Kadel v. Folwell

EmploymentTitle VIIAcademiaTitle IXAffordable Care ActEqual ProtectionNorth Carolina4th CircuitInsuranceGender Affirming Care

May 1

Written By Mack Karbon

*Plaintiffs Max Kadel and Julia McKeown*

Fourth Circuit Court of Appeals

On appeal from the U.S. District Court for the Middle District of North Carolina

Case no. 1:19-cv-00272-LCB-LPA (M.D. NC)
Case no. 20-1409, 22-1721 (4th Cir.)

STATUS: ONGOING

STATUS UPDATE: VICTORY! On April 29, 2024, the Fourth Circuit Court of Appeals issued a joint decision en banc in this case and Anderson v. Crouch, affirming the district court decisions below and finding that healthcare plans that cover medically necessary treatments for certain diagnoses but bar coverage of those same medically necessary treatments for patients diagnosed with gender dysphoria violate federal law and the U.S. Constitution.

CASE SUMMARY

In March of 2019 - prior to the Supreme Court’s ruling in Bostock v. Clayton County - current and former employees of the University of North Carolina (UNC) brought a suit against UNC and state officials challenging the categorical exclusion of gender affirming care from the North Carolina State Health Plan for Teachers and State Employees (“NCSHP” or “the plan”). The plaintiffs alleged that they were discriminated against on the basis of sex and transgender status in violation of the Fourteenth Amendment’s Equal Protection Clause, Title IX, and Section 1557 of Affordable Care Act. They requested injunctive and declaratory relief, as well as compensatory and consequential damages.

Defendants filed motions to dismiss and to stay proceedings pending the Supreme Court’s decision in Bostock (then known as R.G. & G.R. Harris Funeral Homes, Inc. v. EEOC).

In a groundbreaking opinion issued on March 11, 2020, the district court denied each of the defendants’ motions and ruled that the plaintiffs had stated cognizable claims in violation of the Equal Protection Clause, Title IX, and the ACA. It also held that claims of discrimination on the basis of transgender status were per se actionable under Title VII, and, by extension, Title IX.

By denying coverage for gender-confirming treatment, the Exclusion tethers Plaintiffs to sex stereotypes which, as a matter of medical necessity, they seek to reject. This Court therefore finds that, under the reasoning outlined in Price Waterhouse, Plaintiffs have properly alleged discrimination “on the basis of sex.”

The Exclusion also discriminates on the basis of natal sex — that is, the sex one was assigned at birth — by denying equal access to certain medical procedures, depending on whether an individual’s assigned sex is male or female. For example, a cisgender woman born without vagina may qualify for a vaginoplasty (the surgical creation of a vagina) to correct that congenital defect; however, a transgender woman (whose natal sex is male) would not be able to seek the same procedure, even if deemed medically necessary to treat gender dysphoria. Likewise, while a cisgender woman may opt to undergo breast reconstruction after a cancer related mastectomy, a person whose assigned sex is male cannot receive coverage for breast augmentation to aid in gender transition. In this way, the Exclusion discriminates not just based on nonconformance with sex stereotypes, but based on employee’s physical sex characteristics as well.

The Health Plan Defendants filed an interlocutory appeal of March 11, 2020, denial. The Fourth Circuit Court of Appeals AFFIRMED the district court’s order, over a dissent from Judge Agee. The same Defendants then filed a petition for certiorari in the U.S. Supreme Court, which was DENIED on January 18, 2022.

District Court’s June 10, 2022, Memorandum & Order

On June 10, 2022, the district court again sided with the plaintiffs in ruling that the 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. It reserved judgment on the plaintiffs’ ACA claims. The court also 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.”

After additional briefings by the parties, the district court ruled on December 5, 2022, to GRANT the plaintiffs’ summary judgment motion with regard to the ACA claim.

Appeal to Fourth Circuit & Rehearing En Banc

Defendants appealed to the Fourth Circuit Court of Appeals. After extensive briefing by both parties and respective amici, a three-judge panel heard oral arguments on January 25, 2023. On April 12, 2023, by a sua sponte poll of the court, the Fourth Circuit ORDERED a rehearing en banc, which was held on September 21, 2023.

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Fourth Circuit En Banc Decision

On April 29, 2024, the Fourth Circuit handed down a joint decision in this case and Anderson v. Crouch. Both cases were briefed in full before the district and appellate courts, and the Fourth Circuit, by sua sponte orders, reheard each case en banc in September of 2023.

The en banc decision was a resounding victory for trans individuals, medical patients, and employees. The Court found that healthcare plans that cover medically necessary treatments for certain diagnoses, but prohibit coverage of those same medically necessary treatments for a diagnosis unique to transgender patients, violated federal law and the U.S. Constitution.

Issues Before the Court

The issue 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 covered some gender-affirming care, but not gender-affirming surgery, or, as the Program calls it, “[t]ranssexual surgery,” violated the rights of trans Medicaid beneficiaries.

Arguments & Findings

The appellant-states in both cases argued that the coverage exclusions do not discriminate on the basis of sex or gender, but rather on the basis of “diagnosis.” The Court disagreed: “In this case, discriminating on the basis of diagnosis is discriminating on the basis of gender identity and sex.” The exclusions were therefore subject to - and ultimately failed to satisfy - the heightened standard of scrutiny applied to cases involving distinctions based on “quasi-suspect” characteristics like sex and gender.

The appellants further argued that, even if the coverage exclusions do discriminate on the basis of sex and gender, the discrimination is permissible because it is “rationally related to legitimate government interests.” According to the appellants, gender-affirming care is too expensive and ineffective to cover. Again, the Court disagreed. It swiftly disposed of the costs argument, noting that “a state may not protect the public fisc by drawing an invidious distinction between classes of its citizens.” Regarding effectiveness, the Court found that the appellants failed to offer evidence to support their contentions. Furthermore, against the immense volume of evidence provided by the plaintiffs that gender-affirming care is efficacious, the appellants’ unsupported assertions to the contrary are unpersuasive.

Importantly, the Court delves into an analysis the oft-cited 1974 Supreme Court case Geduldig v. Aiello. Geduldig was relied upon heavily by the appellant-states and frequently by others attempting to rationalize exclusions for gender-affirming care. The reason is obvious: the Court in Geduldig found, in so many words, that pregnancy is not a proxy for sex, and that healthcare exclusions that deny coverage for conditions related to pregnancy do not discriminate on the basis of sex. Thus, as appellants argue, exclusions that apply to only a subsection of a protected group - here, trans people seeking gender-affirming care - cannot be said to discriminate against thaat group on the basis of sex or gender.

The Court, again, did not agree, and set forth three reasons why the appellants’ argument cannot stand. First, while Geduldig held that pregnancy is not a proxy for sex, it did not hold that any characteristic of a subset of a protected group cannot ever be a proxy for that group. Second, gender dysphoria is so intimately related to transgender status as to be virtually indistinguishable from it: “The excluded treatments aim at addressing incongruity between sex assigned at birth and gender identity, the very heart of transgender status.” In contrast to pregnancy, which is a condition that can be described entirely separately from a person’s sex, gender dysphoria is simply the medical term relied on to refer to the clinical distress that can result from transgender status. Third, the exclusions cannot function without relying on direct discrimination. For example, determining whether a treatment like reduction mammoplasty (top surgery) constitutes “transsexual surgery,” or whether a testosterone supplement is prescribed in connection with a “sex change[] or modification[],” is impossible — literally cannot be done — without inquiring into a patient’s sex assigned at birth, and comparing it to their gender identity. Indeed, those procedures are routinely covered by the appellant-states’ healthcare plans in situations where the only material difference is the patient’s sex.

In sum, the Court found that both states’ exclusions violate the Equal Protection Clause, and that the Medicaid exclusions in Anderson additionally violate the Medicaid Act and the Affordable Care Act.

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Judge Gregory wrote the majority opinion, in which Chief Judge Diaz and Judges King, Wynn, Thacker, Harris, Heytens, and Benjamin joined. Judges Richardson, Wilkinson, Niemeyer, Quattlebaum, Agee, and Rushing dissented.