Blue Cross & Blue Shield of Illinois just caught a legal breather in a high-stakes fight over coverage for gender affirming care. A Ninth Circuit panel has vacated a district court judgment that had ordered the insurer to reprocess denied claims for transgender plan members and has sent the case back to the trial court for another look.
The appeals court wiped out the lower court’s summary judgment and put a hold on an injunction that would have required BCBSIL to administer coverage under certain employer-sponsored plans, according to Justia. The judges instructed the district court to reassess its decision in light of fresh guidance from the U.S. Supreme Court.
The Ninth Circuit opinion, written by Judge Milan D. Smith Jr., with Judge Jed S. Rakoff sitting by designation and a concurrence from Judge Johnnie B. Rawlinson, agreed with the district court on several preliminary issues but questioned its discrimination analysis in light of the Supreme Court’s recent United States v. Skrmetti decision, according to FindLaw. That shift in higher court precedent was enough for the panel to vacate summary judgment and send the case back for more work.
Crain's Chicago Business reports the certified class includes transgender minors who say BCBSIL denied coverage for puberty-delaying medication and gender affirming chest surgery, even after some treatments were initially approved and then rescinded. The outlet notes that plan sponsors such as Catholic Health Initiatives sought exclusions for religious reasons and that BCBSIL did not respond to a request for comment.
What the appeals court left open
On remand, the panel pointed to two main paths the plaintiffs might pursue. One is to show that some class members had qualifying non-dysphoria diagnoses, such as precocious puberty, that would ordinarily justify treatment but were still denied coverage. The other is to prove that the exclusions function as pretexts or proxies for invidious discrimination. Those fact-intensive, class-wide questions are better handled by the district court, which may need further proceedings or even a trial, according to FindLaw.
Legal implications for insurers and employers
The opinion reaffirmed that an insurer’s operations can fall within the scope of Section 1557 of the Affordable Care Act, meaning a third party administrator can be independently liable for discriminatory coverage decisions. As the court put it, "We therefore vacate the summary judgment against BCBSIL and remand so the district court may consider the implications of that authority," and it directed the lower court to test whether BCBSIL’s stated reasons are merely a pretext. The panel also concluded that the Religious Freedom Restoration Act does not provide a defense in litigation between private parties, according to the court opinion reported by Justia.
What's next
Back in the U.S. District Court for the Western District of Washington, judges will now decide whether summary judgment is still appropriate or whether the plaintiffs can move forward on their pretext arguments at trial. Legal observers warn that applying Skrmetti to private, employer-sponsored plans could make it easier for insurers and plan sponsors to craft exclusions, unless plaintiffs can prove those carve-outs are pretextual, according to FindLaw. For now, the Ninth Circuit’s ruling keeps the coverage battle alive and leaves thousands of dollars in potential medical claims hanging in the balance.
