The Fight Over California’s Abortion Coverage Mandate

Can a state require that all health plans offered to its residents cover elective abortions? The federal government thinks not, and the state of California is poised to lose at least $200 million in Medicaid dollars because it insists that health plans in its state cover abortion services.

In early 2020, the U.S. Department of Health and Human Services (HHS) under the Trump Administration issued a notice to California that the state’s abortion coverage mandate violated federal law. According to a December press release from the HHS Office for Civil Rights, the federal government may enforce its decision by withholding $200 million in federal Medicaid funds each quarter until the state comes into compliance.

California implemented its abortion coverage mandate in August 2014 with an order from the state’s Department of Managed Health Care. The department explained that a state statute and the California Constitution prohibit health plans from discriminating against women who choose to terminate a pregnancy. The department instructed all insurance providers to remove discriminatory coverage rules, such as those limiting coverage to only medically necessary abortions.

California’s order revoked approval for the health care plans offered by two Catholic universities because they did not cover elective abortions. In response to California’s revocation, several organizations sent a letter expressing their intent to file a civil rights complaint. This letter explained that the California Constitution prohibits only the state, not private actors, from discriminating against women who choose to terminate a pregnancy by limiting coverage. The letter also argued that the federal Weldon Amendment prohibits discrimination against health plans that do not cover abortions.

HHS subsequently received three complaints challenging California’s mandate, filed on behalf of religious organizations and their employees. In 2016, HHS—then under the Obama Administration—responded by finding that California’s mandate complied with federal law. HHS explained that the Weldon Amendment only protects health care entities that object to abortion on religious or moral grounds, not the institutions or individuals insured by those entities. In this case, the affected health plan issuers all offered other plans that covered abortion, indicating that the insurance entities had no religious or moral objections to abortion. HHS argued that the Weldon Amendment did not apply.

In addition, the 2016 decision from HHS expressed another concern: If HHS found that California violated the Weldon Amendment, the federal government might have to rescind massive funds from California. The U.S. Supreme Court has held that a federal statute is unconstitutional if it coercively threatens to terminate state funding.

Under the Trump Administration, however, HHS reversed its position. In 2017, religious organizations again filed a complaint with HHS over California’s rule. After extensive investigation, including interviews, data requests, and reviews of relevant court documents, HHS issued a notice in January 2020 stating that California’s rule violated federal law.

This time, HHS explained that the Weldon Amendment protects all health plans that decline to cover abortion, without requiring the plan to have a religious affiliation or reason to decline coverage. HHS argued that the Weldon Amendment protects a health plan issuer that wants to issue a single plan without elective abortion coverage, even if the issuer does not object to abortion coverage in all its other plans. Thus, to comply with federal law, California would need to provide exemptions to all health plans seeking to limit abortion coverage.

California refused to back down. In a letter to HHS, Californian Attorney General Xavier Becerra asserted that the state already complied with the Weldon Amendment. Becerra noted that HHS’s current position contradicts its prior adjudication, stating that no relevant facts had changed since 2016.

Becerra also raised constitutional concerns, stating that HHS’s threat of billions of dollars in federal funding attacked California’s sovereignty by unconstitutionally pressuring the state to change its policy. He argued that this threat was made more coercive by HHS’s refusal to identify the particular funds it would withhold.

In December 2020, HHS announced it would withhold $200 million in Medicaid funds going to California in the upcoming quarter. HHS stated it would withhold an additional $200 million per quarter, totaling $800 million annually, until the state comes into compliance with the Weldon Amendment.

HHS noted that California’s mandate compelled seven health insurance issuers to suspend plans, forcing more than 28,000 individuals out of those plans.

HHS determined that the $200 million per-quarter disallowance was the “most appropriate mechanism” to induce compliance with federal law while remaining consistent with Congress’s authority to impose reasonable conditions on states. Medicaid receives funding from both state and federal governments, with federal funds contingent on certain requirements. In 2018, California spent over $82 billion in Medicaid services, and the federal government provided about 50 percent of California’s Medicaid funds. The $200 million disallowance arguably represents a much smaller amount than what the Supreme Court has held to be unconstitutionally coercive.

Becerra has since been announced as the nominee to lead HHS for the Biden Administration. If led by Becerra, HHS will likely reverse course on California. Republican groups, critical of Becerra’s “extremist” record on abortion, are fighting to stop his nomination.