T. S. v. Heart of CarDon, LLC

Citation: Not availableDocket: 21-2495

Court: Court of Appeals for the Seventh Circuit; August 5, 2022; Federal Appellate Court

Original Court Document: View Document

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The case before the United States Court of Appeals for the Seventh Circuit involves T.S., a dependent with autism, who is suing Heart of CarDon, LLC and its Employee Benefit Plan for excluding autism treatment coverage, alleging a violation of section 1557 of the Patient Protection and Affordable Care Act (ACA). This section prohibits discrimination based on disability in healthcare entities receiving federal funds. CarDon, which is reimbursed by Medicare and Medicaid, argued that T.S. does not qualify as a plaintiff under section 1557, asserting that only intended beneficiaries of federal assistance—specifically recipients of CarDon's healthcare services—can sue. The district court denied CarDon’s motion for judgment on the pleadings, allowing for immediate appeal.

The appellate court affirmed the district court's decision, stating that T.S.'s lawsuit aligns with the text and purpose of section 1557, thereby falling within the protected interests of the statute. It noted that the limitation CarDon sought to impose on who may bring suit is based on outdated precedent that Congress has effectively overridden. Consequently, T.S. is deemed a proper plaintiff, and the litigation is permitted to proceed. The excerpt also outlines the ACA's broader goals of increasing health insurance coverage and reducing healthcare costs, and details section 1557's prohibition against discrimination based on disability, referencing relevant statutes that underpin these protections.

Section 1557 prohibits discrimination based on specific grounds and mandates that enforcement mechanisms from related statutes apply to violations of this section. In this preliminary stage, factual allegations are accepted as true. CarDon operates a skilled-nursing and assisted-living facility, providing healthcare services to patients, including those covered by Medicare and Medicaid. CarDon also offers a self-funded group health plan for employees and their dependents, which includes various medical and mental health benefits. T.S., a minor and beneficiary of the Plan, was diagnosed with Autism Spectrum Disorder, for which his physician recommended Applied Behavioral Analysis (ABA) therapy. Initially, the Plan's third-party administrator authorized six months of ABA therapy, but a new administrator later denied continued coverage, citing exclusions for autism-related services. Consequently, T.S. was unable to receive therapy due to his parents' inability to pay out-of-pocket. Although he later received Medicaid coverage for ABA therapy, his development suffered during the gap. T.S. and his parents sued CarDon for intentional discrimination based on disability, claiming the Plan's design and enforcement excluded necessary autism treatment. CarDon's motion for judgment on the pleadings was rejected by the district court, which found T.S. was a member of the protected class under section 1557. The court certified the denial for interlocutory appeal, and proceedings are stayed pending resolution. Although CarDon was granted judgment on other claims related to the Employee Retirement Income Security Act and the Mental Health Parity and Addiction Equity Act, those claims are not part of the current appeal. Jurisdiction exists under 28 U.S.C. 1292(b) due to the certified order regarding the ACA claim, allowing for an appeal focused solely on T.S.'s right to sue under section 1557 without determining the merits of the discrimination claim.

CarDon acknowledges its primary business is healthcare, that it receives federal financial assistance through Medicare and Medicaid, and that it sponsors a self-funded health plan. However, it contends that T.S. does not fall within the zone of interests protected by section 1557, asserting that only intended beneficiaries of the federal funds related to patient care can be proper plaintiffs. CarDon cites legal precedent to argue that the zone-of-interests inquiry is not merely prudential standing, but rather focuses on whether a specific class of persons has the right to sue under a statute. The inquiry requires courts to interpret statutory provisions to determine if a plaintiff's claim is encompassed by a legislatively conferred cause of action.

Section 1557 prohibits discrimination based on disability in any health program receiving federal financial assistance, aiming to prevent federal resources from supporting discriminatory conduct and providing individuals a means to protect themselves against such discrimination. The provision extends a private right of action to individuals discriminated against by healthcare entities due to disabilities. T.S. claims that CarDon's health plan excluded him from coverage because of his autism, positioning him within the class of plaintiffs protected by section 1557. CarDon disputes this interpretation, arguing that only its patients, as intended beneficiaries of federal funds, can bring claims under section 1557.

T.S. is not prohibited from being a plaintiff under section 1557, despite CarDon's argument that only patients qualify. Section 1557 protects "individuals" rather than limiting the term to "patients" or "beneficiaries," indicating a broader scope of protection. CarDon's interpretation fails to recognize that the statute's language allows for individuals like T.S., who allege direct discrimination, to be covered under the zone-of-interests test, as established in past cases like Thompson v. North American Stainless, LP. CarDon's claim that the protections should extend only to patients receiving federal funding is unconvincing. The ACA does not define "health program or activity" narrowly; instead, it aligns with broader definitions established by prior legislation, such as the Rehabilitation Act, which encompasses all operations of healthcare entities receiving federal assistance, not just the patient care component. The term "program or activity" has historically included entire organizations, not merely the segments receiving federal funds. This interpretation was reinforced by the Civil Rights Restoration Act of 1987, which aimed to extend protections beyond just the federally funded parts of organizations. Thus, "health program or activity" in section 1557 is not restricted to specific operations of CarDon that receive Medicare and Medicaid reimbursements. The regulatory discussions regarding the scope of "health" in this context continue to evolve.

Both parties reference HHS rules to support their arguments, but the court need not defer to these interpretations as the statute's meaning is clear. The term 'health program or activity' in section 1557 includes all operations of an entity primarily engaged in healthcare, which CarDon acknowledges it is. Consequently, this classification resolves the inquiry. HHS interprets 'health program or activity' to cover all operations of entities that receive federal financial assistance, underscoring that CarDon's entire operation qualifies, regardless of federal funding.

CarDon's reliance on subsection (c) is misapplied. This subsection distinguishes between entities primarily engaged in healthcare and those merely providing health insurance, clarifying that the provision of health insurance does not alter the status of an entity primarily providing healthcare. Thus, an entity's designation as primarily engaged in healthcare is not diminished by also offering health insurance.

Section 1557's anti-discrimination provisions protect individuals beyond just those directly benefiting from federal assistance, as evidenced by T.S.’s claim of intentional disability discrimination within CarDon’s operations, which aligns with section 1557's protective intent.

CarDon's reference to Simpson v. Reynolds Metals Co. is incorrect in limiting section 1557's scope. While Simpson established that plaintiffs must be intended beneficiaries of federal programs under section 504 of the Rehabilitation Act, section 1557’s language and purpose extend protection to a broader class of individuals, allowing T.S. to maintain his claim.

Plan enrollees, such as T.S., are deemed not to be intended beneficiaries of Medicare or Medicaid payments received by CarDon, thereby excluding them from claims within section 1557’s zone of interests. Courts agree that a private right of action serves as an enforcement mechanism within section 1557, which incorporates rights from statutes that permit challenges to discrimination. The Rehabilitation Act explicitly allows private individuals to sue for violations concerning disability discrimination. However, the broader scope of what constitutes an enforcement mechanism is debated. The Sixth Circuit interprets enforcement as the process of ensuring compliance with substantive rights but has ruled that section 1557 does not adopt state statute limitations relevant to private suits under the Rehabilitation Act. In contrast, the Fourth Circuit believes section 1557 includes Title IX’s waiver of sovereign immunity as integral to its private right of action.

The discussion raises the question of whether the intended-beneficiary limitation, identified in Simpson, relates more closely to statutes of limitation or waivers of sovereign immunity. CarDon argues this limitation is part of the Rehabilitation Act’s enforcement mechanism, while T.S. contends that Simpson is outdated without providing substantial counterarguments. It is assumed, for the sake of argument, that if the Rehabilitation Act restricts its protections to intended beneficiaries, this would be part of section 1557's enforcement mechanism. However, this assumption does not benefit CarDon, as Congress has effectively nullified the reasoning in Simpson through subsequent legislation. 

Initially, when the Rehabilitation Act was enacted in 1973, it did not define "program or activity receiving Federal financial assistance." In Simpson, the plaintiff's claim was dismissed for failing to show a connection between his discrimination claim and federal assistance. The court determined that section 504 did not prohibit discrimination against handicapped individuals generally but required a direct or indirect effect on handicapped persons within the federally assisted program or activity. This interpretation aligned with Title VI, which similarly restricted remedies to actions causing discrimination against primary beneficiaries of federal assistance. Thus, Simpson ruled that federal assistance to one part of a business does not extend section 504 coverage to the entire entity.

Simpson's interpretation of section 504 of the Rehabilitation Act linked the concepts of intended beneficiaries and program-specific funding, limiting plaintiffs to those directly affected by the specific program receiving federal assistance. This interpretation was narrowed further by the Supreme Court, which held that discrimination protections applied only to individuals discriminated against by the specific program or activity receiving federal funding (Consol. Rail Corp. v. Darrone). Congress, disagreeing with this restrictive view, enacted the Civil Rights Restoration Act of 1987 (CRRA) to broaden the definition of "program or activity" to encompass all operations of a covered entity engaged in providing healthcare that receives federal funds, thus expanding the scope of anti-discrimination protections.

The CRRA effectively dismantled Simpson’s narrow interpretation by allowing a wider class of plaintiffs to bring claims under section 504, even if they were not intended beneficiaries of a specific program. This change meant that more individuals could sue covered entities for discrimination, thereby increasing the potential liability for these entities. The district court affirmed that T.S. has plausibly alleged an interest protected under section 1557 of the ACA, allowing his suit against CarDon to proceed without determining the merits of the discrimination claim. The court concluded that T.S. qualifies as a permissible plaintiff under the expanded definitions established by the CRRA.