Fain v. Crouch

540 F.Supp.3d 575

Christopher FAIN; Zachary Martell; and Brian McNemar, individually and on behalf of all others similarly situated, Plaintiffs,

v.William CROUCH, in his official capacity as Cabinet Secretary of the West Virginia Department of Health and Human Resources; Cynthia Beane, in her official capacity as Commissioner for the West Virginia Bureau for Medical Services ; West Virginia Department of Health and Human Resources, Bureau for Medical Services; Ted Cheatham, in his official capacity as Director of the West Virginia Public Employees Insurance Agency ; and the Health Plan of West Virginia, Inc., Defendants.

CIVIL ACTION NO. 3:20-0740

United States District Court, S.D. West Virginia, Huntington Division.

Signed May 19, 2021

Anna P. Prakash, Nicole Jean Schladt, Nichols Kaster, Minneapolis, MN, Avatara Antoinette Smith-Carrington, Lambda Legal Defense and Education Fund, Dallas, TX, Carl Solomon Charles, Lambda Legal, Atlanta, GA, Nora Huppert, Lambda Legal Defense and Education Fund, Los Angeles, CA, Sasha J. Buchert, Lambda Legal Defense and Education Fund, Washington, DC, Tara L. Borelli, Lambda Legal Defense and Education Fund, Decatur, GA, Walt Auvil, The Employment Law Center, Parkersburg, WV, for Plaintiffs.

Caleb B. David, Kimberly M. Bandy, Lou Ann S. Cyrus, Roberta F. Green, Shuman McCuskey & Slicer, Charleston, WV, for Defendants William Crouch, Cynthia Beane, West Virginia Department of Health and Human Resources, Bureau for Medical Services.

Christopher K. Weed, David E. Rich, Eric Salyers, Perry W. Oxley, Oxley Rich Sammons, Huntington, WV, for Defendant Ted Cheatham.

Aaron C. Boone, Bowles Rice, Parkersburg, WV, Stuart A. McMillan, Bowles Rice, Charleston, WV, for Defendant The Health Plan of West Virginia, Inc.

MEMORANDUM OPINION AND ORDER

ROBERT C. CHAMBERS, UNITED STATES DISTRICT JUDGE

Pending before the Court are Defendant Ted Cheatham's Motion to Dismiss the Complaint (ECF No. 22), and Defendants William Crouch, Cynthia Beane, and the West Virginia Department of Health and Human Resources, Bureau for Medical Services' (collectively, "WVDHHR Defendants") Motion for Partial Dismissal of Plaintiffs' Class Action Complaint (ECF No. 23) and Motion to Dismiss (ECF No. 32). For the reasons stated below, the motions are DENIED .

Also pending before the Court is Plaintiffs' Motion for Leave to file Sur-Reply (ECF No. 56). For good cause shown, this motion is GRANTED .

I. BACKGROUND

The putative Class Action Complaint asserts several claims, each of which is rooted in the same theory: that Defendants discriminated against Plaintiffs by denying coverage for gender-confirming health care. The Complaint defines "gender-confirming care" as health care which "includes, but is not limited to, counseling, hormone replacement therapy, and surgical care .... for the treatment of gender dysphoria—the clinically significant distress that can result from the dissonance between an individual's gender identity and sex assigned at birth ...." Compl. ¶¶ 1-2. According to the Complaint, these treatments are denied to transgender individuals despite being available to cisgender individuals.¹

Based on this overarching theory, the Complaint raises two types of individual and class action claims: (1) those brought by Medicaid recipients against the WVDHHR Defendants and (2) those brought by state employees and their dependents against Ted Cheatham, the Director of the West Virginia Public Employee Insurance Administration, and The Health Plan, a health maintenance organization permitted to offer health plans to state employees through PEIA.²

(1) WVDHHR Defendants

Christopher Fain, a transgender male, brings four discrimination claims individually and on behalf of the proposed Medicaid Class against the WVDHHR Defendants. As a Medicaid recipient, Fain relies on WVDHHR Medicaid plans for insurance coverage. However, Fain alleges that he has been denied hormone replacement therapy and surgical care (double mastectomy ), despite needing that care to treat his gender dysphoria diagnosis. According to Fain, WVDHHR has denied this treatment under its Medicaid Policy Manual, which excludes "[t]ranssexual surgery" from coverage (the "Exclusion"). Compl. ¶ 61. Fain challenges the Exclusion as well as similar policies adopted by the three managed care organizations ("MCO") in the Mountain Health Trust system. This includes Fain's MCO, UniCare, which excludes coverage for "[s]ex transformation procedures and hormone therapy for sex transformation procedures." Id. at ¶ 61.

Since lodging the Complaint, WVDHHR Defendants submitted an affidavit stating that, "[i]n providing prior authorization services for the West Virginia Bureau of Medical Services' pharmaceuticals program, the Rational Drug Therapy Program does not have a policy of denying testosterone for treatment of gender dysphoria." Wowczuk Aff. ¶ 7, ECF No. 32-1. Based on this affidavit, Fain agreed not to pursue his claims based on denial of hormone therapy. See Stipulation ¶ 10, ECF No. 53.

With surgical care as his sole basis for recovery, Fain alleges that WVDHHR Defendants' policies are discriminatory because "the same treatments are covered for cisgender people who are Medicaid participants." Compl. ¶ 62. According to Plaintiffs, this discrimination violates (1) the Equal Protection clause, (2) the nondiscrimination clause under Section 1557 of the Patient Protection and Affordable Care Act ( 42 U.S.C. § 18116 ), (3) the Medicaid Act's Availability Requirements ( 42 U.S.C. § 1396a(a)(10)(A) ), and (4) the Medicaid Act's Comparability Requirements ( 42 U.S.C. § 1396a(a)(10)(B) ). Fain seeks declaratory and injunctive relief for himself and the Medicaid Class as to each of these claims. He also individually seeks compensatory damages under the ACA.

(2) Defendants Cheatham

Plaintiff Brian McNemar is a state employee who is insured through West Virginia's PEIA. McNemar is married to Plaintiff Zachary Martell, who is McNemar's dependent. Martell is a transgender man diagnosed with gender dysphoria and is seeking both hormone replacement therapy and surgical care to treat that diagnosis. McNemar and Martell bring two claims individually and on behalf of the proposed State Employee Class and The Health Plan Subclass.

Like Plaintiff Fain, McNemar and Martell challenge PEIA and The Health Plan policies and practices which exclude gender-confirming care. According to the Complaint, the PEIA plans exclude "[s]urgical or pharmaceutical treatments associated with gender dysphoria or any physical, psychiatric, or psychological examinations, testing, treatments or services provided or performed in preparation for, or as a result of, sex transformation surgery." Compl. ¶ 64. Additionally, there is a similar exclusion in all plans provided by The Health Plan, which are approved by Cheatham. Id. Plaintiffs allege Cheatham's approval of discriminatory policies and failure to offer a non-discriminatory option violates the Equal Protection clause. They seek declaratory and injunctive relief on behalf of the class.³

II. WVDHHR DEFENDANTS' MOTIONS TO DISMISS

On January 11, 2021, WVDHHR Defendants moved for partial dismissal (ECF No. 23), challenging Fain's claim for compensatory damages under the Eleventh Amendment and the sufficiency of Fain's class action allegations. On February 2, 2021, WVDHHR Defendants filed a second motion to dismiss (ECF No. 32), this time challenging standing and ripeness, as well as Fain's ability to represent the proposed class. With the filing of Plaintiffs' Unopposed Motion for Leave to File Sur-Reply in Opposition to WVDHHR Defendants' Motion to Dismiss on April 5, 2021, the motions became ripe for review.

(1) Eleventh Amendment Immunity

The first jurisdictional issue raised by WVDHHR Defendants is whether Fain's claim for compensatory damages against WVDHHR under the ACA must be dismissed. WVDHHR argues that this claim is barred by the Eleventh Amendment, whereas Plaintiff argues that WVDHHR waived its Eleventh Amendment immunity by accepting federal assistance.

The waiver exception applies if a state "voluntarily participat[es] in federal spending programs [and] Congress expresses ‘a clear intent to condition participation in the programs ... on a State's consent to waive its constitutional immunity.’ " Litman v. George Mason Univ. , 186 F.3d 544, 550 (4th Cir. 1999) (quoting Booth v. Maryland , 112 F.3d 139, 145 (4th Cir. 1997) ). Such a waiver must be a "clear and unambiguous" condition of the funding. Arlington Cent. Sch. Dist. Bd. Of Educ. v. Murphy , 548 U.S. 291, 296, 126 S.Ct. 2455, 165 L.Ed.2d 526 (2006).

Here, Fain argues that Congress clearly and unambiguously conditioned federal Medicaid funding on states' waiver of immunity for nondiscrimination provisions when it enacted Section 1003 of the Civil Rights Remedies Equalization Act of 1986. That Section reads:

A State shall not be immune under the Eleventh Amendment of the Constitution of the United States from suit in Federal court for a violation of section 504 of the Rehabilitation Act of 1973, title IX of the Education Amendments of 1972, the Age Discrimination Act of 1975, title VI of the Civil Rights Act of 1964, or the provisions of any other Federal statute prohibiting discrimination by recipients of Federal financial assistance.

42 U.S.C. § 2000d-7(a)(1). According to Plaintiff, the so-called Residual Clause ("or the provisions of any other Federal statute prohibiting discrimination by recipients of Federal financial assistance") incorporates Section 1557 of the ACA, which is a nondiscrimination provision. The Court agrees.

The text of the Residual Clause unequivocally waives immunity against violations of "provisions of any other Federal statute prohibiting discrimination." Section 1557 is unambiguously a federal statute which prohibits discrimination by recipients of Federal financial assistance; it states:

Except as otherwise provided for in this title (or an amendment made by this title),

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