Group Health Plans in the Crossfire: Facilitating Reproductive Choice in the Wake of Dobbs v. Jackson Women’s Health
On June 24, 2022, the Supreme Court issued its much-anticipated decision in Dobbs v. Jackson Women’s Health Organization. The decision explicitly reverses Roe v. Wade, thereby radically altering the legal and political calculus of the debate over access to abortion. The Court overturned nearly 50 years of precedent on broad grounds, which, among other things, impacts the rights of women to make decisions and seek medical treatment respecting their reproductive health. Significantly, Dobbs also impacts whether and how an employer offers abortion coverage and reimburses travel costs under employer-sponsored group health plans.
This post examines the benefits and tax-related issues that employers will confront if they seek to amend their group health plans, or adopt new plans, programs or arrangements, all in an effort to facilitate employee reproductive choice in a post-Roe v. Wade environment. Future posts will examine the other impacts Dobbs will have on the workplace.
The Supreme Court Finds There is No Constitutional Right to Abortion in Dobbs
Dobbs examined Mississippi’s Gestational Age Act, which provides that “[e]xcept in a medical emergency or in the case of a severe fetal abnormality, a person shall not intentionally or knowingly perform . . . or induce an abortion of an unborn human being if the probable gestational age of the unborn human being has been determined to be greater than fifteen (15) weeks.” The law was enacted as a direct challenge to the Supreme Court’s precedents establishing a constitutional right to abortion in Roe v. Wade and Planned Parenthood of Southeastern Pa. v. Casey. The District Court and the U.S. Court of Appeals for the Fifth Circuit ruled against the State of Mississippi based on this precedent. The State of Mississippi appealed, claiming that Roe and Casey were wrongly decided. The Supreme Court, in a 6 to 3 decision, agreed with Mississippi.
The Court’s majority held that Roe and Casey were wrongly decided as the Constitution nowhere confers a right to abortion. Specifically, in overturning long-standing precedent, the majority held that the Constitution makes no express reference to a right to obtain an abortion, and it was also unwilling to find such a right in any of the First, Fourth, Fifth, Ninth, or Fourteenth Amendments, on which the right to abortion was previously anchored. The crux of the decision is a simple, stark determination: The right to an abortion is not a fundamental right protected by the U.S. Constitution.
The Employer’s Perspective
In light of Dobbs, and whether driven by political ideology, workforce demands, or other considerations, many employers will seek to facilitate the exercise of reproductive rights by their employees. This will include striving to make abortion available to employees living in jurisdictions that bar it by subsidizing travel to jurisdictions that permit it. In so doing, employers will need to comply with conflicting Federal and state laws, while at the same time accounting for legal risk. ERISA’s broad preemption provisions are ground zero in this legal battle. While the jurisprudence surrounding ERISA preemption is expansive (the Supreme Court has issued over 30 cases on the subject), the issues presented in this context are relatively straightforward even if the answers are sometimes less than clear.
It is estimated that some 26 states are now either likely or certain to ban abortion. Certain states had so-called “trigger” laws that will quickly cause dormant abortion bans to now take effect. Some states have already enacted laws barring the aiding and abetting of the performance or inducement of an abortion, and other states are likely to follow suit. These laws may aim to hold employers and insurance carriers criminally liable for paying for or reimbursing the costs of abortion and abortion-related services such as travel.
Perhaps anticipating questions related to travel benefits, Justice Kavanaugh, in his concurring opinion, stated that:
[S]ome of the other abortion-related legal questions raised by today’s decision are not especially difficult as a constitutional matter. For example, may a State bar a resident of that State from traveling to another State to obtain an abortion? In my view, the answer is no based on the constitutional right to interstate travel.
While employees seeking to adopt travel-related benefits in their group health plan will welcome this language, it is entirely bereft of any legal analysis. It is also undercut by language in the dissent warning that the majority was not “done with its work” on curbing other related rights.
The Regulation of Group Health Plans and the Impact of ERISA
The extent to which employers can leverage group health plan design in support of their employees’ reproductive rights generally depends on the manner in which the employer health plans are funded:
Fully-insured group health plans, which are subject to state laws regulating insurance, will not be able to reimburse the cost of procuring an abortion under a contract of health insurance issued by a carrier licensed in a state that bans the procedure. Nor, one supposes, would such a contract permit the reimbursement of travel costs associated with procuring an abortion in another jurisdiction that permits it.
Self-funded group health plans are not subject to state laws due to ERISA’s preemptive force. These plans are free to reimburse the cost of procuring an abortion in a state in which abortion is otherwise illegal along with the costs of travel to a jurisdiction in which abortion legal.
This critical funding-based distinction can be traced to ERISA Section 514(b).
ERISA’s Preemption Provision – Section 514
The ERISA preemption provision is “one of the broadest preemption clauses ever enacted by Congress.” PM Group Life Ins. v. Western Growers Assur. Trust, 953 F.2d 543, 545 (9th Cir. 1992) (quoting Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439 (9th Cir. 1990)). ERISA makes the regulation of employee benefit plans principally a matter of Federal concern by preempting, or rendering inoperative, state laws that “relate to” employee benefit plans. The applicable rule from ERISA Section 514(a) reads in relevant part:
[T]he provisions of this subchapter and subchapter III shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan….
“State laws” include not only state statutes, regulations, and common law, but also the laws of any state administrative agency or political subdivision.
The contours of ERISA preemption have expanded and contracted over time, but within a relatively narrow band. The earlier cases read the provision expansively; latter cases less so. Since 1995, with the Supreme Court’s decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995), the categories of state laws that are preempted are those that (i) mandate employee benefit structures or their administration, (ii) bind employers or plan administrators to particular choices or preclude uniform administrative, or (iii) provide alternative enforcement mechanisms to ERISA's civil enforcement provisions.
Congress enacted ERISA to establish, among other things, a uniform Federal standard to enable uniform plan administration on a national basis. By way of example, in Gobeille v. Liberty Mutual Ins. Co., 136 S.Ct. 936 (2016), the Supreme Court invalidated a Vermont law that required all group health plans (self-funded plans included) to report comprehensive medical claims data. According to the Court, the law had an impermissible effect on plan administration. A law aimed at the coverage of and/or the cost of procuring an abortion, as well as any related travel benefit, appears to act immediately and exclusively on an ERISA plan – such a law would have a direct impact on a particular, identifiable plan feature, thereby having an impermissible effect on plan administration.
Exceptions to ERISA’s Preemption Provision
Section 514(b) saves two sets of relevant state laws from ERISA preemption: (i) state laws regulating insurance, banking, and securities; and (ii) state criminal laws of general application.
Under the “insurance saving” clause, states can regulate the terms and conditions of contracts of group health insurance issued by a licensed carrier. The power of states to regulate insurance in this context is curtailed in one narrow, but important respect: under the “deemer clause,” states are barred from treating self-funded plans as insurance, despite that these plans bear insurance risk. The Supreme Court, in Metropolitan Life In. Co. v. Massachusetts, 471 U.S. 724 (1985) recognized that this distinction creates two classes of employer-sponsored health plans, as discussed above.
Under criminal law preemption clause, ERISA does not preempt “any generally applicable criminal law of a State” (emphasis added). A criminal law is not generally applicable, however, if the law is directed at employee benefit plans. In contrast, criminal laws that apply to general criminal conduct such as larceny and embezzlement would fall under the exception, e.g. the prosecution of an executive for embezzling ERISA plan funds would not violate ERISA’s preemption clause.
The precedent under ERISA’s criminal law exception consists of a handful of cases and a Department of Labor advisory opinion or two. Nevertheless, what could distinguish a state criminal law of general applicability from one that is not is not conceptually difficult by focusing on why Congress included the “general criminal” provision in the first instance. Relying on an earlier case decided by the Massachusetts Supreme Court, a 1983 case involving a New York wage deduction law, a New York District Court in Trustees of Sheet Metal Workers' Int'l Ass'n Prod. Workers' Welfare Fund v. Aberdeen Blower & Sheet Metal Workers, Inc., 559 F. Supp. 561, 563 (E.D.N.Y. 1983), put it this way:
[B]y limiting the exclusion from preemption to only those criminal laws of “general” applicability, Congress manifested a purpose to supersede criminal laws directed specifically at employee benefit plans.
A Ninth Circuit case, Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1506 (9th Cir. 1993), is in accord. At issue there was Hawaii’s wage deduction law, which made it unlawful to deduct employer-required medical examination fees. The Ninth Circuit held that the law in question was not directed at general criminal conduct (such as larceny or embezzlement); rather it impermissibly targeted ERISA-governed benefit plans, and was as a result preempted. The Department of Labor reached a similar conclusion in its Advisory Opinion 84-18A (Apr. 19, 1984) involving a Puerto Rico law that, among other things, prohibited specified conduct by employers in their capacity as providers of benefits, which the Department concluded was not a generally applicable criminal law.
Based on this precedent, it appears that a state law targeting group health plans that aid and abet violations of a state law barring abortion would appear to be preempted, because it would not qualify as “generally applicable.” This is especially true where the law is specifically directed towards the conduct of the employer or its executives in their capacity as corporate officers. The central purpose of the ERISA preemption provision is, after all, to prevent state laws from dictating plan terms. But employers should closely watch how the Supreme Court (and other courts) respond to laws that target any person, with no limitations on group health plans and employers as violators, and we strongly recommend employers seek counsel regarding this sensitive issue.
Other Plans, Programs, Arrangements and Issues
The discussion above is focused on coverage under an employer’s group health plan of the cost of procuring an abortion and on the ability of a plan to pay or reimburse the cost of travel to a jurisdiction in which abortion legal. Concerned employers may also weigh other options, including:
Stand-Alone Coverage of Travel Costs
A stand-alone abortion-related travel cost benefit would itself likely constitute an ERISA-covered plan that would violate the ACA insurance market requirements. While perhaps counterintuitive, the result flows from the definition of what constitutes a welfare plan. Per ERISA Section 3(1), a “welfare plan” means, “any plan, fund, or program . . . established or maintained by an employer . . . to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries . . . medical, surgical, or hospital care or benefits . . . .” ERISA Section 732 defines the term “group health plan” to mean a welfare benefit plan (as defined in ERISA section 3(1), “to the extent that the plan provides medical care.” Medical care is, in turn, defined to mean:
[A]mounts paid for—
(A) the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body,
(B) amounts paid for transportation primarily for and essential to medical care referred to in subparagraph (A), and
(C) amounts paid for insurance covering medical care referred to in subparagraphs (A) and (B).
Thus, an employer-funded, stand-alone abortion-related travel cost benefit is subject to regulation under ERISA as a group health plan. Such an arrangement would for ACA purposes be a stand-alone health reimbursement arrangement, which the regulators alternatively refer to as an “employer payment plan.” Stand-alone, employer payment plans violate the following Affordable Care Act (ACA) requirements:
Public Health Service Act (“PHS Act”) section 2711, which generally bars group health plans from imposing annual or lifetime limits on the dollar amount of benefits (the “annual dollar limit prohibition”); and
PHS Act section 2713, which requires non-grandfathered group health plans to provide preventive services without imposing any cost-sharing requirements (the “preventive services requirement”).
While the conventional approach to integration is to make the employer payment plan a feature of the employer’s group health plan, it would also be possible to combine a stand-alone abortion-related travel benefit with a preventive-services-only plan. This approach is not recommended, however, because enrollment would make an otherwise eligible covered participant ineligible for a premium tax credit under individual market plan offered by an ACA exchange.
Alternatively, an employer could offer broad-based, generic travel benefit that is not tied to travel incidental to abortion. Thus, while we are not sure what a truly generic travel benefit would consist of, it would have to also cover transportation that is not primarily for or essential to medical care. Such a benefit would not appear to have the benefit of ERISA preemption, however. As a consequence, employers must consider whether paying for abortion-related travel in this manner would expose them to liability without the benefit of an ERISA preemption defense. Lastly, a generic travel benefit would be an after-tax arrangement (meaning employees would be subject to taxation on the travel benefit they receive).
The Abortion Pills—Mifepristone and Misoprostol
Employers might also want to provide access under their group health plan or other integrated health savings arrangement to mifepristone and misoprostol, which are medications that can terminate a pregnancy. These medications can be prescribed via a telehealth visit and delivered via the mail. Many of the considerations outlined above related to procuring an abortion and covering travel costs may apply here as well, and employers should tread carefully as a result.
There are, in addition, concerns raised by state laws preventing a group health plan offering pharmacy benefits from covering the cost of these drugs, particularly if mailed to a participant in a state with restrictive abortion laws. The Kaiser Family Foundation has cataloged these laws in a recent post available here.
The Mental Health Parity and Addiction Equity Act (MHPAEA)
MHPAEA is a federal law that generally prevents group health plans and health insurance issuers that provide mental health or substance use disorder (MH/SUD) benefits from imposing less favorable benefit limitations on those benefits than on medical/surgical benefits. The law imposes rules that address comparability in both quantitative and non-quantitative terms. The quantitative rules apply mathematical tests to a plan’s cost-sharing (deductibles, copayments, and coinsurance) requirements and limits on the quantity of care (number of visits, treatments, or days of care). The non-quantitative rules evaluate matters that, by their nature, do not lend themselves easily to numerical analysis. With an addition of an abortion-related travel benefit as a medical benefit, an analysis should be undertaken to ensure that there are comparable benefits for mental health and substance use disorders in quantitative and non-quantitative terms.
Where Do Employers Go From Here?
In light of Dobbs, there is no guarantee that the description of the current state of ERISA preemption jurisprudence will provide a safe haven for employers that seek to facilitate reproductive choice in their group health plans. The Supreme Court could, for example, narrow the set of criminal laws that would be ERISA-preempted under the exemption for laws of general applicability.
A few things nevertheless seem clear to us at this point: States that oppose abortion will enact laws designed to deter employers from making abortion access easier for employees in those states; and employers that (for a variety of reasons) wish to enable access to abortions will adopt plan provisions and seek other ways to aid employees who seek reproductive care. States may attempt to level criminal charges against these employers; and employers will invoke ERISA preemption as a defense. And the courts, and in all likelihood the Supreme Court, will create further precedent to guide employers. Congress, should it change hands, could also look to enact newly restrictive laws. Employers should therefore seek counsel to help them understand the far-reaching impact of Dobbs, including in amending their group health plans to include transportation services in support of the reproductive rights of its employees and their beneficiaries.