Employee Benefit Plan Considerations After ROE | SmithAmundsen LLC

The United States Supreme Court’s decision last month to overturn Roe vs. Wade presents new challenges for employee benefit plans. By overturning the case establishing a constitutional right to abortion, the Court’s decision in Dobbs v. Jackson Women’s Health allows states to impose outright restrictions or bans on abortion. The ruling quickly leads to a patchwork of state laws that plan sponsors must now consider.

13 states already had laws that took effect automatically or through swift legislative action banning abortion once Roe was overturned and a total of 26 states are estimated to be likely to quickly block the procedure.

Employers operating in multiple states will have to navigate a patchwork of different rules affecting health plan abortion coverage, depending on where covered employees and dependents live, work and receive health care.

Employer-sponsored health plans and state insurance rules

Fully Insured Group Health Plans, where employers purchase coverage through a commercial insurer, are subject to state regulation and must follow state laws regarding abortion coverage. Several states (including Indiana) already ban fully insured health plans from covering abortions, and more states banning the procedure will likely follow. A fully insured plan written in states that prohibit insurance coverage for abortion cannot provide such coverage. Conversely, a handful of states (including Illinois) require fully insured health plans to cover abortion under certain circumstances and these plans must provide the mandatory coverage.

Self-funded health plans, where employers pay the cost of health plan claims instead of an insurer, are not subject to state insurance laws due to the federal pre-emption provisions of the Employee Retirement Income Security Act (ERISA). ). State laws prohibiting (or requiring) abortion insurance coverage do not apply to these plans.

Reimbursement of travel expenses

Well before the final decision in Dobbs, several employers announced the addition of abortion-related travel allowances for employees working in states that prohibit abortion. Employers seeking to provide such benefits may consider enhancing abortion coverage within a self-insured health insurance plan or providing reimbursement benefits outside of the plan.

Employers with self-insured health insurance plans may consider modifying their plan provisions to cover abortion-related travel expenses and/or coverage for out-of-network abortion providers. Such changes can be made mid-year provided employee bonuses do not increase. Alternatively, employers can adopt a policy of reimbursement for abortion-related travel expenses outside of the health plan.

Generally, reimbursement of travel expenses will constitute taxable compensation for employees, unless the reimbursements qualify as medical expenses. To be considered non-taxable medical expenses, travel expenses must be primarily and essential to receive medical care and are subject to certain limits.

State criminal liability issues

New state laws criminalizing abortion (including “aiding and abetting” an abortion) create additional complexity for self-insured health plans and employers providing abortion-related assistance, including including reimbursement of travel expenses. ERISA generally does not prejudge applicable state criminal laws and the extent to which ERISA preempts such laws is not fully established. Arguably, claims brought against an employer or self-funded health plan for “aiding and abetting” an abortion by reimbursing the costs associated with an abortion performed under the laws of the state in which the abortion is performed should be anticipated by ERISA. However, a self-funded plan that covers abortions performed in a state that has criminalized the procedure may not be protected by ERISA from applicable criminal or civil liability. These issues will likely be taken to court.

Next steps

Employers should: (1) review their health insurance plan documents to determine current coverage, (2) consult with ERISA counsel on the applicability of relevant state laws and potential coverage options, mandates and/or restrictions; and (3) monitor future legal developments on both the state and federal level.

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