matter of sex discrimination, presumably because Baker would have been covered for the procedure had she been identified female at birth.

At this point, then, Baker continues to have a claim under ERISA against Aetna, based on her allegation the insurance company’s refusal to cover her procedure and recovery period violated the terms of the benefit plans, and a sex discrimination claim under Title VII against L-3, based on her allegation that the employer’s benefit plan discriminated against her because of her sex.

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