Employer Healthcare Plans Must Include Coverage for Gender-Affirming Care, Says Landmark Fourth Circuit Decision

Fourth Circuit Court of Appeals

States belonging to the Fourth Circuit include Maryland, West Virginia, Virginia, North Carolina, and South Carolina.

On April 29, 2024, the Fourth Circuit handed down a joint opinion in the two cases of Anderson v. Crouch and Kadel v. Folwell. The court determined that gender identity is a protected characteristic and that medical discrimination infringes upon the equal protection rights of transgender individuals. Similarly, it ruled that Medicaid bans contravene both the Affordable Care Act and the Medicaid Act.

Gender dysphoria is a medical condition defined by the DSM-V as a “marked incongruence between one’s experienced/expressed gender and natal gender” that results in “clinically significant distress or impairment in social, occupational, or other important areas of functioning.” In contrast to the now-defunct diagnosis of “gender identity disorder,” which pathologized the very existence of transgender people, “gender dysphoria” encapsulates the extreme distress that is often present when one’s deeply-felt sense of gender identity is misaligned with one’s assigned sex at birth.

The 2020 Supreme Court decision Bostock v. Clayton County held that discrimination on the basis of someone’s gender identity or sexual orientation is discrimination on the basis of sex. Firing someone because they are trans, then, is prohibited by federal law.

Because of the unique association in America between employment and health insurance, employer healthcare plans cannot legally deny coverage for gender-affirming treatment when the same treatments are available for non-transgender employees. For example, an employer healthcare plan that provides coverage for hormone therapy to treat an endocrine imbalance cannot then deny coverage for the same treatment when used to treat gender dysphoria. Federal courts have been consistent in striking down attempts by employers to exclude trans healthcare from employer healthcare plans.

This issue found its way up to the Fourth Circuit Court of Appeals, which this term heard two cases en banc touching on the issue of gender-affirming care for employees. In the first case, Kadel v. Folwell, current and former employees of the University of North Carolina brought a suit against the university and state officials challenging the categorical exclusion of gender affirming care from the North Carolina State Health Plan for Teachers and State Employees (“the plan”). In a groundbreaking opinion issued in June of 2022, the district court found that plan’s exclusion discriminated on the basis of sex and transgender status in violation of the Equal Protection Clause, and discriminated because of sex in violation of Title VII. The court later determined that the exclusion also violated the Affordable Care Act. The court permanently enjoined the defendants from enforcing the discriminatory exclusion and ordered them to reinstate coverage for “medically necessary services for the treatment of gender dysphoria.”  

In the second case, Anderson v. Crouch, trans Medicaid patients in West Virginia brought a class action lawsuit against the state, challenging the blanket exclusion of coverage for gender-affirming surgeries in its Medicaid and state employee health insurance plans. In August of 2022, the district court ruled in favor of the Medicaid plaintiffs and held that the exclusion violated the Equal Protection Clause, the Affordable Care Act, and the Medicaid Act.

Both sets of defendants appealed to the Fourth Circuit Court of Appeals. The issue before the Court in Kadel was whether North Carolina’s public employee healthcare plan could lawfully exclude medical coverage for “[t]reatment or studies leading to or in connection with sex changes or modifications and related care.” The issue in Anderson was whether West Virginia’s Medicaid Program, which excluded coverage for “[t]ranssexual surgery,” violated the rights of trans Medicaid beneficiaries.

The Fourth Circuit En Banc Decision

On April 29, 2024, the Fourth Circuit issued an opinion joining the two cases. In a huge victory for trans employees and Medicaid beneficiaries, the Court held that discrimination on the basis of “diagnosis” is, in the present context, discrimination on the basis of sex. The exclusions were therefore subject to heightened scrutiny, which they ultimately could not withstand. The exclusions violated the U.S. Constitution, Title VII, Title IX, the Affordable Care Act, and the Medicaid Act.

Unfortunately, days after the decision was handed down, the South Carolina Senate passed a broad gender-affirming care ban. The bill, H.B. 4624, prohibits gender-affirming care for transgender youth and includes an expansive public funding ban. It specifies that “public funds may not be used directly or indirectly” for such care, regardless of the recipient's age. This would eliminate Medicaid coverage, prohibit gender-affirming care under the state employee health insurance plan, and could potentially target any doctor or hospital that receives public funding. The bill directly contradicts the Fourth Circuit’s ruling.

The bill will be returned to the House for concurrence, after which it will proceed to the governor’s desk where it will take effect upon signing. 

The ACLU of South Carolina has already pledged to challenge the bill in court, where the Fourth Circuit’s decision in Kadel will be binding precedent.