In the wake of the Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization that there is not a constitutionally protected right to terminate a pregnancy, employers are now faced with the daunting task of determining how this decision will impact their workforce and their benefits offerings. Some employers are contemplating modifying their group health plans to provide for benefits like travel and lodging reimbursement for those covered individuals who will need to travel to obtain reproductive care. Others are considering offering similar types of reimbursements outside of their group health plan. As the legal landscape following the Dobbs decision continues to evolve, below are some key considerations for employers looking to offer these types of benefits.
Impact on Insured Versus Self-Insured Health Plans
Depending on whether an employer sponsors an insured or self-insured group health plan, the impact of Dobbs will be markedly different:
- Fully-insured plans are regulated by the states. As such, to the extent a particular state outlaws abortion, an insurer licensed in the state would likely be prohibited from issuing insurance policies that provide coverage for medical services associated with a termination of pregnancy within such state’s borders. Some state insurance laws may attempt to prohibit insurance policies underwritten in the state from covering procedures performed anywhere, even if performed in a state where the pregnancy termination would otherwise be legal.
- Self-insured plans, on the other hand, are governed by the federal Employee Retirement Income Security Act (ERISA), which generally preempts state laws that relate to an employee benefit plans. While preemption analysis is complex and uncertain, there is at least a colorable legal argument for plan sponsors to assert that state legislated abortion bans interfere with the uniform administration of ERISA plans and are preempted on that basis. Accordingly, self-insured plans should be able to cover abortion services on the basis of ERISA preemption, even for employees in states where abortion is outlawed, by providing coverage of abortion services from providers in states where abortion is legal. That said, states may seek to pursue action against employers, and we expect that this issue is likely to be litigated. It will take some time before the matter is resolved in the courts.
Notably, ERISA preemption does not apply to state criminal laws of general applicability. Therefore, even an ERISA-governed plan could potentially expose employers to criminal penalties if there are state laws that make paying for certain abortion-related expenses punishable as a criminal matter. While we are not aware of any states that currently are actively enforcing criminal statutes against employers providing such services through their group health plan, this could change if states become more aggressive in their attempts to regulate abortion. Additionally, the issue of whether a state criminal law outlawing termination of pregnancy would be considered a law “of general applicability” will likely be decided by the courts in future litigation. Employers offering abortion-related coverage will want to stay up to date on changing laws and court decisions in this area.
Regardless of whether a plan is fully-insured or self-insured, employers should review their group health plan documentation and consult with their insurer or third-party administrator now to determine what is currently covered under the plan and begin discussions about what changes may be necessary or desirable.
Compliance Considerations for Medical Travel Reimbursement
A number of employers are offering or considering whether to offer medical travel and lodging reimbursement to enable employees who live in a state where abortion is no longer legal to travel out of state for such services. There are a number of ways to design a medical travel reimbursement program, each of which poses compliance considerations. A few common approaches are discussed, in turn, below.
Travel and Lodging Reimbursement Under an Existing Group Health Plan
In order to maintain ERISA preemption of state laws restricting abortion and mitigate administrative and other legal considerations (discussed above), employers may want to provide travel and lodging benefits under an existing group health plan. This allows the benefits to be treated as non-taxable up to IRS limits, but also means that the benefits will be available only to those employees (and their spouses/dependents) who are enrolled in the group health plan.
In addition, the requirements of ERISA, the Internal Revenue Code, the Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Mental Health Parity and Addiction Equity Act (MHPAEA) will apply to these benefits if offered under the group health plan. Below are some key compliance considerations for medical reimbursement programs offered through a group health plan:
- Health Savings Account: Participants who are enrolled in a high deductible health plan (HDHP) and contribute to a health savings account (HSA), likely will need to satisfy their deductible before being reimbursed for travel or lodging costs.
- Tax Implications: Internal Revenue Code rules treat as “medical care” lodging costs (up to $50/person per night) and reasonable travel costs (excluding meals) associated with obtaining medical care. This means that the amounts that are not treated as medical care (e.g., lodging costs over $50 and meals, if covered) will be taxable and must be treated as imputed income. In addition, tax treatment may depend on the type of facility at which services are provided.
- Mental Health Parity: Under the MPHAEA, group health plans are prohibited from placing more onerous restrictions on mental health and substance use disorder benefits than those that apply to medical and surgical benefits. Accordingly, consideration should be given whether the medical travel reimbursement benefit will be limited to just abortion-related care or will apply more broadly to other benefits, including mental health and substance use disorder care; a broader benefit may create less risk under MHPAEA. In addition, if the plan imposes an annual or lifetime limit on travel and lodging, these limits should be assessed in light of the MHPAEA.
- HIPAA: The HIPAA privacy and security rules will apply to a medical travel reimbursement benefit offered under a group health plan.
- Stop-Loss: Employers with stop-loss coverage may need to notify the carrier.
Travel and Lodging Reimbursement Through an EAP
To the extent an employer wants to provide benefits more broadly to all employees (and not just those enrolled in its group health plan), this can create some additional considerations, particularly around ERISA, COBRA, HIPAA, and ACA compliance. One potential option to retain the benefits of ERISA preemption and expand the group of eligible employees would be to offer the medical travel reimbursement through an employee assistance program (EAP). While still generally subject to ERISA, COBRA and HIPAA privacy and security rules, many EAPs are exempted from the ACA, MHPAEA and HIPAA portability requirements as “excepted benefits.” To be an “excepted benefit,” the EAP must satisfy the following criteria:
- The EAP must not provide “significant” medical care benefits. This raises the question of whether travel/lodging expenses, on their own or in combination with other benefits currently offered under the EAP, are “significant” medical care benefits (if they are deemed “medical care” at all). Unfortunately, guidance in this area is limited.
- The benefits under the EAP cannot be coordinated with benefits under another group health plan.
- No employee premiums or contributions may be required as a condition of participation in the EAP.
- There is no cost-sharing for benefits provided through the EAP.
Note that because EAPs are subject to COBRA, employers will need to consider compliance requirements, which could be challenging to manage and administer. HIPAA privacy and security rules will also apply (even if the EAP is considered an excepted benefit) and should be carefully considered to ensure compliance, particularly if the EAP is administered internally. In addition, the same tax implications as noted above would apply in the EAP context as well.
Travel and Lodging Reimbursement Through an HRA
It may also be possible to offer to provide travel and lodging reimbursement benefits under a health reimbursement arrangement (HRA). However, to avoid an HRA running afoul of ACA requirements, the HRA would have to be structured as either an “integrated” HRA or an “excepted” HRA. Both of these types of arrangements create design limitations for employers who desire to offer these expense reimbursement benefits. Integrated HRAs must be offered in connection with a group health plan that meets the ACAs minimum value requirement and can only be offered to individuals covered in the group health plan. Additionally, HRAs are subject to ERISA’s reporting and disclosure requirements, and, like EAPs, are also subject to COBRA.
An excepted HRA has fairly significant limitations on the amount that can be reimbursed. The current limit is $1,800, which may not meet an employer’s design goal for this type of benefit.
Travel and Lodging Reimbursement Outside of an ERISA Plan
To the extent an employer wants to reimburse these expenses on a taxable basis outside of the existing group health plan or EAP, there are a number of risks and considerations. In particular, by reimbursing travel expenses outside of an ERISA plan, the employer would not be able to rely on ERISA’s preemption provisions to argue that the state laws are not applicable, which could make the employer more vulnerable to claims or penalties for failure to comply with state-specific laws.
In addition, where reimbursement for “medical care” is linked to documentation/verification of the medical care provided, the employer runs the risk of inadvertently establishing a group health plan. Such a plan would be subject to ERISA (including notice and filing obligations), the ACA (with which it can’t comply as a standalone plan), COBRA, and HIPAA. This risk could potentially be mitigated by reimbursing travel and lodging on an after-tax basis, by structuring the program as a travel reimbursement policy that is not exclusively linked to medical care, and limiting the reimbursement to the travel and lodging, but there is still some risk, particularly if reimbursement is conditioned on proof of the medical procedure.
If the desire is to offer a taxable reimbursement program, an employer may want to consider offering a broader-based reimbursement program, such as reimbursement for wellness care. The downside to broader-based program, however, is that it may be more widely used by employees and therefore more costly to the employer.
The Road Ahead
Employers providing coverage for pregnancy termination and/or related travel and lodging should carefully monitor developments in this area to understand their legal obligations. We expect that many states are likely to move quickly in adopting new legislation in light of the Dobbs decision, including laws aimed at employers and we expect that much of that legislation will be subject to extensive litigation in the courts. We encourage you to contact your ERISA legal counsel to determine how best to navigate this evolving legal landscape.