Seyfarth Synopsis: The Eighth Circuit upheld dismissal of Title VII claims challenging an employee benefit plan’s blanket transgender exclusion because the exclusion impacted the employee’s transgender son, not the employee. The Eight Circuit overturned the dismissal of the employee’s claim against the plan’s third-party administrator under the Affordable Care Act, finding the complaint sufficiently alleged an actionable claim against the TPA.

The Eighth Circuit granted a potentially short-lived reprieve to a plaintiff challenging a blanket exclusion for transgender services contained in her employer’s health plan. The case, Tovar v. Essentia Health, et al, No. 16-3186 (8th Cir. May 24, 2017), allowed part of the plaintiff’s claim alleging a violation under Section 1557 of the ACA to proceed by remanding it to the district court.

The Section 1557 regulations at issue in Tovar are currently subject to a nationwide injunction issued in the Northern District of Texas. The Department of Health and Human Services is party in that suit, and has indicated that it may seek to repeal that regulation through the typical notice and comment rulemaking procedures. The Circuit Court did not address the precarious nature of Section 1557 in its decision.

Rather, the Eighth Circuit restricted its analysis to the decision of the district court. The District Court dismissed Tovar’s claims under Title VII, the Minnesota Human Rights Act, and Section 1557, as we covered here.

The Eighth Circuit first upheld the dismissal of Tovar’s Title VII and MHRA claims. It agreed that Tovar was not within the class of individuals protected by those statutes because she did not allege discrimination based on her own sex, but that of her transgender son.

The Court went on to overturn the dismissal of the ACA claim against the TPA. The District Court had dismissed her ACA claims for lack of Article III standing because Tovar named the wrong entity and because only the employer (not the TPA) had the ability to modify plan terms (such as the transgender exclusion). The Eighth Circuit found the plan documents did not definitively establish that the named defendant had no involvement in the administration of the plan. The Eighth Circuit further found that Plaintiff alleged sufficient facts showing that the “allegedly discriminatory terms originated” with the TPA. And thus this issue was remanded to the district court.

The Eighth Circuit specifically declined to address the argument that an administrator could not be liable for administering a plan where plan design is under the sole control of another organization. The dissent forcefully addressed this question, noting that an Office of Civil Rights interpretation of Section 1557 provides that “third party administrators are generally not responsible for the benefit design of the self-insured plans they administer and ERISA . . . requires plans to be administered consistent with their terms.”