Full 4th Circuit tackles ‘very important case’ of State Health Plan transgender coverage

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  • The full slate of 4th Circuit US Court of Appeals judges offered Thursday contrasting views over a dispute involving North Carolina State Health Plan coverage for transgender health care.
  • The court held a rare "en banc" hearing of all 14 eligible judges rather than allowing a three-judge panel to decide the case.
  • Some judges compared the dispute to past landmark cases involving equal protection against race and sex discrimination. One warned that the court would take an "imperial" position if told states how to run their own insurance programs.

Splits were evident among 14 judges of the 4th US Circuit Court of Appeals, as they held a rare “en banc” hearing Thursday in a case involving North Carolina State Health Plan coverage for treatment sought by transgender people.

Chief Judge Albert Diaz labeled the dispute, Kadel v. Folwell, “a very important case … obviously,” as he wrapped up the 90-minute session in Richmond, Virginia.

The full court had decided in April to rehear the case. That was before a three-judge panel that had considered the dispute in January had issued a ruling.

A June 2022 trial court order called on the health plan to pay for “medically necessary services” for transgender employees and their dependent children. Those services include hormone therapy and some surgeries. A 2019 lawsuit challenged the plan’s policy denying coverage.

Attorney John Knepper, representing the State Health Plan and State Treasurer Dale Folwell, argued that the challenged policy did not involve discrimination against transgender people.

“In this case, neither transgender status nor biological sex is the basis for determining whether you can get these procedures,” Knepper argued. “We don’t cover them for anyone. We don’t cover them to affirm your current biological sex. We don’t cover them to change your biological sex. We don’t look at the reason you’re seeking them.”

Multiple judges questioned Knepper’s reasoning.

“The plan covers a mastectomy … following a diagnosis of cancer,” Diaz said. “But the plan doesn’t cover a mastectomy following the diagnosis of gender dysphoria if the patient has been advised by his or her doctor that that’s part of the treatment. Isn’t that correct?”

“That is correct,” Knepper responded.

“So how do you justify that?” Diaz asked.

Judge Pamela Harris compared the current dispute to Loving v. Virginia, the 1967 US Supreme Court decision striking down a state ban on interracial marriage.

“Is that something different from Loving, where neither black people nor white people could marry people of the opposite sex?” Harris asked. “Is that different from that kind of reasoning?”

On the other side of the argument, Judge Harvie Wilkinson noted concern about federal judges’ outsized role in one state’s decisions about its health care coverage for government employees.

“What are we doing to the structure of the Constitution when you’re asking us to intervene,” Wilkinson said. “We’re telling the states what they can cover and what they cannot in their own insurance programs.”

“Why can’t a state decide that the money that could have been spent on transgender-related issues should instead be spent to provide greater coverage for cancer, stroke, and heart attack victims?” he asked.

“It seems to me to assume a very imperial position for the federal judiciary to be making these sorts of dictations,” Wilkinson added minutes later.

Tara Borelli, representing the transgender plaintiffs, responded to Wilkinson.

“I think that’s the role that the 14th Amendment requires of the courts,” Borelli said. “It’s particularly important for the courts to protect constitutional rights, especially when we’re talking about classifications based on suspect or quasi-suspect classes.”

Borelli argued that the State Health Plan’s ban on coverage of sex changes presents a clear case of discrimination.

“The question in this case is: Is … a ban on sex changes, a ban on gender dysphoria, is that a closely enough related proxy for transgender people? The answer is unequivocally yes,” she said.

Judges’ contrasting approach to the case emerged clearly little more than halfway through the arguments.

Wilkinson contrasted the current dispute to past equal protection disputes involving race and sex discrimination. “There’s a difference between night and day in terms of the clear-cut equal protection violations” in the landmark Brown v. Board of Education case and the arguments in the Kadel case.

“It’s highly contestable, and in the face of this highly contestable equal-protection doctrine — unprecedented, really — we’re going to tell every state in the country how to run their insurance policies, how to treat their own employees,” Wilkinson said. “Not even the national legislature, or the people of any state, or the federal agencies that administer the funding — not a doggone thing you can do. Doesn’t that give you a little hesitation?”

“I think protecting people from sex discrimination by their government is one of our most cherished constitutional …,” Borelli responded, before Diaz interrupted her.

“Brown was highly contestable at the time, wasn’t it?” Diaz asked. “So was Loving, wasn’t it?”

“That’s the question: whether or not what we’re facing here today is equivalent to those issues,” he said. “To argue that it’s contestable doesn’t really answer the question, I don’t think.”

The full slate of 4th Circuit judges followed North Carolina’s case with an en banc hearing of a  similar dispute from West Virginia. There’s no deadline for the court to rule on either case.

North Carolina’s plan provides medical coverage for more than 750,000 teachers, state employees, retirees, lawmakers, and their dependents. It provides counseling for gender dysphoria and other diagnosed mental health conditions. Prior to the trial court ruling, it did not cover treatment “in connection with sex changes or modifications and related care.”

The trial court ruling from US District Judge Loretta Biggs prompted the State Health Plan to reinstate excluded coverage in July 2022. Coverage had been provided for a single year in 2017 before the plan adopted its challenged policy.

Biggs ruled that the plan unlawfully discriminated against transgender people. She determined that the plan violated both the equal protection clause of the Constitution and Title VII of the Civil Rights Act on the basis of sex.

Seventeen other states and Washington, D.C., filed a friend-of-the-court brief supporting the plaintiffs. Those states pay for the type of care involved in the N.C. dispute.

Meanwhile, 21 states filed a brief in May supporting Folwell and North Carolina’s State Health Plan.

“The States of Missouri, Alabama, Alaska, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, Texas, Utah, and Virginia submit this brief to explain their strong interest in preserving the prerogative of States to make decisions ‘in areas fraught with medical and scientific uncertainties,’” according to the brief filed by Missouri Attorney General Andrew Bailey. “Making policy decisions in an area of scientific uncertainty is a core, sovereign, democratic function.”

The 21 states, called “amici” in legal jargon, oppose U.S. District Court rulings forcing both North Carolina and West Virginia to fund treatment requested by transgender patients.

“The decisions by both district courts threaten this democratic prerogative,” according to the brief. “Taken together, the decisions wrongly assume that the science is settled and fully supports the routine use of puberty blocking drugs, cross-sex hormones, and surgeries to treat gender dysphoria. To the contrary, countries across Europe — the UK, France, Finland, Norway, and Sweden — have recently declared these interventions to be ‘experimental’ procedures, ‘lacking’ in evidentiary support, whose ‘risks … currently outweigh the possible benefits.’ Agencies on this side of the Atlantic have concluded the same.”

“In light of the medical uncertainty acknowledged across the globe, Amici States have taken a variety of approaches to the issue of using puberty blockers, cross-sex hormones, and surgeries to treat gender dysphoria,” the brief continued. “Some States decline to pay for these chemical and surgical interventions through state-funded healthcare programs. Some States — having compared the known, irreversible side-effects to the unknown, speculative benefits — have gone further and passed laws prohibiting these interventions in certain circumstances. Others have passed laws barring these interventions only temporarily — until policymakers obtain the benefit of more scientific studies. And still other States have allowed these interventions only after individuals have first been provided adequate counseling care and psychological support.”

“In light of Supreme Court precedent giving States wide authority in areas of uncertainty, this Court should permit the States wide latitude to respond to these scientifically unsettled issues,” the 21 states argued.