Health Plans Must Cover Transgender Care, Fourth Cir. Says (2)

Two states’ health plans’ blanket coverage exclusions for gender-affirming care are unconstitutional, the full Fourth Circuit said Monday.

A North Carolina state employee health plan violates the 14th Amendment’s equal protection clause by refusing to pay for medically necessary gender-dysphoria treatments, a slim majority of the US Court of Appeals for the Fourth Circuit said.

And West Virginia’s Medicaid program is unconstitutional to the extent that it pays for some gender-affirming care, but not for surgeries that are typically covered for non-transgender patients, the court also said. The exclusion violates the Affordable Care Act and the Medicaid Act, it said.

The decision affirmed lower federal courts in North Carolina and West Virginia, and addressed an issue that’s bedeviling other courts that are considering transgender rights issues—including the validity of state laws banning gender-affirming car for minors and school bathroom-use policies.

Appeals court disagreements on the discrete issue of whether a government action violates the 14th Amendment’s equal protection clause probably require US Supreme Court resolution, experts on LGBTQ+ rights have said. So far, the Sixth and Eleventh circuits have rejected the approach that the Fourth Circuit took, using heightened scrutiny, when deciding that state laws banning gender-affirming care for minors likely pass constitutional muster.

“Decisions like this one, from a court dominated by Obama- and Biden-appointees, cannot stand,” West Virginia Attorney General Patrick Morrisey (R) said. Morrisey vowed to take the case to the US Supreme Court “and win.” The state’s top lawyer added that he’s “confident in the merits of our case: that this is a flawed decision and states have wide discretion to determine what procedures their programs can cover based on cost and other concerns.”

North Carolina Treasuer Dale Folwell, a defendant in the case, said the Fourth Circuit’s decision failed to take account of the plan’s financial situation. The opinion “opens the way for any dissatisfied individual to override the plan’s reasoned and responsible decisions and drive the plan towards collapse,” he said.

The department’s mission is to protect the plan, which is “facing the real risk of looming insolvency,” Folwell said. Providing “coverage that does the most good for the highest number of people” with the limited resources available is the department’s priority, he said.

A majority of the Fourth Circuit’s active judges held that the exclusions discriminate against transgender people on the basis of sex and gender identity. Neither state showed that the exclusions were substantially related to important government interests, the majority said.

Transgender Rights

Lambda Legal Senior Counsel Tara Borelli, the lead lawyer on both lawsuits, praised the decision, saying it will save lives. Co-counsel and Lambda Legal Counsel and Health Care Strategist Omar Gonzalez-Pagan added that the court sent “a clear message that gender-affirming care is critical medical care for transgender people and that denying it is harmful and unlawful.”

“This ruling sets a clear precedent not just for North Carolina and West Virginia but to all jurisdictions within the Fourth Circuit, including South Carolina, where legislators are considering a discriminatory healthcare ban,” Gonzalez-Pagan said.

The split Fourth Circuit rejected the employee health plan’s argument that its refusal to pay for certain care was based on the medical diagnosis for which payment was sought, not the gender of the person requesting it. “In this case, discriminating on the basis of diagnosis is discriminating on the basis of gender identity and sex,” the court said. “The coverage exclusions are therefore subject to intermediate scrutiny,” under which the states were required to show “an exceedingly persuasive justification” for treating transgender people differently, it said,

Neither state could meed the heightened standard, the majority said.

The plan’s decision on whether to cover a claim requires an assessment of a participant’s sex assigned at birth, the majority also said. That’s “textbook” sex-based bias, Judge Roger L. Gregory said. Chief Judge Albert Diaz, Robert B. King, James Andrew Wynn, Stephanie D. Thacker, Pamela A. Harris, Toby J. Heytens, and DeAndrea Gist Benjamin joined.

Private attorneys for North Carolina’s employee health plan didn’t immediately respond to a request for comment.

Dissents Abound

Judge Julius N. Richardson, in a dissent joined by in full by Judges Judges J. Harvie Wilkinson III, Paul V. Niemeyer, and A. Marvin Quattlebaum Jr., and in part by Judges G. Steven Agee and Allison Jones Rushing, said “today’s result oversteps the bounds of the law.

“The Equal Protection Clause does not license judges to strike down any policy we disagree with,” Richardson said. “It instead grants the states leeway to tailor policies to local circumstances, while providing a carefully calibrated remedy for truly illicit discrimination.”

“No such discrimination appears in these cases, he said. The decision was “a defeat for the rule of law,” Richardson said.

In a separate dissent, Wilkinson asked why there is a “rush” to create a substantive 14th Amendment “right to transgender surgery underwritten by the State.”

“This is imperial judging at its least defensible,” Wilkinson said.

Quattlebaum, also in dissent, argued that the majority bent the rules of evidence with respect to proof of medical necessity and efficacy to reach its result.

The court, sitting en banc, heard oral arguments in Richmond on Sept. 21.

These were the first cases to put coverage questions before a full federal appeals court, and the outcomes could influence future decisions affecting trans rights in the health-care arena.

Lambda Legal Defense & Education Fund Inc., Transgender Legal Defense & Education Fund Inc., McDermott Will & Emery LLP, and HWG LLP represent the North Carolina plaintiffs. Bell, Davis & Pitt; and John Knepper of Cheyenne, Wyo., represent the defendants.

The case is Kadel v. Folwell, 4th Cir. en banc, No. 22-1721, 4/29/24.