North Carolina must face challenge to transgender exclusion in state health plan

(CN) — North Carolina’s state health plan is not immune from a discrimination lawsuit brought by government employees over its failure to cover gender-affirming treatments, the Fourth Circuit ruled Wednesday. 

Enrollees in the North Carolina State Health Plan for Teachers and State Employees, or NCSHP, filed a complaint against the health plan and other defendants in 2019, arguing that it violates the Affordable Care Act by discriminating against transgender enrollees.

The plan covers nearly 750,000 teachers, state employees, retirees, current and former lawmakers, state university personnel, community college personnel, hospital staff members and their dependents. 

But it categorically denies coverage for gender dysphoria treatments such as counseling, hormone therapy and related surgical care. 

“Relevant here, NCSHP has adopted an exclusion that denies coverage to all forms of gender-confirming health care—important and sometimes lifesaving care sought by state employees across North Carolina, including plaintiffs,” Chief U.S. Circuit Judge Roger Gregory wrote in Wednesday’s opinion.

The George W. Bush appointee noted that the state provides three different plans to employees and their defendants that purport to cover “medically necessary pharmacy benefits, mental health benefits, and medical care.” But since 2018, he wrote, each of these plans has excluded coverage for gender-affirming health care.

The state defendants, including State Treasurer Dale Folwell, who is in charge of the plan, had claimed immunity from the suit under the 11th Amendment.

The Fourth Circuit's majority found, however, that North Carolina waived immunity because it accepted federal financial assistance for the plan.

The ruling affirms a district court decision that denied the state's motion to dismiss the case last year.

Gregory was joined in the majority by U.S. Circuit Judge Albert Diaz, who clarified in a concurring opinion that he finds it “unnecessary to decide whether Section 1557 [of the Affordable Care Act] constitutes such a waiver standing alone.” The Barack Obama appointee said he only agrees with Gregory’s affirmation of the district court opinion.

U.S. Circuit Judge G. Steven Agee, another Bush appointee, dissented in a separate opinion Wednesday.

“The majority’s flawed decision will not impact just the NCSHP. Since this case was argued, at least one other district court has made the same analytical errors that the majority makes here, finding that the residual clause implicitly waives states’ sovereign immunity from Section 1557 actions,” Agee wrote, expressing concern that more district courts will be compelled to follow the Fourth Circuit’s example in similar cases. 

Agee said that not one of the Affordable Care Act’s provisions defined the phrase “health program or activity” until 2016.  

He added, “The Supreme Court should correct the majority’s errors without delay to ensure the preservation of the integrity of the Eleventh Amendment and the dignity of state sovereign immunity.”

According to Agee, the U.S. Supreme Court has consistently held that the 11th Amendment confirms that states are immune from private suits brought against them in federal court. 

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