Covering Transgender Care Is Good Economics for Insurance Companies

Medically necessary treatments like gender-reassignment surgery and hormone-replacement therapy are also an investment in reducing patients’ future health expenses.

Topher Logan gives himself his bi-weekly injection of testosterone. (Erin Siegal / Reuters)

In mid-November, the largest insurer in Maryland, CareFirst BlueCross BlueShield, extended its coverage for transgender patients, removing language from its policies that said CareFirst would not pay for “treatment leading to or in connection with transsexualism, or sex changes or modifications, including but not limited to surgery.”

While insurers are increasingly starting to pay for gender-reassignment surgery and hormone therapy (as of 2014, the Centers for Medicare and Medicaid Services no longer ban such coverage, for example), many still do not—even though the American College of Physicians, the American Medical Association, and the American Psychological Association are just a few of the many organizations that consider gender-transition services to be medically necessary for transgender people.

In terms of necessity, a transgender person seeking transition services is “the same as saying if you have cancer, you need chemotherapy if you are going to survive,” says William Padula, an assistant professor at Johns Hopkins University’s Bloomberg School of Public Health. He’s not saying that being transgender is like a disease, he clarifies—just that hormone therapies and sometimes surgery are things people need to live a healthy life. And sometimes even to live at all: 41 percent of transgender people have attempted suicide at some point in their lives, compared to the national rate of 4.6 percent.

Padula is the lead author of a study recently published in the Journal of General Internal Medicine, looking at the cost-effectiveness of insurance companies paying for transgender health care. He and his colleagues estimated that gender-reassignment surgery is a one-time cost of roughly between $20,000 and $30,000, plus the ongoing costs of hormone-replacement therapy and any other services the person might need. Without the transition services, the study estimates that health care for a transgender person will cost $10,712 a year, which stems from the risk of depression, drug abuse, and other problems transgender people tend to face without treatment. That’ll add up pretty quickly.

If every insurance company suddenly agreed to cover transgender care, the cost per person (per payee on the insurance plan) would be 1.6 pennies per month. As a comparison, cystic-fibrosis treatment, which costs $300,000 a year, costs five cents a person.

Some insurance companies, Padula says, also end up refusing transgender patients some forms of preventive care—for example, if a trans man with a cervix gets a pap smear, and his gender is officially changed to male on his license and birth certificate and such, the insurance company may just read that as a man unnecessarily requesting coverage for a pap smear and deny it outright.

Though he didn’t look at the economics of preventive care for this study, Padula says, “I would hypothesize that it might be less cost-effective [to deny coverage], because if one of these people who are transgender develops cancer down the road, then you’re kicking yourself.”

And as far as the transition coverage goes, “we consider that this coverage is of really good value and it’s a low-budget impact for society from an insurance standpoint,” he says. “Insurance companies are saying, ‘You want us to make this a necessary service, but we can’t afford to.’ What this paper is saying is, you can absolutely afford to.”