Navigating Employer-Provided Benefits in the Wake of Dobbs

Kirsten Stewart and Russ Johnson

On June 24, 2022, the U.S. Supreme Court issued its opinion in Dobbs v. Jackson Women’s Health Organization, overturning Roe v. Wade and Planned Parenthood v. Casey (which collectively held that the U.S. Constitution prohibits states from banning or unduly burdening access to abortion services prior to the date of viability). As a result, at least 26 states are certain or likely to ban or restrict abortions. Thirteen of those states have “trigger” laws in place that are designed to take effect automatically (or with minimal state action). Relegating control over the access to abortion services to the states creates a complex legal minefield for employers who intend to continue to support access to these services for their employees. This advisory provides employers with options to consider when navigating the new landscape.

Options and Considerations for Employer-Provided Benefits After Dobbs

Employers have always had the discretion whether to cover abortion services under group health plans. Fully-insured group health plans are subject to state mandates, and group health plans covering participants in states banning or limiting abortion will now be required to follow any new state mandates. Self-insured group health plans generally have had more flexibility to design coverage requirements, due to the broad state-law preemption provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). While the scope of regulation and control is continuing to develop and state criminal laws of general application are exempt from ERISA, the Dobbs decision diminishes the ability of employers to rely on preemption arguments.

Notably, Texas and Oklahoma have enacted laws that authorize civil actions against any person who aids or abets access to abortion care, including through reimbursement for the costs of an abortion. Additionally, at least one state (Texas) is considering laws that would prohibit employers who assist employees in obtaining abortion services from conducting business in the state. On the other hand, some state officials in states where abortion is now or will be illegal or restricted, such as North Carolina and Michigan, have indicated an intent not to enforce their abortion restriction laws. The options discussed below should be reviewed carefully in light of the changes to various state laws and discussed with legal counsel.

  1. Eliminating or Limiting Access to Group Health Coverage.

One option an employer could consider would be to expressly limit self-insured group health plan coverage of abortion care for participants who reside in states where that coverage could result in civil or criminal liability for the employer. This approach would permit continued access to abortion benefits for plan participants in abortion-permissible states and could potentially minimize liability exposure to the employer under more restrictive state laws. However, this approach also creates significant disparities in the services available to plan participants (employers might consider any impact on nondiscrimination testing), requires continuous monitoring of applicable state laws to ensure compliance, and potentially cuts against promotion of an inclusive and supportive employment environment. Additionally, this change could require the amendment of plan documents and policies, as applicable.

  1. Significant Curtailment in Coverage Without Loss of Coverage.

If an employer has a self-funded group health plan that covers employees nationwide, and fully-insured plans that cover employees in states that now ban access to abortion services, an employer could consider whether the Dobbs decision ultimately results in a significant curtailment of coverage without a complete loss of coverage that would permit a mid-year change from the fully-insured plans to the self-funded group health plan. The cafeteria plan regulations allow a participant to revoke an election under a plan that undergoes significantly curtailed coverage and to elect another benefit package option providing similar coverage. While the loss of a single physician from a network would not constitute a significant curtailment, the regulations do provide that the loss of coverage of a specialty could create a significant curtailment of coverage under the plan as a whole. Guidance from the IRS regarding this matter would be appreciated.

  1. Use of Travel and Lodging Benefits.

Employers might consider reimbursing the costs of transportation and lodging for employees and dependents who will now be required to travel distances to access abortion care. In general, transportation expenses that are primarily for and essential to medical care can qualify as qualified medical expenses.  Absent federal guidance, state laws that make abortions or abortion-related travel illegal may adversely affect the tax-deductible status of these benefits. There are several options for implementing travel and lodging benefits.

  • Travel and lodging benefits can be added as a feature under a self-insured group health plan. Group health plans could be amended to cover travel and lodging expenses required to access abortion care. Many group health plans already offer transportation and lodging for other types of benefits (for example, organ transplants).  However, employers might consider the following:
    • The third-party administrator of the self-insured group health plan would need to administer the new feature, and the plan document and summary plan description would need to be amended.
    • If the employer sponsors health savings accounts (“HSAs”), such expenses should only be paid after the participant meets the deductible for qualifying medical expenses. Otherwise, an employee could be disqualified from making HSA contributions.
    • Expenses should be limited to reasonable expenses (and could be subject to a cap).
    • Under the Health Insurance Portability and Accountability Act (“HIPAA”), the travel and lodging benefits will be subject to applicable privacy and security rules.
    • Employers might consider whether implementation of these benefits will cause issues under the comparability rules under the Mental Health Parity and Addiction Equity Act (“MHPAEA”) rules. It remains unknown whether offering these benefits may require the plan to offer comparable travel and lodging benefits with respect to mental health or substance use disorder benefits.
  • Travel and lodging benefits can be added as a separate, self-funded group health plan. Under this method, travel and lodging benefits would be added as a separate, self-funded group health plan. Employers might consider the following.
    • This approach requires ensuring that the benefit is provided only to individuals who have coverage under another group health plan. Otherwise, a stand-alone plan could violate the ACA rules prohibiting annual and lifetime limits and requiring provision of preventive care at no cost.
    • Generally, the same considerations described above regarding HSAs; reasonable expenses; and ERISA, ACA, HIPAA, and MHPAEA apply here as well.
    • A separate group health plan might need to be managed in-house, which might require additional attention to protection of protected health information under HIPAA and separate continuation coverage rights under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).
  • Travel and lodging benefits can be offered under an employee assistance program (“EAP”). Employers might consider the following:
    • If the EAP is an excepted benefit, it is exempt from certain federal mandates, including ACA requirements. To be an excepted benefit: (1) the EAP cannot provide “significant benefits in the nature of medical care”; (2) the EAP cannot be coordinated with benefits under a group health plan; and (3) benefits under the EAP cannot be financed by another group health plan.
    • EAPs generally are administered by third parties, and the third party would need to be willing to administer the benefit.
    • Because EAPs are often provided to all employees and family members, not just participants in a group health plan, this approach would theoretically permit a broader swath of employees to receive this benefit.
  • Travel and lodging benefits can be offered through an employee hardship program. Under this approach, employees could apply for reimbursement for expenses related to travel, lodging, and other expenses, like childcare. Employers might consider the following.
    • The breadth of permissible expenses would be discretionary, but employers might consider what information would need to be provided as part of the application.
    • Reimbursements would be available for other types of hardships as well.
    • This approach alleviates HIPAA and MHPAEA concerns because the reimbursement would not be tied to medical expenses. However, documentation and information provided through the program should be kept confidential.
    • Employers using this approach would lose any ability to use ERISA as a shield from state laws that might penalize aiding or abetting access to abortion services.

Regardless of the desired approach, employers might consider working with their consultants, third-party plan administrators, and insurers to ensure that cohesive administration is feasible.  Additionally, as the legal landscape shifts in the wake of Dobbs, employers should work with legal counsel to ensure compliance. Our Employee Benefits group is available to assist our clients with questions and concerns regarding the developing law in this area.