Franciscan Alliance, Inc. v. Burwell

227 F.Supp.3d 660

FRANCISCAN ALLIANCE, INC. et al., Plaintiffs,

v.Sylvia BURWELL, Secretary of the United States Department of Health and Human Services ; and United States Department of Health and Human Services, Defendants.

Civil Action No. 7:16–cv–00108–O

United States District Court, N.D. Texas, Wichita Falls Division.

Signed December 31, 2016

Luke Goodrich, Mark Rienzi, The Becket Fund for Religious Liberty, Washington, DC, Austin R. Nimocks, Texas Attorney General's Office, Austin, TX, for Plaintiffs.

Adam Anderson Grogg, Bailey Wilson Heaps, Emily Brooke Nestler, U.S. Department of Justice, Washington, DC, for Defendants.

ORDER

Reed O'Connor, UNITED STATES DISTRICT JUDGE

Before the Court are Plaintiffs' Motions for Preliminary Injunction and Briefs and Appendix in Support (ECF Nos. 22–26), filed October 21, 2016; Defendants' Response (ECF No. 53), filed November 23, 2016; and Plaintiffs' Replies (ECF Nos. 56-57), filed December 2, 2016. Additionally, the parties appeared at a hearing on the request for a preliminary injunction and presented oral arguments on December 20, 2016. ECF No. 61.

The Plaintiffs challenge a regulation enacted pursuant to the Patient Protection and Affordable Care Act ("ACA") that covers nearly every healthcare provider in the country and reaches into one of the most intimate relationships: that between a physician and her patient. The ACA forbids discriminating on the basis of sex. Pursuant to this statutory provision, Defendants enacted a regulation that forbids discriminating on the basis of "gender identity"¹ and "termination of pregnancy." 42 U.S.C. § 18116(a) ; 45 C.F.R. § 92.4. Plaintiffs argue the new regulation will require them to perform and provide insurance coverage for gender transitions and abortions, regardless of their contrary religious beliefs or medical judgment. See Am. Compl., ECF No. 21. While this lawsuit involves many issues of great importance—state sovereignty, expanded healthcare coverage, anti-discrimination protections, and medical judgment—ultimately, the question before the Court is whether Defendants exceeded their authority under the ACA in the challenged regulations' interpretation of sex discrimination and whether the regulation violates the Religious Freedom Restoration Act as applied to Private Plaintiffs. Before reaching this question however, the Court is obligated to determine whether it has authority to hear the matter.

For the following reasons, the Court concludes that jurisdiction is proper, the regulation violates the Administrative Procedure Act ("APA") by contradicting existing law and exceeding statutory authority, and the regulation likely violates the Religious Freedom Restoration Act ("RFRA") as applied to Private Plaintiffs. Accordingly, Plaintiffs' Motions for Preliminary Injunction should be and are hereby GRANTED .

I. BACKGROUND

The following factual recitation is taken from Plaintiffs' First Amended Complaint (ECF No. 21) unless stated otherwise.² Plaintiffs are composed of eight states (collectively "State Plaintiffs")³ and three private healthcare providers, Franciscan Alliance, Inc. ("Franciscan"), its wholly owned entity Specialty Physicians of Illinois, LLC ("Specialty Physicians"), and the Christian Medical & Dental Society ("CMDA"), doing business as the Christian Medical & Dental Associations (collectively "Private Plaintiffs"). Am. Compl. 4–8, ECF No. 21. They have sued the U.S. Department of Health and Human Services ("HHS"), and HHS Secretary Sylvia Burwell ("Burwell") (collectively "Defendants"), challenging a new rule issued by HHS entitled Nondiscrimination in Health Programs & Activities (the "Rule"). 81 Fed. Reg. 31376–31473, (May 18, 2016) (codified at 45 C.F.R. § 92).

The Rule implements Section 1557 of the ACA ("Section 1557"), which prohibits discrimination by any health program or activity receiving federal financial assistance on the grounds prohibited under four federal nondiscrimination statutes incorporated by Section 1557. 45 C.F.R. § 92.1. The ground at issue in this case is Section 1557's incorporation of the prohibited sex discrimination under Title IX of the Education Amendments of 1972 ("Title IX"). Plaintiffs challenge the Rule's interpretation of discrimination "on the basis of sex" under Title IX as encompassing "gender identity" and "termination of pregnancy." 45 C.F.R. § 92.4 ; State Pls.' Br. 10, ECF No. 23. Plaintiffs argue that because Section 1557 incorporates the statutory prohibition of sex discrimination in Title IX, its scope should be limited by Title IX's unambiguous definition of "sex" as the immutable, biological differences between males and females "as acknowledged at or before birth." Id. at 13, 27. The Plaintiffs also assert that the Rule's definition of sex does not apply to them because the text of Section 1557 incorporates the religious and abortion exemptions of Title IX, and the Rule's failure to incorporate those exemptions renders it contrary to law. See Priv. Pls.' Br. 31–34, ECF No. 25.

On October 21, 2016, Plaintiffs moved for partial summary judgment, or in the alternative, a preliminary injunction. ECF Nos. 22, 24. To resolve the matter before the Rule's insurance provision goes into effect on January 1, 2017, at which time Plaintiffs would be forced to "make significant, expensive changes to their insurance plans," the Court set an expedited briefing schedule and held a hearing on the preliminary injunction motions on December 20, 2016. Priv. Pls.' Mot. 2, ECF No. 24; Nov. 1, 2016 Order 7, ECF No. 32; ECF No. 61. Plaintiffs' motions for preliminary injunction are now ripe for review.

A. The Rule

The challenged Rule was first proposed on September 8, 2015, pursuant to HHS's authority to implement Section 1557 of the ACA. Am. Compl. 10–11, ECF No. 21. After notice and comment, the final Rule was published on May 18, 2016. Id. The Rule took partial effect on July 18, 2016, and the insurance provisions will be effective on January 1, 2017. 81 Fed. Reg. at 31376. The Rule purports to implement Section 1557 which provides:

[A]n individual shall not, on the ground prohibited under title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq. ) ["Title VI"], title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq. ) ["Title IX"], the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq. ) ["ADA"], or section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794 ) ["Section 504"], be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving Federal financial assistance ....

42 U.S.C. § 18116(a) (emphasis added). Section 1557 does not create new bases of prohibited discrimination, but rather incorporates the grounds of four longstanding federal nondiscrimination statutes: Title VI, Title IX, the ADA, and Section 504. 42 U.S.C. § 18116(a). The implementing Rule claims to merely "clarif[y] and codif[y] existing nondiscrimination requirements," incorporated in Section 1557. 81 Fed. Reg. at 31376 (emphasis added). A substantial portion of the Rule deals with discrimination on the basis of disability, but Plaintiffs limit their challenge to the Rule's definition of discrimination on the basis of sex. Priv. Pls.' Br. 24, ECF No. 25.

When implementing the Title IX portion of Section 1557, HHS defined discrimination "on the basis of sex" to include "termination of pregnancy" and "gender identity." 45 C.F.R. § 92.4. The Rule does not define termination of pregnancy but defines gender identity as "an individual's internal sense of gender, which may be male, female, neither, or a combination of male and female, and which may be different from an individual's sex assigned at birth." Id. The Rule explains that the "gender identity spectrum includes an array of possible gender identities beyond male and female." 81 Fed. Reg. at 31392.

Plaintiffs claim the Rule's interpretation of sex discrimination pressures doctors to deliver healthcare in a manner that violates their religious freedom and thwarts their independent medical judgment and will require burdensome changes to their health insurance plans on January 1, 2017. Priv. Pls.' Mot. 1–2, ECF No. 24; State Pls.' Br. 31–33, ECF No. 23. Plaintiffs argue that Defendants define prohibited sex discrimination to include: (1) refusing to provide abortion-related services and health insurance coverage of abortion-related services; and (2) refusing to provide transition-related services and health insurance coverage of transition-related services. See Am. Compl., ECF No. 21. Defendants claim the Rule does not mandate any particular procedure, rather it requires only that covered entities provide nondiscriminatory health services and health insurance in a nondiscriminatory manner. Defs.' Resp. 35, ECF No. 50; Hr'g Tr. 49:25–50:3, Dec. 20, 2016.

1. Health Coverage

One of the "discriminatory actions prohibited" under the Rule is "hav [ing] or implement[ing] a categorical [insurance] coverage exclusion or limitation for all health services related to gender transition." 45 C.F.R. § 92.207(b). The Rule declares that categorizations of all transition-related treatment as cosmetic or experimental are now "outdated and not based on current standards of care." 81 Fed. Reg. at 31429. The "range of transition-related services" contemplated by the Rule includes treatment for gender dysphoria⁴ and is "not limited to surgical treatments and may include, but is not limited to, services such as hormone therapy and psychotherapy, which may occur over the lifetime of the individual." 81 Fed. Reg. at 31435–36.

Because the Rule contains no age limitation, Plaintiffs are concerned it may require health insurance coverage of transitions for children and they note that transition-related procedures are viewed by many in the medical community as harmful, including HHS's own medical experts.⁵ Priv. Pls.' Br. 40, ECF No. 25. They argue the Rule prohibits covered...