Employee benefits and the end of ‘Roe v. Wade’

Earlier this summer the U.S. Supreme Court issued its expected ruling in Dobbs v. Jackson Women’s Health Organization, which overruled long-standing precedent and allowed individual states to regulate access to abortion services.

At least twenty-six states immediately banned abortion or are poised to ban access, requiring individuals residing in these states to travel to another state to obtain reproductive health care.

In an effort to maintain equal access to care regardless of location, many companies have attempted to reduce monetary barriers imposed by such travel through changes to their employee benefits packages. The structure of such a travel reimbursement presents a complex Gordian knot of applicable and sometimes conflicting employment, healthcare, benefits, and tax laws, however. Below we discuss some options, related risks, and other considerations for employers as they endeavor to implement new policies and/or expand existing benefits.

Option 1: Expand group health plan benefits

The easiest means of implementing travel reimbursement benefits requires the employer to expand its existing group health benefits to include reimbursement for travel required to access certain medical services. This is because such a reimbursement program is likely a group health plan on its own, subject to the Employee Retirement Income Security Act (ERISA) and certain requirements under the Affordable Care Act (ACA).

Additionally, this approach can minimize privacy concerns because the health plan provides the benefits directly, eliminating the need for employees to approach their employer to request reimbursement and affording sensitive information the protections of the Health Insurance Portability and Accountability Act (HIPAA) privacy and security rules.

Finally, the health plan’s vendors — rather than the employer’s — would be processing requests for benefits, relieving employers from handling protected health information. Because travel benefits provided through a group health plan are likely to enjoy ERISA preemption, this option also may protect the employer from potential enforcement of, and liability under, state civil statutes that allow individuals to recover penalties through lawsuits against companies or individuals that aid or abet the procurement of abortions.¹

This option would also permit employers to provide travel reimbursements in a more tax-efficient manner. Transportation expenses primarily for and essential to provision of the medical care are not includible in the gross income of the individual receiving that care; however, meals and lodging would be taxable to the individuals.

Although this is the simplest approach, employers may find it far from perfect. To start, it is an option really available only to self-insured employers. Fully-insured employers are at the mercy of what their carriers will cover. Even if fully-insured employers added a stand-alone health reimbursement arrangement (HRA) to pay for out-of-state services (an option also available to self-insured employers), group insurance approaches are far from comprehensive. For instance, providing these benefits through the group health plan naturally requires that the benefits apply only to those employees and dependents enrolled in the plan or, subject to certain additional requirements, under the employee’s spouse’s group health plan.

In other words, this approach would exclude from eligibility any employees who, for any reason, did not elect coverage and/or who are not benefits-eligible (i.e., part-time employees, interns). An intermediate approach is to offer an excepted benefit HRA to all benefits-eligible employees, whether they are enrolled in the plan or not. The downside of this approach is the limited amount an employer may make available under the HRA for a year ($1,800 in 2022, which may be increased for cost-of-living adjustment in future years).

Another potential limitation, whether the benefit is added to an existing health benefit plan or as a stand-alone HRA (including an excepted benefit HRA), is that to the extent the program is a group health plan it would likely be disqualifying coverage for purposes of health savings accounts (HSAs).

Thus, employees enrolled in a high-deductible health plan with an HSA would not get travel reimbursements until the statutory minimum deductible had been reached. Employers with high deductible plans may, however, count expenses for out-of-state medical travel toward the employee’s annual deductible and out-of-pocket maximums. Although this is not as good as full reimbursement, it would help alleviate some financial burdens for employees with significant annual medical expenses.

Option 2: Structure the program as part of an employee assistance program (EAP)

Another option for employers may be to structure the travel reimbursement program as part of an EAP that satisfies the ACA’s “excepted benefit” requirements. In short, those requirements are that (i) the program does not provide significant benefits in the nature of medical care, (ii) the program is not coordinated with benefits under another group health plan, (iii) no employee contributions are required, and (iv) there is no cost-sharing under the program.

If the travel benefit is part of an excepted benefit EAP, it can be offered to all employees and their dependents (i.e., not just those enrolled in the group health plan) without running afoul of the ACA’s group health mandates. Employers should reach out to their current EAP providers to determine whether the EAP could support this benefit.

The downside of this option is that coverage of abortions themselves would probably undermine the EAP’s excepted benefit status. This is particularly important for those employers that have fully-insured coverage.

Option 3: Standalone travel reimbursement policy

Employers seeking to offer benefits most expansively may consider creating a standalone reimbursement policy through which the employee would seek reimbursement directly from the employer. This approach affords companies greater flexibility in setting eligibility, scope, and coverage parameters. To this end, it also offers employers the ability to cover reasonable expenses of an accompanying companion if desired.

The drawbacks include the risk of potential penalties for non-compliance with the ACA requirements for group health plans discussed above (e.g., the requirement to cover recommended preventive services without cost and not imposing any annual dollar limits on available benefits). At this time, there is no current guidance from either the Internal Revenue Service or the Department of Labor (the enforcement authorities for such requirements) on this type of policy.

Practically speaking, while it is not likely that the current administration would issue any applicable adverse regulatory guidance, a different administration after 2024 could readily announce a different enforcement policy with respect to these employer reimbursement arrangements (at which time, the policy might need to be reconsidered). Additionally, some states with strong anti-abortion positions may take the position that funding travel for abortion services may constitute “aiding and abetting” abortion services in violation of certain civil or criminal statutes.

Things to consider regardless of selected approach

Should the program be limited to abortion services only? Travel reimbursement programs limited to abortion are more likely to catch the eye of regulators in states that take anti-abortion positions. Therefore, employers should consider offering a broad-scope travel reimbursement program for all medical expenses. In fact, many group health plans already provide travel benefits for certain complicated procedures (such as transplants), so existing programs may easily be expanded. Also, following the Dobbs decision, it is anticipated that many states will likely target other health services (such as services related to gender dysphoria). An expansive program would cover these costs without requiring additional amendment.

What limits should be placed on the program? Reimbursable travel benefits typically include airfare, lodging, car rental, and meals. To help manage costs, employers can place maximum reimbursements on each of those categories, or an aggregate reimbursement maximum can be applied. Usually, limits are applied annually rather than a lifetime maximum benefit.

How will the information be communicated?  Keeping in mind that the situations in which employees will need to access these benefits will be highly personal and often very stressful, employers will want to be proactive with communication about the specific details of any benefits offered.

Will additional paid time off be made available for this purpose? Employers desiring to offer additional paid time off for reproductive health care should consider including details in any travel reimbursement policy or communication. Please note, however, that any paid time off policy available only to women for this purpose (i.e., and not made available to accompany a dependent for the same reason) may violate certain sex and/or gender discrimination laws.

In short, companies seeking to modify their policies, group health plans, and/or benefits packages to address gaps in equal access to healthcare post-Dobbs should speak with their employment and/or benefits attorneys to evaluate their risks and options.

Kimberly Harding is the deputy leader of Nixon Peabody’s litigation department and a partner in the labor & employment practice. She co-authored this column with Damian Myers, a partner in the corporate practice. Nixon Peabody summer associate Sarah Clancy assisted with the preparation of this article.

¹ Please note that ERISA does not preempt state criminal laws, and it is possible that state attorneys general will seek to prosecute employers who “aid and abet” employees in obtaining abortion services out of state by funding their travel. At this juncture, it is not clear whether and how courts would react to criminalization of abortion services. They might narrow the exception from the ERISA preemption for broadly applicable criminal laws to exclude criminal sanctions for abortion services from this exception.