Health Care Discrimination Litigation Gets a New Set of Teeth under the ACA: 2015 Litigation Review and Preview of 2016

Discrimination in health care was prohibited before the Affordable Care Act, but on a limited basis.  Protected classes did not include sex; prohibitions excluded private physicians accepting Medicare Part B; and, most importantly, anti-discrimination laws did not allow for any private right of action on disparate impact claims. Section 1557 of the ACA changed all this.

Section 1557 incorporates and prohibits discrimination on the bases protected under other federal statutes:

  • Title VI of the Civil Rights Act of 1964 – race, color, national origin, religion;
  • Section 504 of the Rehabilitation Act of 1963 – disability;
  • Age Discrimination Act of 1975 – age; and 
  • Title IX of the 1972 Education Amendments of the Civil Rights Act – sex.

Section 1557 prohibits health care providers—now expansively defined to include virtually every health care provider, insurer, and retail pharmacy—from excluding individuals from participation in, denying individuals the benefits of, or subjecting individuals to discrimination under any health program based on any of the grounds protected in the statutes above.  See 42 U.S.C. § 18116.  The Section states that the enforcement mechanisms of each of the statutes apply to claims on the basis of classes they protect.

Section 1557’s enactment of a private right of action for disparate impact claims opens the door to class-based claims challenging facially neutral health care policies, treatment decisions, and insurance coverage on the basis that they disproportionately affect members of protected classes.  Section 1557 also provides a right of action to disparate treatment claims on the basis of sex (now an explicitly protected class) and gender identity (derived from inclusion of sex as a protected basis).  In September 2015, the Department of Health and Human Services issued a proposed rule for implementing Section 1557, attempting to clarify the standards used to implement the statute, bolstering language regarding assistance requirements, and specifically including gender identity.  See Nondiscrimination in Health Programs and Activities, 80 Fed. Reg. 54172 (proposed Sept. 8, 2015) (to be codified at 45 C.F.R. pt. 92).

So far, only four federal courts have issued decisions in cases alleging Section 1557 violations, all in 2015.  A case filed in the federal district court for Minnesota in January 2016 may be the next.  A recurring theme throughout the 2015 decisions is how to assess Section 1557 claims given the Section’s incorporation of different anti-discrimination statutes, with varying standards of proof and other aspects of enforcement. 

March 2015: Rumble v. Fairview Health Services, No. 14-cv-2037, 2015 WL 1197415 (D. Minn. Mar. 16, 2015).

In this disparate treatment case, a transgender man who visited a Minnesota emergency room brought suit under Section 1557, alleging that the treatment he received constituted discrimination based on his gender identity.  The plaintiff alleged that he was treated hostilely and disparagingly by the treating physician and was asked inappropriate questions about his sexual activity including “whether he was having sex with men or women, engaging in penetration, and whether he had ever had sex with objects.”  Id. at *15.  The plaintiff also alleged that the hospital staff did not attend to him with the same degree of urgency as they attended to other patients.  The defendants moved to dismiss the Section 1557 claim.

Because it was a case of first impression, the applicable standards of proof to apply were not clear.  The defendant Emergency Physicians argued that different standards should apply depending on the plaintiff’s protected class and corresponding statute.  Accordingly, its motion to dismiss was premised on the “discriminatory intent” standard from Title IX, stating that the plaintiff had failed to show that the physicians treated him differently because of his transgender status.  Id. at *15.  The plaintiff advocated for a uniform standard for Section 1557 claims, regardless of protected class status.  The court wrote that “Congress intended to create a new, health-specific, anti-discrimination cause of action that is subject to a singular standard, regardless of a plaintiff’s protected class status.”  Id. at *11, *15.  However, the court concluded that it did not need to determine the standard to apply at that time because, even if the Title IX discriminatory intent standard applied, the plaintiff had met the standard by alleging that the doctor discriminated against him by treating him with hostility and aggression and denying him the benefits of medical care to which he was entitled.  The court denied the motion to dismiss.

May 2015: Southeastern Pennsylvania Transportation Authority v. Gilead Sciences, Inc., No. 14-6978, 2015 WL 1963588 (E.D. Pa. May 4, 2015). 

In contrast to Rumble, the court in Gilead held that the plaintiffs failed to state a cause of action in their Section 1557 disparate impact claim against a pharmaceutical manufacturer.  The plaintiffs alleged that Gilead Sciences, Inc.’s “price gouging scheme” for its Hepatitis C drugs violated Section 1557, specifically through Section 504 of the Rehabilitation Act and Title VI of the Civil Rights Act.  See id. at *3.  Plaintiff SEPTA, the Philadelphia regional transit authority, maintained an employee health and welfare benefit plan which provided employees prescription drug coverage.  The plaintiffs alleged that Gilead sold Hepatitis C drug ingredients at a much lower price abroad and provided steep discounts on its drugs to federal agencies and large benefit managers.  The plaintiffs argued that Gilead’s pricing had a disparate impact on those with disabilities and discriminated against racial minorities due to Gilead’s deliberate indifference to the fact that “Hepatitis C victims [are] disproportionately African Americans.”  Id. at *4.

Gilead is striking in its divergence with Rumble on the issue of standards.   The Gilead court found that “Congress’s express incorporation of the enforcement mechanisms from th[e] four federal civil rights statutes, as well as its decision to define the protected classes by reference thereto, manifest[ed] an intent to import the various different standards and burdens of proof into a Section 1557 claim, depending upon the protected class at issue.”  Id. at *6.  In explaining its disagreement with the Rumble court, the Gilead court explained that “[w]e do not find that adopting an interpretation of the statute whereby standards and burdens change based on a plaintiff’s protected class status to be ‘patently absurd.’”  Id. at *6 n.3.  Had Congress intended for a uniform standard, the court explained, it could have listed the protected classes without reference to the civil rights statutes, and it could have expressly provided for one enforcement mechanism.  Id.  The Gilead court ultimately held that the plaintiffs did not meet the standards of the statutes governing disability and race discrimination, and granted defendant’s motion to dismiss.

July 2015: Cruz v. Zucker, No. 14-cv-4456, 2015 WL 4548162 (S.D.N.Y. July 29, 2015).

The plaintiffs in Cruz were Medicaid recipients diagnosed with Gender Dysphoria (“GD”) who brought a Section 1557 disparate impact claim against the Commissioner of the New York State Department of Health.  They argued that the state of New York wrongfully denied Medicaid coverage to them and many others for various medical procedures that alleviate the severe anxiety suffered by those with GD.  Id. at *1-2.  These procedures include breast augmentation, facial feminizing surgery, “tracheal shave,” body sculpting procedures, and electrolysis.  Id. at *2.  The plaintiffs sued the Commissioner based on the Department’s promulgation of a statute (1) excluding coverage for “cosmetic surgery, services, and procedures”; and (2) denying coverage for hormone therapy or gender reassignment surgery for individuals younger than the age of eighteen, or for gender reassignment surgery for those under twenty-one, where the surgery would result in sterilization (the “Youth Exclusion”).  Id

The plaintiffs argued that the Youth Exclusion discriminated on the basis of sex because it (1) denied transgender people certain services available to non-transgender people, and (2) its coverage exclusions had a disparate impact on transgender people.  Id. at *12.  Granting in part and denying in part the motion, the federal court for the Southern District of New York held that the plaintiffs had failed to state a claim for sex discrimination under Section 1557 because the plaintiffs had failed to show that “the treatments barred by the Youth Exclusion [we]re available to non-transgender youth.”  Id.  (Some of the plaintiffs’ other claims, based on various provisions of state and federal law, were allowed to proceed.)

September 2015: Callum v. CVS Health Corp., No. 4:14-cv-3481, 2015 WL 5782077 (D.S.C. Sept. 29, 2015).

In Callum, an African American military veteran suffering from Post-Traumatic Stress Disorder (PTSD) sued CVS, its holding company, and several employees after he was repeatedly denied the request for an accommodation to shop in CVS stores.  The plaintiff called several CVS store managers, requesting that—due to his PTSD and anxiety—he be allowed to shop for 10 to 15 minutes after the store closed, and with the door locked, so that he could avoid other customers. While several stores other than CVS agreed to the accommodation, various CVS stores repeatedly denied the plaintiff’s request.  In one instance, the plaintiff (because of his anxiety) requested that a store manager speak to him outside to discuss a possible accommodation.  The store manager came to the plaintiff’s car, blocked his door, and invited others to gather around the plaintiff’s car—an act that caused Plaintiff to suffer an anxiety attack.   The plaintiff also alleged that one store manager used a racial slur when denying his request, while another store manager stated, “[A]re you the same black guy that contacted us before? . . . I don’t trust you and your request seems suspicious.”  Id. at *3-4.

The plaintiff then asked his white, female friend to seek the same accommodation at several CVS stores.  When she called, she was met with friendly response, and several managers agreed to let her shop after hours with the doors locked.  This last alleged fact—that CVS store managers treated a similarly-situated white woman differently from the plaintiff—was significant to the court’s holding that the plaintiff stated a claim for discrimination under Section 1557. 

The Callum court was faced with the issue of whether CVS was a “health program or activity” within the meaning of Section 1557.  In answering this, the Callum court considered the Department of Health and Human Services’ proposed regulations for Section 1557—something that the other cases could not consider because the regulations had not yet issued.  Those proposed regulations “provide[d] persuasive authority to support a finding—at the 12(b)(6) stage of th[e] litigation—that CVS provides and administers health programs or activities that fall within the meaning of Section 1557.”  After resolving this issue, the Court concluded that the plaintiff had stated a plausible claim for discrimination based on his race, gender, and disability. 

On the Horizon: 2016 

On January 15, 2016, the first Section 1557 case of the new year was filed in Minnesota: Tovar v. Essentia Health, No. 16-cv-100 (D. Minn. 2016).  Plaintiff Brittney Tovar brought sex discrimination claims against Essentia Health and Health Partners, Inc., alleging that the health care providers discriminated against her teenage son, who was diagnosed with GD and is transitioning from female to male.  Tovar’s health insurance policy excluded care related to gender reassignment, and the medications and procedures sought by Plaintiff’s son were denied.  Tovar will test how the federal court for the District of Minnesota will reconcile its Rumble holding that Congress meant for there to be a uniform standard used in Section 1557 cases with the DHHS proposed regulations adopting the separate standards of each civil rights law incorporated in Section 1557 and decisions from other districts reaching similar conclusions.

Another case, Doe v. Dallas, No. 2:16-cv-787, was filed in the Eastern District of Pennsylvania on February 18, 2016.  This case, like Tovar, concerns a man diagnosed with GD alleging discrimination under Section 1557.  The plaintiff argues that the Secretary of Pennsylvania Department of Human Services unreasonably adopted and enforced regulations that ban individuals from receiving medically necessary Medicaid coverage for treatment of GD.

While both of these gender cases are in their early stages, they represent what appears to be the next wave of Section 1557 litigation—cases alleging sex discrimination in policy coverage and exclusions.

Risk Reduction

Companies in the health care industry are well advised to consider the potential for Section 1557 claims as they make treatment and business decisions in 2016.  Gender-related treatment decisions seem to be likely candidates for both disparate treatment and disparate impact claims.  One step to reduce the potential for Section 1557 litigation on this basis is to review treatment plans and insurance coverage to avoid differential treatment or impact on the basis of sex or gender.  Health industry companies should also consider having neutral business decisions reviewed to look for and minimize any actions with the potential to be viewed as having a disparate impact on a protected class, such as adopting new coverage exclusions in an insurance plan that may adversely affect transgender individuals; closing a clinic in a neighborhood with a population predominated by members of a particular race; or failing to provide translations of medically necessary information.