Developments in Gender-Affirming Care Litigation in Fifth and Eleventh Circuits

This week saw further developments in litigation regarding whether and in what circumstances the denial of gender-affirming care may constitute discrimination in violation of federal law. First, on January 31, 2025, the Fifth Circuit denied a request to rehear a challenge to Department of Health and Human Services (HHS) guidance interpreting section 1557 of the Affordable Care Act (ACA), which had been dismissed for lack of standing. Second, on February 4, 2025, the Eleventh Circuit, sitting en banc, heard oral argument in a rehearing of a panel decision that found that a municipal health plan's gender-affirming care exclusion was facial employment discrimination in violation of Title VII.

On December 16, 2024, in Neese v. Becerra, 123 F.4th 751 (5th Cir. 2024), a Fifth Circuit panel reversed a lower court decision in favor of the plaintiffs, finding that the lower court erred in concluding they had Article III standing. The plaintiffs are two physicians who brought a pre-enforcement challenge to 2021 HHS guidance stating that HHS would interpret section 1557's prohibition on discrimination on the basis of sex to include discrimination on the basis of sexual orientation and gender identity based on the Supreme Court's decision in Bostock v. Clayton County, 590 U.S. 644 (2020). Section 1557 prohibits discrimination in covered health programs and activities, including in the provision of federally funded healthcare. The plaintiffs challenged the guidance based on their fear that HHS would terminate their federal funding for refusing to provide gender-affirming care in some circumstances. The panel found that the plaintiffs did not have standing to challenge the guidance because "they have not shown how their conduct constitutes gender-identity discrimination under any plausible reading" of the guidance and, hence, they faced no credible threat of enforcement.

Judge James C. Ho of the Fifth Circuit called for a rehearing of Neese en banc, but the poll failed 16-1. The denial notice stated that there was no reason to rehear the case, as the panel decision was unanimous, and even if it were not, the guidance had already been superseded twice: once by the Biden administration's 2024 Final Rule codifying the guidance and again by the Trump administration's executive order directing federal agencies to enforce "sex-protective laws" in accordance with the understanding that there are "two sexes, male and female" that are "not changeable." Judge Ho dissented from the denial, arguing that the court should not "extend" Bostock by failing to rehear the case.

In Lange v. Houston County, Ga., No. 22-13626 (11th Cir. May 13, 2024), an Eleventh Circuit panel held that Houston County's self-funded health plan, which contains an exclusion for services related to "a sex change and/or the reversal of a sex change" (the Exclusion), discriminated against the plaintiff in violation of Title VII of the Civil Rights Act of 1964. The plaintiff is an employee of the county who was denied coverage under the plan for certain services to treat gender dysphoria, including gender-affirming surgery. The lower court found that the Exclusion facially discriminated against the plaintiff as a matter of law and a split panel of the Eleventh Circuit agreed. The panel opinion applied Bostock's reasoning to find that the Exclusion violated Title VII: "The Exclusion is a blanket denial of coverage for gender-affirming surgery. Health Plan participants who are transgender are the only participants who would seek gender-affirming surgery. Because transgender persons are the only plan participants who qualify for gender-affirming surgery, the plan denies health care coverage based on transgender status."

The Eleventh Circuit granted Houston County's request for en banc review of the case on the question of facial Title VII discrimination. At the February 4, 2025, oral argument, the judges pressed the parties' advocates to explain how Bostock should be applied in a case about health benefits, where many considerations factor into the decision of what services a plan does and does not cover. Multiple judges expressed skepticism that Bostock's "change one factor" test — in which facial discrimination may be determined by changing the biological sex of the employee alleging discrimination to see if their treatment would change — worked in this context. Counsel for the plaintiff emphasized that the Exclusion drew a sex-based line, because if the plaintiff had been born female, the surgical procedure would not be subject to the Exclusion. The judges tested that reasoning by raising hypotheticals in which non-transgender individuals may be impacted by the Exclusion or otherwise denied care, asking whether it mattered that the surgery could fall under other exclusions for cosmetic surgeries, that dependents of cisgender employers my be denied care under the Exclusion, or that "de-transition" services for persons that did not identify as transgender were also excluded. The judges also questioned whether the county's asserted non-sex-based rationale for the Exclusion, the "purpose" of the procedure sought, was sufficiently divorced from the plan participant's sex so as to avoid the inference of discrimination on that basis.

Even if the Eleventh Circuit reverses the panel decision, litigation in Lange is likely to continue in the lower court, where the plaintiff's constitutional claim is still pending, the outcome of which may be influenced by the Fourth Circuit's decision finding that a gender-affirming care exclusion violated the Equal Protection Clause. Although Neese has been dismissed, litigation over section 1557 continues in many courts and will likely be impacted by the Trump administration's change in orientation towards discrimination on the basis of gender identity.

Tri-Agencies Issue Inaugural RxDC Report to Congress

HHS, the Department of Labor (DOL), and the Treasury (collectively, the Departments) issued its inaugural report to Congress on "Prescription Drug Spending, Pricing Trends, and Premiums in Private Health Insurance Plans" (2024 Report) in November 2024. The 2024 Report was prepared pursuant to section 240 of the Consolidated Appropriations Act, 2021 (CAA), mandating reporting of prescription drug reimbursements under group health plans and individual health insurance coverage, prescription drug pricing trends, and the impact of prescription drug costs on health insurance premiums and coverage. It contains an analysis of data from 2020 and 2021 submitted by group plans and issuers through the Prescription Drug Data Collection program (RxDC) across seven different categories of private health insurance coverage: self-insured large employer plans, self-insured small employer plans, fully insured large group plans, fully insured small group plans, individual plans, student health plans, and Federal Employee Health Benefit (FEHB) plans. 

One of the purposes of the RxDC program is to fill the data gap regarding "net prices paid by private health insurance plans, issuers, and consumers... for private health insurance coverage." As the 2024 Report notes, pertaining to prescription drugs, "post-rebate or net prices paid by private health insurance plans and issuers may be higher than the net prices received by manufacturers given supply chain markups and amounts retained by or paid to [pharmacy benefit managers (PBMs)]." 

Some highlights of the 2024 Report are:

• Average deductibles and out-of-pocket maximums in employer-sponsored coverage have generally increased since 2014. 
• Employer-sponsored health insurance plans are making greater use of coinsurance, in which members pay a percentage of a drug's cost, rather than a fixed copayment. 
• Employer-sponsored health insurance plans have adopted benefit designs with a larger number of cost-sharing tiers, allowing them to set higher cost-sharing for more expensive brand drugs. 
• Estimates of recent trends consistently suggest gross drug prices have been growing more rapidly than prices net of rebates paid by manufacturers to PBMs.
• Ratios of total spending net of rebates to gross spending including rebates were .80 in 2020 and .78 in 2021, with variation across therapeutic class, market segment, and state. Rebates therefore accounted for 20-22 percent of gross drug spending in employer-sponsored and individual market plans, a smaller share than the 31 percent n Medicare Part D or the 53 percent in Medicaid. 

Data reporting under the RxDC program for an employer-sponsored plan is the duty of the plan (or issuer for insured plans), but PBMs will have some of the required information to be reported. The 2024 Report details some of the limitations on the data set because of the practical realities of reporting by PBMs, including that when a PBM submits drug data, it is aggregated data for all plans the PBM served because "in many cases, it was not possible to directly link data from the same underlying health plan across the right required templates for the purposes of conducting the analyses," leading to the inability to "use the RxDC data to address the role of prescription drug costs in contributing to changes in premium levels." Additionally, the 2024 Report points out that spending reported by PBMs was in some cases spending by a PBM rather than spending by a plan or issuer (and so included negotiated rebates not passed onto the plan or issuer), which "limits the ability to use the data to understand what portion of rebates is retained by PBMs." The 2024 Report signals that the Departments and the Office of Personnel Management (OPM) are "looking for opportunities to improve the consistency of the aggregation of data and to facilitate linkages among templates from related entities" so that dual reporting by the plan or issuer and a third-party administrator (TPA) does not create reporting deficiencies. 

Trump DOJ Appeals Vacatur of Biden Administration's Fixed Indemnity Notice Rule

In a surprise development, the U.S. Department of Justice (DOJ) filed a Notice of Appeal on February 3, 2025, in a case challenging the Biden administration's May 2024 rulemaking mandating a new consumer notice requirement for fixed indemnity and hospital indemnity insurance coverage. A federal district court in Texas vacated portions of the challenged rule in December 2024, thereby invalidating certain provisions related to the new notice requirement. The bareboned Notice of Appeal does not include information about the basis for the appeal. 

Upcoming Speaking Engagements

Joanne will speak at the ABA 2025 Employee Benefits Committee Midwinter Meeting on February 8.

Joanne and Elizabeth will speak at the ABA 2025 Midyear Tax Meeting on February 20. 

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.