Supreme Court Backs Health Plan in ‘Disparate Impact’ Discrimination Case

The U.S. Supreme Court has issued a 7-2 ruling that could help shield insurers and other companies against a wide range of discrimination suits.

DaVita, a kidney dialysis provider, argued that the Marietta Memorial Hospital health plan violated Medicare discrimination laws, because the plan’s limits on kidney dialysis reimbursement rates hurt enrollees with end-stage kidney disease more than other enrollees.

The Supreme Court majority noted that the plan provides the same level of dialysis benefits for all enrollees.

The court held that DaVita could not sue based on the plan benefits rules having a “disparate impact” on people with severe kidney disease because the Medicare law involved did not contain any disparate-impact provisions.

What It Means

Plaintiffs have used disparate-impact data in many different types of discrimination lawsuits.

In recent years, for example, critics of new, automated life insurance underwriting systems have suggested that any systems with a disparate impact on Black applicants or other applicants in protected classes might be discriminatory.

The new ruling, in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita (Case Number 20-1641), could limit federal court plaintiffs to using disparate impact arguments only in cases involving federal statutes that include explicit disparate-impact provisions.

The Case

Marietta Memorial Hospital, located in Marietta, Ohio, was founded in 1929 and now has more than 200 employees.

DaVita, a large U.S. dialysis provider, sued the hospital´s health plan in 2018, arguing that the benefits structure violated the federal Medicare Secondary Payer Act.

Medicare pays for kidney dialysis services, but part of the Medicare Secondary Payer Act discourages employer-sponsored health plans from pushing plan enrollees who need dialysis into Medicare’s arms by prohibiting a plan from providing different levels of benefits for enrollees with end-stage kidney disease than for other enrollees.

The Ruling

Justice Brett Kavanaugh wrote in an opinion for the majority that offering different levels of benefits is different from offering one level of benefits with a disparate impact on different groups of enrollees.

The Medicare Secondary Payer statute does not include a disparate-impact provision, and the Centers for Medicare and Medicaid Services has not included such a provision in the regulations implementing the statute, according to Kavanaugh.

Kavanaugh also argued that implementing a disparate-impact theory in connection with kidney dialysis benefits would be all but impossible.

“The premise of the disparate-impact theory is that the plan’s benefits for outpatient dialysis are inadequate,” Kavanaugh wrote. “But what level of benefits would be adequate, and how would courts determine the level of benefits that qualifies as adequate?”

The Dissent

Justices Elena Kagan and Sonia Sotomayor disagreed with part of the ruling.

Kagan wrote, in a dissenting opinion, that trying to distinguish between differentiation of benefits and disparate impact makes no sense in this case, because most people who get dialysis have end-stage kidney disease, and almost all people diagnosed with end-stage kidney disease get dialysis.

“A reimbursement limit for outpatient dialysis is in reality a reimbursement limit for people with end-stage renal disease,” Kagan asserted. “A tax on yarmulkes remains a tax on Jews, even if friends of other faiths might occasionally don one at a Bar Mitzvah.”

Kagan predicted that health plans will now see that they can push enrollees with end-stage kidney disease onto Medicare simply by limiting benefits for dialysis, rather than specific types of patients.

“Congress would not — and did not — craft a statute permitting such a maneuver,” Kagan wrote. “Now Congress will have to fix a statute this court has broken.”

Pictured: The U.S. Supreme Court building in Washington, D.C.  Photo: Diego M. Radzinschi/ALM