Jeannette Simonton, V. Washington State Health Care Authority

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 JEANNETTE SIMONTON and RYAN
 KELSO, each on their own behalf and                 No. 86988-4-I
 on behalf of similarly situated others,
                                                     DIVISION ONE
               Appellants,
                                                     PUBLISHED OPINION
               v.

 WASHINGTON STATE HEALTH CARE
 AUTHORITY; and SUE BIRCH, director
 of the Washington State Health Care
 Authority and chair of the Public
 Employees Benefits Board and School
 Employees Benefit Board, in her official
 capacity,

               Respondents.


       BIRK, J. — The Washington State Health Care Authority (HCA) denied

coverage to Jeanette Simonton and Ryan Kelso for medications prescribed to treat

obesity, based on an exclusion in the HCA’s Uniform Medical Plan (UMP) for

prescription drugs to treat obesity. On behalf of a putative class, Simonton and

Kelso argue that denying coverage because the prescription was to treat obesity,

a recognized disability, rather than because of any “evidence-based” or other

“legitimate clinical justification,” amounted to discrimination in “benefit design . . .

because of . . . present or predicted disability,” in violation of RCW

48.43.0128(1)(a). The superior court dismissed their claims, reasoning that a

regulation, WAC XXX-XX-XXXX, specifically authorized the exclusion. However, the
No. 86988-4-I/2


regulation only establishes minimum benefits that plans must offer, and does not

address whether the plan benefit design is discriminatory. The regulation does not

defeat as a matter of law Simonton and Kelso’s claims that the plan benefit design

was discriminatory in violation of RCW 48.43.0128(1)(a). We therefore reverse

dismissal of their claims. We do not hold that Washington plans must cover

prescription drugs to treat obesity, but only that discovery may proceed and

Simonton and Kelso may attempt to show through evidence that the UMP’s

exclusion of coverage was discriminatory. An exclusion is not discriminatory if it is

based on “appropriately utilizing reasonable medical management techniques,” or

if it excluded “a service that is not medically necessary.” RCW 48.43.0128(2), (5).

                                            I

       Because we are reviewing rulings on a motion to dismiss for failure to state

a claim upon which relief can be granted under CR 12(b)(6) and a motion for

judgment on the pleadings under CR 12(c), we accept as true the factual

allegations contained in the complaint and may consider hypothetical facts

supporting the claim. Wash. Trucking Ass’ns v. Emp’t Sec. Dep’t, 188 Wn.2d 198,

207, 393 P.3d 761 (2017).

       Simonton and Kelso were state employees and “enrollees in [HCA’s] health

benefit plan(s) in the State of Washington,” here the UMP. The HCA’s “2023 UMP

Classic [Public Employees Benefits Board] (PEBB) Certificate of Coverage,” lists

“[e]xcluded drugs and products,” which “include, but are not limited to, prescription

drugs for . . . [o]besity (or weight loss).” This exclusion applies “even if the services

are medically necessary.”       Some obesity treatments are covered in certain


                                           2
No. 86988-4-I/3


circumstances, such as “bariatric surgery” or “[n]utrition counseling and therapy,”

but the plan excludes “[a]ny . . . drugs . . . for weight control, weight loss, or obesity

treatment.”

       Simonton and Kelso allege they each were diagnosed with obesity by a

treating physician and received a prescription for medication to treat the diagnosis

of obesity. Simonton was informed that “ ‘medications used for weight loss are in

a category of medications that are not covered under your prescription benefit’ ”

and was “provided no other basis for the denial” such as a “determination that the

treatment was not medical necessity or experimental/investigational.”              Kelso

similarly “submitted a request for preauthorization to [the HCA], which was denied

based solely on the exclusion.”

       Simonton and Kelso filed a putative class action complaint against the HCA.

They say the obesity exclusion “is a form of benefit-design discrimination targeted

at disabled individuals with obesity.”      Under RCW 48.43.0128(1)(a), a health

carrier may not, in its benefit design or implementation, “discriminate against

individuals because of their . . . present or predicted disability.” And under the

Washington Law Against Discrimination (WLAD), ch. 49.60 RCW, obesity is

recognized as a disability. Taylor v. Burlington N. R.R. Holdings, 193 Wn.2d 611,

615, 444 P.3d 606 (2019). Simonton and Kelso argue that excluding coverage for

prescription medication to treat obesity is prohibited discrimination on the basis of

disability. They asserted claims for breach of contract and violation of the WLAD.

       The superior court dismissed the breach of contract claim under CR

12(b)(6), and later dismissed the WLAD claim under CR 12(c). Interpreting WAC


                                            3
No. 86988-4-I/4


XXX-XX-XXXX as “specifically authoriz[ing] health plans to exclude prescription

drugs for the treatment of obesity,” the court reasoned that, as something that is

expressly allowed, excluding treatment for obesity “is not illegal discrimination.” In

addition, as to the WLAD claim, the superior court ruled that Simonton and Kelso

had not alleged disparate treatment because of disability, because they did not

allege that the plan covered prescription drugs for weight loss for some persons,

but not those within the protected class. To hold otherwise, the court reasoned,

would require health plans “to cover every treatment for every impairment that

meets [the] WLAD’s broad definition of disability.” Simonton and Kelso appeal.

                                           II

       Courts “treat a CR 12(c) motion for judgment on the pleadings identically to

a CR 12(b)(6) motion to dismiss for failure to state a claim.” P.E. Sys., LLC v. CPI

Corp., 176 Wn.2d 198, 203, 289 P.3d 638 (2012). For both, we review de novo

whether “a plaintiff can prove any set of facts that would justify relief.” Id.

                                           A

       Two Washington statutory provisions generally bar discrimination in

insurance, with certain carveouts. The WLAD guarantees “[t]he right to be free

from discrimination” based on, among other statuses, “the presence of any

sensory, mental, or physical disability,” and this includes “[t]he right to engage in

insurance transactions.” RCW 49.60.030(1)(e).           The insurance code, title 48

RCW, states in relevant part that, notwithstanding any provision contained in title

48 RCW to the contrary, “[t]he amount of benefits payable, or any term, rate,

condition, or type of coverage may not . . . be restricted, modified, excluded, or


                                           4
No. 86988-4-I/5


reduced on the basis of the presence of any disability of the insured or prospective

insured.” RCW 48.30.300(1).

       Among the carveouts, a WLAD proviso states that a practice that is “not

unlawful” under three provisions of the insurance code “does not constitute an

unfair practice for the purposes of this subparagraph.” RCW 49.60.030(1)(e).

Each of those provisions—RCW 48.30.300, 48.44.220, and 48.46.370—prohibits

certain kinds of discrimination, with certain other carveouts. The WLAD proviso

exempts those carveouts from the WLAD. Relevant here is RCW 48.30.300, which

generally prohibits certain kinds of discrimination, but provides a carveout for “fair

discrimination on the basis of sex, or marital status, or the presence of any

disability when bona fide statistical differences in risk or exposure have been

substantiated.” RCW 48.30.300(2). But this carveout is subject to exceptions,

including under RCW 48.43.0128. Id. So, the “fair discrimination” authorization is

eliminated—and the general prohibition against discrimination is not subject to the

exception—if the discrimination is prohibited by RCW 48.43.0128.1

       This provision deals specifically with health insurance. RCW 48.43.0128

adopts as Washington law a prohibition against discrimination analogous to one in

the Patient Protection and Affordable Care Act (ACA), Pub. L. No. 111–148, 124

Stat. 119 (2010). Generally, the ACA “bars insurers from taking a person’s health


       1 Unlike an insurer-issued plan, the UMP’s certificate of coverage is “[s]elf

insured by the State of Washington.” The HCA is not a “health carrier” as defined
by RCW 48.43.005(31)(j) or WAC XXX-XX-XXXX(18)(i). But “[e]ach health plan that
provides medical insurance” offered under the code chapter chartering the HCA is
“subject to the provisions of RCW . . . 48.43.0128.” RCW 41.05.017. Thus, the
UMP is subject to RCW 48.43.0128.


                                          5
No. 86988-4-I/6


into account when deciding whether to sell health insurance or how much to

charge.” King v. Burwell, 576 U.S. 473, 479, 135 S. Ct. 2480, 192 L. Ed. 2d 483

(2015). The ACA also prohibits certain kinds of discrimination. Before the ACA,

an insurer could generally “design plans to offer or exclude benefits as it saw fit,”

so far as federal law was concerned. Schmitt v. Kaiser Found. Health Plan of

Wash., 965 F.3d 945, 948 (9th Cir. 2020). Under the ACA, an individual shall not

be “excluded from participation in, be denied the benefits of, or be subjected to

discrimination under, any health program or activity, any part of which is receiving

Federal financial assistance,” on grounds prohibited by four federal anti-

discrimination statutes. 42 U.S.C. § 18116(a). As a result, the ACA prohibits

discrimination in the design of plan benefits. Schmitt, 965 F.3d at 954. The ACA

“does not guarantee individually tailored health care plans,” but it “imposes an

affirmative obligation not to discriminate in the provision of health care—in

particular, to consider the needs of disabled people and not design plan benefits

in ways that discriminate against them.” Id. at 955.

       RCW 48.43.0128 imposed a similar prohibition against discrimination as a

matter of Washington law. A covered health carrier may not “[i]n its benefit design

or implementation of its benefit design, discriminate against individuals because of

their age, expected length of life, present or predicted disability, degree of medical

dependency, quality of life, or other health conditions.” RCW 48.43.0128(1)(a).

However, the law “may [not] be construed to prevent a carrier from appropriately

utilizing reasonable medical management techniques,” and it may not be

construed to “mandate coverage of a service that is not medically necessary.”


                                          6
No. 86988-4-I/7


RCW 48.43.0128(2), (5). Finally, the law grants rule-making authority to the Office

of the Insurance Commissioner (OIC). RCW 48.43.0128(7)-(8).

       Simonton and Kelso acknowledge that the plan may exclude coverage

based on “evidence-based, clinical justifications.” The plan excludes services that

are “not medically necessary for the diagnosis and treatment of injury or illness or

restoration of physiological functions and are not covered as preventive care.”

Among other things, to be considered “medically necessary,” a level of service,

supply, intervention, prescription drug or prescription drug dose must be

appropriate considering the potential benefits and harm to the member, known to

be effective in improving health outcomes, and cost-effective compared to

alternative interventions, including no intervention. Determining medical necessity

includes consideration of scientific evidence, and whether “the benefits and harms

relative to the costs represent an economically efficient use of resources for

members with this condition.”

       Simonton and Kelso’s claims were not denied based on these factors.

Simonton and Kelso maintain that excluding coverage for a treatment because it

is for obesity is unlawfully discriminatory where it lacks “any legitimate clinical

justification.” They are supported by the plain language of the nondiscrimination

statute, under which a covered health carrier may not “[i]n its benefit design or

implementation of its benefit design, discriminate against individuals because of

their . . . present or predicted disability . . . or other health conditions.” RCW

48.43.0128(1)(a). The nondiscrimination statute allows excluding coverage for

services to treat a disability for an undefined range of valid reasons, for instance


                                         7
No. 86988-4-I/8


because they are experimental, not effective, or not cost-effective (among other

reasons), but it prohibits excluding coverage for services simply because they are

to treat that disability. To do so would discriminate “because of” that disability.

                                          B

       The HCA responds that a regulation implementing the nondiscrimination

statute, WAC XXX-XX-XXXX, expressly authorizes excluding services to treat

obesity. Section 5642(1)(b) states, “A health benefit plan may, but is not required

to, include . . . as part of the EHB-benchmark[2] package . . . [o]besity or weight

reduction or control,” WAC XXX-XX-XXXX(1)(b)(viii), and says the same of “[w]eight

loss drugs,” WAC XXX-XX-XXXX(6)(b)(ii). The HCA interprets the regulation as

expressly authorizing the exclusion of services for obesity or weight reduction,

says that this is an implementation of RCW 48.43.0128(1)(a), and implies that the

regulation amounts to rulemaking that excluding these services is not a violation

of the nondiscrimination statute. Simonton and Kelso argue that section 5642 does

not determine compliance with the nondiscrimination requirement, which is a

separate requirement with which plans must independently comply. They say

section 5642 serves a narrower purpose of establishing only benefit minimums.

The background of the ACA supports Simonton and Kelso’s argument.

       Under the ACA, a covered health insurance issuer “shall ensure” that its

coverage “includes the essential health benefits package” required under 42

U.S.C. § 18022(a). 42 U.S.C. § 300gg-6(a). The ACA required the Secretary of

       2 “ ‘EHB-benchmark plan’ means the set of benefits that an issuer must

include in nongrandfathered plans offered in the individual or small group market.”
WAC XXX-XX-XXXX.


                                          8
No. 86988-4-I/9


Health and Human Services (HHS) to define “essential health benefits” in 10

categories. 42 U.S.C. § 18022(b)(1)(A)-(J). In defining essential health benefits,

HHS was to, among other things, “not . . . design benefits in ways that discriminate

against individuals because of their age, disability, or expected length of life,” and

“take into account the health care needs of diverse segments of the population,

including women, children, persons with disabilities, and other groups.” 42 U.S.C.

§ 18022(b)(4)(B)-(C). The ACA relied on the “actuarial value” of the benefits to

recognize four “levels of coverage.” 42 U.S.C. § 18022(d)(1), (2)(A).

       Under federal regulations, providing essential health benefits means

providing benefits “substantially equal” to an “EHB-benchmark” plan. 45 C.F.R. §

156.115(a)(1). States may establish an EHB-benchmark plan by starting with a

“base-benchmark” plan and updating it to meet ACA standards. 45 C.F.R. §

156.100, .100(b). Federal regulations allow an issuer of a plan to “substitute

benefits for those provided in the EHB-benchmark plan,” but require that any

substitute benefit be actuarially equivalent, allow states to prohibit substitute

benefits within the same EHB category, and prohibit substitution between EHB

categories.   45 C.F.R. § 156.115(b)(1)(i), (2).     The OIC first established the

Washington benchmark plan in regulations adopted in 2013. WSR 13-15-025.

       In the 2013 regulations, the OIC defined essential health benefits in former

WAC 284-43-878 (2013). The language whose import the parties dispute largely

dates from the original regulations and remains similar in current section 5642.

One essential health benefit category that a plan “must cover” is “ ‘ambulatory

patient services.’ ” WAC XXX-XX-XXXX(1). The regulation directs that an insurer


                                          9
No. 86988-4-I/10


classify certain services under this category “[f]or purposes of determining a plan’s

actuarial value.” Id. It lists services that a plan “must include” and classify as

ambulatory patient services. WAC XXX-XX-XXXX(1)(a). Then, it lists services that

a plan “may, but is not required to, include” as part of the benchmark package.

WAC XXX-XX-XXXX(1)(b). If a plan includes these benefits, “the issuer should not

include” them “in establishing actuarial value for the ambulatory category.” 3 Id.

The services that may be included, are not required to be included, and if included

may not be used in actuarial value include “[o]besity or weight reduction or control,”

with certain exceptions. WAC XXX-XX-XXXX(1)(b)(viii). Likewise, both former WAC

284-43-878(6)(b)(ii) (2013) and WAC XXX-XX-XXXX(6)(b)(ii) identify “[w]eight loss

drugs” as services that a plan may, but is not required to, include as part of the

EHB-benchmark package, and may not include in establishing the actuarial value

for the prescription drug category.

       A clear focus of section 5642 is on “determining a plan’s actuarial value.”

E.g. WAC XXX-XX-XXXX(1). Section 5642 specifies certain benefits that a plan

must include. Then, it specifies benefits that a plan may include. It then explains

that the latter benefits may not be included in determining the plan’s actuarial

value. Thus, section 5642 accomplishes two things clearly, both of which relate to

the actuarial value of a plan. First, it requires plans to cover essential health

benefits, and second, it prevents certain other benefits from counting towards the

plan’s actuarial value.


       3  It originally read, “These services . . . should not be included in
establishing actuarial value for this category.” Former WAC 284-43-878(1)(b).


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No. 86988-4-I/11


       This serves the ACA’s goal of covering essential health benefits. Further,

specifying benefits that may not be included in actuarial value is consistent with

federal law allowing states to prohibit the substitution of benefits “within the same

EHB category.” 45 C.F.R. § 156.115(b)(2). And it is consistent with the principle

that a plan must “provide coverage that is substantially equal to the EHB-

benchmark plan,” where “substantially equal” requires that each EHB category be

a meaningful health benefit and deliver value substantially equal to the EHB-

benchmark plan both in the aggregate and category-by-category. WAC 284-43-

5622(1)(a)-(b). By preventing coverage for obesity treatment from adding to the

actuarial value for ambulatory patient services, section 5642 ensures that

coverage cannot be reduced for essential health benefits without reducing the

actuarial value of the plan and its categorization under the ACA.

       But these background purposes do not support that section 5642 also

means that a plan providing minimum benefits is not discriminatory. Schmitt came

to the same conclusion with respect to the ACA’s nondiscrimination requirement,

adopting federal regulators’ position that “compliance with federal and state law

regarding essential health benefits did not guarantee compliance with the ACA's

nondiscrimination requirement.”      965 F.3d at 956.       The nondiscrimination

requirement of RCW 48.43.0128 must be met independently of compliance with

the essential health benefits mandates of section 5642.

                                         C

       The HCA’s arguments to the contrary are not convincing.




                                         11
No. 86988-4-I/12


                                           1

       The HCA relies on the fact that section 5642 lists the nondiscrimination

statute, RCW 48.43.0128, among the statutory authority that it implements. The

HCA implies that section 5642 amounts to a rule that excluding coverage for

obesity and weight loss is not discriminatory under RCW 48.43.0128. The history

of the two provisions signals otherwise.        Section 5642 allowed exclusion of

coverage for obesity and weight loss and prevented their counting towards

actuarial value years before Washington enacted the nondiscrimination

requirement.

       The OIC first promulgated the relevant language now appearing in section

5642 in 2013.4      Six years later, in 2019, the legislature first enacted the

nondiscrimination provisions in RCW 48.43.0128. That provision included new

rulemaking authority. RCW 48.43.0128(7). The OIC relied on RCW 48.43.0128

to amend section 5642 in 2020, published at Washington State Register 20-03-

114, with the purpose to “implement the legislative directives” in the bill that created

RCW 48.43.0128. Wash. St. Reg. 20-03-114 (citing LAWS Of 2019, ch. 33); see

LAWS OF 2019, ch. 33, § 15.          This amendment made no changes to the

longstanding provisions defining essential health benefit categories, and their

prohibitions on using services for obesity and weight loss to contribute to actuarial


       4 Published at Washington State Register 13-15-025, former WAC 284-43-

878 (2014) defined the essential health benefit categories. In 2015, at Washington
State Register 15-20-042, the OIC set an expiration for former WAC 284-43-878,
and established former WAC XXX-XX-XXXX (2017). And in 2016, at Washington
State Register 16-01-081, the OIC recodified former WAC XXX-XX-XXXX as section
5642.


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No. 86988-4-I/13


value. See WAC XXX-XX-XXXX(1)(b)(viii), (6)(b)(ii). Among other changes not

relevant here, WSR 20-03-114 added a new paragraph requiring benefits to be

consistent with federal rules in effect on January 1, 2017. WAC XXX-XX-XXXX(12).

These enactments signal intent to adopt a Washington baseline for essential

health benefits with a nondiscrimination requirement consistent with federal

standards in effect on January 1, 2017.

       The text of section 5642 distinguishes between benefits that must be

included and those that may be included or excluded but cannot count towards

actuarial value, which serves the ACA’s purposes in mandating baseline benefits

and comparability between benefit levels. Yet nothing in the text signals that the

distinction was also meant to be determinative of discrimination in benefit design.

When the OIC promulgated the distinction in 2013, the nondiscrimination rule

existed only as a federal requirement, whose scope is exclusively a federal

question. Schmitt, 965 F.3d at 956-57 (“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.”). When Washington added its own nondiscrimination requirements in

2019 and 2020, they did not transform preexisting rules serving different purposes

into now also serving to define what is or is not discrimination.5

       5 The parties refer us to the OIC’s January 16, 2020 concise explanatory

statement relating to its rulemaking implementing the 2019 legislation. OFF. OF
INS. COMM’R, MATTER NO. R2019-10, CONCISE EXPLANATORY STATEMENT;
RESPONSIVENESS SUMMARY; RULE DEVELOPMENT PROCESS; AND IMPLEMENTATION
PLAN (2020). With reference to section 5642’s permitting the exclusion of treatment
for hearing loss, obesity and other services, three commenters asked the OIC to
“[m]ake it clear that the non-discrimination section applies to all categories of


                                          13
No. 86988-4-I/14


                                         2

      This conclusion forecloses the HCA’s argument that Simonton and Kelso

are challenging agency rulemaking and are therefore limited to making a challenge

under the Administrative Procedure Act (APA), ch. 34.05 RCW.

      With exceptions not relevant here, the APA establishes the exclusive means

for judicial review of agency action. RCW 34.05.510; Lakeside Indus., Inc. v. Dep’t

of Revenue, 1 Wn.3d 150, 155, 524 P.3d 639 (2023). This includes judicial review

of challenges to a regulation based on the theory that the implementing agency

has exceeded its statutory authority. See RCW 34.05.570(2)(c), (3)(b), (4)(c)(ii)

(courts may grant relief under the APA when an agency rule, order, or other action

exceeds the statutory authority of the agency). Section 5642 does not determine

the question of discrimination. Simonton and Kelso are not challenging the validity

of section 5642 in asserting that their plan design violated RCW 48.43.0128. Their

claim does not fall under the APA.

                                         3

      The HCA also points to legislative action that it says shows that it is legally

prohibited from adding coverage for prescription drugs for the treatment of obesity

to the UMP. First, the legislature considered, but did not enact, bills that would



essential health benefits.” Id. at 11-12. In response, the OIC said that the new
nondiscrimination provision was “a statement of general application” and it was
“not necessary” to restate it in every specific category. After describing the
structure of the rule, the OIC concluded, “The rule does not state that the excluded
benefits may continue to be excluded; instead it states that they are improperly
excluded.” Id. at 12. The OIC’s answer does not determine the issue before us.
But our holding that RCW 48.43.0128 is independent of EHB benefit minimums is
consistent with the OIC’s answer.


                                        14
No. 86988-4-I/15


have added coverage for prescription drugs to treat obesity. See S.B. 6182, 68th

Leg., Reg. Sess. (Wash. 2024); S.B. 5353, 69th Leg., Reg. Sess. (Wash. 2025);

H.B. 1326, 69th Leg., Reg. Sess. (Wash. 2025). However, “[n]othing can be

inferred from the legislature’s inaction on [a] proposed bill.” City of Medina v.

Primm, 160 Wn.2d 268, 280, 157 P.3d 397 (2007).

      Second, the HCA points to provisions, most recently in the 2025 operating

budget, directing the HCA not to cover prescription drugs to treat obesity or weight

loss because of the insufficiency of the funding rate for insurance benefit

premiums.6 See LAWS OF 2025, ch. 424, § 909(5). But the budget does not resolve

the CR 12 motions before us, because a budget bill typically is not accepted to

alter substantive law. Courts have “ ‘repeatedly indicated the Legislature may not

abolish or adopt substantive law in an appropriations bill’ ” and further “construed

[Washington Constitution] art. II, § 19 to forbid inclusion of substantive law in

appropriations bills.” Wash. State Legislature v. State, 139 Wn.2d 129, 144-45,

985 P.2d 353 (1999) (quoting Wash. State Legislature v. Lowry, 131 Wn.2d 309,

328 n.11, 931 P.2d 885 (1997)).

      The legislature mandated nondiscrimination in benefit design through RCW

48.43.0128.   Whether the noncoverage of Simonton and Kelso’s claims was

discriminatory under RCW 48.43.0128 is a separate question from whether the

      6 The legislature is actively studying the possibility of coverage for obesity

and weight loss. See LAWS OF 2025, ch. 424, § 145(11)(a) (analysis of the cost to
implement an obesity treatment benefit); LAWS OF 2024, ch. 376, § 212(9) (“By
December 1, 2024, the authority shall submit a report to the legislature describing
options, and a recommendation, for possible future coverage in the uniform
medical plan for food and drug administration approved glucagon-like peptide 1
agonists for the treatment of obesity and weight loss.”).


                                        15
No. 86988-4-I/16


legislature anticipated a given coverage. This is not to say the HCA’s funding

concern is not relevant. As already noted, RCW 48.43.0128(2) authorizes the use

of “reasonable medical management techniques” and expressly does not mandate

services that are not medically necessary. RCW 48.43.0128(2), (5). The exclusion

for services that are not medically necessary incorporates considerations of costs

and benefits, among other considerations. At the CR 12 stage, however, we

accept as true Simonton and Kelso’s allegation that the HCA never evaluated

whether prescription drugs to treat obesity can be medically necessary, and

instead arbitrarily targeted a particular disability, obesity, for noncoverage.

Simonton and Kelso allege the HCA “did not engage in a ‘cost-benefit’ analysis to

determine whether coverage for treatment related to obesity should be added” but

rather excluded coverage for their claims for treatment of obesity “because it had

always done so.” This alleges a violation of RCW 48.43.0128.

                                         III

       We last address the viability of Simonton and Kelso’s claims for breach of

contract and for violation of the WLAD to enforce the alleged violation of RCW

48.43.0128. We conclude each claim may proceed.

                                         A

       Limitations in insurance contracts contrary to public policy and statute will

not be enforced, but otherwise insurers are permitted to limit their contractual

liability. Brown v. Snohomish County Physicians Corp., 120 Wn.2d 747, 753, 845

P.2d 334 (1993). “ ‘There is no longer any judicial doubt that the state may regulate

insurance, so closely is that industry affected with the public interest, and


                                         16
No. 86988-4-I/17


regulatory statutes become a part of the policy of insurance. Thus, a valid statute

becomes a part of and should be read into the insurance policy.’ ” McLaughlin v.

Travelers Com. Ins. Co., 196 Wn.2d 631, 640, 476 P.3d 1032 (2020) (quoting

Touchette v. Nw. Mut. Ins. Co., 80 Wn.2d 327, 332, 494 P.2d 479 (1972)). When

the insured makes a prima facie case that there is coverage, the burden is on the

insurer to prove that the loss is not covered because of an exclusionary provision

in the policy. Brown, 120 Wn.2d at 758-59.

      With their allegations taken as true, Simonton and Kelso adequately allege

that they sought treatment for potentially covered, medically necessary services.

For the reasons discussed below concerning discrimination and the WLAD, they

also adequately allege that their claims were denied based on using an exclusion

in violation of a statute. For purposes of CR 12, this adequately alleges that the

denial of coverage was a breach of contract.

                                         B

      The trial court dismissed Simonton and Kelso’s WLAD claim for two

reasons. First, the court explained, Simonton and Kelso argued “the challenged

actions are subject to WLAD because a violation of RCW 48.43.0128 in a health

benefit contract is also discrimination under RCW 49.60.030(1).” But the trial court

ruled that section 5642 was determinative of discrimination under RCW

48.43.0128, therefore there could not be a violation of RCW 48.43.0128 or the

WLAD. The HCA defends the trial court’s ruling dismissing the WLAD claim on

only this ground, arguing that because “state law expressly authorizes the

exclusion of drugs for obesity and weight loss,” it follows that “the contract


                                        17
No. 86988-4-I/18


exclusion in the Uniform Medical Plan’s Certificate of Coverage cannot be a valid

basis of a WLAD claim.” But because section 5642 does not have this legal effect,

Simonton and Kelso’s WLAD claims are not defeated on this basis. Discrimination

in violation of RCW 48.43.0128(1)(a) may violate RCW 49.60.030(1)(e), if the

elements of WLAD liability are also met.7

       Second, the trial court ruled that Simonton and Kelso had not adequately

pleaded disparate treatment based on disability in violation of RCW 49.60.030(1).

Liability under the WLAD requires as one element8 a showing “that the defendant

discriminated against the plaintiff by providing treatment not comparable to the

level of services provided to individuals without disabilities.” Wash. State Commc’n

Access Project v. Regal Cinemas, Inc., 173 Wn. App. 174, 187, 293 P.3d 413

(2013); accord Fell v. Spokane Transit Auth., 128 Wn.2d 618, 637, 911 P.2d 1319

(1996). In this court, the HCA does not attempt to defend the trial court’s ruling on

this ground, but we reach it because it will arise on remand.

       7 In contrast, to the extent the insurer is “appropriately utilizing reasonable

medical management techniques” or excluding services that are not medically
necessary, RCW 48.43.0128(2), (5), then the insurer does not violate RCW
49.60.030(1)(e). This is the appropriate harmonization of the two statutes, and, if
harmonization were not possible, the same result that would follow from the
general-specific canon of construction. See O.S.T. ex rel. G.T. v. BlueShield, 181
Wn.2d 691, 701, 335 P.3d 416 (2014).
        8 We have not identified a Washington decision describing the elements of

a WLAD claim for disability discrimination in an insurance transaction. In the
absence of an existing decision, the elements of this iteration of a WLAD claim
must be adapted from existing decisions on disability discrimination, such as Fell
v. Spokane Transit Auth., 128 Wn.2d 618, 637, 911 P.2d 1319 (1996), among
others. The parties’ briefing and our decision focus on the grounds on which the
superior court dismissed the plaintiffs’ claims. Because the parties have not
specifically briefed the full articulation of the elements plaintiffs would have to meet
to establish WLAD liability, we believe it is most prudent to permit the parties to
brief this issue on remand.


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       Taking the allegations in the complaint as true, the plan arbitrarily barred

coverage for certain kinds of treatment for a particular disability, for no reason more

than they were to treat that disability. This does not mandate a conclusion of

discrimination because of that disability, but it permits that inference. Schmitt

explained, “[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.” 965 F.3d

at 949. A similar inference is present here. For those with obesity, the potential

discrimination lay in the plan’s allegedly arbitrary limitation on coverage for their

disability, as opposed to others having different health needs. The plan covers

some services to treat obesity, which runs counter to a conclusion of

discrimination. Yet according to Simonton and Kelso’s allegations, the exclusion

for prescription drugs to treat obesity is nevertheless categorically based on

nothing more than the drugs’ treating that disability. This supports an inference of

discrimination “because of” the presence of a disability in violation of RCW

48.43.0128(1)(a) and RCW 49.60.030(1).9

       But a finding of discrimination is not a foregone conclusion, nor is the extent

of any discrimination that may be found necessarily as far reaching as Simonton

and Kelso maintain. Allowing Simonton and Kelso to proceed to discovery and

attempt to prove a violation of RCW 48.43.0128 does not raise the specter forecast


       9 We do not limit the framing of Simonton and Kelso’s claims as disparate

treatment, disparate impact, proxy discrimination, or overdiscrimination. See
Hegwine v. Longview Fibre Co., Inc., 162 Wn.2d 340, 353-54 n.7, 355 n.8, 172
P.3d 688 (2007); Schmitt, 965 F.3d at 958.


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by the trial court that plans would have to cover “every treatment for every

impairment that meets WLAD's broad definition of disability.” Excluding coverage

for supported clinical or cost-benefit reasons, among others, is not unlawfully

discriminatory.    RCW 48.43.0128(2), (5).       There could be “a reasonable,

nondiscriminatory reason” for the exclusion for prescription drugs for obesity, and

even if Simonton and Kelso were to prevail and the exclusion had to be limited to

the extent it is discriminatory, the plan could still use exclusions “based on

nondiscriminatory standards” such as excluding “treatment that is experimental or

has a high cost-to-benefit ratio” based on the efficacy of the treatment and its cost

at the time the benefit plan became effective. Schmitt, 965 F.3d at 958. What the

statute does not permit, and what the ACA was designed fundamentally to reform,

is what Simonton and Kelso allege happened here—a plan’s deciding not to deal

with a person’s disability for no reason other than “because it had always done so.”

                                         IV

       We reverse and remand for proceedings consistent with this opinion.




WE CONCUR:




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