Labor & Employment Law Daily Wrap Up, DISCRIMINATION—SEX—9th Cir.: Transgender discrimination class action remanded in light of Skrmetti, (Nov 20, 2025)

By Sherri M. Schroeder, J.D.

However, the court rejected the third-party administrator’s arguments it was not liable for sex-based discrimination under the ACA due to lack of federal funding, RFRA protections, and more.

On appeal from the Western District of Washington, the Ninth Circuit has vacated the district court’s summary judgment against Blue Cross Blue Shield of Illinois (BCBSIL) in a class action alleging that BCBSIL violated Section 1557 of the Affordable Care Act (ACA) by refusing to cover treatment for gender dysphoria because of exclusions put in place at the insistence of the employer sponsors of the health insurance plans. The Ninth Circuit court rejected BCBSIL’s arguments that it was not committing sex-based discrimination because its plans were not funded by the federal government, it was acting at the employers’ direction, and it was shielded by the Religious Freedom Restoration Act (RFRA). However, the court concluded that the district court’s analysis rejecting the argument that BCBSIL’s exclusions did not discriminate based on sex was undercut by the intervening Supreme Court decision in U.S. v. Skrmetti. Because the court concluded that this case potentially differed from Skrmetti because some of its plaintiffs allegedly had diagnoses other than gender dysphoria but were still refused treatment and because Skrmetti left open that argument that BCBSIL’s justifications for its actions were a pretext for invidious discrimination, the Ninth Circuit chose to remand the case back to district court (C.P. v. Blue Cross Blue Shield of Illinois, No. 23-4331 (9th Cir. Nov. 17, 2025)).

Background. C.P., a transgender 16-year-old diagnosed with gender dysphoria, was denied coverage for a second round of hormone therapy and for chest reconstruction surgery by BCBSIL, which is the third-party administrator for the Catholic Health Initiatives Medical Plan which covered C.P. through his mother. C.P. and his parents sued BCBSIL, asserting the coverage denial violated the ACA’s anti-discrimination provision (Section 1557). The suit was filed as a putative class action; the court narrowed the definition of the plaintiff class to those denied coverage (see Transgender class certified in suit alleging Blue Cross coverage discrimination, Nov. 15, 2022).

Government funding. BCBSIL first argued that it was not liable under Section 1557 because its plans were not funded by the federal government. The court employed an entity-level analysis, rather than a plan-level analysis, to find that BCBSIL’s provision of health insurance was a “health program or activity, any part of which is receiving Federal financial assistance.” BCBSIL argued that it received no federal funding for the plans that excluded gender-affirming care, so those plans were not covered. The appellate court, however, concluded that because BCBSIL received federal funding, all its operations were covered. However, the court did conclude that the district court’s analysis of “health program or activity,” which found providing “credits, subsidies, or contracts of insurance” as examples of health programs or activities, was erroneous. Instead, the court agreed that these were forms of financial assistance.

Employer sponsors. BCBSIL next argued that it cannot be liable for administering and enforcing a discriminatory plan term designed by the plan sponsor because the Employee Retirement Income Security Act (ERISA) requires third-party administrators to discharge their duties according to the documents and instruments governing the plan. The court disagreed, concluding that ERISA does not require third-party administrators to implement unlawful plan terms. Because intentional discrimination based on sex violates Section 1557, even if intended only to comply with the terms selected by the plan sponsor, BCBSIL can be liable for violating Section 1557, per the court.

RFRA. BCBSIL next contended that enforcing Section 1557 in this case would infringe on the religious exercise of its employer-customers and violate RFRA. Here, the court agreed with the district court, concluding that RFRA provides relief against the government and does not apply to disputes between private parties—though the court did note that the circuit courts are divided over this issue. In addition, the court agreed that BCBSIL is not an entity with a sincerely held religious belief, as is required under RFRA. Per the court, “only people whose religious exercise has been burdened can raise a defense under RFRA.”

Skrmetti. BCBSIL’s final argument found somewhat more purchase with the court. The district court had rejected BCBSIL’s argument that its exclusions did not discriminate based on sex. However, the Ninth Circuit court concluded that the district court’s analysis was undercut by intervening Supreme Court authority in Skrmetti. In Skrmetti, the Supreme Court ruled that a Tennessee law prohibiting gender-affirming medical care for minors did not violate equal protection (see Court upholds Tennessee law prohibiting youth gender-affirming care, June 18, 2025). The Ninth Circuit court found two arguably distinguishable aspects in the case at hand. Some of the plaintiffs in this class action allegedly had diagnoses other than gender dysphoria that entitled them to hormones or other treatment, but BCBSIL still would not treat them. In addition, Skrmetti left open the argument that BCBSIL’s justifications for its actions were a pretext for invidious discrimination, which the class-action plaintiffs argued based on a proxy-discrimination theory. Here, it was important to the court that BCBSIL admitted that the treatment sought by the plaintiffs can be medically necessary for treating adolescents with gender dysphoria, but the health plans at issue categorically excluded those treatments. Therefore, BCBSIL could not justify its categorical exclusion by citing medical necessity. “Something else may be afoot, and that something may be invidious discrimination against transgender people,” stated the court.

Concurring. Although the court specifically stated it expressed no view about the appropriate outcome on remand, one of the panel stated in a concurring opinion that she found it improvident for the panel to opine on issues remanded to the district court, specifically how the district court could potentially distinguish Skrmetti.

Ultimately, the court vacated the summary judgment ruling and remanded to the district court to reconsider its ruling in light of Skrmetti.

The case is No. 23-4331.

Judge: Smith, M.

Attorneys: Eleanor Hamburger (Sirianni Youtz Spoonemore Hamburger PLLC) for Patricia Pritchard. Gwendolyn C. Payton (Kilpatrick Townsend & Stockton, LLP) for Blue Cross Blue Shield of Illinois.

Companies: Blue Cross Blue Shield of Illinois

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