• Does the law’s distinction between nonprofit and for-profit private clubs deny equal protection of the law to the owners of for-profit private clubs?
• Must a country club be nonprofit to qualify for the private club exemption?

The Court of Appeals’ answers to these questions are no and yes, respectively. In Liebes v. Guilford County Department of Public Health,[1] the Court of Appeals held that there is a rational basis for the legislature’s decision to treat for-profit and nonprofit private clubs differently, and that the distinction therefore does not violate a for-profit club owner’s right to equal protection. In Edwards v. Morrow,[2] the court concluded that the law requires country clubs as well as other types of private clubs to be nonprofit in order to qualify for the exemption. The North Carolina Supreme Court denied review in both cases.

The Equal Protection Question

The statewide smoking ban applies to restaurants that must be inspected and permitted under the state’s public health laws, and also to bars that have certain ABC permits. (See the definitions of “restaurant” and “bar” in G.S. 130A-492.) Gate City Billiards Country Club in Guilford County is a members-only establishment that serves alcoholic beverages and has a type of ABC permit that brings it within the law’s definition of a “bar” that is subject to the ban. The establishment also is considered a “private club” under North Carolina’s ABC laws, but not under the smoking ban, which defines “private club” as:

A country club or an organization that maintains selective members, is operated by the membership, does not provide food or lodging for pay to anyone who is not a member or a member’s guest, and is either incorporated as a nonprofit corporation in accordance with Chapter 55A of the General Statutes or is exempt from federal income tax under the Internal Revenue Code as defined in G.S. 105‑130.2(1). For the purposes of this Article, private club includes country club.

G.S. 130A-492(11).

Because Gate City is not a nonprofit establishment, the Guilford County Department of Public Health (Guilford DPH) concluded that it was subject to the smoking ban, which took effect on January 2, 2010. The bar’s owner, Don Liebes, continued to allow smoking in his establishment after that date. In accordance with procedures in G.S. 130A-22(h1), Guilford DPH notified Liebes that he was in violation of the law and gave him an opportunity to comply, then imposed administrative penalties of $200 per day when he failed to do so. A person aggrieved by a local health department’s imposition of administrative penalties must first appeal to the local board of health, but if dissatisfied with the board’s decision may contest it in district court (G.S. 130A-24). In this case, the penalties were upheld by both the Guilford board of health and the district court. Liebes then appealed to the NC Court of Appeals.

In his appeal, Liebes argued that the smoking law’s distinction between nonprofit and for-profit private clubs violated his constitutional right to equal protection. He argued that the smoking law’s definition of “private club” was patently irrational because it was inconsistent with the ABC law’s definition of the same term. The Court of Appeals rejected this argument, pointing out that the smoking law’s definition closely matches another definition of “private club” in the food and lodging sanitation laws, and that those laws—like the smoking ban—are concerned with the protection of the public health. Liebes next noted that the stated policy of the smoking ban is to protect the health of individuals in public places and places of employment, and contended that because the nonprofit clubs exempted from the ban are also places of employment, the distinction between for-profit and nonprofit clubs is not rational. The court rejected this argument as well, pointing out that the smoking law has another stated purpose: to prohibit smoking in public places. It reasoned that the decision to exempt only nonprofit private clubs from the ban was rationally related to this legislative goal, even if it fails to further other goals of the same law.

The Country Club Question

As regular readers of this blog know, I have wondered for some time about the scope of the smoking law’s exemption for country clubs. Shortly after the law became effective, I wrote this post, in which I tackled two questions: What type of entity counts as a “country club”—a term the law does not define? And must a country club meet the four conditions for “private club” that are in the statute’s definition of that term in order to qualify for the exemption?

The definition clearly required that most private clubs meet four conditions to be eligible for the ban: (1) maintain selective membership, (2) be operated by the members, (3) provide no food or lodging for pay to anyone but members and guests, and (4) be nonprofit. However, I believed the law was ambiguous as to country clubs, and that there was a reasonable argument that a country club did not have to meet those conditions. (Not everyone agreed with me, as a comment to my post reveals. Also, the North Carolina Division of Public Health has consistently maintained that the four conditions applied to country clubs.)

The Court of Appeals has spoken, and we now know that a country club must be nonprofit to qualify for the exemption.

In Edwards v. Morrow, the owners of several private bars in Pitt County allowed smoking to continue in their establishments after the effective date of the smoking ban, and were ultimately subject to administrative penalties imposed by the local health director. After the local board of health upheld the penalties, the bar owners appealed to the district court, arguing that the law violated equal protection by exempting all country clubs from the ban but not providing an exemption for similarly situated private clubs that are not country clubs. In this case, the district court agreed with the bar owners, holding that the law was unconstitutional as applied to them and unenforceable against them. The Pitt county health director appealed.

The Court of Appeals first rejected the bar owners’ contention that the law exempts all country clubs from the smoking ban. The court noted that the term “country club” is not defined in the General Statutes and its meaning is ambiguous. The court considered but did not answer the question of what characteristics an organization must have to be considered a “country club” (must there be a golf course? must it be suburban? etc.).  Instead it concluded that it need only  interpret the term in a way that gives effect to the legislature’s intent, which the court said is to protect individuals in public places from secondhand smoke while also respecting the rights of association of members of truly private organizations. Thus the court concluded that the law must exempt only private country clubs, not public country clubs. While there is no clear test for distinguishing private country clubs from public country clubs, nonprofit status presumptively ensures that a country club is truly private, as for-profit country clubs are actually quasi-public in that they seek to maximize profit with membership open to anyone willing to pay the fee.

Once the court determined that the exemption applies only to nonprofit country clubs, the Pitt county bar owners’ argument dissolved. It was based on the statute’s distinction between for-profit country clubs and other for-profit private clubs—but according to the court, no such distinction exists. The court concluded by reiterating Liebes’ holding that there is a rational basis for distinguishing between nonprofit and for-profit clubs. Judge Beasley concurred in the majority’s holding but disagreed with the conclusion that the legislature intended the exemption for country clubs to be limited to nonprofit country clubs. In December, the Supreme Court dismissed the owners’ appeal and denied discretionary review.

Conclusion

The North Carolina law that bans smoking in most restaurants and bars contains an exemption for “private clubs.” In order to qualify for this exemption, a club must meet four criteria. One of those criteria requires the club to be a nonprofit. Specifically, it must be incorporated as a nonprofit under state laws, or it must be exempt from federal taxes because it qualifies as a tax-exempt nonprofit under the Internal Revenue Code. The requirement that a club be a nonprofit to qualify for the exemption extends to country clubs as well as other private entities, such as bars that are considered private under the state’s ABC laws. The legislature’s distinction between for-profit and nonprofit private clubs has a rational basis and therefore does not run afoul of state and federal constitutional guarantees of equal protection.

Now we know.

In North Carolina, local health departments are required by law to obtain and maintain accreditation. If the local health department becomes part of a CHSA, then the CHSA acquires the duty to obtain and maintain accreditation. How is this so, and what does it mean for counties that create a CHSA incorporating public health?

Why must a CHSA be accredited as a local health department?

When a county creates a CHSA that includes public health, the consolidated agency acquires “the responsibility to carry out the duties of a local health department.” G.S. 130A-43(a). One of the duties of a local health department is to obtain and maintain accreditation through the North Carolina Local Health Department Accreditation program. G.S. 130A-34.1(f). Effective July 1, 2014, an agency providing local public health services in North Carolina must be accredited in order to continue to receive state and federal public health funding. G.S. 130A-34.4.

What must an agency do to be accredited?

Local health departments or CHSAs that provide local public health services must satisfy accreditation standards established by the North Carolina Commission for Public Health, the statewide rulemaking body for public health. The standards have been adopted as rules and are published in the North Carolina Administrative Code, Title 10A, Chapter 48.

The accreditation standards establish 41 benchmarks addressing the agency’s core functions and essential services, facilities and administrative services, and governance. Each benchmark has a list of activities associated with it. To satisfy a benchmark, the agency must complete all of the activities associated with the benchmark. For example, Benchmark 36 requires local board of health members to be trained regarding their service on the board. To satisfy this benchmark, a local agency must complete three activities: (1) provide board of health members with an up-to-date handbook, (2) assure that new board members receive training and reference materials within their first year of service on the board, and (3) assure that board members receive ongoing training in the authorities and responsibilities of boards of health.

The current rules require an agency to satisfy at least 33 of the 41 benchmarks, including a minimum of 22 benchmarks related to agency core functions and essential services, three related to facilities and administrative services, and six related to governance. The two additional required benchmarks may come from any of those categories. The Commission for Public Health recently approved a change to the rules that will focus on activities rather than benchmarks. Under the rule change, an agency will be required to satisfy at least 83 of the 103 activities related to agency core functions and essential services, at least 24 of the 27 activities related to facilities and administrative services, and at least 25 of the 28 activities related to governance. The rule change is not yet final, as it is awaiting consideration by the Rules Review Commission.

How does this apply to an agency that does not have a “board of health”? For example, when a CHSA provides public health services, it does not have a board of health – it either has a consolidated human services board or is directly governed by the county commissioners.

It is correct that a CHSA is governed by something that is not called a “board of health.” A CHSA may be governed by an appointed consolidated human services board, or it may be governed directly by the county commissioners under a part of the new legislation that authorized commissioners to assume direct control of certain local boards. G.S. 153A-77(a). In either case, the CHSA’s governing board becomes the “board of health” for purposes of the accreditation requirements, as well as for other laws that assign authority or responsibilities to a local board of health.

Here’s how it works: If a consolidated human services agency includes public health, by law the board that governs the agency acquires the responsibilities, powers and duties of a local board of health, except direct appointment of the local health director. G.S. 153A-77(d); see also 130A-43(b). One of the duties the governing board thus acquires is the duty to satisfy accreditation standards that specify activities for the local board of health. If a CHSA has an appointed consolidated human services board, the appointed board is responsible for satisfying the accreditation requirements that require action by the local board of health. If a CHSA is governed directly by the county commissioners, the commissioners are responsible for satisfying those requirements.

Which local health department accreditation requirements affect the agency governing board?

There are references to the board throughout the accreditation standards, but most of the activities that the governing board is directly responsible for are contained in the accreditation standards on governance — benchmarks 34 through 41 (10A N.C.A.C. 48B.1301 – .1308). Those benchmarks address local public health rule-making; adjudications related to local public health rules and fines; board of health training; the development, implementation and evaluation of local health services and programs to protect and promote public health; the establishment of public health goals and objectives; assurance of resources to implement public health essential services; advocating in the community on behalf of public health; and promoting public health partnerships.

If a CHSA is governed directly by the county commissioners, may the commissioners take on some of the powers and duties of the governing board, but give others—including the accreditation responsibilities—to an advisory committee?

First, let’s talk about the creation of a health advisory committee, since that is something that the new legislation addresses. If a CHSA that includes public health is governed directly by the county commissioners, the commissioners must appoint an advisory committee that includes the same membership as a county board of health: a physician, a dentist, an optometrist, a veterinarian, a registered nurse, a pharmacist, a county commissioner, a professional engineer, and three representatives of the general public. G.S. 153A-77(a); 130A-35. The new law does not describe the advisory committee’s role or give it any particular powers and duties, but it seems clear that its purpose is to advise the commissioners when they carry out duties that would otherwise be performed by a local board of health.

Now, to the question of whether the board of county commissioners may divide the CHSA governing board responsibilities, assuming some to itself but assigning others to the advisory committee: When a board of county commissioners wishes to assume the duties of a CHSA board, it does so by adopting a resolution “assuming and conferring upon the board of county commissioners all powers, responsibilities and duties” of the board. G.S. 153A-77(a) (emphasis added). This statutory language does not appear to allow the commissioners to assume only some of a board’s powers and duties – it seems to be an all-or-nothing proposition. Further, G.S. 153A-76—the state statute that generally permits county commissioners to organize county government—specifically prohibits assigning elsewhere “a function or duty assigned by law to a particular office, position, department, board, commission, or agency” (emphasis added). As I explained previously, when a CHSA is created its governing board acquires the powers and duties of a local board of health, including those that pertain to the agency’s accreditation. So, when the board of county commissioners is the CHSA’s governing board, it acquires those duties.

Could the commissioners assume all the responsibilities, powers and duties of a CHSA board but then delegate some of them to the advisory committee?

This is a slightly different question, as assumption of duties followed by delegation is a bit different from dividing the duties between entities in the first place. However, I think delegation of duties assigned by law to the governing board—as the accreditation duties are—still runs afoul of G.S. 153A-76(3) and its prohibition on reassigning such duties. Further, several of the accreditation benchmarks and activities require the exercise of a board of health’s statutory duties, such as policy-making or rule-making (G.S. 130A-39), or adjudication (G.S. 130A-24). Nothing in the board of health statutes permits the delegation of those powers or duties to another person or entity. (In contrast, boards of social services are expressly authorized to delegate certain of their duties to the local director of social services.)

In practice, I believe the commissioners could use the advisory committee to inform their work in satisfying accreditation standards. That would certainly seem to be consistent with the rationale for having an advisory committee in the first place. But ultimate responsibility for satisfying the accreditation standards still appears to lie with the commissioners.

To be eligible for deferred action, an individual must provide evidence that he or she:

• Arrived in the United States before his or her 16^th birthday;
• Was physically present in the US on June 15, 2012, and was both undocumented and less than 31 years of age on that date;
• Has continuously resided in the US since June 15, 2007;
• Is currently in school or has graduated from high school or obtained a GED, or is an honorably discharged veteran; and
• Has not been convicted of a felony or certain misdemeanors, and does not otherwise pose a threat to national security or public safety.

Demonstrating eligibility for deferred action requires individuals to provide a fair amount of documentary evidence, which may include medical records. US Citizenship & Immigration Services (USCIS) began accepting applications for deferred action in August. Since that time, a number of local health departments in North Carolina have received requests for medical records from individuals who want to apply. For answers to health departments’ most frequently asked questions about releasing medical records for the deferred action program, please keep reading.

How may medical records be used in an individual’s application for the Deferred Action program?

A person who wants to apply for deferred action must document his or eligibility for the program by completing Form I-821D and providing supporting evidence. According to the form’s instructions, medical records may serve as the evidence for any or all of the following:

• That the applicant arrived in the United States before his or her 16^th birthday.
• That the applicant was present in the United States on June 15, 2012.
• That the applicant has continuously resided in the United States since June 15, 2007.

Does HIPAA allow disclosure of medical records for this purpose?

Yes. An individual who is seeking medical records for this purpose may ask for copies of the records to be provided directly to the individual him or herself, or may ask for copies to be provided to a third party who is assisting with the application. In either case, HIPAA allows the disclosure, but certain conditions must be met.

Disclosure directly to the individual. Under HIPAA, individuals have a right to obtain copies of their own medical records. The local health department must verify the individual’s identity before providing a copy of the medical record, if the person’s identity is not already known.

In some cases a person requesting copies of an individual’s record may be the individual’s personal representative rather than the individual him or herself. For HIPAA purposes, a personal representative is a person who has the authority to make health care decisions for the individual. A personal representative may obtain copies of an individual’s medical record or authorize the disclosure of the records to a third party. The health department must verify that the person is a personal representative of the individual before providing the copies.

In most cases, a person such as an advocate or attorney who is assisting with a deferred action application is not a personal representative for HIPAA purposes. He or she is a third party for purposes of records release. (There may be an occasional case in which a person who is advocating for an applicant also has legal authority to make health care decisions for the individual, but that is probably the rare exception, not the rule.)

Disclosure to a third party. In some cases, a person seeking medical records for a deferred action application may want the copies to be disclosed directly to a third party, such as an advocate or attorney who is assisting with the application. This disclosure requires a HIPAA-compliant authorization form, signed by the individual who is the subject of the records (or a personal representative, if applicable).

Who may request a minor child’s records – the parent, or the child?

The answer depends on whether the parent is the personal representative for HIPAA purposes. Parents of minor children are often the personal representatives of their children, but not always. For example, a parent may not be treated as the personal representative of a minor who has received treatment on his or her own consent under North Carolina’s minor consent law.

When a health department receives a request for a medical record of a minor child, the health department must determine whether the parent or the minor is the appropriate person to receive the record or to authorize its disclosure to a third person. This circumstance is not unique to the deferred action program and arises frequently enough that health departments should, and probably do, have policies and procedures specific to the release of minors’ records – those should be consulted and applied in this case. For further information on disclosure of minors’ records, see this outline.

Exactly which records should be copied and provided in response to a request for records for a deferred action application?

This is probably the most difficult question to answer and it will likely require case-by-case determinations. There actually is a simple legal answer—the department should provide whichever records the individual or personal representative requests—but in practice individuals may not know exactly which records they need. As a result, a person may submit a request that is unclear, or he or she may ask for a copy of the entire medical record.

If the individual clearly requests the entire medical record the agency may legally provide it, but this can pose significant practical problems: in some cases providing the whole record may be unnecessarily costly to the client and administratively burdensome to the health department.

If the department needs to clarify a request or wishes to assist an individual in narrowing the request, it will be helpful to keep in mind how medical records will be used in the deferred action application process. The instructions for Form I-821D state that medical records may be used to demonstrate any or all of the following:

• That the individual arrived in the United States before his or her 16^th birthday.
• That the individual was present in the United States on June 15, 2012.
• That the individual has continuously resided in the United States since June 15, 2007.

The instructions also state that the records must concern treatment or hospitalization, provide the name of the medical facility or physician that provided the treatment, and specify the date(s) of treatment. Obviously, they should also identify the individual.

Keeping this in mind, here are some general guidelines for helping an individual determine which records will serve his or her purposes:

• If all an individual is seeking is evidence of arrival in the United States before the 16^th birthday, then any record of any service provided before the 16^th birthday should suffice, so long as it includes the individual’s name and date of birth, the date of treatment, and the name of the health department or the physician who provided the treatment.
• If all the individual is seeking is evidence of presence in the United States on June 15, 2012, a record of any service provided on that date may be all he or she needs. Again, the record would need to include the individual’s name and date of birth, the date of the treatment, and the name of the health department or physician.
• If the individual is planning to use medical records as evidence of continuous residence in the United States since June 15, 2007, he or she will likely need all records of treatment since that date.

These guidelines are not rules that should be imposed on individuals requesting records; they are simply suggestions that may help health departments assist an individual in determining the scope of a request for records, if the individual requests or is receptive to such assistance. Ultimately, the health department should provide the records the individual requests.

May a local health department offer a memorandum or letter verifying the specific information requested in lieu of copies of the medical records themselves?

No, the health department should provide copies of the original medical records. The federal agency responsible for the program (USCIS) has advised me that it will not accept a letter or memorandum in lieu of original records. (Personal phone communication, Oct. 4, 2012).

May a local health department refuse a request for records if the department believes the request is unduly burdensome?

No. Under HIPAA, an individual has a right to obtain a copy of his or her medical record. This right may be denied only in very limited circumstances that are set out in the HIPAA Privacy Rule. Administrative burden to the agency is not a ground for denying a copy of a record. The full text of this portion of the Privacy Rule is available here.

The health department may require an individual to request the copy in writing. Once the written request is received, the department generally must provide the record within 30 days if the record is maintained and accessible on-site, or within 60 days if it must be retrieved from an off-site location. If the department is unable to provide the record within these timeframes, it may take a one-time extension of up to 30 additional days, but it must notify the individual in writing of the reason for the delay and the date by which the record will be provided.

May a local health department impose a fee for copies of the records? 

HIPAA allows covered entities to charge a “reasonable, cost-based” fee for copies of records that are requested by an individual. It doesn’t specify an amount, but it does specify that the fee may cover only the cost of copying the information that is requested.

In North Carolina, there is also a state law that addresses fees for copies of medical records but the law says it applies only when the records are requested for certain kinds of claims (personal injury lawsuits and social security disability). This law sets the maximum fee at 75 cents per page for the first 25 pages, 50 cents for pages 26 through 100, and 25 cents for each page in excess of 100. In the past, it was a common practice for North Carolina health care providers to look to this law for guidance on setting fees for copies of records, even when the law did not apply to the particular request because it did not relate to a personal injury or disability claim. However, the state law now must be read in conjunction with HIPAA’s provisions regarding reasonable, cost-based fees. If the fees established in the state law exceed the health department’s actual costs, they are too high—the department needs to set lower fees based on actual costs.

Local health departments should have a policy on fees for copies of medical records. Departments may apply that policy to impose fees for copies of records requested for the deferred action program.

The Dogwood county board of health knows that a 2009 law gave it the authority to adopt rules regulating smoking in outdoor areas owned, leased or occupied by local governments. The board also knows that when it exercises its public health rule-making authority, the rules it adopts ordinarily apply throughout the county, including within the town limits of Mayberry. But the county attorney who advises the board of health, Andrea Taylor, is concerned that a board of health rule regulating smoking might be different—that the rule might apply only in the unincorporated areas of the county. Why would Ms. Taylor think this? Is she right?

The question arises because of two provisions in G.S. 130A-498, the law that authorizes local regulation of smoking. Subsection (a) of the law authorizes local ordinances, board of health rules, or policies regulating smoking in certain places. However, a local board of health rule that regulates smoking must be “approved by an ordinance adopted by the Board of County Commissioners.”  Subsection (e) of the same law then states: “A county ordinance adopted under this section is subject to the provisions of G.S. 153A‑122”—the law that establishes the territorial jurisdiction for county ordinances. Under that law, county ordinances are effective only in the unincorporated areas of the county and do not apply within a municipality unless the municipality adopts a resolution consenting to be governed by the ordinance.

Thus we get to Ms. Taylor’s question: Does the requirement that the board of commissioners approve the board of health rule by ordinance have the effect of limiting the jurisdiction of the health rule to the unincorporated areas of the county?

I think it does not, but this is debatable and I can see the path to a different conclusion. The argument that subsection (e) does in fact limit the reach of a board of health smoking rule to the unincorporated areas of the county seems straightforward: A board of health rule regulating smoking must be approved by a county ordinance and a county ordinance’s territorial jurisdiction is limited to the unincorporated areas of the county. Therefore, the approval granted by the county ordinance applies only to the unincorporated areas and the rule cannot be enforced within municipalities because it lacks the approval required to be effective.

The problem I have with this argument is that it would seem to render a portion of the smoking law meaningless. If the effect of subsection (e) is indeed to limit the territorial jurisdiction of a board of health rule to the unincorporated areas of a county, then why does the law give boards of health authority to regulate smoking in the first place? Subsection (a) already authorizes cities and counties to adopt ordinances regulating smoking. I simply do not see the point of granting separate authority to a board of health to adopt smoking rules if all the affected counties and municipalities must also adopt ordinances in order for the rules to be effective. 

I also think it is significant that the legislature required that a board of health smoking rule be approved by an ordinance of the county commissioners, as opposed to adopted as an ordinance. A requirement for approval strikes me as a provision the legislature might reasonably include to ensure that there is oversight of the board of health’s decision-making in this area by the body that appoints it, without compromising the board of health’s authority to regulate throughout the jurisdiction—including within municipalities—under G.S. 130A-39 (the law that gives boards of health their general rule-making authority).

If you accept this position, however, then haven’t I essentially argued that subsection (e) of the statute is meaningless? I don’t think so. My take on subsection (e) is that it applies to county ordinances directly regulating smoking in the county, not county ordinances approving a board of health rule regulating smoking. Of course, that would be the rule anyway under G.S. 153A-122 so it is curious that it would be repeated here. However, it could be a clarification of the scope of a board of county commissioners’ authority to regulate smoking in local government buildings or on local government grounds—two terms that are defined broadly enough that it might appear the county commissioners could directly regulate smoking in city buildings and grounds absent this restriction. (The definitions are in G.S. 130A-492.) 

What does all of this mean for the Dogwood county residents who would like to see smoking restricted in the parks, including the park that is in the Mayberry town limits? Certainly smoking could be regulated in parks throughout the county if both the board of county commissioners and the town’s governing body adopted separate ordinances regulating smoking in the parks within their jurisdiction. I also think the same result could be achieved by a single rule adopted by the county board of health and approved by an ordinance of the board of county commissioners.

If you were Ms. Taylor, how would you advise the board of health?

States have a significant role in implementing the ACA provisions that are intended to extend insurance coverage to individuals who are presently uninsured. This post describes two aspects of that role and the steps North Carolina has taken or may take to carry them out. Before I write about that, I want to acknowledge that a great deal of background work on state implementation has already been undertaken by the North Carolina Institute of Medicine (NCIOM). In 2010, the state Departments of Insurance and Health & Human Services asked the NCIOM to convene several workgroups to study ACA implementation and make recommendations. Eight workgroups on several matters, including the two discussed in this post, were convened and developed recommendations that were published in this report.

Health Benefits Exchanges

The ACA calls for states to set up health benefits exchanges for individuals who are not insured through other means, such as employer-provided insurance. The idea of the exchanges is to create an insurance pool so that uninsured people may purchase health insurance at lower rates than are typically available to individuals in the present market. If a state does not set up a health benefits exchange, the federal government will provide an exchange for residents of the state. The Court’s decision yesterday left unchanged the ACA’s provisions regarding health benefits exchanges.

The NCIOM workgroup on health benefits exchanges recommended that North Carolina develop a state exchange. In 2011, the North Carolina legislature stated its intent to do so in the budget technical corrections act (S.L. 2011-391, sec. 49), and legislation that would create a state exchange passed the North Carolina House (H 115). However, H 115 has not yet been considered in the Senate. A state that wishes to create its own exchange must demonstrate operational readiness by mid-2013 and begin operating in 2014. If North Carolina does not meet these target dates, the federal government is required to provide an exchange for the state’s citizens and legal immigrants. (Under the ACA, unauthorized immigrants are not permitted to purchase insurance through a health benefits exchange.)

Medicaid Expansion

The ACA included an expansion of Medicaid, the health insurance program for low-income individuals. Medicaid is a voluntary program, but states receive large amounts of federal funding to support it and no state declines to participate in it. To receive federal Medicaid funds, a state must have a state plan that complies with federal laws and is approved by the U.S. Department of Health and Human Services. At present, Medicaid coverage extends only to people who fit into particular categories, such as pregnant women, families with children, or individuals with disabilities.

The ACA extends Medicaid eligibility to individuals with incomes up to 133% of the federal poverty level regardless of whether they fit within a category. The chief impact of this provision is to extend Medicaid to low-income adults who are under age 65 and do not have minor children. The federal government will pay 100% of the cost of the expansion during the first three years of its implementation, which is slated to begin January 1, 2014. Then states begin picking up part of the cost, beginning at 5% in 2017 and increasing each year until 2020 when the cost-sharing would stabilize at 90% federal and 10% state. Under the ACA as written, a state that did not comply with this expansion of Medicaid would have been at risk of losing all its federal Medicaid funding – not just funding for the expansion, but also federal funds that are used to support current programs.

In yesterday’s decision, the Court held that the Medicaid expansion exceeded Congress’ authority under the spending clause. While Congress may use its spending power to create and regulate voluntary state-federal programs such as Medicaid, it may not coerce states into participating in them. Chief Justice Roberts described the threat of loss of very large amounts of federal funding as “economic dragooning” that left states with no choice but to go along with the Medicaid expansion – in other words, it amounts to the coercion that is not constitutionally permitted. However, the Court prescribed a remedy: The constitutional violation is cured by prohibiting the federal government from withholding all Medicaid funds from a state that declines participating in the expansion. Instead, it may withhold only those funds necessary to pay for the expansion.

Each state will need to decide whether to put the Medicaid expansion into effect. To do this in North Carolina, the state’s Medicaid plan would need to be amended. The federal agency that is responsible for Medicaid—the Centers for Medicare and Medicaid Services (CMS)—has adopted rules for states to follow in implementing the expansion. The state agency that is responsible for preparing and modifying the plan is the Division of Medical Assistance (DMA) of the state Department of Health and Human Services. DMA is required to take several steps before amending the plan, including consulting with stakeholder groups, allowing the public to review the proposed changes and provide comments, and submitting the amended plan to CMS for approval. The NCIOM workgroup on Medicaid reported that DMA estimated that the expansion would result in an additional 525,000 individuals enrolling in either Medicaid or North Carolina Health Choice (the state children’s health insurance plan) in 2014. New enrollees must be citizens or legal immigrants who are eligible for Medicaid under existing federal immigrant benefit eligibility laws.

Conclusion

Now that the ACA has been upheld, North Carolina has some decisions to make regarding how to proceed with implementation. The two issues discussed in this post present decisions that will probably need to be made sooner rather than later in order to meet the ACA’s deadlines.

At least half a dozen bills have addressed LPHA governance at some point during the 2011-12 legislative session. The bills have addressed different issues at different times, but one concept that has consistently surfaced has been the removal of the population threshold from G.S. 153A-77—the state law that presently allows a county with a population exceeding 425,000 to abolish any or all of its human services boards, including the board of health, and transfer the powers and duties of the abolished board(s) to the county commissioners. (The law also allows a county meeting the population threshold to create a consolidated human services agency, but that’s not what this post is about. For more about consolidated human services agencies, see here  and here.) At present, North Carolina has three counties with populations exceeding 425,000: Guilford, Mecklenburg, and Wake. Mecklenburg county has exercised its authority under existing law to abolish its board of health. If the population threshold is removed, any county could take this action.

What would it mean for the county commissioners if the board of health were abolished? What new powers and duties would the board acquire?

First, the current versions of both H 438 and S 433 would require the board of commissioners to appoint an advisory committee with the same membership that presently is required for a county board of health: a physician, a dentist, an optometrist, a veterinarian, a registered nurse, a pharmacist, a county commissioner, a professional engineer, and three representatives of the general public. 

Next, the commissioners themselves would assume the role and charge of a local board of health, which by law  is to be responsible for protecting and promoting the public’s health within its jurisdiction. To carry out that role, the board of commissioners would acquire the following powers and duties related to public health and the operation of the local public health agency:

Appointment of the local health director. A local board of health appoints a local health director after consultation with the county commissioners. If the county commissioners abolish the board and assume its duties, the commissioners will be responsible for appointing the local health director. In most cases, the local health director must meet minimum education and experience requirements. More information about local health director qualifications, powers and duties is available here.

Policy-making authority for the department. The board of county commissioners would become the policy-making body for the local public health agency.

Rule-making authority for public health throughout the jurisdiction, including within municipalities. Local boards of health have the authority to adopt rules to protect and promote the public’s health within their jurisdictions. The rule-making authority of a local board of health differs from the ordinance-adopting authority of boards of commissioners in significant ways:

• When a board of health adopts public health rules, its territorial jurisdiction exceeds that of a board of county commissioners exercising ordinance-making authority. Typically, county ordinances apply only in the unincorporated areas of the county, not inside the municipalities (unless the municipalities consent to be governed by the county ordinance). However, a board of health rule applies throughout the board of health’s territorial jurisdiction—including within municipal borders.
• A board of health’s authority to adopt rules is limited to matters related to public health, and has other limits imposed by law. At least some of these limits would apply to the board of commissioners if it chose to adopt a local public health rule.
• There are statutory procedures regarding notice to the public that must be followed when a public health rule is adopted, and they differ from the procedures for adoption of county ordinances.
• When a board of commissioners acting as a board of health adopts a public health rule, the options for enforcing the rule are different from those available to a traditional board of health.

A board of county commissioners that has assumed the powers and duties of a local board of health would therefore need to determine and document when it was exercising its general ordinance-making authority versus its public health rule-making authority, to ensure proper procedures are followed and any limits to the authority are observed. For more information about local board of health rule-making authority and its limits, see this bulletin.

Adjudicatory body for public health. The board of county commissioners would acquire the power and duty to adjudicate disputes pertaining to the local agency’s application of local board of health rules or the imposition of administrative penalties by the local health director. For example, if the local health director imposed a fine on a restaurant for failing to comply with the state law governing smoking in public places and the restaurant appealed the fine, the board of county commissioners would hear the appeal and issue a decision.

Imposing fees for public health services. A local board of health has limited authority to impose fees for services rendered by the local public health agency, with the approval of the board of county commissioners. State law prohibits fees for some services and requires the state to approve local fees in some cases. (More information about these limitations is available here.) Fees must be deposited into the local agency’s account and expended for public health purposes. A board of county commissioners acting as the board of health would have the authority to impose these fees, subject to any applicable limitations in state law.

Duties related to accreditation. A North Carolina law requires each local public health agency to obtain and maintain accreditation. As part of the accreditation process, the local board of health must satisfy at least six of eight benchmarks—a duty the county commissioners would acquire. To satisfy a benchmark, the department must demonstrate satisfactory completion of a list of activities associated with the benchmark. The benchmarks for boards of health are:

• Exercising the public health rule-making authority.
• Assuring a fair and equitable adjudication process.
• Training regarding board of health service.
• Assuring the development, implementation, and evaluation of local public health services and programs.
• Participating in the establishment of public health goals and objectives.
• Assuring the availability of resources to implement the essential public health services.
• Advocating in the community on behalf of public health.
• Promoting the development of public health partnerships.

The above discussion highlights some of the main changes that would occur in a county that abolished its board of health, but what would remain the same?

First, the county would still be subject to a state law that requires counties to provide public health services by operating or participating in a LPHA, or contracting with the state. Therefore, a county that abolished its board of health would likely still operate a county health department or a consolidated human services agency. (Contracting with the state to provide services within the county is also an option, but it has not been exercised by any county in decades.)

Second, the particular services provided by the LPHA would be determined in large part by state laws and state and federal funding streams, and would be subject to state oversight. More information about the laws affecting local public health services is available here.

Finally, the status of the county’s LPHA employees would not be affected by the act of abolishing the local board of health. County health department employees are appointed by the local health director and are subject to the State Personnel Act, and would remain so even if the board of health were abolished. However, if the population threshold is removed from G.S. 153A-77, the county could choose also to create a consolidated human services agency. Employees of consolidated agencies are appointed by the consolidated human services director with the county manager’s approval. Under present law, they are not covered by the State Personnel Act. However, both H 438 and S 433 contain a provision that would require consolidated human services agencies to have merit personnel systems that comply with any applicable federal laws. As one way of meeting this requirement, countycommissioners would be authorized to elect to make the employees subject to the State Personnel Act. More information about LPHA employees is available here.

Local Public Health Service Delivery

North Carolina counties have a statutory duty to provide public health services to their residents, which they carry out by operating or participating in some form of local public health agency. I described the types of local public health agencies that are presently authorized by state law in a June 27 blog post.

During its 2011 regular session, the General Assembly considered several bills that addressed how local public health agencies may be organized. No new legislation was enacted, but three bills made the legislature’s crossover deadline and remain eligible for consideration by the 2011-12 General Assembly. I wrote about those bills in this post on June 28. A couple of the bills would amend GS 153A-77, a state law that permits counties with populations greater than 425,000 to (1) abolish their county human services boards (including a county board of health) and transfer their duties to the board of county commissioners, or (2) form consolidated human services agencies, combining public health, social services, and mental health in a single agency. Among other things, the bills would remove the statute’s population threshold, thus allowing more counties to exercise those options.

When the General Assembly met in special session the week of November 27, the House Committee on Health and Human Services took up Senate Bill 433. In my June 28 post, I described the fourth edition of S 433 as a “combined” bill that addressed several different types of models for local public health agencies. The House committee voted to set aside that version of the bill and return to an earlier version, the third edition, which would amend GS 153A-77 but not address other forms of public health agencies. The third edition was the version of S 433 that had passed the Senate, so if it had passed the House in November it could have been ratified and sent to the Governor without further action by the Senate (in contrast, if the House had passed the fourth edition, it would have had to be returned to the Senate for concurrence). The House committee gave the third edition of S 433 a favorable report, but the House was unable to vote on it during the November session because of a procedural irregularity that it could not resolve before adjournment on November 29.

I will predict with confidence that some version of S 433 will come up again in 2012, but I’m less confident about predicting when that will happen. The General Assembly has scheduled special sessions for February and April. The resolution authorizing those sessions limits the matters that may be considered to bills related to the revision of voting districts, bills vetoed by the Governor, and bills relating to election laws [Res. 2011-12 (S 793)]. S 433 does not appear to be eligible for consideration during the February or April sessions. There will be another special session on January 4, as the Governor has issued a proclamation directing the General Assembly to reconvene on that date to consider a bill she vetoed on December 14. The plans for the January special session have not been announced, but ordinarily such a session would be limited to consideration of the vetoed bill. When the regular short session convenes on May 16 any bill that made the 2011 crossover deadline will be eligible for consideration. I anticipate the issues reflected in S 433 and similar bills will be taken up again at that time, if they have not been considered already.

Smoking Regulation

Smoking has been prohibited in most NC restaurants and bars since January 2, 2010. Complaints about violations of the law are compiled by the NC Tobacco Prevention and Control Branch. If the low number of complaints the Branch has received is an indication of compliance with the law, it appears that the vast majority of regulated establishments are complying. However, some entities have refused to comply and have challenged the law in court.

In the first case to reach the state’s appellate courts, Liebes v. Guilford County Department of Public Health, a bar owner in Guilford county challenged a portion of the law that exempts non-profit private clubs from the smoking ban, but does not provide a similar exemption for for-profit private clubs. In July, the NC Court of Appeals rejected the challenge, holding that there is a rational basis for the legislature’s decision to treat for-profit and non-profit clubs differently. The NC Supreme Court denied discretionary review in November. You can read the Court of Appeals’ decision here.

A second case, Edwards v. Pitt County Health Director, is now on the NC Court of Appeals’ docket (No. 11-754). In this case, the trial court concluded that an exemption for country clubs in the NC smoking law violated the state constitution’s equal protection clause, as there was no rational basis for the legislature’s decision to treat for-profit country clubs and for-profit private clubs differently. Since the smoking law was initially enacted, the state Tobacco Control Branch has consistently maintained that the country club exemption in the law does not apply to for-profit country clubs but only to non-profit country clubs. The trial court’s order implicitly rejected this position in reaching its conclusion, but did not explain its reasoning. Both sides have addressed this issue in their briefs. The Court of Appeals will hear the case on January 12.

More information about the regulation of smoking in public places under North Carolina law, including SOG webinars and frequently asked questions, is available here.

The statute has two subsections that address the types of injuries and illnesses that must be reported—one that applies to all patients, and one that applies only to patients who are minor children. Subsection (b) identifies the injuries and illnesses that must be reported regardless of the patient’s age. Subsection (c1) describes the additional circumstances in which a report is required if the patient is a minor child. This post summarizes the provisions of each section and then addresses some frequently asked questions.

Injury or Illness Potentially Caused by a Criminal Act [G.S. 90-21.20(b)]

A physician or administrator of a health care facility must report:

• Gunshot wounds and any other injuries caused or apparently caused by the discharge of a firearm
• Illnesses caused by poisoning
• Wounds or injuries caused or apparently caused by a knife or sharp or pointed instrument, if it appears to the treating physician that a criminal act was involved
• Wounds, injuries, or illnesses “in which there is grave bodily harm or grave illness if it appears to the physician or surgeon treating the case that the wound, injury or illness resulted from a criminal act of violence”

The report must be made to local law enforcement officials—the police department for the city in which the treatment occurred, or if the treatment occurs outside city limits, the county sheriff’s department. The law does not specify how the report is to be made, but it requires that the report be made “as soon as it becomes practicable before, during or after completion of treatment.” This suggests to me that a telephone call would be both appropriate and preferable to a written report. The information to be reported is specified (and limited to): the patient’s name (if known), age, sex, race, residence or present location (if known), and the character and extent of the patient’s injuries.

A physician or administrator who makes a report required by this section in good faith is immune from any civil or criminal liability that might otherwise arise under state law as a result of the disclosure of information.

Nonaccidental Recurrent Illness or Serious Physical Injury to a Child [G.S. 90-21.20(c1)]

The reports required by subsection (b) apply to all patients regardless of age. Subsection (c1) imposes an additional reporting requirement that applies only if the patient is a child under the age of 18. This subsection requires a physician or administrator to make a report if a child who is treated has a recurrent illness or serious physical injury that, in the physician’s professional judgment, is the result of nonaccidental trauma.

The report must be made to local law enforcement officials—the police department for the city in which the treatment occurred, or if the treatment occurs outside city limits, the county sheriff’s department. The law does not specify how the report is to be made, but like the reporting requirement of subsection (b), it requires that the report be made as soon as practicable. The content of the report is not specified.

The law specifies that the report to law enforcement must be made in addition to any report that is made to the department of social services pursuant to G.S. 7B-301 (requiring all persons to report cause to suspect a child is abused, neglected, dependent, or has died as a result of maltreatment). In other words, a report to DSS alone does not suffice; the physician or facility administrator must also report to law enforcement.

A physician or administrator who makes a report required by this section in good faith is immune from any civil or criminal liability that might otherwise arise under state law as a result of the disclosure of information.

Frequently Asked Questions

The statute gives the required reporters immunity from liability under state law. What about HIPAA, a federal law?

The HIPAA privacy rule specifically permits reports to law enforcement that are required by law, including reports of wounds and injuries. 45 C.F.R. 164.512(f). HIPAA defines “required by law” to include state statutes that require disclosures of information, which captures G.S. 90-21.20. So long as the disclosure complies with the terms of the statute—is made in good faith, reports an injury or illness that is required to be reported, etc.—the disclosure is permitted by HIPAA.

What constitutes “grave bodily harm” or “grave illness” for purposes of the reports required by subsection (b)?

Those terms are undefined and no court of record has interpreted them. In practice, physicians exercise their clinical judgment in determining whether an illness or injury falls into this category. In my experience, they are generally comfortable with their determinations that a patient has suffered bodily harm or an illness, but they sometimes ask what is meant by “grave.” Merriam-Webster defines the adjective “grave” as (among other things) “likely to produce great harm or danger.” Grave bodily harm or illness must be reported only if the treating physician believes it resulted from a “criminal act of violence,” another undefined term, but one that causes less angst. If the physician believes in good faith that the grave harm was the result of intentional violence, I think that is sufficient to trigger the duty to report.

Similarly, what constitutes “recurrent illness” or “serious physical injury” for purposes of the reports about children required by subsection (c1)?

These terms are also undefined and uninterpreted, so physicians exercise their clinical judgment. Going back to the dictionary, it’s easy to conclude that a “recurrent illness” is an illness that returns or occurs repeatedly. Whether a physical injury is serious may be a more difficult determination, but I think it is useful to bear in mind that “serious physical injury” is also the term used in the N.C. juvenile code’s definition of “abused juveniles” for purposes of determining whether a child is in need of protective services. See G.S. 7B-101(1). In my opinion, if a nonaccidental physical injury triggers the duty to make a report of suspected child abuse to DSS, a physician likely has good-faith cause to believe the injury is serious enough to trigger this separate duty to report to law enforcement.

Are health care providers required to report domestic violence to law enforcement?

It depends on the nature of the victim’s injuries. Some states have laws that specifically require health care providers to report domestic violence. North Carolina does not have a law that requires reports of domestic violence per se, but some domestic violence cases result in injuries that fall under the reporting requirements of G.S. 90-21.20. If a domestic violence victim suffers an injury or illness described in the bulleted list above, the physician or facility administrator must report the injury to law enforcement. 

Suppose a health care provider makes a report to law enforcement that is required by G.S. 90-21.20. Law enforcement officials determine they need additional information for their investigation. May the health care provider respond to law enforcement requests for additional information?

G.S. 90-21.20 does not authorize any further disclosures to law enforcement officials. It is possible further disclosures may be made, but authority for such disclosures must come from some source other than this statute, and it must be permitted by HIPAA as well. That’s a whole other blog post, but you can read my outline summary of when local health departments may disclose information to law enforcement officials here.

There are three main laws in North Carolina that directly or indirectly address this question:

• the statute that states the mission and essential services of the public health system,
• a set of state rules that identify the mandated services that each local health department must provide or assure are otherwise available within the department’s jurisdiction, and
• the statute and rules that require local health departments to be accredited according to standards that assess each department’s capacity to deliver the nationally recognized “ten essential public health services.”

This post summarizes those three laws and responds to a few frequently asked questions. The post does not address services that health departments may have to provide as a result of federal law (such as the obligation to provide language assistance to limited-English proficient persons, which arises under Title VI of the Civil Rights Act), or obligations that may be imposed by other state laws – it is limited to a discussion of the laws identified in the bullet points.

What are the essential public health services?

If you pose this question to a public health professional, they will probably assume you are referring to the ten essential public health services that were adopted in 1994 by a national committee as part of an attempt to provide the framework for effective public health systems nationwide.  But several years before the “ten essentials” were identified, North Carolina had adopted its own law stating the mission and essential services of our state’s public health system.

In GS 130A-1.1, the NC General Assembly declared that the following categories of public health services should be available to all citizens of the state:

1. Health support services, including community health assessments, patient and community health education, public health laboratories, and vital event registration.
2. Environmental health services, including water and food safety and sanitation, lodging and institutional sanitation, and regulation of on-site wastewater systems (septic systems).
3. Personal health, including child health, chronic disease control, communicable disease control, dental public health, family planning, and maternal health.
4. Public health preparedness.

The statute gives state agencies the responsibility for ensuring that these services are available throughout the state, but the actual provision of most services occurs at the local level. The mandated services rules provide the framework for local services.

Is the above list of essential public health services the same as the nationally recognized ten essential public health services?

No. It is similar to the national list, but not identical to it. However, the national list does appear in NC law, in the local health department accreditation statute (discussed in more detail below). To my knowledge, having two not-quite-identical lists of essential services in our state laws hasn’t caused any major practical problems, but the mismatch appears to have caught legislators’ attention. During the 2011 legislative session, a bill that could affect local public health agencies (S 433) included a provision that would amend GS 130A-1.1 to reflect the same list of essential services that appears in the accreditation statute. (I discussed the potential effect of S 433 on local public health agencies in more detail in this post.)

What are the mandated services?

GS 130A-9 authorizes the NC Commission for Public Health to “establish reasonable standards governing the nature and scope of public health services rendered by local health departments.” The Commission has adopted rules specifying public health services that local health departments must guarantee. These rules are known as the mandated services rules, and they can be found in the NC Administrative Code, Title 10A, Chapter 46, beginning in section .0201.

There are thirteen mandated services, and they fall into two categories. The first category contains services that the local health department must provide under the direction of the local health director and supervision of the local board of health. Five services are in this category: food, lodging, and institutional sanitation; individual on-site water supply; sanitary sewage collection, treatment and disposal; communicable disease control; and vital records registration.

In the second category are services that a county may provide through the health department, contract with another entity to provide, or not provide at all if the health department can certify to the state’s satisfaction that the services are available in the county from other providers. Eight mandated services are in this category: adult health, home health, dental public health, grade-A milk sanitation, maternal health, child health, family planning, and public health laboratory support.

Each of the thirteen mandated services has its own rule that identifies more specifically which services must be provided or assured. For example, the specific services that must be provided for maternal health include pregnancy testing, information, and referral; and prenatal care for pregnant women not served by another health care resource.

Where in the mandated services rules do you find this distinction between services the health department must provide versus those it may provide, contract for, or certify are available?

You can find this in the individual rules for each of the services. The first sentence of each rule specifies whether the local health department must provide the service, or whether it must provide, contract for, or certify the availability of the service. For example, the rule addressing communicable disease control states, “A local health department shall provide services and perform activities for the control of communicable disease within the jurisdiction of the local health department.” It does not offer the alternatives of contracting for these services or certifying that they are otherwise available in the jurisdiction.  

In contrast, the rule addressing adult health states, “A local health department shall provide, contract for the provision of, or certify the availability of adult health services for all individuals within the jurisdiction of the local health department.”

How does accreditation come into play?

Under GS 130A-34.1, North Carolina local health departments are required to obtain and maintain accreditation. The statute directed the Commission for Public Health to adopt accreditation standards that address the local health department’s capacity to provide a list of services, which match the nationally recognized ten essential public health services. In 2006, the Commission adopted rules setting forth the benchmarks by which local health departments are assessed when they are reviewed by the state accreditation board, which then assigns the department a status of accredited, conditionally accredited, or unaccredited. Thus, accreditation is one way the NC General Assembly has attempted to ensure local health departments provide the ten essential public health services.

Does any law specify how much money a local government must provide for essential or mandated public health services?

The General Assembly has not specified a minimum level of local funding that must be provided for public health generally. However, it has required that departments provide particular services, which may be tantamount to a requirement that funding be sufficient to support the services and activities the health department must undertake in order to satisfy the mandated services rules and the accreditation requirements.

Also, there are two maintenance-of-effort statutes that prohibit counties from reducing local appropriations for particular public health programs when state money increases. GS 130A-4.1 is a maintenance-of-effort requirement for maternal and child health services, and GS 130A-4.2 is for health promotion programs. These laws do mean that a certain amount of local funding must be provided for these services, but they are not a large factor in local funding for health departments.

May a local health department provide additional services, beyond those that are necessary to satisfy the mandated services rules?

Yes. Local health departments are permitted to provide additional services that are not specifically identified in the mandated services rules, and many do. The essential public health services–both those found in GS 130A-1.1. and the national list of ten that is reflected in the accreditation statute–encompass broad categories that allow for a wide variety of activities not specified in the mandated services rules. The mandated services rules may be seen as a floor, not a ceiling.

Conclusion

North Carolina counties are required to provide public health services to their residents (GS 130A-34). There are three main state laws that influence which services local health departments in North Carolina provide. GS 130A-1.1 identifies the essential public health services that should be available to all citizens in the state. State administrative rules identify the mandated services that each local health department must either provide or assure are otherwise available within the local health department’s jurisdiction (10A NCAC 46.0201-46.0216). Finally, GS 130A-34.1 and its implementing rules require local health departments to be accredited. To be accredited, a health department must meet certain requirements, including undertaking activities that pertain to the ten essential public health services.

Since January 2, 2010, there has been a statewide ban on smoking in the enclosed areas of most restaurants and bars, and some lodging establishments as well (G.S. 130A-496). A restaurant is subject to the ban if it is a food service establishment that is required to be inspected, graded, and permitted under state public health laws. A bar falls under the ban if it has a permit to sell alcoholic beverages under certain sections of the state’s ABC laws. However, there is an exception to the ban for a bar or restaurant that is a private club, defined as

[a] country club or an organization that maintains selective members, is operated by the membership, does not provide food or lodging for pay to anyone who is not a member or a member’s guest, and is either incorporated as a nonprofit corporation in accordance with [G.S. Chapter 55A] or is exempt from federal income tax under the Internal Revenue Code … .

Gate City Billiards Country Club is an establishment owned by Don Liebes. According to its website, it has over a dozen billiards tables and hosts regular billiards tournaments. It also serves alcoholic beverages and has one of the ABC permits referenced in the smoking law’s definition of “bar.” However, it is neither incorporated as a nonprofit under state laws nor exempt from federal income tax—criteria that must be met to be considered a private club for an exemption from the smoking law.

After the smoking ban went into effect in January 2010, Gate City continued to permit smoking in its enclosed areas. The Guilford county health department subsequently sent two letters notifying Mr. Liebes that his establishment was in violation of the state smoking law. On March 3, 2010, the health department sent a third notice of violation letter and imposed a $200 administrative penalty. A fourth notice of violation and a second $200 administrative penalty followed on March 11, 2010.

Gate City appealed the imposition of the administrative penalties to the county board of health (which is the first route of appeal for these matters under G.S. 130A-24). The board of health upheld the penalties, and Gate City appealed to the district court, arguing that the distinction the law makes between non-profit private clubs and for-profit businesses that qualify as private clubs under the ABC laws is not rationally related to a legitimate state interest and therefore violates equal protection. The district court upheld the board of health’s actions, and Mr. Liebes took his case to the North Carolina Court of Appeals, which issued its decision today.

The opinion reviews the tiers of scrutiny that are used in analyzing equal protection challenges and concludes that the rational basis test applies to this case, as no suspect class of persons is involved and smoking is not a fundamental right. Under the rational basis test, the question is whether a distinction made by a law bears a rational relationship to a legitimate governmental interest. The court cited a number of cases describing and applying the rational basis test, emphasizing that governmental classifications are presumptively valid and that rational basis review is highly deferential, requiring only that a court be able to “envision some rational basis for the classification” (citation omitted). 

Gate City did not contend that it would have been unconstitutional for the legislature to exempt all private clubs from a smoking ban law (indeed, the plaintiff would appear to favor such an exemption). Rather, its position was that the distinction the law makes between non-profit and for-profit private clubs—exempting the former but not the latter—lacks a rational basis. Gate City made two main arguments.

First, it pointed out that it is a “private club” under the ABC law’s definition of that term. To qualify as a private club under the ABC laws, an establishment must be open only to members and guests, but need not be nonprofit. Gate City contended that a comparison of the ABC law’s definition and the smoking law’s definition make apparent that the latter’s is irrational:

It would appear, therefore, that the General Assembly actually went out of its way to penalize and discriminate against for-profit private clubs by specifically exempting only nonprofit clubs from its reach, even though the ABC statute, which was already on the books, did no such thing.

The court rejected this argument, pointing out another relevant definition that was already on the books, in state public health laws regulating the sanitation of food and beverage facilities. The state’s public health code has long contained a definition for “private club” that is almost identical to that in the smoking law, and it also allows an exemption from sanitation requirements only for a private club that is non-profit. The court drew two points from this: (1) that in enacting the smoking law, the General Assembly had at least two existing statutory definitions to choose from and it chose this one; (2) that the choice of the public health code’s definition was rational since both sanitation and smoking are matters of public health concern, while the ABC laws are “grounded in concerns over retail activity and commerce.” It further concluded that, even without a nearly-identical definition in the sanitation laws, the General Assembly’s decision to exempt only non-profit private clubs from the smoking ban would be a rational means of protecting the health of individuals in public places, while preserving the freedom of organizations that are “genuinely closed to the public” (such as fraternal organizations) to decide whether to allow smoking.

Gate City’s second argument noted that the stated policy of the smoking ban is to protect the health of individuals in public places and in places of employment (G.S. 130A-491). It pointed out that the non-profit private clubs exempted from the ban are also places of employment, then asked:

[W]hat is the rational basis for treating employees of private nonprofit … clubs and fraternal organizations differently from employees of private, for-profit billiards clubs … given the intent of the General Assembly in protecting the health of individuals in places of employment[?]

The court rejected this as a flawed argument that contradicted Gate City’s earlier position that a general private club exemption would pass the rational basis test, as a focus on employee protection would necessarily call into question the rationality of an exemption for private clubs generally. (Gate City had specifically emphasized that the issue in this case was the narrower one of whether the distinction between for-profit and non-profit clubs is rational.)

The court also pointed out that the smoking ban law has another stated purpose: to prohibit smoking in public places. It reasoned that the decision to exempt only non-profit private clubs from the ban was rationally related to this legislative goal, even if it fails to further other goals of the same law.

Finally, the court speculated that the General Assembly may also have considered that experience with the ABC law’s definition suggests that it is problematic. It described several administrative cases in which establishments with the ABC “private club” designation may in fact have been open to the public. It also noted that in 2009 the legislature directed the ABC commission to examine and report to a legislative committee on violations and noncompliance by private clubs. The court opined that it is plausible that, “[r]ather than rely on a definition that has proven to be subject to avoidance, the legislature reasonably imposed a more narrowly tailored definition of private clubs to effectuate the purpose of the exemption.” This, too, would provide a rational basis for the distinction made by the legislature.

Having determined that the legislature had a rational basis for distinguishing between for-profit and non-profit private clubs, the court concluded that the law did not violate the state or federal equal protection clauses, either on its face or as applied to Gate City.

There is a lot to digest in today’s opinion, and this post provides only a summary. I welcome your thoughts and further discussion in the comments section.