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‘Complicated Mess’ Follows Judge’s Obamacare, Transgender Ruling

Oct. 17, 2019, 9:10 AM

Transgender people face uncertainty in their health care following a Texas federal judge’s decision to toss out anti-discrimination protections under Obamacare, an issue the Trump administration is also weighing and one that likely will wind up before the Supreme Court.

Judge Reed O’Connor—the same judge who struck down the Affordable Care Act in its entirety in December—ruled Oct. 15 that a regulation barring health providers and insurers from discriminating against people based on their gender identity or the termination of a pregnancy violates federal law. It runs afoul of rulemaking requirements under the Administrative Procedure Act and religious liberties provided under the Religious Freedom Restoration Act, he said.

The decision means medical providers are no longer required to provide services to transgender people that practitioners say violate their sincerely held religious beliefs. The administration had previously been blocked by O’Connor from enforcing the Obama-era rule.

O’Connor’s ruling in the U.S. District Court for the Northern District of Texas comes while the administration is in the middle rewriting that same regulation and while the U.S. Court of Appeals for the Fifth Circuit weighs the constitutionality of the ACA.

“This is really a complicated mess,” said John Cogan Jr., an associate professor of law at the University of Connecticut School of Law, who was not involved in the case.

Revision Pending

The U.S. Department of Health and Human Services has proposed rewriting the 2016 rule that O’Connor struck down. That rule interprets Section 1557 of the ACA, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in health programs that receive federal funding. The Obama administration defined discrimination “on the basis of sex” to include termination of pregnancy, sex-stereotyping, and gender identity.

Because the HHS now plans to wipe out that definition in a new rulemaking, the government asked O’Connor to delay his ruling in the case. The judge forged ahead anyway, and the medical groups and eight states that brought the challenges are happy he did.

“A proposed rule is just a proposed rule,” said Luke Goodrich, vice president and senior counsel the Becket Fund for Religious Liberty, who represented the challengers. “It may never get finalized or it may get finalized in a very different form.”

On behalf of his clients, Goodrich asked the court to provide clarity on an issue that continues to be litigated. The groups argued the rule forced doctors to violate their medical judgment and their deeply held religious beliefs.

“It’s a win for common sense, for conscience, for quality health care, and for sound medical judgment,” he said of the decision.

Appeal Expected

Legal scholars say O’Connor’s decision will likely be appealed to the U.S. Court of Appeals for the Fifth Circuit.

The American Civil Liberties Union of Texas and River City Gender Alliance asked to intervene in the long-running case in September 2016 in defense of the Obama administration’s definition. O’Connor kept them out of the proceedings until now. In his Oct. 15 ruling, he granted their request to participate.

“He only ruled that they were allowed to intervene at the same time he was closing the case,” Cogan said. “He’s very adept at closing any opposition out, which is really bizarre because our entire judicial system is based on the notion of the adversarial process.”

The ACLU is still reviewing the decision and considering options, a spokesman for the nonprofit told Bloomberg Law.

Ping-Pong Potential

A final rule defining sex under Section 1557 of the administration will also likely be challenged.

“This feels like it will be one of those rules that ping-pong back and forth,” said Katie Keith, a health law professor at Georgetown University. “It feels like folks will fight about this one no matter what until we have guidance from the Supreme Court.”

The high court is now considering whether discrimination on the basis of sex in employment under Title VII of the Civil Rights Act covers sexual orientation and gender identity. What the justices decide could impact the administration’s final rule for Section 1557 or serve as precedent for the Fifth Circuit if O’Connor’s decision is appealed.

“It’d be a little nutty for the Trump administration to finalize the 1557 rule before the Title VII decision,” Keith said. “What a waste of time and resources. That’s not to say they won’t do it, but you’d almost think they would have to wait.”

Goodrich is anticipating a ruling that bolsters O’Connor’s decision.

“There is a very strong possibility the Supreme Court’s ruling will powerfully confirm the ruling we got yesterday, namely that 1557 doesn’t extend in the way the Obama administration tried to extend it,” he said. “It’s also possible a Supreme Court ruling along those lines would make it really difficult for groups like the ACLU that has intervened in our case to challenge a revised rule.”

In addition to O’Connor’s decision, the administration issued a rule in May that allows doctors and hospitals that receive federal funding to refuse to provide services based on their religious beliefs. That rule, which now faces its own legal challenges, is set to take effect Nov. 22.

“To put another layer of crap-flavored icing on this horrible cake, there is the conscience rule that came out this summer,” Cogan said.

He called the conscience rule and the administration’s plan to rewrite the rule for Section 1557 “a belt and suspenders type approach to allow these health-care providers pick and choose who they want to treat.”

The case is Franciscan Alliance Inc. v. Azar, N.D. Tex., No. 16-cv-0108, 10/15/19.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com