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Employer-Provided Benefit Options After Dobbs – Employee Benefits & Compensation


This article was originally published in Bloomberg Law. Reprinted with permission.
Any opinions in this article are not those of Winston & Strawn
or its clients. The opinions in this article are the authors’
opinions only.

The US Supreme Court’s landmark decision in Dobbs v. Jackson Women’s Health
Organization
, 142 S. Ct. 2228 (June 24, 2022) overturned
Roe v. Wade, 410 U.S. 113 (1973) and
Planned Parenthood of Southeastern Pa. v.
Casey
, 505 U.S. 833 (1992), revoking the constitutional
right to an abortion. The impact of this decision returned the
right to regulate access to abortion to the states.

As a result, many states have introduced new laws, given effect
to previously enacted trigger laws and/or have taken the position
that pre-Roe laws are automatically reinstated with the effect of
reducing or prohibiting a woman’s right to seek abortion
related care and services.

In response to the Supreme Court’s ruling and state action,
employers are assessing how and whether to provide additional
support for employees and their dependents seeking abortion
services and related care if they live in states that restrict or
prohibit such access. Since this issue is politically charged on
both sides, and there is risk associated with an employer’s
actions or failure to act, understanding the legal and practical
implications is critical.

As discussed more fully below, amid current legal uncertainty,
many employers are considering various options to provide
abortion-related benefits to their employees, including the
adoption of travel benefits in connection with abortion-related
services.

OPTIONS TO EXPAND RELATED BENEFITS

Self-Insured Medical Plan

Self-insured medical plans are not subject to state insurance
laws, and employers generally have more freedom to design plan
benefits and features as long as such plans otherwise comply with
applicable federal laws. Thus, if an employer decides to offer
abortion care or travel reimbursement to its plan participants, the
medical plan can be amended to offer such benefits.

Amending a plan to add such coverage is not a fiduciary act
under the Employee Retirement Income Security Act of 1974
(ERISA)—it is settlor in nature. Nevertheless, any such
amendment would have to comply with applicable federal law, such as
mental health parity, nondiscrimination and tax laws, and adding or
expanding such benefits will need to be discussed and negotiated
with the plan’s third-party administrator(s) (TPAs) to confirm
they can and will administer such benefits.

Fully-Insured Medical Plans

Fully-insured medical plans are subject to state laws regulating
insurance. Certain states prohibit insurers licensed in the state
from issuing insurance policies that provide coverage for medical
services associated with abortion. As a result, employers that
offer fully-insured medical coverage to employees and their
dependents in these states will have less flexibility to make
benefit plan changes in response to Dobbs.

Thus, if an employer with a fully-insured medical plan decides
it wants to offer abortion care or travel reimbursement to its plan
participants—and the state law does not permit an insurance
policy delivered in the state to cover such care—the employer
will be required to look to other sources to provide this coverage.
Even in states without restrictive abortion laws, changes to
coverage may require review and approval by the state insurance
regulators and special underwriting, so employers with insured
medical plans may not be able to implement expanded abortion care
benefits quickly.

RELATED BENEFITS OUTSIDE OF MEDICAL PLANS

Alternative Health Plans

Employers that choose to offer abortion care or travel
reimbursement but are unable to do so through a fully-insured
medical plan, or those that want to offer abortion-related benefits
to a wider population than employees participating in the
company-sponsored medical plan, may seek alternative ways to offer
such coverage.

For example, some Employee Assistance Plan (EAP) service
providers are offering different types of services to meet the
needs of employers. Alternatively, adding or enhancing telehealth
benefits or a health reimbursement arrangement (HRA)/excepted
benefit HRA (EBHRA) are potential options, albeit with potential
legal hurdles. Also, certain fertility service providers are now
agreeing to administer abortion travel benefits.

These alternative types of health plans would have to be
carefully structured to comply with applicable federal laws, such
as ERISA, the Affordable Care Act (ACA), the Consolidated Omnibus
Budget Reconciliation Act (COBRA), the Health Insurance Portability
and Accountability Act of 1996 (HIPAA), and the Internal Revenue
Code. For example, an employer cannot provide a stand-alone
traditional HRA to employees without integrating it with
ACA-compliant medical coverage and must ensure that any EAP or
telehealth benefit remains qualified as an ACA “excepted
benefit.”

Travel Reimbursement Programs

Employers also could consider establishing a stand-alone travel
expense reimbursement program. Under this option, an employer could
reimburse an employee’s travel expenses on a taxable basis.
There is some risk that a stand-alone travel reimbursement program
could be viewed as an ERISA-covered plan given that the travel
benefits are offered in connection with the receipt of medical
care, even though the reimbursements are made on an after-tax
basis.

If so, the program would have to comply with federal laws
applicable to group health plans, such as ERISA, the ACA, COBRA,
HIPAA, and the Internal Revenue Code. If a travel benefit were
added as part of a general taxable reimbursement program, such as a
lifestyle reimbursement account, inclusion of medical travel as an
eligible reimbursement expense should not subject the lifestyle
reimbursement program to ERISA.

Some employers are assessing whether to hire third-party service
providers to administer these programs or administer them in-house.
Although a third-party service provider is likely more expensive
and may take additional time to implement, it can add a layer of
privacy between an employer and those employees who are accessing
these benefits. In addition, if a travel benefit is considered an
ERISA group health plan it would be subject to added privacy
protections under HIPAA, discussed further below.

Paid Leave or Child Care Benefits

Employers that are considering offering paid leave or child care
assistance for employees who need to travel out of state to obtain
abortion care are exploring whether to enhance existing paid leave
programs or add new ones. Paid leave programs are subject to
federal laws, such as FMLA and discrimination laws, and there are
also many states and municipalities that regulate paid leave. Any
changes to paid leave programs will need to be designed with these
legal obligations in mind.

LEGAL RISKS

Potential Civil or Criminal Liability

Adding or expanding abortion care or travel reimbursement in
states that prohibit or restrict abortion access is not without
risk. Companies and their boards could face scrutiny, pressure, and
liability depending on their actions. Some states have enacted laws
that enable private citizens to bring a civil action against a
“person” for aiding and abetting an individual in
obtaining a prohibited abortion. For example, both Texas and
Oklahoma have enacted “bounty hunter” style laws that
authorize a private right of action against any person or entity
that knowingly engages in conduct that “aids or abets”
the performance or inducement of an abortion, including paying for
or reimbursing the costs of an abortion through insurance or
otherwise.

In addition to civil enforcement statutes in Texas and Oklahoma,
all states have criminal laws making the act of assisting or aiding
the primary actor—e.g., attempt, accessory, conspiracy, or
aiding and abetting—a felony. States could theoretically
extend—or attempt to extend—their generally applicable
aiding and abetting criminal statutes to the abortion context,
asserting that reimbursing abortion costs constitutes active
participation or assistance in the crime of abortion. Unlike the
Texas and Oklahoma civil enforcement laws, however, these
activities are not currently codified under the generally
applicable aiding and abetting or abortion-specific statutes.

Thus, an employer that offers abortion care or travel
reimbursement to its employees and their dependents in these
states, either through an ERISA-covered plan or by some other
means, may be subject to civil, and in some cases, criminal
liability. At this time, it is unclear how these laws will impact
employer-sponsored group health plans that provide coverage for
abortion and/or transportation and lodging benefits in connection
with abortion services in states where such services are legal.
Early legal discourse has centered on potential arguments that some
of these state laws may be preempted by ERISA, but certain states
may be aggressive in trying to regulate in this area.

ERISA PREEMPTION

Most employer-sponsored employee benefit plans are subject to
ERISA, which preempts “any and all state laws insofar as they
may now or hereafter relate to” any ERISA benefit plan. A
state law “relates to” an ERISA plan for purposes of
ERISA preemption if it bears either a “reference to,” or
a “connection with,” the plan. “State laws”
include not only state statutes, regulations, and common law, but
also the laws of any state administrative agency or political
subdivision.

The standard of ERISA preemption has evolved over time, but
generally, as currently interpreted by the Supreme Court, ERISA
preempts state laws that mandate employee benefit structures or
their administration, bind employers or plan administrators to
particular choices or preclude uniform administration, or provide
alternative enforcement mechanisms to ERISA’s civil enforcement
provisions.

However, not all state laws are preempted by ERISA, which
“saves” from preemption state laws that regulate
insurance, banking, or securities. In addition, state criminal laws
of general application are not preempted by ERISA. Thus, the impact
of state laws will be different depending on whether an employer
sponsors an insured or self-insured group health plan, whether the
benefit is subject to ERISA, and whether the law is civil or
criminal.

Based on ERISA preemption, there is a good argument that state
abortion bans interfere with the uniform administration of ERISA
plans and are preempted on that basis. However, ERISA preemption is
not absolute. ERISA preemption does not apply to “generally
applicable” state criminal laws that do not specifically
target employee benefit plans. Less clear is whether state laws
similar to those in Texas and Oklahoma that penalize aiding and
abetting a criminal activity, such as abortion, would be preempted
by ERISA. Ultimately, the strength and breadth of ERISA preemption
in this area will need to be litigated in court.

Privacy Considerations

Privacy protection for individuals who avail themselves of
abortion care or travel reimbursement is tenuous. States with
restrictive abortion laws could attempt to obtain medical and
travel records in connection with investigations of purportedly
illegal abortions.

Medical plans and other ERISA-governed health plans are subject
to federal privacy protection requirements under HIPAA. HIPAA
protection is beneficial because it provides a federal law basis
for refusing or limiting the response to state government and legal
requests that do not meet specified requirements. On June 29, 2022,
the Office for Civil Rights (OCR), the agency that administers and
enforces HIPAA’s privacy rules, provided clarifying guidance to address how HIPAA limits access to
protected health information (PHI) relating to reproductive health
care, including abortion, maintained by health plans, health care
providers, and other covered entities.

The guidance reminds covered entities about rules regarding
disclosure of PHI without an individual’s authorization in
response to law enforcement and other legal requests, and notes
that major professional organizations, including the American
Medical Association and American College of Obstetricians and
Gynecologists, have stated it would be inconsistent with
professional standards of ethical conduct to disclose information
about an individual’s interest, intent, or prior experience
with reproductive health care to law enforcement. Under Executive Order 14076 issued by President Joe
Biden on July 8, 2022, the US Department of Health and Human
Services is directed to “consider actions, including providing
guidance under [HIPAA] and any other statutes as appropriate, to
strengthen the protection of sensitive information related to
reproductive healthcare.”

HIPAA does not apply to non-ERISA travel reimbursement programs
or lifestyle reimbursement accounts. Thus, a state government or
law enforcement official could have broader powers to subpoena
claim records under state data privacy laws. In deciding how to
offer expanded or enhanced abortion-related benefits, employers
will need to balance the potential protections offered by ERISA
preemption and the HIPAA privacy rules against the administrative
and legal requirements that come with operating an ERISA and
HIPAA-covered health plan.

EMPLOYMENT DISCRIMINATION CONCERNS

Travel reimbursement programs will also have to be designed to
comply with applicable discrimination laws. Title VII of the Civil
Rights Act of 1964 bans employment discrimination based on color,
national origin, race, religion, and sex. There are currently no
federal laws that protect the right to abortion or that mandate
abortion coverage. The Pregnancy Discrimination Act of 1978 (PDA),

42 U.S.C. § 2000e(k)
, a federal law enacted under Title
VII, requires that women affected by pregnancy, childbirth, or
related medical conditions be treated the same for all
employment-related purposes, including receipt of benefits.

As a result, an employer that provides a health plan/policy for
its employees must provide coverage of abortion where the life of
the mother would be endangered if the fetus were carried to term,
and it must also cover complications related to an abortion,
regardless of the reason for the abortion. Employers may provide
more generous benefits than those required by the PDA. One could
argue that the PDA preempts more stringent state abortion laws that
do not have exceptions for the life or health of the mother.
However, these issues have not yet been vetted in court.

TAX CONSIDERATIONS

Reasonable travel expenses that are incurred for necessary
medical treatment may be reimbursed on a tax-free basis by a
medical plan, Health Savings Account (HSA), Health Flexible
Spending Account (Health FSA), or an HRA. Transportation costs and
lodging benefits up to $50 per night could be provided through a
medical plan, including HSAs and Health FSAs, on a tax-free basis,
subject to federal tax requirements. Travel for medical care cannot
be for purely personal reasons, nor can it be for a purpose that is
merely for the general improvement of an individual’s
health.

In addition, certain transportation and lodging—up to an
additional $50 per night—expenses may be reimbursed tax-free
for a medically necessary companion who accompanies the patient.
I.R.C. § 213(d); IRS Publication 502: Mental and Dental
Expenses
.

Note that there are proposals in Congress to eliminate the
federal tax deduction for abortion services and the transportation
and lodging expenses associated with such services. While such
proposals are not likely to be enacted under the current
administration, it is possible that federal tax laws could be
amended in the future. Some anticipate that similar laws will be
introduced at the state level. Travel benefits that are provided
without adequate substantiation could be subject to tax.

Certain child care assistance benefits can be excluded from an
employee’s wages. If the child care is being offered through an
off-site daycare facility, this falls under the dependent care
assistance rules, which allows a family to defer up to $5,000 per
year for child care expenses incurred so a person can be gainfully
employed. I.R.C. § 129(a).

However, in these circumstances, reimbursing an employee for
child care so the employee can seek abortion care or services,
would not be a tax-free benefit because the child care expenses are
not being incurred so the employee can be gainfully employed. There
is no alternative tax mechanism for excluding the cost of
employer-provided or reimbursed child care service from an
employee’s wages. Thus, providing reimbursement for child care
to permit an employee to travel for medical care would not be a
tax-free benefit.

ADDITIONAL CONSIDERATIONS

In addition to the legal compliance issues and state/ERISA
concerns discussed above, employers should also evaluate its
business nexus with a state, such as contracting with the state for
services, or benefitting from special tax status or licensing
permits, to determine if there is any additional exposure, as
states may start to impose restrictions on employers who do
business in the state and also cover abortion in other
jurisdictions. Reputational risk must also be assessed. Each
employer’s approach will be different, based on its corporate
culture, employee expectations, risk tolerance, location, and
business posture with the state and ability of carriers and vendors
to administer benefits.

CONCLUSION

Virtually all employers will be impacted by the Dobbs
decision. Employers should work with insurers, TPAs, pharmacy
benefit managers, and legal counsel to review their medical and
prescription drug coverage and other benefit offerings to assess
available options and the legal implications. Employers should also
continue to monitor federal, state, and local developments in this
area as the legal landscape continues to evolve.

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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