Texas Court Vacates HHS Guidance on Mandatory Coverage of Gender Dysphoria Treatments

On October 1, 2022, the US District Court for the Northern District of Texas in Texas v. EEOC issued an order vacating HHS guidance concerning gender-affirming care as arbitrary, capricious and in violation of the Administrative Procedure Act.

On March 2, 2022, HHS issued guidance that interpreted Section 1557 of the ACA. Section 1557 prohibits healthcare programs that receive federal funds from discriminating against patients on the basis of sex. The guidance interpreted Section 1557 to prohibit federally funded entities from restricting an individual's ability to receive medically necessary care, including gender-affirming care, from their healthcare provider solely on the basis of their sex assigned at birth or gender identity. The guidance also stated that restrictions on the receipt of medically necessary care on the basis of gender dysphoria, gender dysphoria diagnosis, or perception of gender dysphoria could violate the Americans with Disabilities Act (ADA). HHS based this guidance in part on the United States Supreme Court case, Bostock, which held that Title IX (whose definition of sex discrimination was incorporated into Section 1557) prohibited discrimination based on gender identity or homosexuality.

HHS issued this guidance after the Texas governor instructed the state’s department of family and protective services to investigate incidents of sex change procedures performed on minors as child abuse.

The state of Texas sued HHS, as well as the EEOC (which issued similar guidance a year earlier) and Attorney General Garland, asking the court to declare the guidance unlawful, vacate it, and enjoin the agencies from enforcing it. The court agreed with the state, declaring the guidance unlawful and vacating it.

The court concluded that the guidance took the Bostock decision too far. According to the court, the holding in that case was limited to the status of being homosexual or transgender and did not go so far as to cover all conduct correlated with that status. Accordingly, the court stated that the Bostock decision did not provide support for the HHS guidance. In addition, the court found that HHS acted in an arbitrary and capricious fashion by failing to explain how the Bostock decision applied to gender dysphoria and by implying that gender dysphoria was a disability under the ADA (which the court found to be a misstatement of the law). Finally, the court determined that the guidance was a substantive rule and found that HHS did not follow the Administrative Procedure Act when it issued its guidance without notice and an opportunity for interested parties to comment first.

Employer-sponsored health plans should be aware of this legal development. Although this is a district court order that may be appealed, it demonstrates how the sex discrimination prohibitions under Section 1557 and gender dysphoria treatments, in particular, are in legal flux. Several states, including Texas, are restricting or prohibiting gender dysphoria treatments. The federal government is trying to prevent the states from doing this, asserting that such prohibitions are a form of sex discrimination prohibited under federal law. As of now, the matter is not settled. Employers should keep an eye on these developments.

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