Stephen F. Diamond, an associate law professor at Santa Clara University, thought his closest encounter with Michael E. Engh, the university president and a Jesuit priest, was likely to be a glimpse across a crowded hall during graduation ceremonies. So he was surprised last October when an envelope from Engh arrived in the mail at Diamond's home. Even more unsettling was the enclosed letter: a message to the university community announcing that the school's managed care plan for faculty and staff would no longer cover what Engh called "elective" abortions. Santa Clara's "core commitments as a Catholic university," Engh wrote, "are incompatible with the inclusion of elective abortion coverage in the University's health plans." The letter described elective abortions as "not medically necessary." The university stated that a revised Anthem Blue Cross group plan would continue to cover only "therapeutic abortions," conducted to save the life or health of the mother. But 42 years ago, the California Supreme Court essentially eliminated the distinction between "medically necessary" and "elective" abortions. The court found that standards for criminalizing abortion other than to save "the physical or mental health of the mother" were too vague, striking down on constitutional grounds a state law that limited access to the procedure. (People v. Barksdale, 8 Cal. 3d 320 (1972).) Engh's letter seemed to ignore the ensuing decades of court opinions on reproductive rights in California. To Diamond, who describes himself as pro-choice, the proposed changes to his family's group plan "came as a bolt from the blue." He adds, "I don't get letters at home from the university president. I read it to my wife, and we were shocked." Diamond and his wife weren't alone. Across the manicured lawns of SCU's Silicon Valley campus and inside its tile-roofed buildings, faculty reacted to the changes to their insurance coverage. Some decried the abortion restrictions, while others protested Engh's failure to consult the faculty senate despite the university's long tradition of shared governance. About the same time last fall, a nearly identical uproar occurred in Los Angeles at Loyola Marymount University, another Catholic school, where Engh had previously been a college dean. For months, James G. Hanink, a professor of philosophy and member of RenewLMU - an alliance of faculty, alumni, and students seeking to strengthen Loyola's Catholic identity - had been pressuring administrators about the university's HMO insurance coverage for abortions. RenewLMU had criticized the school in recent years for allowing politicians who supported abortion rights - including former Los Angeles Mayor Antonio Villaraigosa and state Treasurer Bill Lockyer - to deliver commencement addresses. It also attacked university president David W. Burcham for appointing Brietta Clark, a law professor the group considers pro-abortion, to the board of Loyola's Bioethics Institute. In mid-July emails that were published online by the California Catholic Daily, Loyola responded to Hanink's inquiries by referencing state regulations that the school interpreted to prohibit excluding from coverage "elective abortions under the fully-insured PPO and HMO plan options." But the school administrators promised to "explore other options." By October, Loyola's board of trustees had affirmed the decision to buy an Anthem Blue Cross plan for 2014 that limited abortion coverage for faculty, staff and their dependents. News of that change also arrived by letter. As at Santa Clara, faculty members were angered by the lack of advance notice, and objected that they'd had no voice in the policy change. The faculty senate unanimously passed a resolution calling on Burcham to work toward shared governance at the university. The conflict at Loyola started the debate, says Philip A. Zampiello, a member of RenewLMU, a Loyola alumnus, and a real estate attorney at McGarrigle, Kenney & Zampiello in Chatsworth. "I think Loyola's decision created a need for Santa Clara and Engh to move proactively" to change insurance coverage. Zampiello doubts the dispute will end with coverage limits for abortion. "Some of these contraceptive drugs [offered under the school's policy] have abortifacients, and that presents a problem for Catholics as well," he says, referring to drugs that induce abortion. "I think it's going to be an ongoing issue for Catholic universities." The twin controversies in California erupted last year as 23 states enacted restrictive abortion laws, and as the U.S. Supreme Court accepted for review two cases that ask whether the Religious Freedom Restoration Act (RFRA) and the First Amendment allow for-profit companies to deny employees contraceptive coverage under the Affordable Care Act. (See Sebelius v. Hobby Lobby Stores Inc., 723 F.3d 1114 (10th Cir. 2013), cert. granted, 134 S.Ct. 678 (pending as 13-354) and Conestoga Wood Specialties Corp. v. Sebelius, 724 F.3d 377 (3d Cir. 2013), cert. granted, 134 S.Ct. 678 (pending as 13-356).) Pro-choice advocates in California believe the state would not be significantly affected even if the Court favors Hobby Lobby, because RFRA does not preempt state law. And California's constitutional right to privacy provides even broader protection for abortion than the U.S. Constitution. Engh's letter to the Santa Clara faculty referred vaguely to the country "working through all the implications of implementing the [Affordable Care Act] and state law" - even though the ACA does not cover large group plans like Santa Clara's. (It covers plans sold through state exchanges to uninsured individuals.) Despite the public perception of clear state constitutional and statutory protections for abortion in California, private insurance law has a muddier history. The state's little-known Department of Managed Health Care (DMHC) regulates 68 HMOs and 52 specialty plans covering 20 million Californians under the Knox-Keene Health Care Service Plan Act of 1975. (Cal. Health & Saf. Code §§ 1340-1399.864.) Documents released by DMHC under the Public Records Act confirm that Anthem Blue Cross won the department's approval in 2008 to sell a group plan without abortion coverage to a client affiliated with the Roman Catholic church. And Kaiser Permanente says it won approval in 2012 to market a plan excluding abortions deemed not "medically necessary" regardless of the employer's religious affiliation. Anthem and Kaiser have used these approvals as the basis for offering similar terms in insurance plans marketed to other clients. Members of group health plans elsewhere in California may soon find themselves as surprised as Diamond to learn how weak protections for access to abortion have become under the state's health insurance regulators. Reaction to Engh's letter on the Santa Clara campus was swift. A protest petition quickly drew roughly 600 signatures online. In tandem with release of his announcement, Engh called for a series of town hall sessions to allay faculty concerns and to discuss the canceled insurance coverage. The university's Markkula Center for Applied Ethics agreed to mediate some of the talks. But those efforts only fueled the discontent. Diamond, who had served as an ethics scholar at Markkula very publicly resigned from the center after it announced its mediation role (the San Jose Mercury News carried a report the next day). Despite a pledge by Kirk O. Hanson, Markkula's executive director, that the center would remain neutral, Diamond believed its involvement would only lend legitimacy to and advance the university's position. "It was like voting in Cuba," Diamond says. "They announce the result, and then we get to vote." In December the Santa Clara faculty voted overwhelmingly (215 to 89) to declare the university's changes to the managed care plan invalid, and appealed Engh's unilateral action to the school's board of trustees. The trustees, however, sided with Engh in February. With the university's pledge of shared governance now in tatters, faculty senate president Juliana Chang stepped down. A faculty committee was formed to work out a response to the crisis. "A lot of people like me were outraged," says committee member Nancy Unger, a history professor. "We believed we were entitled to full health care coverage. And then Engh doubled down. He did not feel the need to go through the shared governance process, and it caused a lot of unhappiness." Many of Santa Clara's faculty are not Catholic, and fewer than 40 members of the Jesuit order teach there. Unger points out that the coverage limitation affects not just faculty and staff, but also their dependents - such as her own daughter. "I would be concerned about sending her to a Catholic hospital," she says. "Theology is taking precedence over health." In March, the committee presented the faculty senate with a list of options, up to and including a one-day work stoppage or a no-confidence vote targeting either individual administrators or the board of trustees. Engh himself reacted to the list of proposals April 2, in a "Dear Colleagues" letter that further polarized the faculty. The president said he remained "deeply disturbed by the divisive discourse over the past six months." He declared the faculty committee's toughest options "short-sighted and fraught with serious repercussions that could harm Santa Clara University for years to come." While noting that current employee coverage for women's reproductive care would remain unchanged through the end of 2014, Engh admonished, "Santa Clara University cannot be true to its Jesuit Catholic identity and willingly offer, through its health care programs, financial support to a woman seeking an abortion that is not medically necessary." Describing the letter's tone as "blaming the victim," Unger comments, "Engh is not taking responsibility for his decision, which was so upsetting to the campus." By mid-May, the faculty had made no decision on how to proceed. At Loyola, the administration tried a different approach. It quickly fashioned a supplement to the amended Anthem policy for religious-affiliated institutions: Individuals would be allowed to purchase a separate policy rider through a third-party administrator that would cover abortions excluded from the revised coverage. "We call it the 'Scarlet A,' " says Unger. "You can buy the rider if you plan ahead to have an abortion." What's so unusual about the current debate is that it's taking place in California, where insurance coverage for contraception and abortion has long been on equal footing with prescription drug and other medical coverage. In 1967 the state Legislature enacted the Therapeutic Abortion Act, one of the first laws in the nation permitting doctors to perform abortions at hospitals in the first 20 weeks of pregnancy to protect the life or health of the mother. (See former Cal. Health & Saf. Code §§ 25950-25954.) Two years later the California Supreme Court struck down a penal code section that held physicians criminally liable for performing abortions. (People v. Belous, 71 Cal. 2d 954 (1969).) In its 1972 Barksdale ruling, the state Supreme Court held that the Therapeutic Abortion Act's requirement of "substantial risk" that the pregnancy would "gravely impair" the physical or mental health of the mother was too ambiguous and vague to prohibit a doctor from providing abortions. It removed restrictions in the statute, affirming a woman's general right to an abortion performed by a doctor in a hospital. A year later the U.S. Supreme Court's landmark decision in Roe v. Wade (410 U.S. 113 (1973)) legalized abortion based on the constitutional right to privacy. In the years since Roe v. Wade, the California Supreme Court has repeatedly rejected efforts to curtail abortion rights, but it has had little to say about abortion coverage offered by private insurers under Knox-Keene. In 1981 it found unconstitutional several state budget acts that had restricted Medi-Cal payments for abortions to those cases involving a threat to the mother's life, fetal deformity, rape, incest, or unlawful sex with a minor. (Comm. to Defend Reproductive Rights v. Myers, 29 Cal. 3d 252 (1981).) The court later struck down a law that required parental consent for girls under 18 to obtain an abortion. (Amer. Board of Pediatrics v. Lungren, 16 Cal. 4th 307 (1997).) For its part, the Legislature in 1999 enacted the Women's Contraception Equity Act (WCEA), which required employers to treat birth control on an equal basis with other prescription drug coverage their insurance plans provide. (Cal. Health & Saf. Code § 1367.25; Cal. Ins. Code § 10123.196.) In 2002 California became the first state to attempt to safeguard abortion rights against the possibility that the U.S. Supreme Court might one day overturn Roe v. Wade: The Reproductive Privacy Act of 2002 (Cal. Health & Saf. Code § 123462) declares that "[e]very woman has the fundamental right to choose ... to obtain an abortion," and "[t]he state shall not deny or interfere with" this right. Presumably, that would encompass state regulation of group health plans. The WCEA drew a First Amendment challenge from Catholic Charities of Sacramento, a nonprofit, public benefit corporation operating under the auspices of the local Roman Catholic diocese. Catholic Charities conceded that it did not qualify as a "religious employer" under the new statute's narrow exception, but asserted it had standing to sue under the establishment and free exercise clauses of the federal and state constitutions. Apart from churches or convents, very few employers meet WCEA's four-part criteria for exemption from contraceptive coverage requirements. The statute requires that the business purpose must be religious inculcation; its employees all must share the same faith; it must serve people with primarily the same religious beliefs; and it must qualify with the IRS as a nonprofit organization. (In 2010 the federal Affordable Care Act modeled its religious exemption for contraceptive coverage on the WCEA standard.) The lower courts rejected Catholic Charities' constitutional claims, and the state Supreme Court subsequently affirmed. (Catholic Charities of Sacramento, Inc. v. Superior Court, 32 Cal. 4th 527 (2004).) According to Susan Berke Fogel, an attorney and director of Reproductive Health at the National Health Law Program in Los Angeles, under Catholic Charities neither Santa Clara University nor Loyola would qualify as a religious employer. Nevertheless, despite abortion's equal footing with other types of pregnancy care in California, the DMHC has approved group health plans that restrict coverage of - and thus access to - abortion. Quietly, religious-affiliated organizations in early 2008 began requesting group health plans that limit abortion coverage. Documents provided by the DMHC through a Public Records Act request show that an unidentified Catholic client approached Anthem Blue Cross for such an amended plan, which the insurer proposed to the DMHC in May of that year. Knox-Keene spells out the basic health services that insurers must provide to meet medical standards of care. Significantly, the statute contains no religious exception for eliminating abortion access. Anthem does not name the group client for which it amended its plan, and the DMHC declined to comment. Still, documents show that in July 2008 the department approved Anthem's license to sell a plan that excludes "elective abortion" to religiously affiliated groups. Despite the OK, it appears the plan was not sold at that time. But in a 154-page coverage description of a plan similarly amended in September 2013, Anthem repeated a key section from its 2008 filing. Printed in bold type, the section reads, "Per agreement with the Department, only for religious groups, the text of the provisions dealing with pregnancy, maternity care, infertility and birth control may be limited to a minimum number of a 'variety of family planning services,' family planning services, intrauterine contraceptive devices and doctor's services, prescription and fitting of IUDs, and coverage of elective abortion may be deleted." Anthem's initial 2008 proposal to the DMHC had gone even further. Documents show that Anthem sought to eliminate coverage for some forms of contraception entirely, including "shots or implants for birth control, intrauterine contraceptive devices (IUDs) or diaphragms," and related doctors' services. Katie Coyne, the DMHC's senior counsel (and now deputy director of plan licensing), questioned that provision in a telephone conversation and in a written inquiry to Donna S. Sieff, an Anthem attorney. The insurer filed a response a month later stating that its proposal complied with Health and Safety Code section 1367.25(a)(1) because it provided coverage for "a variety of Food and Drug Administration approved prescription contraceptive methods," as the section requires. As for removing its coverage for birth control injections or implants, IUDs, and diaphragms, Anthem asserted there is no requirement that a plan cover "all FDA approved contraceptive methods." The filing continued, "The plan is not proposing to exclude coverage of medically necessary family planning services." In a footnote, Anthem added, "We can't 'gag' the doctors and tell them not to speak with a patient about their opinion about medically necessary care." Less than a month after Anthem's filing, however, the insurer backed off, stipulating in a memo to DMHC that "The plan would include coverage of intrauterine contraceptive devices (IUDs) in addition to the other contraceptive methods covered under the prescription drug benefit." And the memo reiterated that "this benefit plan design will only be offered to groups with a religious affiliation." A spokesman for Anthem, asked to define "religious affiliation" and what constitutes a "variety" of contraceptive methods - or to provide a legal basis for offering amended plans without regard to the narrow exception under Catholic Charities for covering contraceptives - declined to comment. In May 2012 Kaiser Permanente submitted to the DMHC an amended family service plan that eliminated from coverage "voluntary termination of pregnancy." Spokesman Won S. Ha said that Kaiser, responding to purchaser requests, sought coverage language that excluded "elective" abortion. In an emailed statement, Ha said the DMHC "did not object, and in September 2012 we began reflecting this change in our coverage benefits documents for purchasers (regardless of religious affiliation)." Since that license was approved, Ha says, Kaiser has referred to the 2012 plan "in other Evidence of Coverage filings." In a prepared statement, Loyola told this magazine, "We purchased fully insured, approved plans from Anthem Blue Cross and Kaiser Permanente that excluded elective abortions. The issue is really between the insurance companies and the California Department of Managed Care." Loyola spokeswoman Celeste Durant said that the university "declined to participate" in this story. Officials at DMHC initially declined to comment on approval of the Anthem or Kaiser plans. But the agency later replied in an email, "The Department of Managed Health Care is reviewing coverage issues pertaining to abortion services." None of the documents the DMHC provided includes the agency's replies to Anthem's filings, or refers to its own policies. In response to questions for this article, an agency spokesman stated: "In general, the Knox-Keene Act requires health plans under the DMHC's jurisdiction to cover all medically necessary basic health care services, including pregnancy-related services." Who at the DMHC issued the licenses to Anthem and Kaiser - and on what legal basis - remains a mystery. But lawyers who have had adversarial dealings with DMHC say the agency's decision-making in the past has seemed more protective of insurers than consumers. Jeffrey B. Isaacs, a partner at Isaacs Friedberg & Labatan in Los Angeles who formerly was a chief assistant Los Angeles city attorney, describes the DMHC as "very political" when he dealt with it in 2008-09. Isaacs had been assigned by the City Attorney to combat consumer insurance fraud, and joined forces with William M. Shernoff, founding partner of Claremont's Shernoff Bidart Echeverria Bentley and a pioneer in bad-faith insurance litigation. Isaacs and Shernoff pressured the DMHC to investigate allegations of unjustified policy cancellations by insurers, and to fine violators. Although the DMHC's settlements with insurers offered consumers some relief, by 2008, Isaacs says, the agency had relaxed its efforts to improve cancellation standards. "The DMHC is a problem," adds Jerry Flanagan, lead attorney at Consumer Watchdog in Santa Monica, who waged a successful five-year legal battle against the agency for permitting insurers to deny coverage of an effective autism treatment. "They act like defense counsel for the insurance industry, rather than a regulator," Flanagan says. With no public announcement, the 2008 amendment to Anthem's coverage went largely unnoticed. "We would have been all over this if we'd known," says Beth H. Parker, chief legal counsel for the Planned Parenthood affiliates of California. "The legal basis for approval is the $64,000 question. We believe there is none." What finally got the attention of California's reproductive rights groups was the public outcry at Santa Clara and Loyola. Representatives of Planned Parenthood, the ACLU, and the National Health Law Program met with DMHC officials last November to express their concerns. According to attorneys who attended, Shelley Rouillard - then acting director of the department - said the DMHC had not approved any plans that excluded medically necessary abortion and the agency didn't want to define the term, in order to leave doctors free to treat patients. Rouillard was confirmed a month later as the DMHC director. The crucial question for patients, physicians, insurers, and regulators, then, is whether a basic health service that is elective can also be medically necessary. For Margaret C. Crosby, an attorney with the ACLU of Northern California in San Francisco, the answer is clear. "Anthem is selling a large-group insurance policy that we believe violates Knox-Keene," she asserts. " 'Medically necessary' is a broad term that basically means a service the doctor thinks is OK," Crosby says. "It would exclude, for example, experimental procedures. But if you are pregnant, you need medical care. The decision about which option to use - abortion or to give birth - is precisely what the constitution protects." Crosby, who argued the Myers case before the state Supreme Court in 1981 and two decades later helped draft the Women's Reproductive Privacy Act, adds, "The reason the state Supreme Court maintained Medi-Cal funding of abortion in 1981 was [that] the state funded prenatal and birth care, but not care to end a pregnancy. That [legislative policy] was an ideological decision, not a medical one. [Knox-Keene] is a medical statute that included abortion." Not so, says Catherine W. Short, an attorney and legal director of Life Legal Defense Foundation in Napa, which opposes abortion. "Knox-Keene does not require coverage for abortion," Short contends. "Knox-Keene says nothing about abortion." According to Short, Santa Clara and Loyola questioned a DMHC assumption that any elective abortion service must be covered. The agency has "chosen to interpret [Knox-Keene] to mean that any abortion recommended by a physician is medically necessary, and must be covered," Short says. But "even under the DMHC'S own terms, it should not require coverage of elective abortion. By definition, that is not medically necessary." "Up until the last year or two, the practice at DMHC has been to reject any plan that did not cover elective abortion," Short adds. Santa Clara and Loyola thought they had to cover abortion, she says, "but now it turns out they don't. It was not the law, it was [DMHC's] interpretation." Berke Fogel at the National Health Law Program says, "Anthem is redefining 'medically necessary.' But abortion is a medical service to treat a condition - pregnancy. Any treatment for pregnancy is medically necessary." At Santa Clara, neither Engh nor any of the university's administrators agreed to be interviewed for this article. However, spokeswoman Deborah Lohse confirmed that Santa Clara learned from its insurers last year that "it was legally possible to exclude elective abortion (abortions that are not medically necessary) coverage from the university's health care plans." Lohse continues, "In 2014, the university was informed by the Department of Managed Health Care that it is currently reviewing what abortions will be required to be covered in health care plans that it regulates. The university understands that this review will also determine what constitutes a medically necessary abortion. Specifics about the university's 2015 health care plans will, as is customary, be made available to university faculty and staff during open enrollment in the fall of this year. The university does not have a religious exemption." In March, the DMHC said in a statement it "has not approved health plan products to be offered by Santa Clara University in 2015." For Diamond, the controversy at Santa Clara has only continued to intensify. At every university meeting he's attended since the coverage dispute began, he says, he has felt the presence of the school's officials. At one point, Diamond says, he was accused of planning to sue the university. "I am not," he says flatly. "It's important to remember, we're paying 50 percent of the health care coverage out of our pockets," Diamond adds. "That payment is recognized as wages. These are our wages, and [SCU is] using them on our behalf. The university is just an intermediary. I don't understand why they think they are morally compromised, when they take my wages and tell me they'll use it to cover my wife's reproductive health." Given California's leading role in establishing women's reproductive rights, the ACLU's Crosby draws another lesson: "What is written in statutes is not always a reality in people's lives," she says. "There is an enormous gap between formal rights and real live pregnancy conditions. It is a lesson for civil rights lawyers to keep in mind - our work is not done when the law is passed." Pamela A. MacLean is a contributing writer at California Lawyer.