Key Considerations When Offering Abortion Coverage Under a Group Health Plan
Not surprisingly, leading up to and in the wake of the U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, our employee benefits team has been spending a lot of time helping our clients wade through the many issues associated with providing abortion-related benefits to their employees. This article will cover some of the key considerations we have been counseling our clients to consider when covering abortion and abortion travel benefits under a group health plan, which could be directly through their major medical plan or under a health reimbursement arrangement (HRA) that is integrated with a group major medical plan. There are also other potential ways for employers to provide an abortion travel benefit separately from the group health plan approach, including through an employee assistance program or a broad wellness travel policy. We will publish a separate article on those options in the coming weeks.
Note that in general, the analysis below applies with respect to self-funded ERISA plans. Employers with fully-insured plans will generally have no control over the terms of their plans and are subject to whatever the insurance company and state insurance law permits, with the exception of perhaps being able to create a self-funded HRA to provide additional abortion-related benefits. See the fourth key consideration below, for more information on HRA options.
First Key Consideration: What abortion or medical travel expense does your plan currently cover?
Our experience has been that most plans that currently cover abortions would only do so when those abortions are permitted by law because the plan contains a general provision restricting payment to services allowed under applicable law and provided by a licensed medical provider. However, to help reduce the risk that a state could sue your company for aiding and abetting an illegal abortion (please see the second key consideration below for more information), we think it is worthwhile to modify your SPDs and any relevant plan documents to explicitly exclude coverage for any services that are provided in violation of any state law, i.e., they should be legal in the state where performed. These updates will likely necessitate discussion with your plan’s third-party administrator (TPA).
For plans that cover abortion-inducing drugs (abortifacients), you may want to have a discussion with your PBM/TPA, regarding whether these drugs might be available via mail order to participants in states where abortion has been banned. As discussed under the second key consideration below, there are likely going to be states that take the position that civil or criminal liability can arise when these drugs are taken within a state where abortion is banned.
In addition, if you are looking to add abortion travel benefits to your plan, you will need to figure out how to administer those benefits and whether your TPA can assist with that administration. Many plans already provide some travel benefits for transplants or services provided at centers of excellence, and you may be able to use that same administrative structure to provide travel benefits for abortion-related travel.
Second Key Consideration: Are you willing to take the risk of an aiding and abetting lawsuit or criminal charge?
At this time, our best interpretation of existing law is that ERISA would preempt any civil law that imposes a penalty for a self-funded ERISA health plan aiding or abetting an abortion and that it might, but probably would not, preempt a generally applicable criminal aiding and abetting law. ERISA preemption would not apply with respect to any law aimed at what insurers can and cannot cover under an insured medical benefit. There are also good arguments that a state cannot criminalize or impose a penalty with respect to an abortion that is performed in another states where such abortion is legal.
Regardless of ERISA preemption and whether a state can impose civil penalties or criminal charges with respect to abortions that its residents receive outside of that state, every employer that covers abortions or abortion-related travel under its health plan must be aware that there is a risk that they could be the test case on these issues or the subject to a public attack from state politicians. An example of such an attack came this month when a group of Texas Republicans threated partners at a prominent national law firm with civil penalties, felony charges and disbarment for offering to pay for out-of-state abortion costs under a firm benefit plan. These threats were based on existing Texas law which criminalizes “furnishing the means for procuring an abortion…,” including drug-induced abortions if any part of the drug is ingested within the state of Texas, even when the drugs are dispensed outside of Texas, as well as future laws that these legislators say they intend to pass.
We and other commentators expect years of litigation over existing laws and future laws, and we’ve been counseling our clients to expect these benefits to be continually evolving.
Third Key Consideration: How can you avoid a Mental Health Parity violation?
As you probably know, the Mental Health Parity and Addiction Equity Act (MHPAEA) generally requires health plans to cover mental health and substance abuse services as generously as those plans cover medical and surgical services. A plan can meet MHPAEA requirements by providing travel benefits with respect to any service that is not legally available within a specified number of miles of a participant’s home.
Fourth Key Consideration: Do you want to provide abortion travel benefits under your plan to employees who are not otherwise enrolled in the plan and if so, how can you structure that?
It is possible for an employer to provide abortion travel benefits to employees who are not otherwise enrolled in the employer’s major medical plan. For example, the travel benefit can be provided through an HRA that is integrated with major medical coverage. What that means, as a practical matter, is that an employer can only offer this benefit to employees who are enrolled in the employer’s group major medical plan or who are enrolled in other group major medical coverage, such as coverage through a spouse’s employer, and who certify that they have other group major medical plan coverage.
Related considerations include how you will administer this HRA, particularly if you do not otherwise offer an HRA or have an insured plan with an insurer that may not be equipped to administer this for you. You will also need a plan document for the arrangement.
Fifth Key Consideration: What tax consequences result from abortion travel benefits provided under your plan?
Abortion travel benefits are considered eligible medical expenses under Section 213(d) of the Internal Revenue Code, with some limits:
A plan can generally reimburse up to $50 of lodging per night on a tax-free basis. Any reimbursement beyond that amount will have to be reported as taxable income to the participant.
A plan can reimburse airfare on a non-taxable basis, although there are some practical considerations associated with airfare reimbursement, such as whether it should be limited to airfare for travel of more than a specified number of miles from the participant’s home and to the nearest facility.
A plan can reimburse auto mileage at IRS-approved rates. Any reimbursement beyond IRS-approved rates will have to be reported as taxable income to the participant.
In addition, if an employer offers a high-deductible health plan, it cannot reimburse abortion-travel expenses before application of the plan’s deductible. That is true whether the reimbursement is provided directly through the high-deductible health plan or through an integrated HRA. Any first dollar (pre-deductible) coverage would cause the plan to fail as a high-deductible health plan and make plan participants ineligible to contribute to a health savings account (HSA) or receive employer contributions to an HSA. It is possible that the federal government could announce relief from this requirement, like it did with free telemedicine during the COVID-19 pandemic, but it hasn’t done so yet.
Sixth Key Consideration: Is there an upside to offering abortion travel benefits through a group health plan?
We see several upsides to this approach, including:
The possibility of a built-in administration mechanism through your existing third-party administrator or insurer.
HIPAA, ACA, ERISA and COBRA compliance are built in (through existing HIPAA policies and procedures, modification of existing ERISA disclosures such as SPDs and existing COBRA election procedures).
The possibility of ERISA preemption defeating civil penalties and aiding and abetting claims with respect to self-funded ERISA plans.