United States District Court, E.D. California
FOOTHILL CHURCH, CALVARY CHAPEL CHINO HILLS, and SHEPHERD OF THE HILLS CHURCH, Plaintiffs,
MICHELLE ROUILLARD, in her official capacity as Director of the California Department of Managed Health Care, Defendant.
action arises from letters issued by the California
Department of Managed Health Care ("DMHC") to seven
private health insurers ("insurers" or
"Plans") on August 22, 2014, which required them to
remove any limitations on or exclusions of abortion services
from the health care coverage they offer. Compl. Ex. 1, ECF
No. 1-1. Plaintiffs Foothill Church, Calvary Chapel Chino
Hills, and Shepherd of the Hills Church
("plaintiffs" or "Churches"), three
churches who allegedly offer their employees DMHC-regulated
health coverage through these insurers, filed this action
against defendant Michelle Rouillard ("defendant"
or "Director"), Director of the DMHC, alleging the
letters violate their constitutional rights under the First
and Fourteenth Amendments. This matter is before the court on
defendant's motion to dismiss the complaint. ECF No. 21.
Plaintiffs oppose the motion. ECF No. 26. The court held a
hearing on May 6, 2016, at which Jeremiah Galus, Erik
Stanley, and David Hacker appeared for plaintiffs, and Joshua
Sondheimer and Hadara Stanton appeared for defendant. As
explained below, the court GRANTS defendant's motion.
STATUTORY AND REGULATORY BACKGROUND
State Regulatory Framework for Health Care Industry
California, the DMHC and the California Department of
Insurance ("CDI") oversee regulation of the health
care industry. The DMHC regulates "health care service
plans" under the Knox-Keene Health Care Service Plan Act
of 1975 ("Knox-Keene Act" or "Act"), Cal.
Health & Safety Code § 1340 et seq., including
by approving or disapproving language submitted in evidence
of coverage filings. The Knox-Keene Act defines "health
care service plans" as "[a]ny person who undertakes
to arrange for the provision of health care services to
subscribers or enrollees, or to pay for or to reimburse any
part of the cost for those services, in return for a prepaid
or periodic charge paid by or on behalf of the subscribers or
enrollees." Cal. Health & Safety Code § 1345(f)(1).
Health maintenance organizations ("HMOs") and other
structured managed care organizations ("MCOs") are
"health care service plans" under this definition.
Rea v. Blue Shield of Cal., 226 Cal.App.4th 1209,
CDI, on the other hand, regulates traditional health
insurance companies under the California Insurance Code. Cal.
Ins. Code §§ 740-742.1; see Rea, 226
Cal.App.4th at 1215. The Knox-Keene Act does not generally
govern entities regulated by the CDI, see Cal.
Health & Safety Code §§ 1343(e)(1) & 1349, and
sections 740 to 742.1 of the Insurance Code, in turn, do not
apply to health care service plans, see Cal. Ins.
Code §§ 740(g) & 742(b).
addition, because the federal Employee Retirement Income
Security Act of 1974 ("ERISA"), 29 U.S.C. §
1001 et seq., preempts most state health plan
regulations, self-funded health plans subject to ERISA need
not comply with most state health coverage requirements.
See District of Columbia v. Greater Wash. Bd. of
Trade, 506 U.S. 125, 130 (1992); FMC Corp. v.
Holliday, 498 U.S. 52, 61 (1990).
The Knox-Keene Act
Knox-Keene Act requires a person to secure a license from the
Director of the DMHC before offering a health care service
plan. Cal. Health & Safety Code § 1349. One requirement
for licensure is that "[a] health care service plan
contract [must] provide to subscribers and enrollees all of
the basic health care services included in subdivision (b) of
Section 1345." Cal. Health & Safety Code § 1367(i).
Section 1345(b) lists the following as "basic health
(1) Physician services, including consultation and referral.
(2) Hospital inpatient services and ambulatory care services.
(3) Diagnostic laboratory and diagnostic and therapeutic
(4) Home health services.
(5) Preventive health services.
(6) Emergency health care services, including ambulance and
ambulance transport services and out-of-area coverage.
"Basic health care services" includes ambulance and
ambulance transport services provided through the
"911" emergency response system.
(7) Hospice care pursuant to Section 1368.2.
Id. § 1345(b). Section 1367(i) continues that
"[t]he director shall by rule define the scope of each
basic health care service that health care service plans are
required to provide as a minimum for licensure" under
the Act. Id. § 1367(i). Based on this
authority, the Director promulgated regulations defining the
scope of "[t]he basic health care services required to
be provided by a health care service plan to its enrollees .
. . where medically necessary." Cal. Code Regs. tit. 28,
§ 1300.67. The regulations define "physician
services" to include services "provided by
physicians licensed to practice medicine or osteopathy,
" id. § 1300.67(a), and define
"preventive health services" to include "a
variety of voluntary family planning services, "
id. § 1300.67(f)(2).
Knox-Keene Act provides for a number of categorical and
individualized exemptions, including the following examples.
First, "[a] plan directly operated by a bona fide public
or private institution of higher learning" and the
California Small Group Reinsurance Fund are each exempt from
regulation under the Act. Cal. Health & Safety Code §
1343(e). Second, the Act gives the Director the authority,
"for good cause, by rule or order [to] exempt a plan
contract or any class of plan contracts" from the
requirement of providing all of the basic health care
services included in section 1345(b). Id. §
1367(i). The Act also gives the Director broad authority to
exempt any class of persons or plan contracts from the
regulations of the Act or to waive any requirement of any
rule or form if the Director finds exemption or waiver to be
in the public interest and not detrimental to the protection
of the subscribers, enrollees, or persons regulated under the
Act. Id. §§ 1343(b), 1344(a). Third, the
Act offers religious employers exemptions from providing
coverage for "FDA-approved contraceptive methods that
are contrary to [their] religious tenets, " id.
§ 1367.25(c), or coverage for "forms of treatment
of infertility in a manner inconsistent with [their]
religious and ethical principles, " id. §
Reproductive Rights Under California Law
1972, California voters amended the state constitution to
include a right to privacy among the inalienable rights
protected by Article I, section 1. See Chico Feminist
Women's Health Ctr. v. Butte Glenn Med. Soc., 557
F.Supp. 1190, 1201 (E.D. Cal. 1983) (citing White v.
Davis, 13 Cal.3d 757, 773-74 (1975)). The California
Supreme Court has interpreted Article I, section 1 as
providing that "all women in this state-rich and poor
alike-possess a fundamental constitutional right to choose
whether or not to bear a child." Comm. To Defend
Reprod. Rights v. Myers, 29 Cal.3d 252, 262 (1981).
addition to these constitutional protections, the
Reproductive Privacy Act of 2002 declares, "[I]t is the
public policy of the State of California that . . . [e]very
woman has the fundamental right to choose to bear a child or
to choose and to obtain an abortion . . . ." Cal. Health
& Safety Code § 123462(b). It prohibits the state from
"deny[ing] or interfer[ing] with a woman's right to
choose or obtain an abortion prior to viability of the fetus,
or when the abortion is necessary to protect the life or
health of the woman." Id. § 123466.
The Federal Patient Protection and Affordable Care
federal Patient Protection and Affordable Care Act of 2010
("ACA"), 124 Stat. 119, "generally requires
employers with 50 or more full-time employees to offer
‘a group health plan or group health insurance
coverage' that provides ‘minimum essential
coverage.'" Burwell v. Hobby Lobby Stores,
Inc., __ U.S. __, 134 S.Ct. 2751, 2762 (2014) (quoting
26 U.S.C. §§ 4980H(a), 4980H(c)(2), 5000A(f)(2)).
If any covered employer stops providing health insurance
altogether and at least one full-time employee enrolls in a
health plan and qualifies for a subsidy on one of the
government-run ACA exchanges, the employee must pay $2, 000
per year for each of its full-time employees. Id.
(citing 26 U.S.C. §§ 4980(H)(a), (c)(1)).
FACTUAL AND PROCEDURAL BACKGROUND
October 16, 2015, plaintiffs filed a complaint, which makes
the following allegations. Compl., ECF No. 1. On August 22,
2014, the Director of the DMHC sent letters to seven private
health insurers stating that the DMHC had reviewed their
contracts and the relevant legal authorities and
"concluded that it erroneously approved or did not
object to" language in some previous evidence of
coverage ("EOC") filings that may discriminate
against women by limiting or excluding coverage for
termination of pregnancies. Compl. ¶¶ 2, 27; Compl.
Ex. 1 at 1. Private insurers had previously submitted EOC
filings to the DMHC notifying defendant of benefit plan
options that excluded coverage for voluntary and elective
abortions, and defendant and the DMHC had not objected.
Compl. ¶¶ 45-47.
The purpose of this letter is to remind plans that the
[Knox-Keene Act] requires the provision of basic health care
services and the California Constitution prohibits health
plans from discriminating against women who choose to
terminate a pregnancy. Thus, all health plans must treat
maternity services and legal abortion neutrally.
Compl. Ex. 1 at 1.
ensure compliance with California law, the letters required
the recipient private health insurers to review all current
health plan documents to ensure compliance, to amend current
health plan documents to remove discriminatory coverage
exclusions and limitations, and to file any revised relevant
health plan documents with the DMHC, all within ninety days
of the date of the letter. Id. at 2. Plaintiffs
refer to these requirements generally as "the
Mandate." See Compl. ¶ 2. The letters
provided examples of discriminatory limitations or
exclusions, such as excluding coverage for
"voluntary" or "elective" abortions, and
stated the insurer "may, consistent with the law, omit
any mention of coverage for abortion services in health plan
documents, as abortion is a basic health care service."
Compl. Ex. 1 at 2. For support, the letters cited the
authorities described above, specifically, Article 1, section
1 of the California Constitution, California Health and
Safety Code section 1340 et seq., California Health
and Safety Code section 123460 et seq., and
implementing regulations. Id. Each letter noted,
"Consistent with 42 U.S.C. § 18054(a)(6), this
letter shall not apply to a Multi-State Plan."
Id. at 1 n.2. Section 18054(a)(6) provides
specifically that "[i]n entering into contracts under
this subsection, the Director shall ensure that with respect
to multi-State qualified health plans offered in an Exchange,
there is at least one such plan that does not provide
coverage of [abortion services]." The DMHC also
published copies of the letters on its website. Compl. ¶
27; Compl. Ex. 2, ECF No. 1-2.
are three non-profit Christian churches located in Southern
California. Compl. ¶¶ 13-15. Each plaintiff has
more than fifty full-time employees and must, therefore,
provide health coverage for its employees under the ACA.
Id. ¶¶ 59-61. Foothill Church offers
health insurance plans to its employees through Kaiser
Permanente and Blue Shield, with the plan year beginning and
ending annually on or about July 1. Id. ¶ 13.
Calvary Chapel Chino Hills offers health insurance plans to
its employees through Kaiser Permanente, Aetna, and Anthem
Blue Cross, with the plan year beginning and ending annually
on or about November 30. Id. ¶ 14. Shepherd of
the Hills Church offers health insurance plans to its
employees through Anthem Blue Cross and Kaiser Permanente,
with the plan year beginning and ending annually on or about
December 1. Id. ¶ 15. Plaintiffs' insurers
each received a letter from the DMHC as described above.
See Compl. Ex. 1.
all hold what they describe as "historic and
orthodox" Christian teachings on the sanctity of human
life. Compl. ¶ 17. They "believe and teach that
abortion ends a human life and is a grave sin, " and
they "believe that participation in, facilitation of, or
payment for abortion is inconsistent with the dignity
conferred by God on creatures made in His image."
Id. ¶¶ 20-21. "Consistent with their
Christian beliefs and principles, Plaintiffs also promote the
physical, emotional, and spiritual well-being of their
employees through the provision of generous health insurance
as a benefit of employment." Id. ¶ 22. In
furtherance of these beliefs and principles, plaintiffs
consulted with their insurance brokers and/or insurers to
provide employee group health plans that do not pay for
abortions. Id. ¶¶ 23-24. However,
plaintiffs' insurance brokers and/or insurers have
informed them that the DMHC's letters require their group
health insurance plans to cover abortions, including
voluntary and elective ones. Id. ¶ 25.
action followed. The complaint alleges the DMHC's letters
violate plaintiffs' rights under the Free Exercise,
Establishment, Free Speech, and Equal Protection clauses of
the U.S. Constitution. See Id. ¶¶ 104,
114, 119, 126. In support of the Free Exercise and
Establishment clause claims, the complaint alleges defendant
issued the letters after learning that two Catholic
universities unrelated to plaintiffs eliminated elective
abortion coverage from their health care plans. Id.
¶ 48. It further alleges defendant had knowledge her
letters would coerce religious employers and churches, like
plaintiffs, to violate their sincerely held religious
beliefs, id. ¶ 7, and in fact designed the
content of the letters "to make it impossible for
Plaintiffs to comply with their religious beliefs, "
id. ¶ 62. With respect to the Free Speech
claim, the complaint alleges the letters infringe
plaintiffs' rights by requiring plaintiffs to purchase
group health plans that provide coverage for abortions, and,
as a result, to fund abortions through their employee health
plans. Id. ¶¶ 116-17. Finally, in support
of the Equal Protection claim, the complaint alleges the
letters treat plaintiffs differently than similarly situated
persons and businesses "in that there are categorical
and individualized exemptions to the Knox-Keene Act and the
[letters'] requirements." Id. ¶ 123.
In addition to the exemptions discussed above, the complaint
alleges the letters do not apply to health benefit plans
offered by the California Public Employees' Retirement
System (CalPERS) to active and retired state and local
government employees. Id. ¶ 52 ("CalPERS
continued to offer health benefit plans excluding coverage
for elective abortions after Defendant issued the
January 12, 2016, defendant moved to dismiss the complaint
under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
ECF No. 21 ("Mot."). Plaintiffs opposed the motion,
ECF No. 26 ("Opp'n"), and defendant replied,
ECF No. 30 ("Reply"). At hearing, plaintiffs
clarified they are challenging only the letters and the
DMHC's enforcement of the Knox-Keene Act; they are not
bringing a facial constitutional challenge against the
underlying state laws.