Health Reform WK-EDGE States and faith-based providers granted preliminary injunction against HHS nondiscrimination rule
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Thursday, January 5, 2017

States and faith-based providers granted preliminary injunction against HHS nondiscrimination rule

By Jeffrey H. Brochin, J.D.

Eight states and three faith-based private health care providers were entitled to preliminary injunctive relief from enforcement of an HHS regulation implementing a section of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), a federal district court in Texas has ruled. The regulation violated the Administrative Procedures Act (APA) by contradicting existing law and exceeding statutory authority, and likely violated the Religious Freedom Restoration Act (RFRA) (42 U.S.C. § 2000bb) (Franciscan Alliance, Inc. v. BurwellDecember 31, 2016, O’Connor, R.).

Background: HHS enacted a regulation pursuant to the ACA forbidding health care providers from discriminating on the basis of "gender identity" and "termination of pregnancy." Eight states and three faith-based private health care providers filed suit against HHS, challenging the new rule entitled ‘Nondiscrimination in Health Programs & Activities’, claiming that the agency exceeded its authority under the ACA in its interpretation of sex discrimination, and on the basis that the regulation violated the RFRA as applied to the private providers (see Lawsuit argues HHS overstepped requiring provision of transition procedures, redefining ‘sex’, August 24, 2016). The HHS rule was enacted purportedly to implement Section 1557 of the ACA, which prohibits discrimination by any health program or activity receiving federal financial assistance on the grounds prohibited by four federal nondiscrimination statutes incorporated by Section 1557.

The issue before the court was Section 1557’s incorporation of prohibited sex discrimination under Title IX of the Education Amendments of 1972. The states and providers challenged HHS’ interpretation of discrimination "on the basis of sex" under Title IX as encompassing "gender identity" and "termination of pregnancy." They argued that because Section 1557 incorporated the statutory prohibition of sex discrimination in Title IX, its scope should have been limited by Title IX’s unambiguous definition of "sex" as the immutable, biological differences between males and females as acknowledged at or before birth. They further asserted that the rule’s definition of sex should not apply to them because the text of Section 1557 incorporated the religious and abortion exemptions of Title IX, and the rule’s failure to incorporate those exemptions rendered it contrary to law. The court granted the parties’ motion for preliminary injunction.

Examining the rule. The challenged HHS rule took partial effect on July 18, 2016, however, its insurance provisions were scheduled to take effect on January 1, 2017. The states and providers contended that the rule’s interpretation of sex discrimination would pressure doctors to deliver health care in a manner that would violate their religious freedom and thwart their independent medical judgment, and would require burdensome changes to their health insurance plans come January 1, 2017. They also argued that HHS defined prohibited sex discrimination to include: (1) refusing to provide abortion-related services and health insurance coverage of abortion-related services; and (2) refusing to provide transition-related services and health insurance coverage of transition-related services. HHS countered that the rule did not mandate any particular procedure; rather, it only required that covered entities provide nondiscriminatory health services and health insurance in a nondiscriminatory manner.

Prohibited discriminatory actions. Among the "discriminatory actions prohibited" under the rule was having or implementing a categorical insurance coverage exclusion or limitation for all health services related to gender transition. The rule also declared that categorizations of all transition-related treatment as cosmetic or experimental were deemed to be outdated and not based on current standards of care. Although the faith-based providers provided standard medical care to every individual, including those who identified as transgender, their religious beliefs did not allow them to perform or cover transition-related procedures. They also cited the fact that their religious beliefs prevented them from being able to participate in, refer for, or cover elective sterilizations or abortion-related procedures.

State party facing investigation. Texas, one of the state parties to the lawsuit, was already under investigation by HHS’s Office for Civil Rights (OCR) and faced a potential loss of more than $42.4 billion in federal health care funding, a move which it claimed would jeopardize the availability of health care for the nation’s most vulnerable citizens.

Establishing injury in fact. HHS argued that the states and providers lacked standing to bring the lawsuit due to the absence of any discernible injury in fact, and that claimed injuries were merely conjectural and hypothetical. The court rejected that argument and found that the injuries alleged were particularized and affected each of the parties. For example, the rule would affect the faith-based providers’ ability to continue operations because with no assurance that they would be exempt from the rule’s provisions that contradict their religious beliefs, they would be forced to either maintain their current insurance coverage plan that violates the rule and risk debilitating consequences or violate their religious beliefs. As to the state parties, the court found that because the states enforce categorical exclusions of transition-related procedures, and have no religious defense to assert, the rule would mandate revision of their policies and force the states to conduct individualized inquiries into whether a particular transition procedure was medically necessary. The rule would also force the states to cooperate with ongoing investigations, expend millions on training personnel under the rule, and adjust physical facilities to accommodate what the rule described as "an array of possible gender identities."

Fear of penalties. The fear of being subjected to penalties under the challenged rule was deemed reasonable by the court given that the parties were all covered entities whose insurance plans included a categorical exclusion of transition-related procedures that is forbidden by the rule. The court also noted that the likelihood that the parties would suffer further harm from the rule was strengthened by the current HHS investigation into potential noncompliance. Accordingly, the parties had sufficient concrete evidence to support their fears that they would be subject to enforcement under the rule.

Associational standing. HHS argued that one of the faith-based medical associations which participated in the lawsuit lacked associational standing because its members had not established their religious or conscience-based objections to performing transition-related or abortion services. However, the court ruled that a representative organization need only establish that one member would suffer harm under the rule, and that the organization satisfied that requirement by providing the declaration of a physician-member that the organization’s ethical statements were consistent with his own medical and religious beliefs.

Protections for religious freedom. HHS contended that the lawsuit failed the ripeness test because the alleged injuries were too speculative to warrant injunctive relief. They based this on the fact that the rule incorporated applicable federal statutory protections for religious freedom and conscience. The court disagreed with that position and found that the rule’s prohibition of categorical exclusions of transitions and abortions forced the private providers to make an individualized assessment of every request for performance of such procedures or coverage of the same. The rule therefore placed substantial pressure on those providers to perform and cover transition and abortion procedures.

Administrative Procedure Act. The providers claimed that the rule violated the APA because it was contrary to and exceeded statutory authority by interpreting Title IX’s prohibition of sex discrimination to include gender identity. HHS argued that under the APA, the interpretation was subject to the agency’s interpretation of Section 1557 of the ACA. However, the court held that because Congress clearly addressed the question at issue by incorporating Title IX’s existing legal structure, HHS had no authority to interpret a significant policy decision of the scope of sex discrimination under Title IX.

For the foregoing reasons, the court found that the motions for preliminary injunction should be granted, and they enjoined HHS from enforcing the rule’s prohibition against discrimination on the basis of gender identity or termination of pregnancy. The OCR issued a statement expressing disappointment with the court’s decision, but noting it would "continue to enforce the law . . . to the full extent consistent with the Court's order."

The case is No. 7:16-cv-00108-O.

Attorneys: Luke Goodrich (The Becket Fund for Religious Liberty) for Franciscan Alliance, Inc., Christian Medical and Dental Society, and Specialty Physicians of Illinois, LLC. Adam Anderson Grogg, U.S. Department of Justice, for Sylvia Burwell, Secretary, U.S. Department of Health and Human Services, and U.S. Department of Health and Human Services.

Companies: Franciscan Alliance, Inc.; Christian Medical and Dental Society; Specialty Physicians of Illinois, LLC; U.S. Department of Health and Human Services

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