STORY: Protesters marched through Peru's capital Lima on Friday urging the government scrap a new law that labels transgender people, among others, as having a mental illness.

Peru's government says the change aims to facilitate insurance coverage for transgender people, and "others with gender identity disorders", when they seek mental health care.

But it's courting backlash.

"Gender identities stopped being considered pathologies many years ago", says transgender activist Gahela Cari Contreras. She says "this is a transphobic law."

Peru bases its universal healthcare plan on the World Health Organization's International Classification of Diseases, or known as CIE-10 in Peru.

Lawmaker and neurologist Edward Malaga said the language, in this case, is obsolete.

"This law is outdated. It comes from 1994, if I am not wrong. The CIE-10 and the Ministry of Health have quoted unquote updated it but it's an outdated law as it declares homosexuality a disease, which is obviously out of discussion. It's not like that. What lawmakers have done is to ask the Ministry of Health to amend this."

Government officials insist there is a misunderstanding over the new law.

The health ministry says it rejects the stigmatization of LGBTQ people and the legal language simply seeks to ensure more complete health coverage.