On August 23, 2016, several States and three faith-based healthcare providers filed suit in the Northern District of Texas against the U.S. Department of Health and Human Services (“HHS”) over HHS’s interpretation of “sex” in the final rule under Section 1557 of the ACA. In particular, the Plaintiffs challenge HHS’s much-heralded and transformative interpretation of “sex” as extending protections against discrimination on the basis of gender identity in the provision of healthcare. Under this interpretation of Section 1557, a healthcare provider must treat transgender individuals consistent with their expressed gender and may not deny transgender individuals access or treatment to healthcare on the basis of their gender identity.

By way of background, and as I have written before, Section 1557 is the new civil rights paradigm for the healthcare industry and potentially expands healthcare providers’ exposure to discrimination lawsuits by creating new protected classes, creating new causes of actions, and covering more healthcare entities. (For more background information on Section 1557 of the ACA and its nondiscrimination provisions, you can read my summary of the law here. And for more information on HHS’s regulatory overlay and requirements, you can read my summary on the impact of the final rule here.)

Plaintiffs challenge HHS’s expansion of the term “sex” from Title IX

The main thrust of this lawsuit centers on HHS’s expansion of the term “sex” from Title IX. As the Plaintiffs point out, Section 1557 itself does not use the term “sex.” Instead, Section 1557 simply cross-references Title IX as a grounds protected from discrimination under the ACA. Thus, Plaintiffs argue, HHS violated its rule-making authority by using the final rule under Section 1557 to expand the reach of the term “sex” beyond that which it reaches under Title IX. In other words, because “sex” under Title IX does not extend to gender identity, the Plaintiffs argue, it may not be interpreted as doing so under Section 1557.

The States also argue, however, that HHS exceeded its authority under the Constitution—by infringing on a state’s sovereignty to regulate the medical profession—and by violating the Constitution’s “Spending Clause.” Under the Spending Clause, the federal government must provide the States with clear notice of the conditions it places on the receipt of federal funds.

Plaintiffs also assert a Religious Freedom Restoration Act challenge

Part of this lawsuit against HHS also asserts that the final rule’s protections on the basis of gender identity violate the Religious Freedom Restoration Act by substantially burdening a faith-based provider’s exercise of his or her religion. As I have written before, because HHS chose not to adopt a religious exemption in its final rule under Section 1557, this challenge was to be fully expected.

In particular, the faith-based provider Plaintiffs argue that the final rule substantially burdens their religious beliefs to the extent it would require them to perform gender reassignment surgeries, prescribe puberty-blocking hormones for children, or perform abortion or sterilization related services—all of which Plaintiffs maintain would violate their sincerely held religious beliefs.

The Importance of this Challenge to the Future of Section 1557

It may go without saying, but this lawsuit is very important to the future impact of Section 1557—and not just because it challenges the final rule’s transformative protections on the basis of gender identity. This lawsuit will also go a long way towards solidifying how the federal courts will interpret Section 1557. For example, does Section 1557 create a new, stand-alone legal standard for future civil rights lawsuits? Or is Section 1557 bound to the pre-existing law that it cross-references?

Moreover, because this lawsuit challenges one of Section 1557’s most transformative protections—and because it raises fundamental questions as to the nature of Section 1557—this lawsuit is likely a good candidate for the Supreme Court’s first meeting with Section 1557. That case, of course, would have a significant and long-lasting impact on healthcare providers across the country for years to come.

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