Transgender health care coverage debated in marathon Fourth Circuit hearings

(CN) — A debate over whether two states’ public health care policies should cover certain gender-affirming treatments took center stage Thursday in rare, back-to-back en banc hearings before the Fourth Circuit Court of Appeals in Richmond, Virginia.

For nearly three hours, an engaged panel consisting of all the Fourth Circuit’s judges heard oral arguments in two appeals out of North Carolina and West Virginia, peppering both sides with questions, with no clear consensus among them in either case.

Underpinning Thursday’s arguments in both cases was a debate over whether health care policies could separate the diagnosis of gender dysphoria from the sex and gender identity of the patients pursuing the treatment.

In the first case, Kadel v. Folwell, a federal judge ruled in 2022 that the North Carolina State Health Plan, which covers teachers and state employees, violated the Fourteenth Amendment by excluding coverage of “treatment or studies leading to or in connection with sex changes or modifications and related care.” The state appealed.

And in Fain v. Crouch, the state of West Virginia is appealing a similar decision about its Medicaid program, which covers some gender-affirming treatments but specifically excludes “transsexual surgery.” 

Attorney John Knepper, representing the state of North Carolina, did not dispute that gender-affirming care could be a medically necessary treatment. Instead, he argued that no federal or state law requires the State Health Plan to cover all medically necessary treatments.

The lower court's determination that the state’s policy facially discriminated against transgender plan members was incorrect, Knepper argued. The discrimination claim is built on “proxy-based reasoning,” which should be teased out in trial. That’s because the exclusion of gender-affirming care from the state plan “does not identify or classify individual plan members at all.”

“The distinction is not based on who they are or their identity, it’s based on their medical diagnosis,” Knepper said.

A mastectomy, for instance, is covered for all plan members in the treatment of breast cancer, but not in the treatment of gender dysphoria. That policy holds true for all members, regardless of their gender identity.

But some justices were skeptical, noting that in this case, the diagnoses and treatments associated with gender dysphoria are inherently tied to one's gender.

“The person who is excluded is a person who wants treatment in connection with a sex change or modification, and I’m just hung up on how that’s not based on somebody’s transgender or gender status,” said U.S. Circuit Judge Pamela Harris, a Barack Obama appointee.

Attorney Caleb David, representing the state of West Virginia, faced similar questions.

But U.S. Circuit Judge Paul Niemeyer, a George W. Bush appointee, seemed to support that a separation between the two concepts was possible. He noted that both sides appeared to concede that not all transgender people suffer from gender dysphoria.

“You’re trying to link the treatment to the persons because there’s only a narrow group of persons that would be involved, but even in your language, it doesn't involve 100% of the persons, it involves those who are treated with dysphoria,” he told Tara Borelli of Lambda Legal, who represents the plaintiffs in both cases. “The question is, is that a facial discrimination?”

Borelli pointed to the language of West Virginia’s policy, which specifically uses the phrase “transsexual surgery,” an outdated term, rather than any particular treatment.

“The reason this is phrased the way it is, and I think this has been acknowledged, is that this is an older, quite outmoded phrasing, but it is quite honest about who it singles out for deferential treatment, and that is ‘transsexual’ — or in more modern terms, transgender — people,” Borelli said.

U.S. Circuit Judge Harvie Wilkinson, a Ronald Reagan appointee, expressed particular concern in both cases about whether requiring states to cover these types of treatment would encroach on state's rights. In the North Carolina case, he doubted that courts should have the ability to determine how states cover their own employees.

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

“I don’t see how we could get into the business of saying to the states, ‘hey you can cover this but not that, hey you can do this but not that.’”

Both North Carolina and West Virginia's briefs cited concern about rising costs for their health care plans as reasons for restricting coverage.

But Chief U.S. Circuit Judge Albert Diaz, a Barack Obama appointee, agreed with Borelli’s argument that the Equal Protection Clause of the 14th Amendment would trump those concerns.

“If there’s an Equal Protection violation, then the courts should step in if there’s been discriminatory actions taken up against a particular suspect group,” Diaz said. “And it seems to me that the costs are not relevant at that point. The insurer’s decision has to comply with the law.”

Omar Gonzalez-Pagan, an attorney from Lambda Legal who accompanied Borelli during arguments on Thursday told Courthouse News that it was a day of fair hearings. The court notably did not grapple with the necessity or evidence behind gender-based care, he said. Rather, it remained focused on the issues and legal theories.

“Certainly a variety of views, but we are hopeful that we will prevail,” he said.

Knepper and David did not immediately respond to requests for comment.

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