California Health Insurer Fined $200K for Not Covering Elective Sex Change Procedures

(PHOTO: REUTERS/JEAN-PAUL PELISSIER)A nurse checks a patient in the intensive care unit at a hospital.

A California health insurer has been penalized with a hefty fine for refusing to cover sex-reassignment procedures.

The state's Department of Managed Health Care, the entity responsible for overseeing health care plans in the state, has penalized the insurance company Health Net with a fine of $200,000 for violating a 2012 law called the Insurance Gender Nondiscrimination Act. The act bans health insurance companies from having line-item exclusions for gender transition treatments or procedures.

California was the first state to pass such a law and 15 other states have adopted similar legislation.

In 2013, the California Department of Managed Health Care clarified the law by ordering the removal of blanket exclusions in health plans based on gender identity, according to the Transgender Law Center.

A recent letter of agreement signed by Health Net's Vice President Douglas Schur and the Department of Managed Health Care's Deputy Director of the Office of Enforcement, Drew Brereton, explains that from 2013–2015, Health Net rejected coverage for seven people who sought services related to gender transition.

According to the agreement, the services that were denied included "consultation, testosterone injections, gender reassignment surgery, bilateral mastectomy, and facial feminization surgery."

The letter explains that the Health Net plan did not cover "procedures or treatment related to changing a member's physical characteristics to those of the opposite sex."

According to the letter, four of the seven cases were denied on the grounds that the requested services were not covered under the plan. In three of the seven cases, Health Net denied coverage because services request were "cosmetic in nature."

"The department has determined that a corrective action plan ... and an administrative penalty of $200,000 are warranted," the letter of agreement reads.

In addition to the fine, the company must also revise its policies to ensure that the violation does not occur again and provide written confirmation to the state that its plan has been revised.

Additionally, the company must reimburse enrollees who incurred out-of-pocket expenses as a result of the company's denial of coverage.

Health Net has until Sept. 30 to complete is corrective action plan.

According to the San Francisco Chronicle, the Department of Managed Health Care had previously punished three other healthcare insurers over their handling of gender transition coverage.

However, a department spokesperson told the news outlet that the Health Net case is the first time in which the department has issued an enforcement action to an insurer for violating the Insurance Gender Nondiscrimination Act.

Earlier this month, it was reported that the administration of President Donald Trump plans to rescind an Obama-era Department of Health and Human Services mandate that required healthcare insurers and health providers to cover or perform procedures and treatments associated with gender transition if they are services offered to non-transgender individuals as well.

The mandate was struck down by a federal judge in Texas earlier this year after a number of states and organizations representing religious doctors sued on grounds that such a mandate would require faith-based doctors and hospitals to provide services that violate their religious convictions. The Trump administration did not appeal the ruling.

Follow Samuel Smith on Twitter: @IamSamSmith
Follow Samuel Smith on Facebook: SamuelSmithCP