Update 6/24/2022: The Supreme Court of the United States has now published its decision in Dobbs v. Jackson and as anticipated, the decision overturns prior Supreme Court precedent in Roe vs. Wade and Planned Parenthood vs. Casey, both which provided federal constitutional protection of abortion rights. As explained further below, this means that states now have the power to pass laws banning or restricting abortion services. In light of this change in the legal landscape, the information below provides an overview of group health plan considerations and potential employee benefit plan options that may be available.
It is anticipated that twenty-six states are likely to enact some sort of restriction or ban on abortion services right away, with approximately thirteen states having already passed so-called “trigger laws” that will automatically ban or restrict abortion services. On the other hand, certain states have moved to enact laws to increase abortion access or further protect the right to abortion.
Employers are now trying to better understand:
- How to navigate any impact to group health plan coverage; and
- What other employee benefit plan options may be available for costs related to receiving reproductive services.
As changes to the legal landscape continue to develop (causing many unknowns at this time), the information below provides an overview of group health plan considerations and potential employee benefit plan options that may be available.
Group Health Plans: What is Covered?
Group health plans can be designed to include coverage for reproduction services, such as abortions. However, elective abortions may not be covered, and abortions performed out-of-state may not be covered as an in-network service.
Importantly, it is essential to first understand any impact federal or state laws may have on group health plan coverage.
Coverage under a Fully Insured Plan is Dictated by State Insurance Law
The coverage of abortion services under a fully insured plan will largely depend on state law. Generally, fully insured plans are subject to the insurance laws of the state in which the policy is written. Because of this, the coverage of abortion by fully insured plans varies greatly by state – some states prohibit all health insurance policies from covering abortion services, many restrict abortion-related services in some way (e.g., may not cover elective abortions), and some states require all private employer plans to offer abortion coverage.
For instance, a Texas law prohibits private insurance plans written out of Texas to cover abortion procedures as part of their general coverage, meaning supplemental coverage would need to be purchased if the insurance carrier chose to offer such additional coverage. On the other hand, California passed a law in March that bans healthcare 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.
Coverage by Self-Insured Plans are Not Subject to Most State Insurance Laws
In contrast, self-insured plans sponsored by private employers are not subject to most state insurance laws. This means that employers have more control over the services offered under the plan and can generally choose to offer (or not offer) coverage for abortion services or limit the coverage to specific circumstances.
On the other hand, it is important to note that employers with self-insured plans may be subject to other state laws that may impact the coverage offered. This will depend on the specific state law at hand and guidance from counsel is best to assist if and when questions arise regarding state law impact on employers and their group health plans.
Reimbursement by Health Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), and Health Savings Account (HSA)
To the extent that abortion services are included by the plan as an eligible medical expense, an FSA or HRA can be used to reimburse costs related to those services. As a reminder, employers have the discretion to design their self-insured group health plans, which include FSAs and HRAs, to cover all IRC Section 213(d) expenses or to restrict coverage to only certain IRC Section 213(d) expenses.
In addition, HSA funds can be used to reimburse costs related to such services; however, abortion services are only eligible for reimbursement under an HRA, FSA, or HSA if the procedure is performed in a state where it is legal, as described in IRS Publication 502.
In consideration of the above and to better understand services covered, employers sponsoring fully insured plans may want to review their plan documents, carrier policies, and laws of the state in which their insurance policy is written. Similarly, employers sponsoring self-insured (including level-funded) plans should review their plan documents and discuss coverage options with stop-loss carriers and third-party administrators (TPAs). In addition, employers should discuss with their TPAs and carriers to understand (1) if out-of-state abortions will are considered out- of- network services, and (2) how to expand their in-network coverage, if desired.
Transportation Reimbursement: Options for Coverage
Many employers are also beginning to consider the potential increase in an employee’s need to travel to obtain abortion services if they reside in a state where services may be restricted. Transportation to medical procedures can be covered by major medical group health plans (most commonly seen in self-insured plans) and employers can review this type of coverage with their insurance carrier or TPA.
Further, transportation expenses are qualified medical expenses that are reimbursable under an FSA and HRA – if permitted by the plan – as well as an HSA, to the extent the transportation is primarily for, and essential to, receiving medical care. Among other items, reimbursable travel expenses can include those for bus, train, plane fares, and transportation expenses of a parent who must accompany a child who needs medical care. For travel by car, out-of-pocket expenses, such as the cost of gas and oil can be included as medical expenses if the car is used for medical reasons, or someone can elect to receive the standard medical mileage rate of 22 cents a mile (rate applicable for expenses paid or incurred after July 1, 2022). Parking fees and tolls may also be considered medical expenses.
Similarly, up to $50 per person can be reimbursed pre-tax for lodging not provided in a hospital or similar institution if certain requirements are met, including (1) lodging is primarily for, and essential to, receiving medical care; (2) such medical care is provided by a doctor and performed in a licensed hospital (or a medical care facility related to or the equivalent of a hospital); (3) lodging is not extravagant given the situation; and (4) no significant part of lodging is for personal pleasure or recreation.
IRS Publication 502 further explains that “the [pre-tax] amount you include in medical expenses for lodging can’t be more than $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals aren’t included.” Note that the cost of meals (and lodging) can be included as medical expenses when incurred at a hospital (or similar) if the primary reason for being there is to receive medical care.
For reference, the Employee Retirement Income Security Act of 1974, as amended (ERISA) Section 733(a)(2) defines medical care to include “the diagnosis, cure, mitigation, treatment, or prevention of disease, or amount paid for the purpose of affecting any structure or function of the body,” and also includes amounts paid for transportation primarily for and essential to medical care (as described) and amounts paid for insurance coverage of the same.
In addition to the above options, an employee assistance program (EAP) may be designed as an excepted benefit covering certain travel expenses. As background, an EAP refers to certain supplemental benefits to group health plan coverage and can range in benefits offered such as mental health, financial planning, and reimbursement of travel expenses. Further, excepted benefit EAPs are exempt from certain Affordable Care Act (ACA) requirements and allows more flexibility on participant eligibility (e.g., can be offered to all employees). To be an excepted benefit EAP, the program cannot (1) provide “significant benefits” in the nature of medical care; (2) be coordinated with benefits under another group health plan; (3) cannot charge a premium for participation; and (4) require any cost sharing.
Importantly, what makes benefits “significant” for purposes of the excepted benefits definition is unclear; however, the amount, scope and duration of the covered services must be taken into account and employers should use a reasonable, good faith interpretation of whether an EAP provides significant benefits in the nature of medical care or treatment.
Compliance Considerations for Employers
Employers who are considering coverage options under their plans may want to take several considerations into account (with the assistance of counsel or a tax adviser), including:
- Providing the benefit on a pre-tax basis. As explained above, travel costs related to medical care and abortion services are eligible pre-tax expenses that can be covered by a group health plan. These expenses are also reimbursable through an HRA or FSA, if the plan permits coverage for such expense. In addition, employers have the option of covering travel costs related to medical care on a post-tax basis through an HRA, which provides more flexibility with certain benefit limitations but is ultimately a taxable benefit to participants. Please note that employer reimbursement of medical expenses are still considered a group health plan and should be ERISA-compliant, whether or not such benefits are considered taxable.
- Providing the benefit through a group health plan. Group health plans, such as FSAs and HRAs, are subject to certain requirements under ERISA, including maintaining and operating the plan per a written plan document, providing certain employee notices, filing Form 5500s, and offering COBRA continuation coverage.
In addition, there are other nuances to both HRAs and FSAs that employers should keep in mind. For example, an HRA is entirely employer-funded and must be integrated with other major medical coverage (i.e., only those enrolled in major medical coverage can participate). While there is no IRS limit as to how much employers can contribute toward an HRA, FSAs have an annual maximum contribution limit that changes annually ($2,850 in 2022).
For participants enrolled in a high deductible health plan (HDHP), employers should be mindful that before the HDHP can pay for abortion-related services, the IRS minimum deductible must be met to maintain participants’ HSA eligibility. Similarly, abortion-related travel cannot be reimbursed through an HRA or HDHP until such minimum deductible is met.
Employers may change the coverage offered (either mid-year or during a policy renewal) to permit coverage for travel costs and/or other abortion-related services if permitted by their carrier (if fully insured) or their stop-loss provider/TPA (if self-insured).
- Providing travel reimbursement through an excepted benefit EAP. Unlike traditional HRAs, excepted benefit EAPs can be offered to employees not enrolled in a group health plan (e.g., part-time employees) and enrollment into an excepted benefit EAP will not disrupt HSA eligibility. It is important to note that the law is unclear as to whether reimbursing travel costs would not be considered “significant benefits” in the nature of medical care (to meet the excepted benefits requirements), and as such, this set up may carry some risk for employers.
- State laws. Some states have enacted (or may be considering) laws that may make it illegal to assist individuals with abortion-related services. As such, employers should consult with legal counsel to assess potential risks associated with offering these benefits to their employees.
- Plan Coverage. If employers consider amending the group health plan or offering an HRA or FSA to provide coverage for travel costs and/or abortion-related services, employers should clearly define what services/travel costs are covered. For example, coverage can be specific to travel costs for only abortion-related services or include travel costs for other types of medical care.
- Telemedicine Coverage. Because telemedicine coverage is subject to state law, a provider located in one state cannot provide services via telemedicine to a patient who is located in another state (unless the provider is also licensed in the state in which the patient is located). Employers should be mindful of this limitation for telemedicine coverage when considering coverage options.
- Plan Documents. If employers make changes to the coverage for abortion-related services and/or travel costs, they should amend their plan documents to accurately reflect coverage and must notify employees within 210 days after the end of the plan year in which the change occurred. If an employer chooses to reduce coverage under their group health plans (after considering any applicable state law), this may require employers to notify employees within 60 days of the change (i.e., distribute a Summary of Material Reduction).
- Privacy and Protected Health Information (PHI). Providing reimbursement or benefits related to abortion services through a self-insured plan (e.g., self-insured major medical, FSA, HRA) increases an employer’s exposure to employee PHI, creates employer obligations under HIPAA, and implicates employee privacy concerns. Specifically, the IRS requires individuals to provide documentation that funds were used for eligible expenses to receive pre-tax benefits under an FSA or HRA. Given the sensitive nature of the services involved and to maintain employee privacy, some employers may want to screen themselves from this information. As such, employers should consider utilizing a third-party vendor to assist with the administration of these plans. Further, employers may want to work with legal counsel to develop internal policies that guard against employee retaliation or discrimination. For further information on the application of the HIPAA privacy rule, the Department of Health and Human Services (HHS) released additional guidance regarding disclosures of information relating to reproductive health care.
- Mental Health Parity. If employers implement plan changes to include travel reimbursement for abortion-related services, they should be mindful of Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requirements. Among MHPAEA’s requirements, it prohibits certain group health plans from imposing stricter treatment limitations on mental health and substance use disorder (MH/SUD) benefits as compared to medical/surgical benefits. For employers considering plan changes to include expanded coverage and/or travel reimbursement, such coverage should avoid imposing more restrictive treatment limitations on MH/SUD benefits in comparison to medical/surgical benefits, as there is potential for a parity issue if travel reimbursement coverage is not also offered for mental health benefits. The less risky approach for plans that offer mental health benefits may be to more broadly cover travel costs related to medical care, rather than only cover travel costs specific to abortion-related services.
Possible Employer Next Steps
With emerging changes to the legal landscape, employers may want to better understand their group health plan coverage for abortion-related services and options around such benefits. As discussed above, employers can review their plan documents to assess current coverage and can discuss potential coverage options with carriers (including stop-loss) and TPAs, as applicable.
Employers interested in implementing or changing benefit options should assess the risk of each option with legal counsel, taking into consideration their company’s risk tolerance. Employers should also carefully consider and monitor the design of the benefit and the associated compliance obligations, as outlined above.
As further news and guidance becomes available, we will continue to communicate any impact to group health coverage, as well as other employee benefit plan considerations.
- IRS Publication 502: Medical and Dental Expenses
- IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans
- HIPAA Privacy Rule and Disclosures of Information Relating to Reproductive Health Care
The Sequoia Compliance Team – This article was co-authored by Joanna Castillo, Diane Cross, Jenny Kiesewetter, and Emerald Law of the Sequoia Compliance Team. The Sequoia Compliance Team works primarily in the realm of employee benefit matters to provide employers with up-to-date legislative news and important information that may affect an employer’s plans.