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Two Courts Reject § 1557 and Title VII Healthcare Discrimination Claims Against Insurance Companies Acting as Third-Party Administrators

In two recent decisions, courts have refused to hold insurers acting as third-party administrators (TPAs) liable under ACA § 1557 or Title VII for carrying out allegedly discriminatory terms of self-funded employer health plans. In both cases, the TPAs did not appear to have any role in setting the terms of the employer-sponsored plans, but only in approving and denying claims under their terms.

Classically, there are two types of employer health plans: fully-insured plans where the employer buys a health policy for its employees from an insurance company which designs and sets the terms, and self-insured plans where the employer designs and sets the terms of the plan which an insurance company or other manager who is acting as the TPA merely administers.  

In Baker v. A.L.I.,[1] a Texas federal court case heard in January 2017, a male-to-female transgender person sued her employer and the insurer who was acting as the TPA for its health plan under § 1557 and Title VII. She claimed she was denied coverage for breast augmentation surgery because her birth gender was male and treatments for gender dysphoria were not covered under the plan. The court rejected the claim brought under § 1557, the Affordable Care Act’s broad statute which prohibits race, sex, disability and age discrimination by federally-funded healthcare programs, finding there was no controlling precedent recognizing a cause of action based on gender identity under that statute.

The Court also rejected the Title VII claim, which prohibits race and sex discrimination by employers in health plans and other fringe benefits – but only against the insurance company, which acted as the TPA. It stated that Title VII requires the plaintiff to have an employment relationship with the defendant. In the Fifth Circuit, for an agent like a TPA to qualify as an employer, it had to have authority for employment practices. Here, the plaintiff alleged that the TPA only had authority to approve or deny benefit claims – activities insufficient to constitute actions as an employer. On the other hand, the court found the plaintiff’s claims sufficient to state a Title VII claim against the employer, which had allegedly set the terms and conditions of the plan, and it permitted that portion of the case to proceed.

In Boyden v. Conlin,[2] a subsequent federal court case in Wisconsin, another male-to-female transgender individual sued her employer and the insurance company who was acting as the TPA for denying coverage for gender dysphoria. The Court again found that the TPA was only responsible for administering the plan according to its terms and had no authority to determine whether gender transition benefits would be offered through the plan. It concluded that to hold a TPA liable under Title VII even though it had no discretion as to the scope of benefits covered made no sense and was beyond Congress’ intent.

It is important to note that these decisions appear to have turned on the nature of the responsibilities of the TPAs. Results might differ if a TPA also has control over the terms of a plan.[3]

David D. Johnson can be reached at or (415) 857-6751.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.   

[1] 228 F.Supp.3d 764 (N.D. Tex. 2017).

[2] No. 17-cv-264-wmc, 2017 WL 5592688 (W.D.Wisc., 2017).

[3] See Tovar v. Essentia Health, 857 F.3d 771 (8th Cir. 2017).