Answer: At this time, federal law does not specifically require self-funded group health plans to provide transgender benefits. However, there are nondiscrimination laws that employers should consider in designing and administering their programs.
First, Section 1557 of the Affordable Care Act (ACA) prohibits discrimination, including gender identity discrimination, in health activities and health programs. The rule only applies to entities that receive some form of federal funding, such as health care providers, insurers, and certain administrators, so your company may be exempt. On the other hand, if you use a third party administrator (TPA) that also is a health insurer, Section 1557 may apply to your plan.
In December 2016, a federal district court enjoined (stopped) the Section 1557 rule that prohibits discrimination based on gender identity. The court’s action applies nationwide so, at this time, Section 1557 does not require health plans to cover gender dysphoria or gender transition services.
Second, Title VII of the Civil Rights Act prohibits employers from discriminating in providing health coverage and other items. Title VII is regulated and enforced by the Equal Employment Opportunity Commission (EEOC), and it is not affected by the court’s injunction regarding the ACA’s Section 1557. For purposes of Title VII, discrimination includes discrimination against transgender persons. For reference, here is the statement posted on the EEOC website:
“EEOC interprets and enforces Title VII's prohibition of sex discrimination as forbidding any employment discrimination based on gender identity or sexual orientation.”
Employers are advised to work with legal counsel to consider possible exposure under Title VII if their group health plan excludes transgender or gender identity services.