Transgender people who are enrolled in the North Carolina State Health Plan can proceed with a lawsuit over its 2018 decision to exclude all coverage for gender dysphoria counseling, hormone therapy, surgical care or other treatment, the 4th U.S. Circuit Court of Appeals held Wednesday.

The 2-1 decision affirmed a federal judge in Greensboro’s 2020 ruling that NCSHP lacks sovereign immunity from the suit, which was filed by Lambda Legal Defense & Education Fund, the Transgender Legal Defense & Education Fund, and Harris, Wiltshire & Grannis on behalf of seven state workers or their dependents under the antidiscrimination provisions of the Affordable Care Act.

NCSHP waived its 11th Amendment protections against the discrimination lawsuit by accepting federal funds, Chief Circuit Judge Roger Gregory wrote for the majority.

He quoted from the Civil Rights Remedies Equalization Act (CRREA), which provides that states have no sovereign immunity from suits alleging a violation of “the provisions of any other Federal statute prohibiting discrimination by recipients of Federal financial assistance.”

Circuit Judge Albert Diaz concurred in the result, specifying that he did so based on the combined effect of CRREA and the Affordable Care Act rather than the ACA’s antidiscrimination section alone.

The dissenter, Circuit Judge G. Steven Agee, said a state’s waiver of sovereign immunity must be knowing and voluntary, and CRREA — which predates the Affordable Care Act, and never mentions it — fails to provide the requisite notice.

“The NCSHP’s sovereign immunity from suit should have been confirmed and the case dismissed,” Agee concluded. “The Supreme Court should proceed expeditiously to correct the constitutional error here.”

The case is Maxwell Kadel et al. v. North Carolina State Health Plan for Teachers and State Employees et al., 4th U.S. Circuit Court of Appeals, No. 20-1409.

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