Kadel v. Folwell

• Decision Date: 10 June 2022
• Docket Number: 1:19CV272
• Parties: MAXWELL KADEL, et al., Plaintiffs, v. DALE FOLWELL, et al., Defendants.
• Court: U.S. District Court — Middle District of North Carolina

MAXWELL KADEL, et al., Plaintiffs,
v.
DALE FOLWELL, et al., Defendants.

No. 1:19CV272

United States District Court, M.D. North Carolina

June 10, 2022

MEMORANDUM OPINION AND ORDER

Loretta C. Biggs United States District Judge

Plaintiffs are transgender individuals or the parents of transgender individuals who receive health insurance through the North Carolina State Health Plan for Teachers and State Employees (“NCSHP” or the “Plan”). (ECF No. 75 ¶¶ 1, 7-12.) They allege that the Plan's categorical exclusion of coverage for treatments “leading to or in connection with sex changes or modifications” discriminates against them on the basis of sex and transgender status in violation of the Equal Protection Clause and the Affordable Care Act (“ACA”) and seek declaratory, injunctive, and monetary relief. (Id. ¶¶ 1, 139-53, 165-74.) Plaintiff Dana Caraway additionally alleges that NCSHP and her employer, the North Carolina Department of Public Safety (“DPS”), discriminated against her on the basis of sex by offering and administering the Plan in violation of Title VII of the Civil Rights Act of 1964. (Id. ¶¶ 175- 188.) Before the Court are cross motions for summary judgment filed by DPS, NCSHP, and

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Plaintiffs, (ECF Nos. 132; 136; 178); Plaintiffs' motions to exclude expert testimony, (ECF Nos. 202; 204; 206; 208; 212); and Plaintiffs' motions to seal, (ECF Nos. 182; 210).^[1]

For the reasons stated herein, the Court finds that the Plan's exclusion discriminates based on sex and transgender status in violation of the Equal Protection Clause and discriminates because of sex in violation of Title VII. The Court will reserve a ruling on claims alleged under the ACA pending further Order from this Court.

I. BACKGROUND

A. Plaintiffs' experiences with the Plan

Plaintiff Connor Thonen-Fleck is a 19-year-old man. (ECF No. 179-2 ¶ 2.) He is also transgender. (Id. ¶ 3.) Thonen-Fleck was “designated ‘female' at birth” but identifies and lives his life as a man. (Id.) In his words, he “demonstrated stereotypically masculine tendencies and characteristics from a young age, ” and by 15 years old, “had socially transitioned and was living in [his] authentic male gender identity in all aspects of [his] life.” (Id. ¶¶ 5-6.) His male identity is now reflected in his legal name, gender marker, birth certificate, and driver's license. (Id. ¶ 8.)

Before Connor and his family understood what it meant to be transgender, Connor “was in serious and increasing distress” and suffered from depression and suicidal ideation.

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(Id. ¶ 5; ECF No. 179-3 ¶ 6.) His psychiatrist diagnosed him with gender dysphoria. (ECF No. 185-1 at 40-41; see ECF No. 179-2 ¶ 7.) Gender dysphoria is “a condition that is characterized by clinically significant distress and anxiety resulting from the incongruence between an individual's gender identity and birth-assigned sex.” (ECF No. 219 at 10; see ECF No. 197 at 13.) Treatments may include therapy, medications, or surgery to align the patient's physiology with their identity and “allow[ ] the individual to transition from his or her birth assigned sex to the sex associated with his or her gender identity.” (ECF No. 219 at 10.) In Connor's case, his physicians recommended counseling, hormone therapy beginning in January 2018, and ultimately chest reconstruction surgery in May 2019 “to bring [his] body into better alignment with [his] gender identity and lived experience and further reduce [his] symptoms of gender dysphoria.” (ECF Nos. 179-2 ¶¶ 7, 9-10; 179-3 ¶ 15.) In his father's words, “it was clear that being a teenage boy without a typically male chest was very painful for [Connor].” (ECF No. 179-3 ¶ 13.)

Connor has health insurance through his father, who is a state employee at the University of North Carolina, Greensboro and a member of the North Carolina State Health Plan for Teachers and State Employees (“NCSHP” or the “Plan”). (Id. ¶¶ 2-4.) When Connor was prescribed testosterone treatments in 2018, NCSHP denied coverage due to a categorical exception for “[t]reatment or studies to or in connection with sex changes or modifications and related care.” (Id. at 22.) Connor's chest surgery also was not covered. (Id. ¶ 14.) As a consequence, the family had to delay the surgery, and Connor worked after school to help raise money for his healthcare. (Id. ¶¶ 14-15; ECF No. 179-2 ¶ 14.) Eventually, the family saved enough to pay out of pocket. (ECF No. 179-3 ¶ 15.) Connor and his father testify that

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the treatments were “life-changing” and “critical for [his] ongoing development and functioning as a young adult.” (Id. ¶ 16; ECF No. 179-2 ¶ 16.) Connor will need ongoing access to hormone therapy and anticipates requiring additional surgery to continue treatment of his gender dysphoria. (ECF No. 179-2 ¶ 17.)

Connor's experience is typical of remaining Plaintiffs. Plaintiffs are all current or former North Carolina state employees or dependents of state employees who receive health insurance through NCSHP. (ECF Nos. 179-1 ¶¶ 2, 5; 179-4 ¶¶ 2, 8; 179-5 ¶ 19; 179-6 ¶¶ 2, 5; 179-7 ¶¶ 5-6; 179-9 ¶¶ 2, 16.) Plaintiffs or their dependents identify as transgender. (ECF Nos. 179-1 ¶ 2; 179-4 ¶ 2; 179-5 ¶ 4; 179-7 ¶ 2; 179-9 ¶ 3.) These Plaintiffs each formed their gender identities early in childhood, (see, e.g., ECF No. 179-5 ¶ 6 (“Ever since I was a young child, I have known that I am [a] boy.”)); see generally ECF Nos. 179-1 ¶ 6; 179-4 ¶ 4-5; 179-6 ¶¶ 7-8; 179-9 ¶ 9), and have suffered from anxiety and depression caused by suppression of their gender identities, discrimination and harassment from peers, and living with physical features not typical of the gender with which they identify, (ECF Nos. 179-1 ¶ 8; 179-4 ¶ 4; 179-5 ¶¶ 13, 24; 179-7 ¶ 7; 179-9 ¶ 11). Each has been diagnosed with gender dysphoria. (ECF Nos. 179-1 ¶ 6; 179-4 ¶¶ 4, 5, 9; 179-5 ¶ 14; 179-7 ¶ 8; 179-9 ¶ 19; 185-1 at 31, 34, 37, 40-41, 43, 60.) And each has been denied coverage for procedures prescribed to treat gender dysphoria, to include puberty delaying medication, hormone therapy, mastectomy, mammaplasty, vaginoplasty, and vocal therapy. (ECF Nos. 179-1 ¶¶ 7, 9-15; 179-4 ¶¶ 9-10; 179-5 ¶¶ 20-22; 179-7 ¶¶ 13-17; 179-9 ¶¶ 20-21, 23-26.)

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B. The Exclusion

The basis for NCSHP's denial of coverage is an exclusion that dates back to the 1990s. (ECF No. 137-2 at 16:10-13.) The North Carolina General Assembly originally formed NCSHP to administer “one or more group health plans that are comprehensive in coverage” and tasked the State Treasurer, NCSHP Executive Administrator, and NCSHP Board of Trustees with certain “duties and responsibilities as fiduciaries for the Plan.” N.C. Gen. Stat. § 135-48.2(a). The Plan is North Carolina's largest insurer with approximately 740, 000 members. (ECF Nos. 137-1 at 35:9-12; 137-2 at 74:1-5.) Individual members pay a monthly premium with additional funding coming from the state. (ECF Nos. 137-2 at 102:22-24, 105:22-24; 137-3 at 1.) From January to August 2018, NCSHP had collected approximately $2.4 billion in revenue and had a cash balance of approximately $1.1 billion. (ECF No. 184 at 132, 142.)

The Plan only covers “medically necessary” services but does not cover all medically necessary services. (ECF No. 137-2 at 58:4-7.) “Medically necessary services or supplies” are defined by North Carolina statute as those services or supplies that are (1) “[p]rovided for the diagnosis, treatment, cure, or relief of a health condition, illness, injury, or disease” and “not for experimental, investigational, or cosmetic purposes, ” (2) “[n]ecessary for and appropriate to the diagnosis, treatment, cure, or relief of a health condition, illness, injury, disease, or its symptoms, ” (3) [w]ithin generally accepted standard of medical care in the community, ” and (4) “[n]ot solely for the convenience of the insured, the insured's family, or the provider.” N.C. Gen. Stat. § 58-3-200(b).

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Each year, NCSHP adopts and publishes PPO Plan Benefit Booklets that list the healthcare that is and is not covered by the Plan. (See ECF No. 184 at 56-104.) The Plan's third-party administrators, Blue Cross/Blue Shield of North Carolina (“Blue Cross”) and CVS/Caremark (“CVS”), then implement the booklet using the national billing practices and medical coding system of the healthcare industry. (ECF Nos. 137-1 at 119:9-10; 197-14 ¶ 11.) From the 1990s to 2016, the Plan contained two exclusions relevant to Plaintiffs' causes of actions. The 2016 Plan did not cover:

• Psychological assessment and psychotherapy treatment in conjunction with proposed gender transformation.

• Treatment or studies leading to or in connection with sex changes or modifications and related care.

(ECF No. 184 at 59-60.) According to Defendants, the first exception has never been implemented and is no longer part of the Plan. (See ECF Nos. 137 at 13 n.2; 137-4 ¶ 27.) Blue Cross and CVS do give effect to the second exclusion by identifying specific treatments that are not covered. (ECF No. 137-4 ¶¶ 20-21; see, e.g., ECF No. 179-3 at 12-13.) According to Blue Cross, four procedures are not covered by the Plan “regardless of the diagnostic code, ” to include “Intersex Surgery, Male to Female, ” “Intersex Surgery, Female to Male, ” “Vaginoplasty for Intersex State, ” and “Clitoroplasty for Intersex State.” (ECF No. 137-4 ¶ 20.) Two dozen other procedures are not covered when the procedural diagnostic code is for “Transsexualism” or “Personal history of sex reassignment.” (Id. ¶ 21.) CVS likewise may deny coverage for medication, such as puberty blockers or hormone treatments, due to the exclusion. (See ECF No. 179-3 at 13 (denying coverage for testosterone where the associated diagnosis was “Transsexualism”).)

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The Plan did briefly cover “Medically necessary services for the treatment of gender dysphoria” in 2017. (ECF No. 184 at 63.) On May 18, 2016, the U.S. Department of Health and Human...