Medical Travel Reimbursement Benefits Under the Supreme Court’s New Dobbs Decision
On June 24, 2022, the Supreme Court of the United States issued its highly anticipated decision in Dobbs v. Jackson Women’s Health Organization, No. 19-1392. The Dobbs decision expressly overrules the two key precedents that established and upheld a constitutional right to abortion—Roe v. Wade (1973) and Planned Parenthood of Southeastern, Pa. v. Casey (1992)—and gives states the authority to regulate abortion. Justice Alito wrote the opinion for the five-justice majority. Chief Justice Roberts concurred in the result only, urging a narrower ruling on the challenged Mississippi law. Justices Breyer, Sotomayor and Kagan dissented.
In the wake of Dobbs, employers with health plans that cover abortion services will have to determine whether or how to provide continued access to this relatively little-used benefit, especially in states that will automatically restrict abortion access now that the ruling has been issued, or that are expected to do so soon.
Many self-insured employers are considering adding medical travel expense reimbursement benefits to their existing medical plans. Doing so raises some Employee Retirement Income Security Act of 1974 (ERISA), tax, and other federal law issues that employers may need to carefully evaluate, as well as potential issues under rapidly evolving state laws. For example, pre-Dobbs, Oklahoma and Texas both enacted “fetal heartbeat” laws that prohibit aiding and abetting, including by reimbursing through health insurance, an abortion performed in violation of those laws.
State laws that relate to employee benefit plans are broadly preempted by ERISA. And courts may well uphold ERISA preemption challenges to state abortion laws that affect benefit plans, including civil provisions on “aiding and abetting” abortions that violate state law. But ERISA preemption has important limits. For example, state criminal laws of general application would not be preempted, and states may update their general criminal laws following Dobbs.
Many employer health plans generally cover abortion services, though these services, like many others, may not be specifically mentioned in plan documents or summary plan descriptions (SPDs). Many health plans also reimburse travel expenses in some limited situations, such as in a center of excellence program for transplants or other high-cost procedures. Some employers added or broadened travel and lodging reimbursement benefits after Texas enacted Senate Bill (SB) 8 in 2021. The leak of the draft Dobbs opinion in early May 2022 greatly increased employer interest in travel reimbursement.
Federal law generally does not require health plans to cover abortion services. The U.S. Equal Employment Opportunity Commission, though, has interpreted the Pregnancy Discrimination Act to require employer health plans to cover abortions in cases where the life of the mother would be endangered if the fetus were carried to term. Health insurers are subject to state insurance laws, including laws governing whether policies may or must cover abortion services, so insured plans may have less discretion regarding how and whether to cover abortion services than self-insured plans have.
Among the issues for employers to consider as they digest Dobbs and its impact:
Third-party administrators may not be willing or able to administer travel reimbursement programs immediately, especially complex or customized versions. Some may be able to offer a standard package or approach to these reimbursements.
Pharmacy benefit managers (PBMs) and telehealth providers may also be affected by new state restrictions on abortions. Many employer plans currently cover abortion medications, which can be shipped to a patient’s home following visits with a medical provider, in person or virtually. PBMs and telehealth companies may be the target of future state laws and regulations in this area.
Certain travel and lodging expenses can be reimbursed as “medical care,” and thus are excludable from income for an employee. For example, the Internal Revenue Service (IRS) sets mileage rates that would apply when patients drive to clinics, and the IRS caps lodging expenses at $50 per night for a patient and $50 per night for a travel companion, if needed for the patient to obtain medical care. Meals and other personal expenses are not “medical care” for tax purposes, and therefore, reimbursements for these items are not excludable from an employee’s taxable income.
Employers providing reimbursements through an existing health plan could generally take advantage of the existing compliance structure in areas such as ERISA reporting and disclosure, continuing health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the Affordable Care Act (ACA) and Health Insurance Portability and Accountability Act (HIPAA) privacy protections. Employers that wish to consider offering reimbursements separate from an existing plan may want to consider carefully compliance issues under these laws.
Employers considering reimbursing for certain medical travel—but not for travel related to mental health or substance-use disorder benefits—may also want to evaluate risks under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The MHPAEA generally restricts plans from applying annual limits, financial requirements, and treatment limitations to mental health and substance-use disorders that are not applied, or are not as stringently applied, to medical benefits generally.