Compliance in Motion – February 2025

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New Administration’s Impact on Employee Benefits

There has been a flurry of executive orders issued by the incoming presidential administration, some of which may impact employers in their benefits programs and employment practices. While we expect legal challenges, we want to provide some thoughts for consideration by employers questioning the potential implications for their plans.

Benefits for the Treatment of Gender Dysphoria

The following major laws may limit the exclusion or restriction of gender dysphoria treatment:

• Title VII of the Civil Rights Act of 1964

  • In 2020, the US Supreme Court held in Bostock v Clayton County that employment discrimination on the basis of sex includes discrimination based on gender identity and sexual orientation. So, those are presumed to be protected characteristics in all aspects of employment, including benefits.
  • Employees may be able to successfully challenge an employer in court when health coverage limits or excludes treatment of gender dysphoria…see Lange v Houston County, Georgia (upheld on appeal in the 11th Circuit in 2024).
  • The effect of this legal precedent is that it is widely assumed that a blanket exclusion of gender dysphoria treatment may be viewed by a court as facially discriminating on the basis of sex.
  • Note that this concept extends to all aspects of employment, such as an interactive discussion of accommodations under the Americans with Disabilities Act (ADA) or granting leave under the Family and Medical Leave Act (FMLA) following a surgery.

• The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA)

  • When a health plan provides mental health or substance use disorder (MH/SUD) benefits, it must ensure such benefits operate in parity with medical/surgical benefits and do not impose more restrictive limitations on MH/SUD than those typically imposed on medical/surgical care.
  • In the most recent final rule on MHPAEA, the DOL confirmed their belief that gender dysphoria is a mental health condition.
  • Given the DOL’s posture on gender dysphoria, it follows that plans excluding coverage for gender dysphoria may be viewed to violate MHPAEA. The idea is that if the plan covers treatments commonly used to treat gender dysphoria for other medical/surgical diagnoses (such as breast removal and reconstruction for breast cancer, or sex hormones for reproductive assistance or menopause), the plan should not place more restrictions or limits for those same services needed to treat gender dysphoria.

FEBRUARY 2025

[Referenced legal cases and federal register links provided in the original document]

• Section 1557 of the Affordable Care Act (ACA)
  • This law prohibits discrimination on the basis of sex in “all health programs and activities, any part of which receives Federal financial assistance from any Federal agency,” according to the definitions of sex discrimination under Title IX of the Education and Amendments of 1972.
  • In May 2024, the previous presidential administration issued a final rule on Section 1557 that, among other things, incorporated the Bostock decision in their interpretation of discrimination on the basis of sex.
  • ACA §1557 has been the subject of much litigation over the years, with recent court decisions on the final rules prohibiting the US Department of Health and Human Services (HHS) from enforcing the gender identity-related provisions of §1557. Despite the court decision preventing HHS enforcement, other courts have still found §1557 prohibits discrimination based on gender identity, resulting in a tenuous legal landscape on this issue.

Executive Orders Impacting Gender Dysphoria Benefits

• Executive Order Recognizing Two Immutable Sexes

  • Executive Order 14168 was issued on January 20, 2025, and states that “It is the policy of the United States to recognize two sexes, male and female. These sexes are not changeable and are grounded in fundamental and incontrovertible reality.”
  • Under this executive order, federal agencies are being directed to interpret and enforce federal law in a manner that solely recognizes two sexes and prohibits the recognition of gender identity in any agency policies, communications, or physical spaces.

• Executive Order Prohibiting Federal Funds Being Used for Gender Affirming Care for Individuals Under Age 19

  • Executive Order 14187 was issued on January 28, 2025, and considers the provision of gender-affirming care for individuals under age 19 to be a form of ‘chemical and surgical mutilation.’
  • Among other things, the EO requires the Secretary of HHS to take appropriate regulatory actions to end the coverage of gender-affirming care for individuals under age 19 in Medicaid and other federal health benefits programs. The EO also states that agencies shall rescind or amend policies that rely on gender dysphoria guidance provided by the World Professional Association for Transgender Health (WPATH), International Classification of Diseases (ICD), and Diagnostic and Statistical Manual of Mental Disorders (DSM).

[Referenced legal cases and federal register links provided in the original document]

Employer Plan Sponsor Impact

These executive orders signal a shift in federal enforcement policy and will likely result in the administration seeking to reverse course on all of the prior administrations’ regulations impacting the treatment of gender dysphoria. Unless the Bostock decision is overturned, it’s likely that plan decisions to discriminate based on gender identity could be challenged in court. However, given the administration’s position on this issue, such challenges would be a result of private litigation (initiated by participants) and likely would not be enforced or defended by the federal government. So, for now, employers will want to remain cognizant of Bostock and Title VII civil rights and consult with legal counsel when determining whether to place limitations or exclusions on gender dysphoria or transition care (noting the Lange decision).

Diversity Equity and Inclusion (DEI)

Federal and corporate DEI initiatives have both gained steam and been challenged over the last several years. Recent US Supreme Court cases dismantling affirmative action in schools, discussions around whether there is a continuing need for affirmative action requirements in federal law and contracting, and a larger public conversation surrounding the efficacy of DEI programs has led to a debate concerning company DEI programs and efforts.

• Executive Order Prohibiting Federal Contractors from Promoting DEI or Affirmative Action
  • Executive Order 14173 “orders all agencies to enforce our longstanding civil-rights law and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” The EO rescinds prior executive orders that addressed environmental justice, established and promoted federal workforce DEI efforts, and required equal employment in the federal government and federal government contracts.
  • The EO also instructs agencies to encourage the private sector to “end illegal DEI discrimination and preferences,” including directing the Attorney General to strategically enforce the end of these practices.

Regulatory Freeze and Deregulation Initiative

Two more executive orders may impact benefit plans.

• One requires removing 10 regulations for every new one created, with an overarching goal that the cost effect over fiscal year 2025 for all new and stricken regulations be less than zero.
• The other order aims to provide a pause to regulations that are not yet effective so the new administration has time to review and open them back up for public comment if desired.

Final Thoughts for Employers

As with all incoming administrations, there is a time where rules flip-flop and confusion ensues. But the bedrock framework of the Constitution and federal laws remains. This means that any changes to final federal regulations would have to go through the rule-making process, and any previously passed laws would have to be amended through the Congressional law-making process. Many of the new EOs have already been challenged in court, so these issues will also be addressed through litigation. Also, note that many states will respond to federal changes by passing state laws that impose a different standard or requirement on the businesses operating in their states.

Employer plan sponsors should seek to comply with all currently imposed laws and regulations unless and until legal counsel or benefits compliance professionals indicate there’s an established change. Seeking the assistance of experts is key.

[Referenced legal cases and federal register links provided in the original document]