Case 3:20-cv-06145-RJB Document 146 Filed 12/19/22 Page 1 of 21

7
UNITED STATES DISTRICT COURT
8
WESTERN DISTRICT OF WASHINGTON
AT TACOMA
9

10
C. P., by and through his parents, Patricia CASE NO. 3:20-cv-06145-RJB
11 Pritchard and Nolle Pritchard, individually
and on behalf of others similarly situated; ORDER ON CROSS MOTIONS
12 and PATRICIA PRITCHARD, FOR SUMMARY JUDGMENT
13 Plaintiff,
v.
14
BLUE CROSS BLUE SHIELD OF
15 ILLINOIS,
16 Defendant.

17

18 This matter comes before the Court on the Defendant Blue Cross Blue Shield of Illinois’

19 (“Blue Cross”) Motion for Summary Judgment (Dkt. 87), and the Plaintiffs’ Cross Motion for

20 Summary Judgment (Dkt. 96), and Plaintiffs’ motion to strike (Dkt. 126). The Court has

21 considered the pleadings filed in support of and in opposition to the motions, oral argument

22 heard on 12 December 2022, and the file herein.

23 In this case, Plaintiffs C.P., a transgender male, and his mother, Patricia Pritchard, claim

24 that Blue Cross violated the anti-discrimination provision of the Affordable Care Act (“ACA”),

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 Case 3:20-cv-06145-RJB Document 146 Filed 12/19/22 Page 2 of 21

1 42 U.S.C. § 18116, when it administered discriminatory exclusions of gender-affirming care in a

2 self-funded health care plans governed by the Employee Retirement Income Security Act of

3 1974 (“ERISA”). Dkt. 1. The Plaintiffs’ motion to certify a class of similarly situated people

4 was granted on November 9, 2022 (Dkt. 113) and amended on December 12, 2022 (Dkt. 143).

5 Blue Cross moves for summary judgment on Plaintiffs C.P. and Ms. Pritchard’s claims.

6 Dkt. 87. Plaintiffs C.P. and Ms. Pritchard cross move for summary judgment on their claims as

7 well as the class claims. Dkt. 96. For the reasons provided below, Blue Cross’s Motion for

8 Summary Judgment (Dkt. 87) should be denied and Plaintiffs’ Motion for Summary Judgment

9 (Dkt. 96) and motion to strike (Dkt. 126) should be granted.

10 I. RELEVANT FACTS, PROCEDURAL HISTORY, AND STATUTORY

BACKGROUND
11
A. FACTS
12
Named Plaintiffs are C.P., a boy of seventeen, and his mother, Ms. Pritchard. Dkt. 38.
13
C.P. is a transgender male, which means that he has a male gender identity even though the sex
14
assigned to him at birth was female. Id. C.P. has been living as a male since around 2015. Dkt.
15
94-1 at 135.
16
Ms. Pritchard receives health care coverage through her employer under the Catholic
17
Health Initiatives (“CHI”) Medical Plan (“the Plan”) and C.P. is enrolled in that Plan as her
18
dependent. Dkts. 81; 97-12 at 8. The Plan is “self-funded” - Ms. Pritchard’s employer directly
19
assumes financial responsibility for employees and their dependents’ health care costs. Dkt. 88-
20
1 at 11.
21
Defendant, Blue Cross, acts as the third-party claims administrator for the Plan. Dkt. 85-
22
10. As a third-party administrator, it “assemble[s] a network of providers, process[es] claims,
23
and handle[s] provider billing.” Dkt. 88-1 at 11. Blue Cross is a division of Health Care
24

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1 Services Corporation and is one of the largest administrators of insured and self-funded health

2 plans in the nation. Id. at 206. It does not receive Federal financial assistance for its

3 administration of self-funded plans, but does receives Federal financial assistance for other of its

4 “products, such as Medicare supplemental coverage, Medicaid, Medicare Advantage and

5 Prescription Drug insurance coverage, and Medicare/Medicaid dual eligibility.” Id.

6 C.P. has gender dysphoria. Dkts. 38; 97-3 at 2. Gender dysphoria is a feeling of clinically

7 significant stress and discomfort that can result from being transgender, or, more specifically,

8 from having an incongruence between one’s gender identity and the sex assigned to that person

9 at birth. Dkt. 38. The American Psychiatric Association’s Diagnostic and Statistical Manual of

10 Mental Disorders, Fifth Edition recognizes gender dysphoria as a medical condition that can be

11 extremely serious, resulting in anxiety, depression, or even death. Dkt. 38 at 6.

12 C.P. sought coverage for his first Vantas Implant (hormone therapy) in 2016. Dkt. 94-1

13 at 139. Blue Cross initially approved the treatment but later informed C.P.’s mother that it had

14 made a mistake; it stated that the treatment was not covered under the Plan. Dkt. 94-1 at 137.

15 Blue Cross paid for the treatment however, but indicated that later claims would be denied. Id. at

16 139. A few years later, in 2019, C.P. filed a claim for a second Vantas Implant and for chest

17 reconstruction surgery; his claim was denied by Blue Cross because “[t]ransgender services

18 [were] not covered under the terms of the Plan.” Id.; 88-1 at 197; 94-3 at 2-10.

19 The relevant exclusionary language in the Plan in 2019 provided: “Transgender

20 Reassignment Surgery Not Covered: Benefits shall not be provided for treatment, drugs, therapy,

21 counseling services and supplies for, or leading to, gender reassignment surgery” (“Exclusion”).

22 Dkt. 88-1 at 120. The Plan generally covers care for hormone treatments, mastectomies and

23 chest reconstruction if that care is considered medically necessary for diagnosis other than for

24

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1 gender affirming care (like for breast cancer). Dkt. 85-8 at 12-13. The condition that triggers

2 Blue Cross to apply the Exclusion is the diagnosis of gender dysphoria. Id. at 14.

3 After his claim was denied, C.P. received treatment – Ms. Pritchard paid $12,122.50 for

4 the uncovered chest surgery and Vantas Implant. Dkt. 88-1 at 299.

5 B. PROCEDURAL HISTORY

6 Plaintiffs, including the class, bring a claims for violation of the antidiscrimination

7 provision of the ACA. Dkt. 38. This provision is referred to in the case law and HHS

8 regulations as “Section 1557” (although codified as 42 U.S.C. § 18116(a)), and this order will

9 refer to it in the same manner. All Plaintiffs seek a declaration that Blue Cross violated

10 Plaintiffs’ rights under Section 1557 when it administered the Exclusion and other similar

11 exclusions in other plans. Dkt. 38 at 21. They seek an order enjoining Blue Cross from

12 “administering or enforcing health benefit plans that exclude coverage for gender-affirming

13 health care, including applying or enforcing the Plan’s Exclusion of services ‘for, or leading to,

14 gender reassignment surgery,’ and other similar exclusions . . . during the class period, now and

15 in the future.” Id. at 21-22. The Plaintiffs seek an order requiring Blue Cross to reprocess, “and

16 when medically necessary and meeting the other terms and conditions under the relevant plans,

17 provide coverage (payment) for all denied pre-authorizations and denied claims” that were based

18 solely upon exclusions for gender affirming care. Id. at 22.

19 Ms. Pritchard brings a claim for financial harm. Id. C.P. and Ms. Pritchard bring claims

20 for emotional distress damages, attorneys’ fees, costs and expenses. Id.

21 In the December 12, 2022 Amended Order Certifying the Class, the class was certified

22 as:

23

24

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1 All individuals who:

2 (1) have been, are, or will be participants or beneficiaries in an

ERISA self-funded “group health plan” (as defined in 29 U.S.C. §
3 1167(1)) administered by [Blue Cross] during the Class Period and
that contains a categorical exclusion of some or all Gender-
4 Affirming Health Care services; and

5 (2) were, are, or will be denied pre-authorization or coverage of

treatment with excluded Gender Affirming Health Care services
6
DEFINITIONS:
7
“Class Period” means November 23, 2016 through the termination
8 of the litigation.

9 “Gender-Affirming Health Care” means any health care service—

physical, mental, or otherwise—administered or prescribed for the
10 treatment of gender dysphoria; related diagnoses such as gender
identity disorder, gender incongruence, or transsexualism; or
11 gender transition. This includes but is not limited to the
administration of puberty delaying medication (such as
12 gonadotropin-releasing hormone (GnRH) analogues); exogenous
endocrine agents to induce feminizing or masculinizing changes
13 (“hormone replacement therapy”); gender-affirming or “sex-
reassignment” surgery or procedures; and other medical services or
14 preventative medical care provided to treat gender dysphoria
and/or related diagnoses, as outlined in World Professional
15 Association for Transgender Health, Standards of Care for the
Health of Transsexual, Transgender, and Gender Nonconforming
16 People, 7th Version (2012).

17 The class asserts claims that Blue Cross Blue Shield of Illinois violated the anti-
discrimination provision of the Affordable Care Act, 42 U.S.C. § 18116, when it
18 administered discriminatory exclusions of gender-affirming care in a self-funded
health care plans governed by the Employee Retirement Income Security Act of
19 1974.

20 The class seeks declaratory relief. They seek an order enjoining Blue Cross Blue
Shield of Illinois from administering or enforcing health benefit plans that
21 exclude coverage for gender-affirming health care, including applying or
enforcing the plans’ exclusions of services for, or leading to, gender reassignment
22 surgery,’ and other similar exclusions during the class period, now and in the
future. The class seeks an order requiring Blue Cross Blue Shield of Illinois to
23 reprocess denied pre-authorizations and claims for gender affirming care under
the relevant self-funded health care plans without applying the discriminatory
24

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1 exclusions, and when medically necessary and meeting the other terms and
conditions of the relevant plans, provide coverage (payment) for those denied pre-
2 authorizations and claims that were based solely on exclusions for gender
affirming care.
3
Blue Cross Blue Shield of Illinois raises several defenses, including that the anti-
4 discrimination provision of the Affordable Care Act, 42 U.S.C. § 18116 does not
apply to it, and even if it did, its third-party administration of the exclusions was
5 not discriminatory. Blue Cross Blue Shield also contends that it is protected by
the Religious Freedom Restoration Act.
6
Dkt. 143.
7
C. SECTION 1557, REGULATIONS AND LITIGATION BACKGROUND
8
This case takes place in the midst of sharply divided regulatory and litigation background.
9
A quick review of the statute, the U.S. Department of Health and Human Services (“HHS”)
10
regulations, and related litigation is helpful in understanding the parties’ positions.
11
The starting point is the text of the antidiscrimination provision of the ACA. Again, this
12
provision is referred to in the case law and HHS regulations as “Section 1557” (although
13
codified as 42 U.S.C. § 18116(a)). Section 1557 provides:
14
“[A]n individual shall not, on the ground prohibited under . . . title IX of the
15 Education Amendments of 1972 (20 U.S.C. 1681 et seq.) . . . be excluded from
participation in, be denied the benefits of, or be subjected to discrimination under,
16 any health program or activity, any part of which is receiving Federal financial
assistance, including credits, subsidies, or contracts of insurance . . . . The
17 enforcement mechanisms provided for and available under such . . . title IX . . .
shall apply for purposes of violations of this subsection.”
18
42 U.S.C. § 18116(a). Title IX provides that “[n]o person . . . shall, on the basis of sex, be
19
excluded from participation in, be denied the benefits of, or be subjected to discrimination under
20
any education program or activity receiving Federal financial assistance.” 20 U.S.C. § 1681.
21
1. 2016 Regulations
22
After passage of the ACA in 2010, HHS proposed, and then finalized, Section 1557
23
regulations on May 18, 2016 (“2016 Rule”). Non-Discrimination in Health Programs and
24

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1 Activities, 81 FR 31,375. While this order substantially complies with the 2016 Rule, a

2 nationwide injunction banning HHS from enforcing it is in place. Franciscan All., Inc. v.

3 Burwell, 227 F.Supp.3d 660 (N.D. Tex. 2016) as affirmed Franciscan All., Inc. v. Burwell, 47

4 F.4th 368 (2022). Accordingly, the 2016 Rule does not impact this case.

5 2. 2020 Regulations

6 Meanwhile, on June 12, 2020, under the Trump administration, HHS finalized

7 regulations (2020 Rule), effective on August 18, 2020, that rescinded significant portions of the

8 2016 Rule. Non-Discrimination in Health Programs and Activities, 85 FR 37,178. Various

9 cases have been filed to prohibit enforcement of the 2020 Rule and to reinstate portions of the

10 2016 Rule, in particular, challenging the definition of discrimination “on the basis of sex.”

11 See e.g. Whitman-Walker Clinic, Inc. v. U.S. Dep't of Health & Human Servs., Case No. 1:20-cv-

12 01630, 2020 WL 3444030 (D.D.C. June 22, 2020); Walker v. Azar, Case No. 1:20-cv-02834

13 (E.D.N.Y. June 26, 2020); Boston All. of Gay, Lesbian, Bisexual & Transgender Youth v. U.S.

14 Dep't of Health & Human Servs., Case No. 1:20-cv-11297, 2020 WL 3891426 (D. Mass. July 9,

15 2020). Injunctions prohibiting HHS from enforcing certain portions of the 2020 Rule’s repeal of

16 the 2016 Rule’s definition of “on the basis of sex” are now in effect. See Id. This order does not

17 comply with the 2020 Rule as provided in Section II. D. below.

18 3. 2021 HHS Notification and Proposed 2022 Regulations

19 On May 10, 2021, under the Biden administration, HHS issued a notice stating that it

20 would interpret Section 1557’s prohibition on sex discrimination to include discrimination on the

21 basis of gender identity consistent with the U.S. Supreme Court’s holding in Bostock v. Clayton

22 County, 140 S. Ct. 1731 (2020). 86 FR 27,984. On August 4, 2022, HHS published a Proposed

23 Rule that proposes repealing large portions of the 2020 Rule (“Proposed 2022 Rule”). Non-

24

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1 Discrimination in Health Programs and Activities, 87 FR 47,824. While the Proposed 2022 Rule

2 is not yet adopted, this order is substantially consistent with it - but the Proposed 2022 Rule does

3 not impact this case.

4 II. DISCUSSION

5 A. MOTION TO STRIKE

6 The Plaintiffs move to strike a newspaper article from the New York Times that was

7 submitted by Blue Cross. Dkt. 126. “Generally, newspaper articles and television programs are

8 considered hearsay under Rule 801(c) when offered for the truth of the matter asserted.” See

9 Green v. Baca, 226 F.R.D. 624, 637 (C.D. Cal. 2005). No exception to the hearsay rule was

10 offered. The Plaintiffs’ motion (Dkt. 126) should be granted.

11 B. SUMMARY JUDGMENT STANDARD

12 Summary judgment is proper only if the pleadings, the discovery and disclosure materials

13 on file, and any affidavits show that there is no genuine issue as to any material fact and that the

14 movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party is

15 entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient

16 showing on an essential element of a claim in the case on which the nonmoving party has the

17 burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1985). There is no genuine issue

18 of fact for trial where the record, taken as a whole, could not lead a rational trier of fact to find

19 for the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586

20 (1986) (nonmoving party must present specific, significant probative evidence, not simply “some

21 metaphysical doubt.”). Conversely, a genuine dispute over a material fact exists if there is

22 sufficient evidence supporting the claimed factual dispute, requiring a judge or jury to resolve

23

24

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1 the differing versions of the truth. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 253 (1986);

2 T.W. Elec. Serv. Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987).

3 The determination of the existence of a material fact is often a close question. The court

4 must consider the substantive evidentiary burden that the nonmoving party must meet at trial,

5 which is a preponderance of the evidence in most civil cases. Anderson, 477 U.S. at 254; T.W.

6 Elect., 809 F.2d at 630. The court must resolve any factual issues of controversy in favor of the

7 nonmoving party only when the facts specifically attested by that party contradict facts

8 specifically attested by the moving party. The nonmoving party may not merely state that it will

9 discredit the moving party’s evidence at trial, in the hopes that evidence can be developed at trial

10 to support the claim. T.W. Elect., 809 F.2d at 630 (relying on Anderson, 477 U.S. at

11 255). Conclusory, non-specific statements in affidavits are not sufficient, and “missing facts”

12 will not be “presumed.” Lujan v. Nat’l Wildlife Fed., 497 U.S. 871, 888–89 (1990).

13 C. PLAINTIFFS’ SECTION 1557 CLAIM

14 The Plaintiffs’ motion and Blue Cross’s response raise issues of law. There are no

15 serious fact issues before the Court.

16 Again, Section 1557 of the ACA provides:

17 “[A]n individual shall not, on the ground prohibited under . . . title IX of the
Education Amendments of 1972 (20 U.S.C. 1681 et seq.) . . . be excluded from
18 participation in, be denied the benefits of, or be subjected to discrimination under,
any health program or activity, any part of which is receiving Federal financial
19 assistance, including credits, subsidies, or contracts of insurance . . . . The
enforcement mechanisms provided for and available under such . . . title IX . . .
20 shall apply for purposes of violations of this subsection.”

21 42 U.S.C. § 18116(a). Title IX prohibits discrimination “on the basis of sex” in education. 20

22 U.S.C. § 1681.

23

24

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1 To make a claim for sex discrimination under Title IX and by extension, under 1557 of

2 the ACA, the Plaintiffs must show that: (1) Blue Cross operates “a health program or activity,

3 any part of which is receiving Federal financial assistance;” (2) the Plaintiffs were excluded from

4 participation in, denied the benefits of, or subjected to discrimination in the provision of that

5 “health program or activity;” and (3) the latter occurred on the basis of sex. See Schwake v. Ariz.

6 Bd. of Regents, 967 F.3d 940, 946 (9th Cir. 2020).

7 1. Provision of Any Health Program or Activity, Any Part of Which Receives

Federal Financial Assistance
8
Under the plain language of Section 1557, Blue Cross’s third party administrator
9
activities constitute the operation of a “health program or activity.” The phrase “any health
10
program or activity,” is not defined in the ACA but it is clearly broader in scope than only the
11
provision of healthcare. The phrase is further defined in a clause in Section 1557’s text:
12
“including . . . contracts of insurance.” The plain language of Section 1557 indicates that a
13
health insurance contract and the administration of a health insurance contract is a “health
14
program or activity.” Schmitt v. Kaiser Found. Health Plan of Washington, 965 F.3d 945, 951
15
(9th Cir. 2020)(holding that Section 1557 prohibits discrimination in the health care system
16
which includes discrimination in health insurance contracts); Kadel v. Folwell, 2022 U.S. Dist.
17
LEXIS 218104 *9 (M.D. N.C. Dec. 5, 2022).1
18
Further, while Blue Cross does not receive Federal financial assistance for its
19
administration of self-funded plans, it receives Federal financial assistance for some of its other
20
products including “Medicare supplemental coverage, Medicaid, Medicare Advantage and
21
Prescription Drug insurance coverage, and Medicare/Medicaid dual eligibility.” Dkt. 88-1 at
22

23
1
Kadel mirrors many of the thoughts in this order.
24

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1 206. Section 1557’s phrase “any health program or activity any part of which is receiving

2 Federal financial assistance” plainly includes “all the operations of a business” principally

3 engaged in providing health programs and activities. T.S. by & through T.M.S. v. Heart of

4 CarDon, LLC, 43 F.4th 737, 743 (7th Cir. 2022); Kadel at *9-10.

5 Accordingly, Blue Cross’s third party administration activities are “health program[s] or

6 activit[ies], . . . part of which receives Federal financial assistance.” The Plaintiffs are entitled to

7 summary judgment on this element of their claim and Blue Cross’s motion for summary

8 judgment on this element should be denied.

9 2. Plaintiffs were Excluded from, Denied the Benefits of, or Subjected to

Discrimination in the Provision of a “Health Program or Activity”
10
Parties do not dispute that Blue Cross denied C.P.’s claim for gender affirming surgery or
11
that C.P.’s mother was “denied the benefits” her employer’s sponsored health plan. Parties do
12
not dispute that Blue Cross denied other class members gender affirming care under exclusions
13
in other self-funded plans. This element is met. The Plaintiffs are entitled to summary judgment
14
on this element and Blue Cross’s motion on this element should be denied.
15
3. Discrimination Occurred on Basis of Sex
16
Section 1557 forbids sex discrimination based on transgender status. Doe v. Snyder, 28
17
F.4th 103, 114 (9th Cir. 2022). This holding from the Ninth Circuit is consistent with the
18
Supreme Court’s determination in Bostock v. Clayton County, Georgia, 140 S.Ct. 1731, (2020)
19
which held that firing a person based on their transgender status is sex discrimination.
20
In its administration of the Plan, the trigger for application of the Exclusion and a denial
21
of coverage was a diagnosis of “gender dysphoria” for C.P. and the other class members. Dkt.
22
85-8. “Gender dysphoria cannot be understood without referencing sex or a synonym.” See
23
Kadel v. Folwell, 2022 WL 11166311, at *4 (M.D.N.C. Oct. 19, 2022)(internal quotation marks
24

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1 and citations omitted). “[A] person cannot suffer from gender dysphoria without identifying as

2 transgender.” Fain v. Crouch, 2022 WL 3051015, at 6 (S.D. West Virginia August 2, 2022).

3 Accordingly, the administration of the Exclusion based on transgender status was discrimination

4 “on the basis sex” contrary to Section 1557. The Plaintiffs’ motion for summary judgment on

5 this element should be granted and Blue Cross’s cross motion for summary judgment on this

6 element denied.

7 4. Conclusion on Plaintiffs’ Section 1557 Claim

8 Blue Cross, as a third party administrator is engaged in a “health care program or

9 activity” and receives Federal financial assistance. It is subject to Section 1557. Its denial of

10 benefits under the Plaintiffs’ plans based on their transgender status was discrimination on the

11 basis of sex. Each of the elements of the claim are met and the Plaintiffs are entitled to summary

12 judgment unless one or more of Blue Cross’s defenses apply.

13 D. BLUE CROSS’S DEFENSES

14 Blue Cross contends that it is entitled to summary judgment based on various defenses.

15 Each will be addressed.

16 1. Covered Entity Defense – “Health Program or Activity”

17 Blue Cross points to the 2020 Rule and argues that the Court should give HHS deference

18 to its interpretation of Section 1557 in the 2020 Rule based on the deference doctrine announced

19 in Chevron, USA Inc. v. NRDC, Inc., 467 U.S. 837 (2014). Dkt. 87. It contends that Section

20 1557 does not apply to its third party administrator activities because those actions are not

21 “healthcare activities” and because it does not receive any federal financial assistance for its third

22 party administrator activities. Dkt. 87 at 18.

23

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1 As it relates to Blue Cross’s argument here, the 2020 Rule provides that “an entity

2 principally or otherwise engaged in the business of providing health insurance shall not, by

3 virtue of such provision, be considered to be principally engaged in the business of providing

4 healthcare.” 85 FR 37178, 37244-45; codified at 45 C.F.R. § 92.3. The 2020 Rule further

5 provided that:

6 As used in this part, “health program or activity” encompasses all of the

operations of entities principally engaged in the business of providing healthcare
7 that receive Federal financial assistance as described in paragraph (a)(1) of this
section. For any entity not principally engaged in the business of providing
8 healthcare, the requirements applicable to a “health program or activity” under
this part shall apply to such entity's operations only to the extent any such
9 operation receives Federal financial assistance as described in paragraph (a)(1) of
this section.
10
Id.
11
The HHS 2020 Rule, arguably in effect, is not entitled to deference in this case. In
12
considering whether to accord an agency’s interpretation of a statute deference under Chevron, a
13
two-part analysis is required. Chevron at 842. First, “is the question whether Congress has
14
directly spoken to the precise question at issue.” Id. If the intent of Congress is clear, the
15
“unambiguously expressed intent of Congress” must be given effect by both the agency and the
16
courts. Id. at 843. “If a statute is ambiguous, and if the implementing agency's construction is
17
reasonable, Chevron requires a federal court to accept the agency's construction of the statute,
18
even if the agency's reading differs from what the court believes is the best statutory
19
interpretation.” Arizona v. Tohono O'odham Nation, 818 F.3d 549, 556 (9th Cir. 2016).
20
In making the threshold determination under Chevron step one, whether statutory
21
language is ambiguous or not “is determined by reference to the language itself, the specific
22
context in which the language is used, and the broader context of the statute as a whole.”
23
Corrigan v. Haaland, 12 F.4th 901, 907 (9th Cir. 2021)(cert. denied, 211 L. Ed. 2d 607, 142 S.
24

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1 Ct. 901 (2022)). “[T]he starting point is the statutory text.” Tohono at 556. As stated above, the

2 plain language of the text includes insurance contracts and their administration as “health

3 program[s] or activit[ies].”

4 Moreover, “[i]n making the threshold determination under Chevron step one, a reviewing

5 court should not confine itself to examining a particular statutory provision in isolation. Rather,

6 the meaning – or ambiguity – of certain words or phrases may only become evident when placed

7 in context.” Corrigan at 910. Further, “[i]n interpreting a statute, a court must also account for

8 that statute’s history and purpose.” Corrigan at 912. “Congress enacted the ACA to increase the

9 number of Americans covered by health insurance and decrease the costs of health care.”

10 Schmitt at 949. It enacted Section 1557 to prohibit discrimination in the health care system to

11 increase access to services and insurance coverage. Id. at 951. “By extending nondiscrimination

12 protections to individuals under ‘any health program or activity,’ Congress clearly intended to

13 prohibit discrimination by any entity acting within the health system.” See Fain v. Crouch, 545

14 F.Supp.3d 338, 342 (S.D.W. Va. 2021). Logically, this includes third party administrators of

15 health insurance plans. To hold otherwise would thwart Congress’s intent to prohibit

16 discrimination in the provision of “health programs and activities.” Clearly, application of the

17 2020 Rule is contrary to the statutory law, and the rule appears to be arbitrary, capricious and

18 contrary to law. The statue, not the 2020 Rule, must be followed here.

19 2. Covered Entity Defense – Federal Financial Assistance

20 Blue Cross argues that even if its third party administration of the Plan is providing a

21 “health program or activity,” it does not receive Federal financial assistance for that activity, so it

22 is not covered under Section 1557. Blue Cross’s argument is unpersuasive. “When the ACA

23 was enacted in 2010, ‘program or activity’ was already a term of art with a clear meaning and a

24

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1 broad scope established by the provisions cited in Section 1557 that ban discrimination in

2 connection with Federal financial assistance.” Heart of CarDon at 742. The words “program or

3 activity” must be read “in accordance with the prevailing understanding the term had under the

4 law that Congress relied on when codifying section 1557.” Id. Section 504 of the Rehabilitation

5 Act, which is also incorporated into Section 1557, “defines ‘program or activity’ as ‘all of the

6 operations of’- among other entities - ‘an entire corporation, partnership, or other private

7 organization, ... which is principally engaged in the business of providing ... health care... any

8 part of which is extended Federal financial assistance.’” Id. (citing 29 U.S.C. § 794(b)(emphasis

9 added). “The meaning of ‘program or activity’ in Section 1557’s other antidiscrimination

10 provisions is materially identical.” Id. (citing 20 U.S.C. § 1687; 42 U.S.C. § 6107(4); 42 U.S.C.

11 § 2000d-4a). Section 1557’s phrase “health programs or activities” plainly includes “all the

12 operations” of Blue Cross including its involvement in “contracts of insurance.” Id. at 743;

13 Kadel at 10.

14 Blue Cross’s motion for summary judgment based on the defense that it is not a covered

15 entity should be denied. It operates “health program[s] or activit[ies]” and receives Federal

16 financial assistance and so Section 1557 applies.

17 3. Plan Design Defense

18 Blue Cross maintains that it is entitled to summary judgment because it did not design the

19 allegedly discriminatory Exclusion applicable to C.P. Dkt. 87. It points to comments to the

20 2016 Rules, 2020 Rules and 2022 Proposed Rules and maintains that under each iteration of

21 these rules, it is “only where the discriminatory terms of the group health plan originated with

22 the third party administrator rather than with the plan sponsor [that] the third party administrator

23 could be liable for the discriminatory design feature under Section 1557.” Dkt. 87 at 10. There

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1 is no Chevron deference owed here to the various iterations of the rules or proposed rules

2 because the statutory text is clear as is Congressional intent – there is no exclusion for third party

3 administrators who did not draft the exclusion at issue.

4 Blue Cross contends that it is entitled to summary judgment because it is obligated under

5 ERISA’s command at 29 U.S.C. § 1104(a)(1)(D) to administer the Exclusion as written. Dkt.

6 87. Under ERISA, benefit plan decisions are required to be made in “accordance with the

7 documents and instruments governing the plan.” 29 U.S.C. § 1104(a)(1)(D). This provision of

8 ERISA does not end the inquiry.

9 The Plaintiffs properly contend that whether Blue Cross provided the Exclusionary

10 language or not is immaterial because Blue Cross has an independent duty to comply with

11 Section 1557. Dkt. 96. The Plaintiffs point to ERISA’s 29 U.S.C. § 1144(d) and argue that

12 ERISA does not supplant Section 1557’s antidiscrimination provisions. Id.

13 ERISA’s Section 1144(d) provides that “[n]othing in this subchapter shall be construed to

14 alter, amend, modify, invalidate, impair, or supersede any law of the United States . . . or any

15 rule or regulation issued under any such law.” Accordingly, ERISA expressly provides that it is

16 not to be construed to impair laws like Section 1557. Harmonizing these provisions of ERISA, a

17 third party administrator must make decisions in “accordance with the documents and

18 instruments governing the plan,” 29 U.S.C. § 1104(a)(1)(D), but that this requirement must not

19 be construed to “invalidate or impair” Section 1557, 29 U.S.C. § 1144(d).

20 Blue Cross’s third-party administration of the Plan and other self-funded plans are

21 “health programs or activities” and it receives “Federal financial assistance” and so is covered by

22 Section 1557. ERISA specifically provides that its requirements are not to be construed to

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1 invalidate or impair laws like Section 1557 and so ERISA’s requirement that Blue Cross follow

2 the Exclusion’s language is no defense. Section 1557 supplements the ERISA requirements.

3 Even if Blue Cross did not have an independent duty to comply with Section 1557, which

4 it does, third party administrators can be liable under Section 1557 based on discriminatory terms

5 in a self-funded plan even if the third party administrator provided the plan document

6 “notwithstanding the fact that the [plan sponsor] subsequently adopted the plan and maintained

7 control over its terms.” See, e.g., Tovar v. Essentia Health, 857 F.3d 771, 778 (8th Cir. 2017).

8 There are issues of fact as to whether the Plan design originated with Blue Cross. Blue

9 Cross points to testimony that CHI drafted the gender reassignment surgery exclusion in the

10 Plan. Dkt. 88-1 at 3. Plaintiffs points to the testimony of Laura Malec, another Blue Cross

11 30(b)(6) witness, who testified that of the 398 plans at issue, 378 (including the CHI Plan)

12 contain the same or similar exclusionary language that is the “standard language” that Blue Cross

13 “offers to employers when they want a gender affirming care exclusion.” Dkt. 85-8 at 7. There

14 are issues of fact as to whether the Exclusion’s language originated from Blue Cross, but those

15 issues need not be decided to justify denial of Blue Cross’s motion for summary judgment on

16 this issue.

17 4. Medical Consensus Defense

18 Blue Cross argues that the Exclusion does not discriminate “on the basis of sex” because

19 “there is no medical consensus regarding gender-affirming treatment.” Dkt. 87. Blue Cross’s

20 argument is unavailing. It did not base the decision to deny care on medical necessity but on

21 C.P.’s and the other class members’ transgender status. Further, it concedes that under its own

22 medical necessity policy, C.P.’s request for hormone therapy and chest reconstruction would be

23 considered “medically necessary.” Dkt. 85 at 23, 25-26. Whether there is medical consensus

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1 about transgender care in general is immaterial as to whether Blue Cross discriminated against

2 the Plaintiffs based on sex.

3 5. Religious Freedom Restoration Act

4 Blue Cross argues that it is entitled to summary judgment because it is protected by the

5 Religious Freedom Restoration Act (“RFRA”). Dkt. 87. It maintains that RFRA exempts CHI’s

6 Plan based on CHI’s sincerely-held religious beliefs. Id. Blue Cross argues that it does not

7 violate Section 1557 if it administers an exempt plan. Id.

8 Under RFRA, “[g]overnment shall not substantially burden a person’s exercise of

9 religion even if the burden results from a rule of general applicability” unless the Government

10 “demonstrates that application of the burden to the person – (1) is in furtherance of a compelling

11 government interest; and (2) is the least restrictive means of furthering that compelling

12 interest.” 42 U.S.C. § 2000bb-1(a), (b). RFRA continues, “[a] person whose religious exercise

13 has been burdened in violation of this section may assert that violation as a claim or defense in a

14 judicial proceeding and obtain appropriate relief against a government.” 42 U.S.C. § 2000bb-

15 1(c)(emphasis added).

16 Blue Cross’s motion for summary judgment based on RFRA should be denied. RFRA

17 provides relief against the government and does not apply to disputes between private

18 parties. Sutton v. Providence St. Joseph Med. Ctr., 192 F.3d 826, 839 (9th Cir. 1999);

19 See Listecki v. Off. Comm. of Unsecured Creditors, 780 F.3d 731, 736 (7th Cir. 2015)(“Based

20 on RFRA’s plain language [and] its legislative history . . . RFRA is not applicable in cases where

21 the government is not a party”). The government is not a party here.

22 Blue Cross’s citation to Burwell v. Hobby Lobby, 573 U.S. 682 (2014) and other similar

23 cases are unavailing. Hobby Lobby involved a challenge by employers to HHS rules requiring

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1 insurance coverage for birth control despite religious objection by employer. The government

2 was a party in all of these cases – for example, Burwell was the Secretary of HHS. Blue Cross

3 also acknowledges that it is not an entity with a “sincerely-held religious belief” (Dkt. 118).

4 Blue Cross argued at oral argument that while it is not asserting a claim or defense based

5 on RFRA, Section 1557 and RFRA must be read together. While it is not wholly clear how that

6 is to occur generally, in this case RFRA does not apply, Section 1557 does. The Court need not

7 reach Blue Cross’s arguments regarding its standing to assert CHI’s religiously held beliefs.

8 There are many approaches and cases covering religious – and, perhaps, other, – reasons

9 to avoid statutory or other legal obligations under the First Amendment to the U.S. Constitution

10 (particularly when the government is involved). It is appropriate to consider such matters in

11 protecting the U.S. Constitution’s First Amendment establishment and free exercise clauses. It

12 cannot be, however, that Blue Cross can trump statutory anti-discrimination law with a potential

13 religious protection claim from a co-contractor, without more, which allegedly frees that co-

14 contractor and Blue Cross from obedience to the law. The law presented here does not clothe

15 Blue Cross with the factual or legal basis to referee such claims of exemption from Section 1557.

16 Perhaps, somehow, such an exemption may be legally reached, consistent with the First

17 Amendment or other law, but the facts here do not support such a conclusion. Blue Cross is left

18 with the obligation to obey Section 1557 as it stands.

19 6. Conclusion on Defenses

20 Blue Cross is not entitled to summary judgment on any of its defenses. None of its

21 defenses apply.

22 E. BLUE CROSS’S MOTION FOR SUMMARY JUDGMENT ON NAMED

PLAINTIFFS’ CLAIM FOR EMOTIONAL DISTRESS DAMAGES
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1 Blue Cross moves for summary judgment on Plaintiffs C.P. and Patricia Prichard’s

2 emotional distress damages claim. Dkt. 87. That portion of the motion should be granted.

3 Emotional distress damages are not recoverable in private actions to enforce the

4 antidiscrimination provisions of the ACA. Cummings v. Premier Rehab Keller, P.L.L.C., 142 S.

5 Ct. 1562 (2022).

6 F. CONCLUSION

7 The conclusions herein are based on the preponderance of the evidence with no material

8 facts in issue. This order addresses Blue Cross’ duties under Section 1557 only, and the Court is

9 mindful that in reaching its conclusion here, Blue Cross was in the legal position of determining

10 how to deal with the conflict between Section 1557, outlawing discrimination, and ERISA’s

11 command at 29 U.S.C. § 1104 (a)(1)(D) to administer plans, including discrimination, as written.

12 The Court is satisfied that ERISA’s command at 29 U.S.C. § 1104 (a)(1)(D) to administer the

13 exclusions as written is subservient to Section 1557, outlawing discrimination, which is

14 dominate. That finding leads to the ultimate conclusion of these summary judgment motions:

15 Blue Cross, as a third party administrator, is a covered entity under Section 1557 and has

16 discriminated against the Plaintiffs and the class Plaintiffs by denying them services for gender

17 affirming care under individual and class Plaintiffs’ insurance policies.

18 The appropriate relief due, if any, will be addressed by motion practice, or at trial.

19 III. ORDER

20 Therefore, it is hereby ORDERED that:

21  The Plaintiffs’ motion to strike (Dkt. 126) IS GRANTED;

22

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1  Defendant Blue Cross’s Motion for Summary Judgment (Dkt. 87) IS GRANTED

2 as to the Plaintiffs’ emotional distress claims and DENIED in all other respects;

3 and

4  The Plaintiffs’ Cross Motion for Summary Judgment (Dkt. 96) IS GRANTED to

5 the extent listed herein.

6 The Clerk is directed to send uncertified copies of this Order to all counsel of record and

7 to any party appearing pro se at said party’s last known address.

8 Dated this 19th day of December, 2022.

10
A
ROBERT J. BRYAN
11 United States District Judge

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