FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ANDREA SCHMITT, on her own 

behalf, and on behalf of all similarly 

situated individuals; ELIZABETH 

MOHUNDRO, on her own behalf, and 

on behalf of all similarly situated 

individuals,

Plaintiffs-Appellants,

v.

KAISER FOUNDATION HEALTH PLAN 

OF WASHINGTON; KAISER 

FOUNDATION HEALTH PLAN OF THE 

NORTHWEST; KAISER FOUNDATION 

HEALTH PLAN, INC.,

Defendants-Appellees.

No. 18-35846

D.C. No.

2:17-cv-01611-

RSL

OPINION

Appeal from the United States District Court

for the Western District of Washington

Robert S. Lasnik, District Judge, Presiding

Argued and Submitted November 8, 2019

Seattle, Washington

Filed July 14, 2020
2 SCHMITT V. KAISER FOUND. HEALTH PLAN

Before: Ronald M. Gould and Jacqueline H. Nguyen, 

Circuit Judges, and Gregory A. Presnell,* District Judge.

Opinion by Judge Nguyen

SUMMARY**

Patient Protection and Affordable Care Act

The panel affirmed in part and reversed in part the 

district court’s dismissal without leave to amend of an action 

alleging that a health insurer violated the Patient Protection 

and Affordable Care Act’s nondiscrimination mandate by 

excluding coverage of all hearing loss treatment except 

cochlear implants.

Plaintiffs claimed that the insurer’s plans discriminated 

against hearing disabled people in violation of section 1557 

of the ACA, which incorporates by reference the grounds 

protected by four earlier nondiscrimination statutes, 

including the Rehabilitation Act, and prohibits 

discrimination on those grounds in the health care system, 

including in health care contracts. The panel agreed with the 

district court that plaintiffs failed to state a plausible 

discrimination claim. The panel held that the ADA 

specifically prohibits discrimination in plan benefit design, 

and a categorical exclusion of treatment for hearing loss 

* The Honorable Gregory A. Presnell, United States District Judge 

for the Middle District of Florida, sitting by designation.

** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
SCHMITT V. KAISER FOUND. HEALTH PLAN 3

would raise an inference of discrimination against hearing 

disabled people notwithstanding that it would also adversely 

affect individuals with nondisabling hearing loss. But the 

exclusion here was not categorical. The panel held that 

while the insurer’s coverage of cochlear implants was 

inadequate to serve plaintiffs’ health needs, it might 

adequately serve the needs of hearing disabled people as a 

group. Because amendment might not be futile, the panel 

reversed the district court’s dismissal without leave to amend 

and remanded.

COUNSEL

Eleanor Hamburger (argued) and Richard E. Spoonemore,

Sirianni Youtz Spoonemore Hamburger PLLC, Seattle, 

Washington, for Plaintiffs-Appellants.

Medora A. Marisseau (argued) and Mark A. Bailey, Karr 

Tuttle Campbell, Seattle, Washington, for DefendantsAppellees.

Huma Zarif, Northwest Health Law Advocates, Seattle, 

Washington; Sarah Somers, Elizabeth Edwards, and Wayne 

Turner, National Health Law Program, Carrboro, North 

Carolina; for Amici Curiae National Health Law Program 

and Northwest Health Law Advocates.

Carly A. Myers, Silvia Yee, and Arlene B. Mayerson, 

Disability Rights Education & Defense Fund, Berkeley, 

California, for Amici Curiae Disability Rights Education 

and Defense Fund; National Association of the Deaf; 

Bazelon Center for Mental Health Law; Hearing Loss 

Association of America; Hearing Loss Association, Oregon 

State Association; Washington State Communication 
4 SCHMITT V. KAISER FOUND. HEALTH PLAN

Access Project; Oregon Communication Access Project; and 

California Communication Access Project.

OPINION

NGUYEN, Circuit Judge:

Section 1557 of the Patient Protection and Affordable 

Care Act (“ACA”), 42 U.S.C. § 18116, prohibits covered 

health insurers from discriminating based on various 

grounds, including disability. Prior to the ACA’s enactment, 

an insurer could generally design plans to offer or exclude 

benefits as it saw fit without violating federal 

antidiscrimination law—in particular, the Rehabilitation 

Act—so long as the insurer did not discriminate against 

disabled people in providing treatment for whatever 

conditions it chose to cover. The primary issue before us is 

whether the ACA’s nondiscrimination mandate imposes any 

constraints on a health insurer’s selection of plan benefits. 

We hold that it does.

Andrea Schmitt and Elizabeth Mohundro have hearing 

loss severe enough to qualify them as disabled. They require 

treatment other than cochlear implants, but their Kaiser 

health insurance plans exclude all hearing loss treatment 

except cochlear implants. In a putative class action, Schmitt 

and Mohundro allege that Kaiser violated section 1557 when 

designing plan benefits. They claim that Kaiser’s 

categorical exclusion of most hearing loss treatment 

discriminates against hearing disabled people. The district 

court ruled that Kaiser’s plans do not exclude benefits based 

on disability because the plans treat individuals with hearing 

loss alike, regardless of whether their hearing loss is 

disabling.
SCHMITT V. KAISER FOUND. HEALTH PLAN 5

We agree with the district court that Schmitt and 

Mohundro have failed to state a plausible discrimination 

claim. The ACA specifically prohibits discrimination in 

plan benefit design, and a categorical exclusion of treatment 

for hearing loss would raise an inference of discrimination 

against hearing disabled people notwithstanding that it 

would also adversely affect individuals with non-disabling 

hearing loss. But the exclusion here is not categorical. 

While Kaiser’s coverage of cochlear implants is inadequate 

to serve Schmitt and Mohundro’s health needs, it may 

adequately serve the needs of hearing disabled people as a 

group. Because the pleadings do not suggest otherwise, we 

affirm the district court’s dismissal of the second amended 

complaint. But because amendment may not be futile, we 

reverse the district court’s dismissal without leave to amend 

and remand so that Schmitt and Mohundro have that 

opportunity.

I. Statutory Background

A. Essential Health Benefits

Congress enacted the ACA “to increase the number of 

Americans covered by health insurance and decrease the cost 

of health care.” Nat’l Fed’n of Indep. Bus. v. Sebelius, 

567 U.S. 519, 538 (2012). The ACA requires most 

Americans to maintain “minimum essential coverage,” 

26 U.S.C. § 5000A(a), which they can do through a variety 

of health insurance plans, such as those provided by their 

employer or the government or purchased directly from 

private carriers. See id. § 5000A(f). Plans that insurers offer 

to individuals and small employers must include an 
6 SCHMITT V. KAISER FOUND. HEALTH PLAN

“essential health benefits package.”1 42 U.S.C. § 300gg6(a); see also 45 C.F.R. § 147.150(a) (“A health insurance 

issuer offering health insurance coverage in the individual or 

small group market must ensure that such coverage includes 

the essential health benefits package . . . .”).

The ACA directs the Secretary of Health and Human 

Services to define, subject to certain constraints, the 

“essential health benefits” that plans in the individual and 

small group markets must cover. 42 U.S.C. § 18022(b)(1). 

The definition must include at least ten specified “general 

categories” of benefits, including “[r]ehabilitative and 

habilitative services and devices,”2 as well as the “items and 

services” within those categories. Id. § 18022(b)(1), 

(b)(1)(G). The scope of coverage must be “equal to the 

scope of benefits provided under a typical employer plan,” 

and the agency must conduct “a survey of employersponsored coverage” to inform its determination. Id.

§ 18022(b)(2)(A).

Under agency regulations, an insurer providing essential 

health benefits must offer benefits that are “substantially 

equal” to a “benchmark” plan set by the state. 45 C.F.R. 

§ 156.115(a)(1). The State of Washington selects as its 

1 A “small” employer generally has no more than 50 employees, but 

states can extend the definition to encompass up to 100 employees. See

42 U.S.C. § 18024 (b)(2)–(3).

2 The other categories are: “[a]mbulatory patient services”; 

“[e]mergency services”; “[h]ospitalization”; “[m]aternity and newborn 

care”; “[m]ental health and substance use disorder services, including 

behavioral health treatment”; “[p]rescription drugs”; “[l]aboratory 

services”; “[p]reventive and wellness services and chronic disease 

management”; and “[p]ediatric services, including oral and vision care.” 

42 U.S.C. § 18022(b)(1)(A)–(F), (H)–(J).
SCHMITT V. KAISER FOUND. HEALTH PLAN 7

benchmark plan “the largest small group plan in the state by 

enrollment,” which it supplements “as needed” to ensure 

coverage of “all of the ten essential health benefits 

categories.” Wash. Rev. Code § 48.43.715(1)–(2); accord

45 C.F.R. § 156.100(a)(1). Washington’s benchmark plan 

includes cochlear implants as “rehabilitative services” but 

excludes “[h]earing aids other than cochlear implants.” 

Wash. Admin. Code § 284-43-5642(7)(b)(i), (c)(iv).

B. Nondiscrimination Statutes

1. The Rehabilitation Act

The Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., 

was the first major federal statute designed to protect the 

rights of individuals with disabilities. Smith v. Barton, 

914 F.2d 1330, 1338 (9th Cir. 1990). Its linchpin, section 

504, “creates a private right of action for individuals 

subjected to disability discrimination.” Fleming v. Yuma 

Reg’l Med. Ctr., 587 F.3d 938, 940 (9th Cir. 2009); see

29 U.S.C. § 794a(a)(2).

Section 504 broadly provides that “[n]o otherwise 

qualified individual with a disability . . . shall, solely by 

reason of her or his disability, be excluded from the 

participation in, be denied the benefits of, or be subjected to 

discrimination under any [federally funded] program or 

activity.” 29 U.S.C. § 794(a). However, section 504 does 

not require an insurer to design plan benefits so as to avoid 

imposing a disproportionate burden on disabled people—the 

insurer need only provide disabled people “meaningful 

access” to whatever benefits it chooses to offer. Alexander 

v. Choate, 469 U.S. 287, 301 (1985). In Choate, the 

Supreme Court rejected a Rehabilitation Act challenge to a 

state Medicaid regulation that adversely affected a 

disproportionate number of disabled users of hospital 
8 SCHMITT V. KAISER FOUND. HEALTH PLAN

services. Id. at 289. The Court reasoned that the rule applied 

equally to disabled and non-disabled people, noting that it 

was “neutral on its face, [was] not alleged to rest on a 

discriminatory motive, and [did] not deny [disabled people] 

access to or exclude them from the particular package of 

Medicaid services [the state had] chosen to provide.” Id.

at 309.

2. The Affordable Care Act

Section 1557 of the ACA prohibits certain types of 

discrimination in health care. It does so by referencing four 

other statutes, including section 504 of the Rehabilitation 

Act, that address discrimination based on various suspect 

grounds: “race, color, or national origin,” 42 U.S.C. § 2000d, 

“age,” id. § 6101, “sex,” 20 U.S.C. § 1681, and “disability,” 

29 U.S.C. § 794(a). See 42 U.S.C. § 18116(a). Section 1557 

provides that “an individual shall not, on the ground 

prohibited under [the four enumerated statutes] . . . , be 

excluded from participation in, be denied the benefits of, or 

be subjected to discrimination under, any health program or 

activity” receiving federal funding, “including . . . contracts 

of insurance.” Id.

C. Factual and Procedural History

Schmitt and Mohundro are insured by Kaiser under 

policies offered through their respective employers.3 They 

both have been diagnosed with disabling hearing loss. They 

require treatment other than cochlear implants, such as 

outpatient office visits to a licensed audiologist and hearing 

3 Schmitt is insured by defendant Kaiser Foundation Health Plan of 

Washington, and Mohundro is insured by Kaiser Foundation Health Plan 

of Washington Options Inc. We refer to these entities and the other 

named defendants collectively as “Kaiser.”
SCHMITT V. KAISER FOUND. HEALTH PLAN 9

aids or other durable medical equipment or prosthetic 

devices. Their Kaiser policies cover cochlear implants and 

related screening tests but exclude all other programs or 

treatments for hearing loss and hearing care.

In October 2017, Schmitt and Mohundro filed this class 

action against Kaiser, asserting a single claim under the 

ACA.4 They alleged that Kaiser’s exclusion of all 

treatments for hearing loss other than cochlear implants 

discriminates against putative class members on the basis of 

their disability in violation of section 1557. The district 

court granted Kaiser’s motion to dismiss their second 

amended complaint for failure to state a claim and entered 

judgment.

The district court concluded that “insurers have 

discretion” over “the scope of benefits provided in the first 

instance” so long as they “provide [the] benefits offered in a 

non-discriminatory manner.” It therefore ruled that Schmitt 

and Mohundro’s allegations “do not . . . give rise to a 

plausible inference that they were excluded from 

participation in or denied the benefits of their health plan 

under . . . the ACA” because “[t]he benefits plaintiffs seek 

are not part of the plan in which they participate.” Although 

the court suggested that a coverage exclusion or limitation 

might “be impermissible and a violation Section 1557 if it 

were motivated by discriminatory intent,” it did not address 

the issue. The court found that Schmitt and Mohundro failed 

to raise an inference of discrimination because “the hearing 

loss exclusion . . . is not designed with reference to a 

4 Mohundro was added as a plaintiff in the second amended 

complaint.
10 SCHMITT V. KAISER FOUND. HEALTH PLAN

disability and applies to both disabled and nondisabled plan 

participants.”

II. Jurisdiction and Standard of Review

The district court had jurisdiction pursuant to 28 U.S.C. 

§ 1331, and we have jurisdiction pursuant to 28 U.S.C. 

§ 1291. We review de novo the district court’s dismissal of 

the operative complaint for failure to state a claim. See

Segalman v. Sw. Airlines Co., 895 F.3d 1219, 1222 (9th Cir. 

2018).

III. Discussion

A. Legal Standards Governing a Discrimination Claim 

Under Section 1557

Applying section 1557 requires an understanding of its 

relationship to previous civil rights statutes. Section 1557 

incorporates by reference the grounds protected by four 

earlier nondiscrimination statutes and prohibits 

discrimination on those grounds in the health care system—

as relevant here, in health insurance contracts. See 42 U.S.C. 

§ 18116(a). In addition to the Rehabilitation Act, section 

1557 invokes Title VI of the Civil Rights Act of 1964 (“Title 

VI”), 42 U.S.C. § 2000d, Title IX of the Education 

Amendments Act of 1972 (“Title IX”), 20 U.S.C. § 1681, 

and the Age Discrimination Act of 1972, 42 U.S.C. § 6101.

Congress occasionally drafts statutes by referencing the 

substantive provisions of earlier-enacted laws. See Panama 

R.R. v. Johnson, 264 U.S. 375, 391–92 (1924) (observing 

that “a generic reference” to an existing statute “is a 

recognized mode of incorporating one statute or system of 

statutes into another, and serves to bring into the latter all 

that is fairly covered by the reference”). The question is how 
SCHMITT V. KAISER FOUND. HEALTH PLAN 11

much of the earlier statutes Congress meant to incorporate. 

As usual, we start with the statute’s text. See Jam v. Int’l 

Fin. Corp., 139 S. Ct. 759, 769 (2019) (“[A]bsent a clearly 

expressed legislative intention to the contrary . . . the 

legislative purpose is expressed by the ordinary meaning of 

the words used.” (quoting Am. Tobacco Co. v. Patterson, 

456 U.S. 63, 68 (1982))).

(a) In general

Except as otherwise provided for in [the 

ACA or its amendments], an individual 

shall not, on the ground prohibited under 

[Title VI], [Title IX], the Age 

Discrimination Act . . . , or [the 

Rehabilitation Act], be excluded from 

participation in, be denied the benefits of, 

or be subjected to discrimination under, 

any [federally funded] health program or 

activity . . . . The enforcement 

mechanisms provided for and available 

under such [T]itle VI, [T]itle IX, 

[Rehabilitation Act], or such Age 

Discrimination Act shall apply for 

purposes of violations of this subsection.

(b) Continued application of laws

Nothing in [the ACA or its amendments] 

shall be construed to invalidate or limit 

the rights, remedies, procedures, or legal 

standards available to individuals 

aggrieved under [Title VI], [Title VII of 

the Civil Rights Act of 1964, 42 U.S.C. 

§ 2000e et seq.], [Title IX], [the 
12 SCHMITT V. KAISER FOUND. HEALTH PLAN

Rehabilitation Act], or the Age 

Discrimination Act . . . , or to supersede 

State laws that provide additional 

protections against discrimination on any 

basis described in subsection (a).

42 U.S.C. § 18116.

The first sentence of section 1557(a) is similar to the first 

sentence of section 504 of the Rehabilitation Act. Both 

statutes provide that an individual with a disability shall not, 

on that ground, “be excluded from the participation in, be 

denied the benefits of, or be subjected to discrimination 

under any [federally-funded health] program or activity.” 

29 U.S.C. § 794(a); accord 42 U.S.C. § 18116(a).

But the two statutes are dissimilar in two respects. First, 

they differ in scope. Section 1557 is both broader and 

narrower than the Rehabilitation Act. It is broader because 

the Rehabilitation Act addresses only disability 

discrimination, and section 1557 concerns discrimination 

based on several additional grounds. It is narrower because 

the Rehabilitation Act addresses disability discrimination 

generally whereas section 1557 is limited to discrimination 

in the context of health programs or activities.

Second, the Rehabilitation Act prohibits discrimination 

“solely by reason of [an individual’s] disability,” 29 U.S.C. 

§ 794(a) (emphasis added), while section 1557 prohibits 

discrimination “on the ground prohibited under . . . [the 

Rehabilitation Act],” 42 U.S.C. § 18116(a), i.e., on the 

ground of disability. In this regard, section 1557 is worded 

more similarly to the other three statutes it references. See

42 U.S.C. § 2000d (prohibiting discrimination “on the 

ground of race, color, or national origin”); 20 U.S.C. 

§ 1681(a) (same “on the basis of sex”); 42 U.S.C. § 6102 
SCHMITT V. KAISER FOUND. HEALTH PLAN 13

(same “on the basis of age”). While section 1557’s omission 

of the modifier “solely” could point to a less strict causal 

standard than under the Rehabilitation Act, see K.M. ex rel. 

Bright v. Tustin Unified Sch. Dist., 725 F.3d 1088, 1099 (9th 

Cir. 2013), that presupposes a single legal standard 

governing all section 1557 claims rather than separate 

standards for each protected classification drawn from case 

law interpreting the incorporated statutes.

The text is ambiguous on this score. Section 1557(a) 

incorporates only the prohibited “ground[s]” and “[t]he 

enforcement mechanisms provided for and available under” 

the four civil rights statutes. A prohibited “ground” for 

discrimination is not typically understood to encompass the 

legal elements necessary to establish a discrimination claim; 

it is simply the protected classification at issue. See, e.g., 

Perry v. Merit Sys. Prot. Bd., 137 S. Ct. 1975, 1982 (2017) 

(“He alleged discrimination on grounds of race, age, and 

disability . . . .”). And “enforcement mechanism” may mean 

no more than “the process for compelling compliance with a 

substantive right, not the substantive right itself.” Doe v. 

BlueCross BlueShield of Tenn., Inc., 926 F.3d 235, 239 (6th 

Cir. 2019). Even if one assumes that “enforcement 

mechanisms” includes the claims available under the four 

statutes and the standards used to evaluate them, it is unclear 

from section 1557’s text whether a plaintiff alleging one type 

of discrimination can utilize any of the statutes’ enforcement 

mechanisms or only the one corresponding to the 

classification at issue.

The agency appears to have taken the view that a plaintiff 

may take advantage of enforcement mechanisms available in 

any of the four incorporated statutes. In response to 

regulations proposed by the Department of Health and 

Human Services’ Office of Civil Rights (“OCR”), several 
14 SCHMITT V. KAISER FOUND. HEALTH PLAN

commenters sought clarification “that all enforcement 

mechanisms available under the statutes listed in [s]ection 

1557 are available to each [s]ection 1557 plaintiff, regardless 

of the plaintiff’s protected class.” Nondiscrimination in 

Health Programs and Activities, 81 Fed. Reg. 31,375, 31,439 

(May 18, 2016). Their concern was the availability of a 

disparate impact theory of discrimination—they believed 

that Title VI did not allow it but the other three statutes did. 

See id. at 31,440. OCR responded that it “interprets [s]ection 

1557 as authorizing a private right of action for claims of 

disparate impact discrimination on the basis of any of the 

criteria enumerated in the legislation.” Id.

Ordinarily, we would defer to an agency’s reasonable 

interpretation of an ambiguous statute that it administers. 

See Rust v. Sullivan, 500 U.S. 173, 184 (1991). Here, 

however, OCR’s interpretation appears to be based on the 

assumption that certain civil rights statutes permit disparate 

impact claims, an assumption that may not be accurate.

Title VI served as the model for Title IX, the Age 

Discrimination Act, and the Rehabilitation Act, so we 

interpret the four statutes similarly. See U.S. Dep’t of 

Transp. v. Paralyzed Veterans of Am., 477 U.S. 597, 600 n.4 

(1986); see also Nat’l Coll. Athletic Ass’n v. Smith, 525 U.S. 

459, 466 n.3 (1999) (noting that the statutes are “defined in 

nearly identical terms”). Title VI implies a private right of 

action for intentional discrimination. See Alexander v. 

Sandoval, 532 U.S. 275, 279–80 (2001). For a time, the 

Supreme Court had construed Title VI to allow disparate 

impact claims as well. See Lau v. Nichols, 414 U.S. 563, 568 

(1974) (“Discrimination is barred which has that effect even 

though no purposeful design is present . . . .”). Sandoval

shut that door. See Sandoval, 532 U.S. at 285 (“[W]e have 
SCHMITT V. KAISER FOUND. HEALTH PLAN 15

since rejected Lau’s interpretation of [Title VI] as reaching 

beyond intentional discrimination.”).

Before the disparate impact door closed, though, we and 

other circuits relied on the Title VI authority to hold that the 

Rehabilitation Act permits disparate impact claims. See, 

e.g., Crowder v. Kitagawa, 81 F.3d 1480, 1484 (9th Cir. 

1996); Prewitt v. U.S. Postal Serv., 662 F.2d 292, 306 (5th 

Cir. Unit A Nov. 1981); NAACP v. Med. Ctr., Inc., 657 F.2d 

1322, 1331 (3d Cir. 1981) (en banc). Although it is unclear 

whether a disparate impact theory remains permissible under 

the Rehabilitation Act after Sandoval, we need not reach that 

issue because here Schmitt and Mohundro did not allege a 

disparate impact claim.

Given the similar analytical framework applied to claims 

under Title VI, Title IX, the Age Discrimination Act, and the 

Rehabilitation Act, we need not decide whether section 1557 

incorporates their legal standards and, if so, how. The 

parties agree, and we can assume, that the case law 

construing the Rehabilitation Act generally applies to claims 

under section 1557 for disability discrimination by a health 

care insurer.

A Rehabilitation Act claim requires a showing that 

(1) the plaintiff is an individual with a disability; (2) she is 

otherwise qualified to receive the benefit; (3) she was denied 

the benefits of the program solely by reason of her disability; 

and (4) the program receives federal financial assistance. 

Updike v. Multnomah County, 870 F.3d 939, 949 (9th Cir. 

2017), cert. denied, 139 S. Ct. 55 (2018). While a private 

plaintiff must show intentional discrimination under the 

statutes modeled after Title VI, we interpret this requirement 

“somewhat more broadly” for Rehabilitation Act claims in 
16 SCHMITT V. KAISER FOUND. HEALTH PLAN

light of that statute’s purpose.5 Mark H. v. Lemahieu, 

513 F.3d 922, 937 (9th Cir. 2008). The claim at issue here—

that Kaiser designed its plan benefits in a discriminatory 

way—inherently involves intentional conduct.6 See id.

at 936 (“To ‘design’ something to produce a certain, equal 

outcome involves some measure of intentionality.”).

B. The ACA Prohibits Discrimination in the Design of 

Plan Benefits

The ACA provides that “[i]n defining the essential health 

benefits,” the agency must “take into account the health care 

needs of diverse segments of the population, including . . . 

persons with disabilities,” and “not make coverage decisions

. . . or design benefits in ways that discriminate against 

individuals because of their . . . disability.” 42 U.S.C. 

§ 18022(b)(4)(B)–(C) (emphasis added). In line with this 

directive, the agency promulgated a regulation that an 

insurer “does not provide [essential health benefits] if its 

benefit design, or the implementation of its benefit design, 

discriminates based on an individual’s . . . present or 

predicted disability . . . , or other health conditions.” 

5 In drafting the Rehabilitation Act, Congress perceived 

discrimination against disabled persons “to be most often the product, 

not of invidious animus, but rather of thoughtlessness and indifference.” 

Choate, 469 U.S. at 295. “[M]uch of the conduct that Congress sought 

to alter . . . would be difficult if not impossible to reach were the 

[Rehabilitation] Act construed to proscribe only conduct fueled by a 

discriminatory intent.” Id. at 296–97. Choate’s “meaningful access” 

standard was an attempt to honor Congressional intent while “keep[ing]

§ 504 within manageable bounds.” Id. at 299.

6 To be entitled to monetary damages, however, Schmitt and 

Mohundro “must prove a mens rea of ‘intentional discrimination’ . . . by 

showing ‘deliberate indifference’ [or] ‘discriminatory animus.’” Mark 

H., 513 F.3d at 938.
SCHMITT V. KAISER FOUND. HEALTH PLAN 17

45 C.F.R. § 156.125(a). Another regulation prohibits health 

insurers from “[having] or implement[ing] . . . benefit 

designs that discriminate on the basis of . . . disability.” Id.

§ 92.207(b)(2). Benefit design, though intentionally 

undefined, “includ[es] covered benefits, benefits limitations 

or restrictions, and cost-sharing mechanisms, such as 

coinsurance, copayments, and deductibles.” 

Nondiscrimination in Health Programs and Activities, 

81 Fed. Reg. at 31,376 (emphasis added).

In holding that the Rehabilitation Act does not cover 

discriminatory plan benefit design, the Supreme Court 

rejected a group of Medicaid recipients’ attempt to define the 

benefit at issue as “the amorphous objective of ‘adequate 

health care.’” Choate, 469 U.S. at 303. “Medicaid 

programs,” the Court explained, “do not guarantee that each 

recipient will receive that level of health care precisely 

tailored to his or her particular needs,” id., and states have 

long had “discretion to choose the proper mix of amount, 

scope, and duration limitations on services covered by state 

Medicaid.” Id. at 307. The Rehabilitation Act does not 

impose a general requirement on “each recipient of federal 

funds first to evaluate the effect on [disabled people] of 

every proposed action that might touch [their] interests . . . , 

and then to consider alternatives for achieving the same 

objectives with less severe disadvantage to [them].” Id.

at 298, 307.

The ACA, in contrast, does almost all of this. While it 

does not guarantee individually tailored health care plans, it 

attempts to provide adequate health care to as many 

individuals as possible by requiring insurers to provide 

essential health benefits. And it imposes an affirmative 

obligation not to discriminate in the provision of health 

care—in particular, to consider the needs of disabled people 
18 SCHMITT V. KAISER FOUND. HEALTH PLAN

and not design plan benefits in ways that discriminate 

against them.

Thus, the ACA allows a claim for discriminatory benefit 

design notwithstanding that, under Choate, the 

Rehabilitation Act does not. In arguing otherwise, Kaiser 

relies on several incorrect assumptions.

1. Compliance with a state’s benchmark plan does 

not guarantee compliance with section 1557

Kaiser assumes that an insurer’s compliance with the 

essential health benefits in a state’s benchmark plan was 

sufficient to comply with the ACA’s nondiscrimination 

requirement. According to Kaiser, “[t]he ACA did not 

include hearing aids or services as an [essential health 

benefit]” and the Secretary of Health and Human Services 

“left it to each state to articulate the scope of essential health 

benefits . . . through the adoption of a ‘benchmark’ plan.”

As discussed, the ACA requires that essential health 

benefits not only include the ten specified categories of 

coverage, but also take into account the needs of persons 

with disabilities and not be designed in ways that 

discriminate against them. See 42 U.S.C. § 18022(b)(4)(B)–

(C). The ten general categories of benefits were intended to 

be a minimum requirement, see id. § 18022(b)(1) 

(“[Essential health] benefits shall include at least the 

following . . . .”), subject to additional limitations and 

“[r]equired elements for consideration,” id. § 18022(b)(4), 

such as nondiscrimination in benefit design.

ACA regulations also make clear that a state-selected 

benchmark plan is only the starting point for determining 

essential health benefits. They define “base-benchmark 

plan” to mean “the plan that is selected by a State from the 
SCHMITT V. KAISER FOUND. HEALTH PLAN 19

options [provided for by regulation], prior to any 

adjustments made pursuant to the benchmark standards.” 

45 C.F.R. § 156.20 (emphasis added). The regulations 

distinguish the base-benchmark plan selected by a state from 

an “EHB-benchmark plan,” which is “the standardized set of 

essential health benefits that must be met” by an insurer. Id. 

“In order to become an EHB-benchmark plan . . . , a stateselected base-benchmark plan must meet the 

requirements for coverage of benefits and limits described in 

[45 C.F.R.] § 156.110”—i.e., the benchmark standards. Id.

§ 156.100(b).7

The benchmark standards require the benchmark plan to 

include the ten essential benefit categories, 45 C.F.R. 

§ 156.110(a), but they also require that the plan “[n]ot 

include discriminatory benefit designs that contravene the 

non-discrimination standards,” id. § 156.110(d). The 

nondiscrimination standards, in turn, provide that an insurer 

“does not provide [essential health benefits] if its benefit 

design . . . discriminates based on an individual’s . . . present 

or predicted disability . . . or other health conditions.” Id.

§ 156.125(a).

Congress authorized the Secretary of Health and Human 

Services to promulgate regulations implementing the 

nondiscrimination provision in section 1557 specifically. 

See 42 U.S.C. § 18116(c). In doing so, OCR explained that 

compliance with federal and state law regarding essential 

7 This was the regulation in effect for the plan years prior to 2020. 

The regulation currently in effect similarly provides that a state’s EHBbenchmark plan must “[p]rovide benefits for diverse segments of the 

population, including . . . persons with disabilities,” and “[n]ot include 

discriminatory benefit designs that contravene the non-discrimination 

standards defined in [45 C.F.R.] § 156.125.” 45 C.F.R. 

§ 156.111(b)(2)(iv)–(v).
20 SCHMITT V. KAISER FOUND. HEALTH PLAN

health benefits did not guarantee compliance with the ACA’s 

nondiscrimination requirement. Commenters on the 

proposed regulations expressed concern that “a State might 

approve a plan that OCR might later find discriminatory,” 

and they suggested “allow[ing] issuers to be deemed 

compliant with [s]ection 1557 if they are compliant with 

existing Federal or State law.” Nondiscrimination in Health 

Programs and Activities, 81 Fed. Reg. at 31,377. The 

agency rejected this suggestion, finding that it would be 

“inappropriate to define requirements under Federal law 

based on what could be the varying, and potentially 

changing, requirements of different States’ approaches.” Id.

at 31,377–78. The agency observed that its approach “is 

consistent with the approach taken by other agencies to civil 

rights obligations, in which compliance with one set of 

requirements, adopted under different laws or for different 

purposes, is not considered automatic compliance with civil 

rights obligations.” Id. at 31,378.

The State of Washington does not even require 

compliance with section 1557 when its insurance 

commissioner establishes the state’s benchmark plan. The 

relevant statute provides that the insurance commissioner 

“[m]ust ensure that the [benchmark] plan covers the ten 

essential health benefits categories,” and “[m]ay consider 

whether the health plan has a benefit design that would 

create a risk of biased selection based on health status and 

whether the health plan contains meaningful scope and level 

of benefits in each of the ten essential health benefits 

categories.” Wash. Rev. Code Ann. § 48.43.715(3)(a)–(b) 

(emphasis added). But even if a state required its benchmark 

plan to incorporate nondiscrimination principles, whether or 

not it complied with section 1557 is a question of federal law 

on which we owe the state no deference. Cf. Coeur D’Alene 

Tribe of Idaho v. Hammond, 384 F.3d 674, 682–83 (9th Cir. 
SCHMITT V. KAISER FOUND. HEALTH PLAN 21

2004) (“[A] question of federal law . . . cannot be 

conclusively resolved in and of itself by the state 

legislature’s mere statement.”).

2. The specific regulation prohibiting categorical 

coverage exclusions for gender transition 

treatment does not implicitly sanction categorical 

coverage exclusions for other conditions

The regulations implementing section 1557 prohibit 

“categorical coverage exclusion[s] or limitation[s] for all 

health services related to gender transition.” 45 C.F.R. 

§ 92.207(b)(4). Kaiser assumes that the agency’s inclusion 

of a regulation specific to gender dysphoria signals the 

agency’s implicit unwillingness to prohibit similar 

categorical exclusions for treatments of other conditions.

Application of the canon expressio unius est exclusio 

alterius might be understandable in the abstract, see, e.g., 

Murray v. Mayo Clinic, 934 F.3d 1101, 1107 (9th Cir. 2019), 

cert. denied, No. 19-995 (U.S. Apr. 27, 2020), though we 

have rejected it in similar circumstances, see Mark H. v. 

Hamamoto, 620 F.3d 1090, 1100 (9th Cir. 2010) (“That one 

regulation identifies a specific requirement for compliance 

with the Rehabilitation Act § 504 . . . does not negate the 

broader rule that a federally funded entity violates the 

Rehabilitation Act § 504 if it denies a qualified disabled 

person the reasonable accommodation that the person needs 

in order to enjoy meaningful access to a program or 

service.”). In any event, the agency explained that that was 

not its intent.

The agency “received a number of comments requesting 

that OCR add language to [45 C.F.R.] § 92.207(b) clarifying 

that categorical exclusions of certain conditions, such as 

coverage related to developmental disabilities or maternity 
22 SCHMITT V. KAISER FOUND. HEALTH PLAN

care, are prohibited.” Nondiscrimination in Health 

Programs and Activities, 81 Fed. Reg. at 31,434. The 

agency declined to do so. Critically, however, it 

acknowledged that “categorical exclusions of all coverage 

related to certain conditions could raise significant 

compliance concerns under [s]ection 1557.” Id. The agency 

did not provide more explicit guidance because it believed 

that “existing regulatory language is sufficient to address this 

scenario.” Id.

The reason for a special regulation pertaining to gender 

transition was that blanket exclusions of treatment have 

historically been justified “because [the treatments] have 

been viewed as cosmetic or experimental.” Id. Because a 

treatment exclusion on these grounds could be seen as a 

nondiscriminatory reason that comports with section 1557, 

the agency clarified that it does not share that view. See id.

at 31,435 (“[T]he across-the-board categorization of all 

transition-related treatment, for example as experimental, is 

outdated and not based on current standards of care.”).

3. Requiring nondiscriminatory plan benefit design 

does not require insurers to cover all treatment

Kaiser also assumes that if the ACA’s nondiscrimination 

provision applies to plan benefit design, “every federallyfunded health insurer would need to immediately amend its 

health plans and policies to cover hearing aids and related 

services, and by extension, all other services and equipment 

that might treat any other potentially disabling conditions.” 

But the agency made clear that while discriminatory benefit 

design is incompatible with essential health benefits, see

45 C.F.R. § 156.125(a), “[n]othing . . . prevent[s] an issuer 

from appropriately utilizing reasonable medical 

management techniques,” id. § 156.125(c).
SCHMITT V. KAISER FOUND. HEALTH PLAN 23

The final rule does not . . . require covered 

entities to cover any particular procedure 

or treatment. It also does not preclude a 

covered entity from applying neutral, 

nondiscriminatory standards that govern the 

circumstances in which it will offer coverage 

to all its enrollees in a nondiscriminatory 

manner. The rule prohibits a covered entity 

from employing benefit design or program 

administration practices that operate in a 

discriminatory manner.

Nondiscrimination in Health Programs and Activities, 

81 Fed. Reg. at 31,434.

It is possible that Kaiser has a reasonable, 

nondiscriminatory reason for its blanket exclusion of 

treatment for hearing loss other than cochlear implants. 

Even if Schmitt and Mohundro ultimately prevail in this 

litigation and Kaiser is forced to withdraw its blanket 

prohibition on coverage for hearing loss treatment other than 

cochlear implants, it still could exclude specific hearing loss 

treatments based on nondiscriminatory standards. For 

example, it may be reasonable for Kaiser to exclude 

coverage of a particular hearing loss treatment that is 

experimental or has a high cost-to-benefit ratio. At this stage 

in the litigation, however, the question is whether the blanket 

exclusion of non-cochlear treatment raises an inference of 

discrimination.

C. The Second Amended Complaint Fails to State a 

Claim

Schmitt and Mohundro argue that Kaiser’s categorical 

exclusion of coverage for hearing loss treatment other than 

cochlear implants is a form of proxy discrimination. “[Proxy 
24 SCHMITT V. KAISER FOUND. HEALTH PLAN

discrimination] arises when the defendant enacts a law or 

policy that treats individuals differently on the basis of 

seemingly neutral criteria that are so closely associated with 

the disfavored group that discrimination on the basis of such 

criteria is, constructively, facial discrimination against the 

disfavored group.” Davis v. Guam, 932 F.3d 822, 837 (9th 

Cir. 2019) (quoting Pac. Shores Props., LLC v. City of 

Newport Beach, 730 F.3d 1142, 1160 n.23 (9th Cir. 2013)). 

“For example, discriminating against individuals with gray 

hair is a proxy for age discrimination because ‘the “fit” 

between age and gray hair is sufficiently close.’” Id. at 837–

38 (quoting Pac. Shores Props., 730 F.3d at 1160 n.23).

Schmitt and Mohundro contend that hearing loss is a 

proxy for hearing disability. All individuals with hearing 

disability have hearing loss because “disability” is defined 

in part as “a physical or mental impairment that substantially 

limits one or more major life activities,” 42 U.S.C. 

§ 12102(1)(A), including “hearing,” id. § 12102(2)(A). But 

since not all hearing loss is substantial, at least some—and 

potentially most—individuals with that condition are not 

deemed disabled.

That the hearing loss exclusion also affects some nondisabled individuals does not doom Schmitt and Mohundro’s 

claim per se, since “overdiscrimination is prohibited.” Pac. 

Shores Props., 730 F.3d at 1160. “Discriminatory laws, 

policies, or actions will often have negative effects (whether 

intended or not) on individuals who do not belong to the 

disfavored group,” yet “such laws, policies, or actions are 

discriminatory when they are undertaken for the purpose of 

harming protected individuals.” Id.

The Supreme Court considered an overinclusive proxy 

in Rice v. Cayetano, 528 U.S. 495 (2000), where a state law 

discriminated on the basis of ancestry, providing benefits to 
SCHMITT V. KAISER FOUND. HEALTH PLAN 25

individuals whose lineage traced to pre-1778 Hawaii. The 

state argued that the classification was not race-based in part 

because Polynesians were not the only race in Hawaii in 

1778. Id. at 514. Rejecting that argument, the Supreme 

Court observed that “[a]ncestry can be a proxy for race,” and 

“[e]ven if the residents of Hawaii in 1778 had been of more 

diverse ethnic backgrounds and cultures, it is far from clear 

that a voting test favoring their descendants would not be a 

race-based qualification.” Id. at 514.

Here, Schmitt and Mohundro allege no facts giving rise 

to an inference of intentional discrimination besides the 

exclusion itself. Thus, the crucial question is whether the 

proxy’s “fit” is “sufficiently close” to make a discriminatory 

inference plausible. Davis, 932 F.3d at 838 (quoting Pac. 

Shores Props., 730 F.3d at 1160 n.23). The second amended 

complaint sheds no light on the answer.

The complaint does not make clear to what extent the 

proxy is overinclusive. Schmitt and Mohundro allege that 

“[u]nder the Exclusion, only people with Hearing Loss, a 

qualifying disability, are excluded from the benefits that they 

require.” However, they define “people with Hearing Loss” 

to include all persons with hearing loss that cannot be treated 

with cochlear implants—not just those with disabilities—so 

it is impossible to infer whether the exclusion primarily 

affects disabled persons. Schmitt and Mohundro claim in 

their brief that “few, if any, non-disabled insureds had claims 

denied under the Hearing Loss Exclusion,” but this 

allegation is not in their second amended complaint and in 

any event requires further explanation to be plausible.8

8 We recognize that prior to discovery it may be difficult for Schmitt 

and Mohundro to allege with statistical accuracy the number of policy 
26 SCHMITT V. KAISER FOUND. HEALTH PLAN

At the same time, Schmitt and Mohundro’s alleged 

proxy is underinclusive because it excludes hearing disabled 

individuals who “require or will require treatment . . . 

associated with cochlear implants.” Just as “[t]he benefit . . . 

cannot be defined in a way that effectively denies otherwise 

qualified [disabled] individuals the meaningful access to 

which they are entitled,” Choate, 469 U.S. at 301, a section 

1557 plaintiff cannot define the benefit so narrowly as to 

require an insurer to curate coverage for each individual’s 

health care needs. Kaiser covers cochlear implants and 

related services, and some proportion of hearing disabled 

insureds can meet their treatment needs through cochlear 

implants alone. We are left to guess what that proportion 

might be. The district court asserted that cochlear implants 

are “medically appropriate only when the hearing loss is 

significant and therefore disabling,” but that assertion is not 

in the complaint. Still, nothing in the complaint suggests 

otherwise. If cochlear implants serve the needs of most 

individuals with hearing disability, that fact would tend to 

undermine a claim of proxy discrimination.

Because Schmitt and Mohundro’s allegations fail to 

show the fit of their alleged proxy, they do not state a claim 

claims by disabled persons relative to non-disabled persons that were 

denied under the hearing loss exclusion, as this information may reside 

exclusively with Kaiser. At the pleadings stage, we do not require a

plaintiff to allege enough detail to state a prima facie case of 

discrimination, see Swierkiewicz v. Sorema N.A., 534 U.S. 506, 515 

(2002)—only “sufficient factual matter, accepted as true, to ‘state a 

claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 

662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 

(2007)). Schmitt and Mohundro may be able to meet this burden, for 

example, by alleging facts showing how the needs of hearing disabled 

persons differ from the needs of persons whose hearing is merely 

impaired such that the exclusion is likely to predominately affect 

disabled persons.
SCHMITT V. KAISER FOUND. HEALTH PLAN 27

for disability discrimination under section 1557. We 

therefore affirm the district court’s dismissal of the second 

amended complaint. “[I]n dismissing for failure to state a 

claim under Rule 12(b)(6), ‘a district court should grant 

leave to amend even if no request to amend the pleading was 

made, unless it determines that the pleading could not 

possibly be cured by the allegation of other facts.’” Lopez v. 

Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) 

(quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 

1995)). Because Schmitt and Mohundro may be able to 

amend their pleading with details that would raise an 

inference of proxy discrimination or some other theory of 

relief, we reverse the district court’s decision not to allow 

amendment and remand with instructions to do so.

AFFIRMED in part, REVERSED in part, and 

REMANDED.