About Us  |  About Cheetah®  |  Contact Us

Challenges to ACA final rule involving gender identity halted while HHS reconsiders rulemaking

By Tulay Turan, J.D.

The Department of Health and Human Services (HHS) has been granted a stay on proceedings involving a final rule it issued pursuant to the Patient Protection and Affordable Care Act (ACA) that prohibits discrimination on the basis of “gender identity” and “termination of pregnancy.” Staying the case and resuming consideration of all pending motions when HHS completes reconsideration of the rule will promote judicial efficiency and impose no undue prejudice on the plaintiffs, a federal district court in Texas ruled (Franciscan Alliance, Inc. v. Price, July 10, 2017, O’Connor, R.).

On December 31, 2016, eight states and three faith-based private health care providers were granted preliminary injunctive relief from enforcement of the rule, which was enacted to implement Section 1557 of the ACA. ACA Section 1557 prohibits discrimination by any health program or activity receiving federal financial assistance on the grounds prohibited by four federal nondiscrimination statutes incorporated by the section. According to the court, the regulation violated the Administrative Procedures Act by contradicting existing law and exceeding statutory authority, and likely violated the Religious Freedom Restoration Act.

Since the court entered its preliminary injunction, the American Civil Liberties Union of Texas and River City Gender Alliance (putative intervenors) appealed the denial of their motion to intervene as of right, plaintiffs filed a motion for summary judgment, putative intervenors requested a stay of the case pending appeal, and HHS filed this motion to remand or stay the case pending reconsideration of the rule.

Reconsideration of the rule. Although HHS did not confess error, identify new evidence, or cite any intervening events to support its remand request, the court found HHS identified “substantial and legitimate concerns” in support of a remand and stay – namely, that the court and the parties could waste limited resources litigating issues that may be mooted by HHS’ impending review of the rule. “[C]ourts ordinarily allow the rulemaking agency an opportunity to reconsider a rule when it cites serious and legitimate concerns, even in the absence of confessed error and before consideration of the merits,” the court wrote.

Timely request. In addition, the court rejected the plaintiffs’ argument that HHS’ request was untimely because it was made four months after the court’s preliminary injunction. It is not unusual for the initiation of rulemaking proceedings to take many months. In fact, courts have found time periods in excess of three years to be reasonable. Thus, the court found HHS’ request to be timely.

No undue prejudice. The court also rejected plaintiffs’ argument they would face undue prejudice even if the preliminary injunction were to remain in effect during the remand or stay. Their concerns about the putative intervenors were moot because the Fifth Circuit dismissed the intervenors’ appeal on the order denying intervention as of right for lack of jurisdiction. In addition, “the potential prejudice from additional lawsuits is too remote to constitute undue prejudice that would lead the Court to consider the merits of Plaintiffs’ claims before allowing HHS time to reconsider the rule.”

Premature to rule on intervenors. In a footnote, the court addressed the putative intervenors request at the hearing to fully resolve their pending motion to intervene before granting a stay or remand. In declining the request, the court noted that a potential revision of the rule could moot or change the court’s intervention analysis. Considering the intervention motion before allowing HHS an opportunity to review the rule would not serve the efficiency considerations cited by the putative intervenors in their own motion for a stay. The court noted it will rule on the motion for permissive intervention, as necessary, after the stay is lifted and before consideration of plaintiffs’ motion for summary judgment.

The court concluded that staying the case and resuming consideration of all pending motions when HHS completes reconsideration of the rule will promote judicial efficiency and impose no undue prejudice on the plaintiffs. Thus, the court granted the motion for a stay of all proceedings, but declined to fully remand the case. The court also clarified that the December 31, 2016, preliminary injunction order is unaffected by this order and remains in full force and effect throughout the duration of the stay and until further order of the court.