Post-Dobbs Benefit Options and Considerations
On June 24, 2022, the U.S. Supreme Court issued its decision in Dobbs v. Jackson Women's Health Organization, which overturned Roe v. Wade, thereby holding that the U.S. Constitution does not expressly or implicitly protect the right to choose an abortion. As a result and in anticipation of state legislation regulating or completely restricting abortion, employers are evaluating their benefit plan options to cover the cost of abortions and related travel.
On July 8, 2022, President Biden signed an Executive Order to protect access to reproductive healthcare services. The Executive Order is intended to defend reproductive rights by (i) safeguarding access to reproductive healthcare services, including abortion and contraception; (ii) protecting the privacy of patients and their access to accurate information; (iii) promoting the safety and security of patients, providers, and clinics; and (iv) coordinating the implementation of federal efforts to protect reproductive rights and access to healthcare. While the Order reflects the Administration's commitment to reproductive healthcare services post-Dobbs, what effect this Order will have is largely unknown at this time especially in states that either restrict or completely ban abortion.
Abortion services are not required to be offered under an employer's group health plan and, in fact, those services are not an essential benefit under the Affordable Care Act (ACA). However, the Equal Employment Opportunity Commission has interpreted the Pregnancy Discrimination Act as requiring a group health plan to cover abortion costs if the mother's life is in danger. Whether an employer's group health plan can cover abortion services (and perhaps related travel) post-Dobbs turns on whether that plan is insured or self-insured.
ERISA Preemption. An employer-sponsored group health plan is subject to ERISA which preempts state laws that "relate to or have a connection with" an employee benefit plan. Examples of state laws preempted by ERISA include ones that (i) mandate a benefit structure, (ii) bind the employer or administrators to choices that preclude uniform administration of the benefit plan, and (iii) provide alternative enforcement mechanisms to ERISA's civil enforcement mechanisms. An important exception to ERISA preemption is for a state law that regulates insurance. Accordingly, if an employer's insured health plan is based on an insurance policy issued in a state that restricts or bans abortions, that plan could be required to restrict or prohibit abortions or the reimbursement of related expenses. This exception does not apply to self-insured plans which are not deemed to be in the business of insurance. So, an employer's self-insured plan is not constrained by state insurance laws; rather, the employer/plan sponsor has greater flexibility and discretion over whether abortion costs will be covered or reimbursed by the plan.
Another exception to ERISA preemption relates to generally applicable criminal state laws. By limiting the exception to only those criminal laws of general applicability, Congress manifested a purpose to supersede criminal laws directed specifically at employee benefit plans. It has yet to be seen whether a state law that criminalizes paying for or reimbursing the cost of an abortion and/or related travel is preempted by ERISA, although if the law prevents the reimbursement of such expenses legally incurred in another state, it should be preempted.
Possible ways to minimize the risk of criminal liability (especially for company management and directors) is to design a self-insured group health plan so those individuals have no authority over the structure of the plan (which is fairly typical anyway) and to fund the plan through an ERISA trust (i.e., a VEBA or 501(c)(9) trust), which is an entity separate from the company and its general assets although the latter will result in additional audit expenses.
Providing Benefits Through a Self-Insured Plan
Your self-insured group health plan may already cover the costs of an abortion or related travel, or it can be amended to provide such coverage. If you are amending your self-insured plan, make sure to discuss this with your stop-loss carrier. As noted above, state laws restricting or prohibiting coverage for an abortion or related travel will be preempted by ERISA although employees residing in a state with such laws will likely have issues accessing abortion services even though covered by the plan. So, travel benefits will be an important offering.
Providing Benefits Through an Insured Plan
If the insurance policy underlying your insured plan was issued in a state that now restricts or prohibits abortion, it will not likely be able to provide (or be amended to provide) such coverage and perhaps travel coverage since there is no ERISA preemption of state insurance law. Insurance policy provisions must be filed with and are regulated by the state insurance department which would not approve such coverage in this type of state.
Providing Benefits Through a Stand-alone Arrangement Integrated With Insured Plan
Another option is to adopt a self-insured medical reimbursement plan (such as a HRA or a Section 105 plan) that reimburses the cost of an abortion and related travel. This type of plan qualifies as a "group health plan" because both abortion coverage and travel "primarily for and essential to medical care" are medical care. As a self-insured group health plan, it will be subject to ERISA, the Affordable Care Act ("ACA"), COBRA, and other applicable group health plan laws. As a stand-alone arrangement, compliance with these laws may not be possible, so best practice would be to integrate it with the insured plan.
Someone will need to administer the self-insured plan, and it may be challenging to find a willing administrator in a state where abortion is restricted or prohibited. If administration falls to the employer, employees administering the plan may receive Protected Health Information requiring compliance with HIPAA's privacy and security rules (or even just more personal information than desired) and could be subject to potential liability under state laws relating to abortion.
Providing Benefits Through an Excepted, Stand-alone Arrangement
Furthermore, employers may provide the abortion and travel benefits through either an excepted benefit HRA or EAP which would not be subject to the ACA mandates. To be an excepted benefit, the arrangement must not provide "significant benefits in the nature of medical care." So, to remain excepted, it would not likely be able to provide reimbursement for the cost of an abortion (if not covered by the group plan) but could possibly reimburse travel costs. The advantage of providing travel benefits through an excepted benefit HRA or EAP is that those benefits could be made available to all employees, not just those enrolled in the group health plan. HRA reimbursement is limited to $1,800 per year and is subject to nondiscrimination rules; EAP reimbursement is not subject to a dollar limit but to be nontaxable must fall within the Code §213 limits. With either arrangement, consideration needs to be given to who will administer it.
Other Legal Considerations
Code §213 Medical Expenses. In order for a health benefit to be tax-free to employees, the medical expense must be deductible under Internal Revenue Code §213. Expenses for medical treatment that is legally performed and to some extent related travel expenses are reimbursable and nontaxable to employees. Nontaxable medical travel expenses are subject to some limits. Transportation expenses for medical care are reimbursable on a nontaxable basis, but the cost of lodging is reimbursable and nontaxable only up to $50 per night for a participant and $50 per night for a traveling companion. Meals outside a medical facility are not reimbursable at all on a nontaxable basis. An employer must ensure any taxable expense is either not reimbursed or, if reimbursed, ensure there is a procedure for reporting the taxable amount to the employees.
Mental Health Parity. Consideration should be given to whether there is a mental health parity violation if an arrangement reimburses for travel related to an abortion and other medical/surgical procedures but does not reimburse for travel related to mental health benefits. In order to avoid this concern (and perhaps a discrimination claim), it is advisable to expand the travel benefit to also include reimbursement for behavioral health or even broaden it to cover all medical travel within a certain number of miles. Arguably the broader the benefit, the harder it would be to successfully argue that the benefit was implemented to assist employees living in a state with an abortion ban.
High Deductible Health Plans. If an employee is enrolled in a high deductible health plan, the employee cannot be reimbursed for the costs of an abortion and/or related travel until the deductible has been met. Such a reimbursement would jeopardize the employee's eligibility for HSA contributions. Accordingly, administration of any reimbursement arrangement with HDHP administration is essential.
Telehealth and Pharmacy Benefits. Telehealth qualifies as a group health plan, subjecting it to ERISA, ACA and other applicable laws. However, telehealth is currently exempted from the ACA mandates during the Public Health Emergency. Using telehealth for a medical consultation and a prescription for abortion pills through an insured plan in a state where abortion is illegal could result in an aiding and abetting charge under state law. However, there is an argument that because the drugs are FDA-approved, the state law is preempted by federal law. Even if state law is preempted, this option may be of limited value due to the temporary nature of the ACA exemption.
Taxable Arrangements. While not as beneficial to employees, a taxable reimbursement arrangement may provide the greatest flexibility and avoid compliance issues. Reimbursements would not need to be limited to Code §213 expenses and, if not limited, might avoid being a "group health plan" subject to ERISA, ACA, COBRA, and other laws regulating group health plans.
Arrangements not requiring reimbursement include annual bonuses, relief fund, relocation benefits, payment to any employee who travels to nearby state for a period of time, and leave that includes paid travel. The flexibility of these taxable arrangements and the ability to avoid compliance issues need to be balanced against the cost of providing payments under broader, non-medical circumstances.
Final Thoughts
If you are amending an existing plan or are establishing a new arrangement, we recommend executing the amendment and/or adopting the new arrangement prior to making the underlying benefit(s) available to employees. This allows for prospective notice of the new benefit(s) to be given to eligible employees.
Given the number of considerations to be taken into account and the uncertainty surrounding the reach of state laws restricting or banning abortion, we recommend you consult with your carriers, administrators, vendors, and legal counsel before deciding on how to provide abortion and related travel benefits in a post-Dobbs world.