Business Law

Skyline Wesleyan Church v. Cal. Dep’t of Managed Health Care, __ F.3d __, 2020 WL 2464926 (9th Cir. May 13, 2020)

Religious employer’s constitutional challenge to DMHC abortion coverage directive was justiciable.

Skyline Wesleyan Church filed suit against the California Department of Managed Health Care and its Director (collectively, the “DMHC”) after the DMHC issued letters to seven health insurers mandating that their insurance plans include coverage for legal abortions. Until the DMHC’s directive, Skyline had obtained DMHC-approved health insurance for its employees that restricted abortion coverage consistent with Skyline’s belief that abortion is impermissible except possibly when the life of a pregnant woman is at risk. Skyline alleged that the DMHC’s abortion coverage requirement unlawfully interfered with its right to the free exercise of religion and other constitutional rights. Skyline sought declaratory relief, a permanent injunction against the abortion coverage requirement, and an award of nominal damages, costs, and attorney fees. The district court granted the DMHC summary judgment without reaching the merits, ruling that Skyline lacked standing and that the controversy was not ripe because the DMHC had not yet received a request for approval of an insurance plan consistent with Skyline’s religious beliefs. Skyline appealed.

The Ninth Circuit reversed, holding that Skyline’s Free Exercise Clause claim is justiciable. Skyline suffered an injury in fact because it lost its abortion-excluded insurance coverage that was in place before the DMHC sent its directive. The DMHC’s directive requiring insurers to change their coverage caused that loss when Skyline’s insurer complied with that directive. The alternative plans available to Skyline were a worse fit for its needs than a DMHC-approved plan. And Skyline’s claims for nominal damages, declaratory relief, and a permanent injunction would redress its claimed loss. Turning to ripeness, the court reversed because the DMHC’s directive had an immediate effect upon Skyline: its insurer promptly amended Skyline’s plan (to comply with the directive). The court held that Skyline’s “challenge is fit for a decision now” and that Skyline need not first seek an exemption from the DMHC or enlist an insurer to seek one.

The Ninth Circuit declined to reach the merits of Skyline’s Free Exercise claim, which the district court had never addressed. After oral argument on appeal, the Supreme Court granted a petition for writ of certiorari questioning whether Employment Division v. Smith, 494 U.S. 872 (1990) should be revisited, and Skyline’s Free Exercise Clause claim turned on Smith. Accordingly, the Ninth Circuit remanded to the district court to determine whether Skyline’s other claims were justiciable, and then to decide the merits of Skyline’s justiciable claims.

The bulletin describing the Ninth Circuit’s decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission. For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.

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