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Action Items Plan Sponsors Should Consider In The Wake Of The U.S. Supreme Court Dobbs Decision On Abortion – Employee Benefits & Compensation


On June 24, 2022, in Dobbs v. Jackson Women’s Health
Organization
, the U.S. Supreme Court ruled that the U.S.
Constitution does not protect the right to obtain an abortion.
While reactions to the opinion vary widely, employers who sponsor
group health plans should consider the potential impact of the
ruling soon, as participants may have questions about the scope of
abortion coverage under their group health plans and, depending on
state law, their ability to legally provide coverage for abortion
related services may be limited. Plan sponsors should work with
employee benefits counsel to review changes to state law, potential
plan document changes, travel and lodging benefits, relocation
benefits, privacy and safety concerns, as well as potential new
federal guidance.

State Law Changes, ERISA Preemption Unclear

States have widely varying laws concerning abortions, including
complete bans, bans that apply a certain time after conception,
bans with limited exceptions (such as to save the life of the
mother), and bans on abortifacient drugs. Generally speaking, state
laws that relate to employee benefits plans are preempted by the
Employee Retirement Income Security Act of 1974
(“ERISA”). However, ERISA generally does not preempt
state laws to the extent that they only have an indirect impact on
employee benefit plans, or regulate a state’s insurance
industry.

There may be a good argument that state civil statutes which
restricts a group health plan from providing coverage for abortion
services may be preempted by ERISA with respect to self-insured
group health plans. However, there is a strong possibility that
states will enforce civil statutes banning abortion services, which
will test ERISA preemption in this case. Fully-insured plans are
subject to ERISA’s “savings clause,” and are
generally subject to state insurance coverage mandates (see
discussion of California, below) or prohibitions where policies are
issued. Therefore, fully-insured plans are likely subject to these
insurance mandates and civil statutes. Additionally, plans not
subject to ERISA like governmental and many church plans will not
be able to rely on ERISA preemption.

While the most obvious employer concern generated by the
Dobbs ruling involves state laws which make having,
providing, or aiding and abetting the provision of abortion a
criminal offense, states may also impose requirements in favor of
coverage for abortion-related services. For instance, California
passed a law in March 2022 that bans group health plans and
insurers from imposing co-pay, deductible, or other methods of
cost-sharing for all abortion and abortion-related services under
policies that are issued, renewed, or delivered after January 1,
2023. Fully-insured group health plans should carefully review
whether they are affected by any laws favoring abortion
services.

ERISA generally does not preempt criminal laws. Therefore,
employers may need to evaluate potential criminal liability if
their plans cover abortion-related services for plan participants
located in states with criminal statutes. There is risk that
criminal conspiracy and/or aiding and abetting laws could be cited
against employers with group health plans that cover abortion or
abortion services within a state with an abortion prohibition. This
will likely be tested in courts.

Action Items for Employers

There are a number of basic steps employers should consider when
evaluating the impact of the Dobbs ruling and state
abortion related laws.

Plan Document Changes

Employers should conduct a census of the states in which their
employees work and reside (which has become more challenging in the
era of COVID-19 and remote work) and analyze the applicable laws in
those states. Plan language that was permissible prior to
Dobbs may no longer be permissible after Dobbs.
This may require plan amendments and revisions to summary plan
descriptions (“SPDs”). Potential items to review may
include abortion services and drugs, exclusions for
abortion-related services, as well as general exclusions for
“illegal” services.

Employers should also discuss abortion coverage with various
providers to their health welfare plan. This includes the pharmacy
benefit manager (“PBM”) for their plan to find out what
type of abortion-related drugs are covered and whether such drugs
might be available via mail order to employees in states where
abortion has been criminalized. Sponsors should also have similar
discussions with their plan’s insurer (for insured plans) or
claims administrator (for self-insured plans) since regardless of
what an employer decides, their carrier or third party
administrator will have to agree to and have the administrative
processes accommodate the decision.

Subject to state law, group health plans may be designed to
include or exclude coverage for reproductive services, such as
abortion. The Pregnancy Discrimination Act of 1978
(“PDA”) which prohibits sex discrimination on the basis
of pregnancy, requires that employer medical plans must cover
expenses for pregnancy-related conditions on the same basis as
other medical conditions. However, the PDA specifies that insurance
coverage for expenses arising from abortion is not required unless
the life of the mother is endangered, or medical complications
arise from the abortion. Even this limited mandate can have
complications—the abortion laws in some states, such as
Tennessee, require a medical provider to prove that the
mother’s life was endangered

Travel and Lodging Benefits

Some employers already provide some type of travel benefit
(usually to address network coverage gaps) for employees seeking
medical services. Some employers have a generic travel benefit that
may cover employees who wish to seek abortion services that might
not be available in their state. Other employers have announced
specific policies to permit travel benefits specifically for
abortion services. Each of these methods has its own compliance
challenges.

The Mental Health Parity and Addiction Equity Act
(“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. Therefore, employers
must carefully consider whether any plan changes could implicate
the MHPAEA. This could occur, for instance, if travel
reimbursements are provided under the medical plan, but were
limited to abortion services.

Therefore, if an employer wishes to consider providing medical
travel reimbursements, it could consider a policy or program that
is neutral as to eligibility (i.e., not just women) and medical
services covered (i.e., not just abortion). Employers may also
consider establishing a geographic limit outside of which services
must not be available for eligibility (i.e., the services must not
be available to the employee within 100 miles, which may be
particularly relevant for employees who live near state
borders).

Employers may also want to consider various funding vehicles for
such a benefit:

Using an HRA. One option for funding would be through a
health reimbursement arrangement (“HRA”). Travel costs
related to medical care and abortion services are eligible pre-tax
expenses that can be funded through an HRA if the plan permits
coverage for such expenses. An HRA is itself a group health plan,
and, in general, to satisfy the requirements of the market reforms
under the Affordable Care Act, must be integrated with a group
health plan. Employers that offer high deductible health plans
(“HDHPs”) should be mindful that before an HRA can
reimburse for abortion services, the minimum required deductible
must be met to maintain a participant’s status as an eligible
individual for contributions to a health savings account
(“HSA”).

Using an EAP. An employee assistance plan
(“EAP”) is an employee benefits program provided by a
company to assist employees with well-being and mental wellness
support. EAPs are not subject to the Affordable Care Act to the
extent that they do not offer “significant benefits in the nature of medical care
or treatment
.” The extent to which an EAP could offer
travel benefits that relate to medical care or treatment is unclear
based on existing guidance. Expanding benefits beyond what is
permissible could cause the EAP to run afoul of the Affordable Care
Act market reforms.

Using a Taxable Reimbursement. From an Affordable Care
Act and ERISA compliance standpoint, simply providing taxable
reimbursements to employees for travel expenses may be the most
straightforward approach. A downside of such an arrangement is that
it creates tax frictions for both the employee and employer. More
significantly, a taxable arrangement would not be subject to ERISA,
which would mean that there would be no preemption argument for an
employer in response to state law abortion restrictions.

Relocation Benefits

In addition to, or instead of, travel benefits, some employers
have announced relocation benefits. Under these programs, employees
are eligible to be reimbursed for the expenses associated with
moving to a different state. For many years, such an expense would
be excludable from employee income, but the Tax Cuts and Jobs Act
of 2017 suspended this tax treatment through 2025.

Privacy and Safety Concerns

The Health Insurance Portability and Accountability Act of 1996
(“HIPAA”) applies to group health plans and prohibits,
among other things, the unauthorized disclosure of employee
protected health information (“PHI”). For instance, PHI
cannot be shared with a plan sponsor for the purpose of
employment-related actions.

To the extent that abortion-related services are made available
to employees outside of a group health plan, HIPAA will not apply
and an employer could be legally compelled to provide information
on its abortion policies and who has taken advantage of them.
Employers should anticipate that employees will be reluctant to
share information about abortions or abortion-related services with
their employer, particularly when privacy protections do not apply.
While employees are protected against discrimination under the PDA,
the Family and Medical Leave Act of 1993, as well as some state
laws, employees may be more comfortable sharing information about
these travel reimbursements with a third party. Employers might
consider contracting with a third-party claims administrator to
handle these reimbursements (and should carefully review the
privacy and security protections provided under that contract).

Potential Federal Regulatory Changes

Finally, employers will need to monitor what will likely be a
fast-shifting regulatory environment on the federal level (in
addition to the many changes already happening on the state level).
President Biden announced that his administration will take
regulatory steps to protect abortion access.

While specific guidance related to benefit plans has not been
provided from the Internal Revenue Service, Department of Labor, or
Health and Human Services, there are some potential areas for
relief. This could include: permitting mid-year changes for
employees who lose access to abortion services due to state law
changes; announcing non-enforcement for provisions under the MHPAEA
that would otherwise prevent travel services specifically for
abortions; and classification of travel benefits as
non-disqualifying for HSAs, even if offered pre-deductible
limit.

Recently, the Department of Health and Human Services has issued
guidance describing when PHI is required and not required to be disclosed
in the abortion context when “required by law.”

Conclusion

Employers face an uphill battle in navigating the changes
resulting from the Dobbs decision, particularly when laws across
states conflict. Employers must monitor this situation closely and
engage with employee benefits counsel to develop policies to meet
their objectives and the needs of their employees. Dickinson
Wright’s Employee Benefits and Executive Compensation Group has
been and will continue to monitor the impact of these changes to
advise clients on how to respond to this evolving landscape.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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