In 1973, Roe v. Wade established the constitutional right to abortion services and struck down a state law that prohibited abortion. On May 2, 2022, the Supreme Court’s draft majority opinion in Dobbs v. Jackson Women’s Health Organization, was leaked to the public and suggested that the Court intends to overturn Roe. Overturning Roe in the current legal landscape would leave the topic of abortion regulation to each state, immediately impacting access to abortion services. By recent counts, at least 26 states are certain or likely to ban or restrict abortions, either through pre-Roe abortion bans enacted prior to 1973 that were never repealed, and/or through “trigger laws” states have enacted that would become effective if Roe is overturned.
Although the Supreme Court’s draft opinion does not have any binding legal authority, some large, multi-state employers have announced steps to support employee access to abortion and related reproductive medical services, specifically for those employees residing in states that do (or will) restrict abortion. This has prompted numerous inquiries on the topic from employers at all points on the spectrum. Regardless of the approach an employer chooses on this issue, there are numerous questions and options that will come to the forefront in the event the draft opinion becomes official.
If the Supreme Court ultimately overturns Roe, all employers should review their health plans to see what, if any, impact the applicable state laws will have. After this review, some employers may decide that these laws and their plans work well, requiring no changes. While other employers may decide that they would still like to support employee access to abortion services and preserve reproductive choice. Employers in this latter category will need to consider many factors, including (1) the types of abortion-related benefits to be offered; (2) whether the type of health plan involved (e.g., self-funded or fully-insured) offers any strategic protections; and (3) any federal guidance the DOL and IRS may issue.
Travel Expenses Covered by the Medical Plan
Many employers with employees in states who would not have access to legal abortion services if Roe is overturned have inquired whether they can cover abortion-related travel benefits under their group health plans to allow employees to travel to a state where access to such services will continue to be available. Under current tax law, covering abortion-related travel benefits on a tax-free basis or reimbursing such benefits through an HRA integrated with the group health plan or through the health FSA should be permissible provided that the benefits offered meet the definition of “medical care” under operative law. Similarly, offering this coverage under an HSA-compatible high-deductible health plan (HDHP) should also be permissible under current guidance.
Medical care for ERISA purposes includes “amounts paid for transportation primarily for, and essential to, medical care,” and likewise, tax law permits “amounts paid for transportation primarily for, and essential to, medical care” to be provided on a tax-free basis. Employers contemplating these provisions should carefully assess their plans and administrative practices to make sure they are compliant.
Abortion Services (Beyond Travel)
Travel is not the only abortion-related coverage being revisited by certain employers. Particularly for self-insured plans as discussed below, the scope of abortion services provided should be limited to those considered medical care. Abortion services themselves have generally been considered medical expenses under Code Section 213(d). However, absent further federal guidance, state laws that make abortions or abortion-related travel illegal may adversely affect the tax-deductible status of such amounts since illegal operations or treatments are excluded from the definition of medical care for this purpose. As such, abortion-related benefits generally would be limited to coverage to procure a legal abortion, performed in compliance with the laws of the state in which the medical services are rendered.
Stand Alone Pre-Tax Travel Reimbursement Benefit
If, instead of providing coverage for abortion-related travel expenses under the health plan, an employer desires to vet offering a broad-based stand-alone travel benefit, the employer should be mindful that such an arrangement could be viewed as a group health plan providing medical care. To the extent it is considered a group health plan, and because group health plans are subject to various federal mandates stemming from the Patient Protection and Affordable Care Act (“ACA”), including requirements to provide enumerated preventive care services and impose no annual or lifetime dollar-limits, a stand-alone benefit would likely be considered a non-compliant group health plan.
Post-Tax Travel Reimbursement Benefit
Some employers are looking for a “simpler” design that would reimburse abortion-related service costs on a post-tax basis outside a formal plan. While there generally are no limitations on providing post-tax payments to employees, there are at least two legal issues to consider:
First, Congress has seen abortion-related bills introduced in the days after the leaked draft opinion. For example, several Senators recently proposed legislation that seeks to prevent employers from deducting costs pertaining to abortion-related travel benefits. While this type of legislation seems unlikely to gain traction given the Democratic control of Congress and the White House, with mid-term elections on the horizon, more discussion on ways to limit access to abortions and reproductive choice is a certainty and could foreshadow the actions of a changed political power structure. In other words, it is unlikely that any tax deduction available to companies would be limited at this time, but that could change in the future.
Second, there is a possibility that the IRS could extend its ACA guidance (from Notice 2015-17) to this situation and treat a post-tax abortion-services reimbursement program as a non-compliant group health plan. Again, under the Biden Administration, this position seems unlikely. However, by way of background, IRS Notice 2015-17 stated that an arrangement under which an employer provides reimbursements or payments that are dedicated to providing medical care, such as cash reimbursements for the purchase of an individual market policy, is itself a group health plan. The IRS further stated that such an arrangement would be subject to the market reform provisions of the ACA applicable to group health plans—the IRS took this position without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Thus, theoretically, post-tax reimbursements of abortion-related travel services could be treated as a non-compliant group health plan if this same legal theory is applied.
Under the doctrine of preemption, federal law preempts state law in the event the laws conflict. Thus, a federal court can stop certain state-level behaviors and actions it believes conflict with federal law. Generally, ERISA broadly preempts state laws that relate to ERISA plans, provided those plans are not governed by state insurance laws. Self-funded health plans that are subject to ERISA are not underwritten by an insurance policy and, thus, are not subject to state laws otherwise related to benefit plans. This means that whether ERISA preemption applies to any of the abortion-related benefits described above will depend on the type of plan that houses them.
Self-Funded Health Plans
Employers that offer self-funded health plans under ERISA could consider adding provisions for coverage of travel expenses associated for eligible participants that reside in a state that restricts abortion services. Employers that do add such provisions could still face criminal or civil actions for aiding or abetting abortions and reproductive choice because of their travel benefits, but they can avail themselves of ERISA preemption arguments/defenses.
Fully-Insured Health Plans
Because fully-insured health plans are generally governed by state insurance laws, employers with fully-insured health plans must continue to monitor changes in state abortion laws because such plans must follow state insurance coverage mandates of the state where the policy is situated. An employer with a fully-insured health plan that is contemplating adding an abortion-related travel benefit or that already has such a benefit should be aware of the penalties for violating state law, such as the Texas statute (known as Senate Bill 8) that imposes civil liability on anyone who knowingly helps someone get an abortion “including paying for or reimbursing the costs of an abortion through insurance or otherwise.” The law allows any person (besides an officer or employee of a state or local governmental entity) to bring suit against anyone alleged to have violated the law.
The Biden administration repeatedly has stated that it is exploring ways to preserve abortion rights and reproductive choice. In this vein, if the DOL and IRS were to issue interpretive guidance (either way) on the points raised above, that would provide confidence on possible benefit options on this complex issue.
This area of the law remains incredibly turbulent and the turbulence will only increase as state and federal policymakers continue the one-upmanship in an election year. Given the seriousness of the stakes, all employers whether they are doing nothing on this issue or are considering extending or limiting abortion-related benefits to employees are strongly encouraged to consult with counsel.