Much has been written about the Supreme Court’s decision in Dobbs v. Jackson to overturn the constitutional right to abortion. For employers in particular, the Dobbs decision raised a number of questions about employee benefit plans. Some employers reviewed the abortion-related services covered under their group health plans in order to determine whether any changes were necessary or desirable. Others also reviewed their travel reimbursement policies, and made decisions about whether to reimburse for travel costs incurred to obtain abortion services.
Many employers implement their health insurance policy renewals and manage their employee benefits open enrollment process in the final months of the year. Having had some time to consider the far-reaching implications of the Dobbs decision, and as we approach year-end, there are a few employee benefit plan issues that employers should consider.
Travel Reimbursement Policies
In the immediate wake of the Dobbs decision, many employers considered whether to reimburse plan participants (including employees and their dependents) for travel related to obtaining abortion services. For employers that wanted to signal support for access to abortion, a common first reaction was to announce an employer-sponsored policy for the reimbursement of abortion-related travel expenses. Some such policies covered abortion-related travel on a nontaxable basis, up to applicable IRS limits. Others covered the entire cost of abortion-related travel, with the portion of the cost above the IRS limit being treated as taxable. However, there are reasons why an employer may want to extend the scope of a travel reimbursement policy beyond only abortion-related travel.
First, the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) generally prohibits a health plan from imposing higher financial requirements or stricter treatment limitations on mental health or substance use disorder services than those that apply to medical and surgical benefits. Employers with fully-insured plans should confirm with their carriers that the addition of a travel reimbursement benefit for abortion-related services will not trigger any adverse consequences under MHPAEA. Employers with self-insured plans should similarly confirm with counsel that the addition of this benefit does not tip the scales in favor of the medical/surgical benefits offered under the plan.
Second, there has been concern about the litigation risk associated with providing access to abortion services. In recent months, the Equal Employment Opportunity Commission received a request to open a civil rights investigation against an employer from a complainant who alleged discrimination against pregnant women because the employer provided nontaxable travel reimbursement for abortion-related services but not pregnancy-related services. By offering to reimburse expenses for all medical-related travel, employers reduce the risk of this type of allegation.
In order to mitigate these risks, employers should consider whether to expand travel reimbursement expenses to cover all medical and surgical services, not just abortion-related services. To cap costs, employers can consider adding certain limitations as a condition of reimbursement, for example, for medical care unobtainable in the participant’s home state and for travel within a certain mile radius of the participant’s home state. The end of the calendar year (or, in the case of a plan that operates on a different fiscal year, the end of the plan year) is a natural time to alert plan administrators of the desire to expand offerings. Depending on whether a plan is fully-insured or self-insured, expansion of travel reimbursement coverage may require a rider to the health insurance policy or a change to the scope of services, or possibly a plan amendment. Companies should consider reaching out to their health plan service providers to discuss.
Health Insurance Plan Structure
One of the much-publicized implications of the Dobbs decision has been the establishment of so-called “aid and abet” laws in certain states. While there is currently no federal law that prohibits abortion, these state statutes provide a mechanism to pursue individuals and entities that facilitate access to abortion services. Certain protections may be afforded to companies that sponsor self-insured health plans because under the federal Employee Retirement Income Security Act of 1974 (“ERISA”) there is a general preemption provision that supersedes state laws that relate to employee benefits. To the extent an employer-sponsored group health plan is self-insured and not subject to state insurance laws, the preemption clause may offer protection against state laws that target access to abortion services.
Conversely, fully-insured health plans are subject to state insurance laws, and generally are unable to take advantage of ERISA preemption.
Even when operating in a state that prohibits abortion, a self-insured medical plan arguably could still cover abortion services because it would not be subject to state law. Self-insurance bolsters the position that ERISA overrides the jurisdiction of state laws prohibiting abortion coverage. Further, employers can mitigate against the risk of litigation by making their travel reimbursement policy a component of their self-insured medical plan. Doing so would arguably extend ERISA preemption protection to the travel reimbursement policy, in addition to the health plan. Finally, while a discussion of the effect of the Affordable Care Act (the “ACA”) is beyond the scope of this article, integration with a health plan also makes it easier to comply with applicable provisions under the ACA.
Adopting a self-insured plan, or switching from a fully-insured to a self-insured plan, is a decision that requires cost analysis and significant advance planning. Implementation steps include the development of plan documents, and negotiation of stop-loss insurance policies and administrative services agreements. By the time the Dobbs decision was released on June 24, 2022, it would have been too late in the calendar year for many employers to consider changing the structure of their health plans. However, now that employers have made their initial decisions about whether and how to provide access to abortion services, and now that year-end cost adjustments are being processed through policy renewal and open enrollment, it is a good time to consider whether switching to self-insurance is feasible or desirable.
The Supreme Court’s Dobbs decision placed a spotlight on employer-sponsored employee benefits. We continue to work through the implications of the Dobbs decision as new issues arise. If you have any questions about the impact of the decision on your employee benefit plans, please feel free reach out to a member of your Goodwin employee benefits team.