Skyline Wesleyan Church v. Cal. Dep't of Managed Health Care

• Decision Date: 13 May 2020
• Docket Number: No. 18-55451,18-55451
• Citation: 959 F.3d 341
• Parties: SKYLINE WESLEYAN CHURCH, Plaintiff-Appellant, v. CALIFORNIA DEPARTMENT OF MANAGED HEALTH CARE ; Michelle Rouillard, in her official capacity as Director of the California Department of Managed Health Care, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

959 F.3d 341

SKYLINE WESLEYAN CHURCH, Plaintiff-Appellant,

v.CALIFORNIA DEPARTMENT OF MANAGED HEALTH CARE ; Michelle Rouillard, in her official capacity as Director of the California Department of Managed Health Care, Defendants-Appellees.

No. 18-55451

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 4, 2019 Pasadena, California

Filed May 13, 2020

Jeremiah J. Galus (argued), Kristen K. Waggoner, and Erik W. Stanley, Alliance Defending Freedom, Scottsdale, Arizona; John J. Bursch, David A. Cortman, and Christiana Holcomb, Alliance Defending Freedom, Washington, D.C.; Charles S. LiMandri, Freedom of Conscience Defense Fund, Rancho Santa Fe, California; for Plaintiff-Appellant.

Karli Eisenberg (argued), Deputy Attorney General; Niromi W. Pfeiffer, Supervising Deputy Attorney General; Julie Weng-Gutierrez, Senior Assistant Attorney General; Xavier Becerra, Attorney General; Office of the Attorney General, Sacramento, California; for Defendants-Appellees.

Tyler R. Andrews, San Clemente, California, for Amici Curiae The Jewish Coalition for Religious Liberty and The Ethics & Religious Liberty Commission.

Before: Mary M. Schroeder and Michelle T. Friedland, Circuit Judges, and Lee H. Rosenthal,^* District Judge.

FRIEDLAND, Circuit Judge:

The California Department of Managed Health Care and its director (collectively, the "DMHC") regulate most of the state’s commercial health insurance market, including by determining what coverage insurers must provide. In the wake of publicity regarding DMHC-approved insurance plans that limited or excluded coverage for legal abortion, the DMHC analyzed whether restrictions like those were consistent with California statutory and constitutional law. The DMHC concluded that, under California law, legal abortion is a basic health care service that must be offered. The DMHC determined, however, that it had erroneously allowed seven insurers to offer plans with some abortion-related restrictions. In 2014, the DMHC issued a directive informing those seven insurers that, effective immediately, their plans had to include abortion coverage. Although the directive did not provide for any exceptions, the DMHC agreed in 2015 to allow one insurer to offer a plan to religious employers that would exclude abortion coverage except when the pregnancy was the result of rape or incest or the life of the pregnant woman was threatened.

Members of the Skyline Wesleyan Church share the religious belief that abortion is impermissible except possibly when the life of the pregnant woman is at risk. Until 2014, Skyline had obtained health insurance for its employees via an insurance plan that restricted abortion coverage consistent with that belief. Since the DMHC’s directive, however, none of the plans available to Skyline have been comparable.

In 2016, Skyline sued the DMHC. Skyline claims, among other things, that its right to the free exercise of religion requires the DMHC to approve a health insurance plan that comports with Skyline’s religious beliefs about abortion. The district court dismissed the case, reasoning that jurisdiction was lacking because (1) any injury Skyline had suffered could not be redressed by a court order directed at the DMHC, and (2) any controversy was not ripe because the DMHC had not yet received a request for approval of an insurance plan that would be consistent with Skyline’s religious beliefs. Skyline appealed.

We hold that Skyline’s claim under the Free Exercise Clause of the First Amendment is justiciable. But we decline to exercise our discretion to reach the merits in the first instance and therefore remand to the district court for further proceedings.

I.

A.

The Knox-Keene Health Care Service Plan Act of 1975, Cal. Health & Safety Code § 1340 et seq. , provides the legal framework for California’s regulation of health maintenance organizations (HMOs) and managed care organizations (MCOs). Rea v. Blue Shield of Cal. , 226 Cal.App.4th 1209, 172 Cal. Rptr. 3d 823, 827 (2014). Regulated insurers must obtain a license from the DMHC to engage in business in the state. See Cal. Health & Safety Code § 1349. As of early 2015, there were more than 20 million enrollees in DMHC-regulated health insurance plans, accounting for most insurance enrollees in California.

The Knox-Keene Act tasks the DMHC with ensuring access to quality care for enrollees. Id. § 1341(a). Covered health plans are generally required to provide their members with all "basic health care services." Id. § 1367(i). The Knox-Keene Act includes a seven-item statutory definition of "basic health care services," see id. § 1345(b),¹ which the DMHC has further fleshed out by regulation, see Cal. Code Regs. tit. 28, § 1300.67.

The Knox-Keene Act vests the DMHC director with discretion to, "for good cause, by rule or order exempt a plan contract or any class of plan contracts" from the requirement of providing all "basic health care services." Cal. Health & Safety Code § 1367(i). The DMHC director also has the authority to adopt rules or issue orders exempting, for example, otherwise covered insurers from the entirety of the Knox-Keene Act. Id. § 1343(b); see also id. § 1344(a) (allowing the director to "waive any requirement of any rule or form in situations where in the director’s discretion that requirement is not necessary in the public interest or for the protection of the public, subscribers, enrollees, or persons or [insurers] subject to [the Knox-Keene Act]").

B.

In late 2013, media outlets reported that two Catholic universities in California, Loyola Marymount University and Santa Clara University, had taken steps to exclude coverage for what the universities termed "elective" abortions from the DMHC-regulated health insurance plans they obtained. Over the next several months, the DMHC conducted an internal review. That review included an assessment of the DMHC’s previous practices. This assessment showed that although the DMHC had not developed a formal policy about whether insurers could restrict coverage for abortions, there were seven insurers that allowed subscribers to sign up for coverage with abortion-related exclusions, and the DMHC had either approved those plans or allowed them to take effect by not objecting.

As part of its review, the DMHC requested information from those insurers. The responses revealed that, of the more than 20 million individuals enrolled in DMHC-regulated insurance plans, at least 28,647 were enrolled in plans restricting abortion coverage.²

The DMHC ultimately concluded, based on both the Knox-Keene Act and California constitutional and statutory provisions addressing the right to choose whether to carry a pregnancy to term, that legal abortion is a "basic health care service" that insurers must cover. On August 22, 2014, the DMHC sent roughly identical two-page letters (the "Letters") to the seven insurers that had offered plans with abortion coverage restrictions. The Letters stated that those insurers were required to immediately remove restrictions on covering legal abortions and submit to the DMHC revised plan documents reflecting that change.³ The Letters also stated that, because abortion is a "basic health care service," an insurer could bring its plan language into compliance by simply "omit[ting] any mention of coverage for abortion services in health plan documents." The Letters did not state that there was any exemption based on an employer’s objection to abortion, or that there would be a process for applying for exemptions in the future.⁴ All seven insurers who received the Letters promptly complied with the DMHC’s directive. We refer to the directive to cover abortion services, as captured through both the underlying provisions of California law and the Letters, as the "Coverage Requirement."

C.

Skyline is a nonprofit Christian church in La Mesa, California. It employs more than 100 people, many part-time. Skyline adheres to the view that abortion "is incompatible with the Bible’s teachings about the sanctity of human life." Its beliefs countenance only one possible allowance for an abortion: in those "rare pregnancies where there are grave medical conditions threatening the life of the mother," and even then only after "medical and spiritual counseling" and "very prayerful consideration." As Skyline’s pastor testified, beliefs that the church and its members hold do not permit an abortion for a pregnancy resulting from rape or incest.

Skyline has, at all relevant times, provided employee health care coverage through a DMHC-regulated plan. It does so for several reasons, including compliance with the federal Affordable Care Act, a belief that providing health insurance is the proper way to care for its employees even if not legally required, and a concern that non-DMHC-regulated options (like self-insurance) would not be affordable. Before the DMHC sent the Letters, Skyline had a DMHC-regulated Aetna plan that Skyline considered acceptable and consistent with its beliefs about abortion.⁵ Skyline has explained that the only coverage consistent with its beliefs would exclude "voluntary abortion, except when medically necessary to save the mother’s life."

After the Letters were sent, Aetna removed references to abortion restrictions from Skyline’s coverage documents. As the Letters had advised, this meant that the plan would cover abortion as a "basic health care service." When Skyline learned that its plan had changed, it contacted its insurance broker to find out whether it could obtain a plan that excluded most abortion coverage, such as through a religious exemption from the Coverage Requirement. Aetna informed Skyline’s broker that it no longer offered any options that restricted coverage for legal abortion, because of "the 08-22-2014 California abortion mandate." Since then, Skyline has switched to a different DMHC-regulated insurance provider, but Skyline has not obtained a plan that is consistent with its beliefs about abortion.

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