The recent decision of the Supreme Court to overturn Roe v. Wade has created additional complexities for employers. As publicized, some employers are reacting to the Supreme Court decision by announcing that they will reimburse travel and lodging expenses incurred by employees and their dependents who must travel to another state to obtain an abortion. Many of these employers are providing for this reimbursement through the employer's group health plan, which raises several legal considerations. This bulletin provides high-level employer group health plan items to consider.
In general, it appears most employers are providing reimbursement of travel and lodging expenses through the group health plan to shield against potential state civil and/or criminal penalties. In particular, employers are looking to the preemption rules under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA is a federal law that regulates most employee benefit plans. A goal of ERISA is to provide national rules, so that plan sponsors do not have to comply with various state laws that sometimes conflict. The recent Supreme Court decision is a perfect example of this conflict in that abortions are only legal in some states.
Under the ERISA preemption rules, ERISA will generally "supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan". Many employers are relying on the ERISA preemption rules to cover abortions under the employer group health plan. Taking the ERISA preemption rules a step further, many employers are looking to add the reimbursement of travel and lodging expenses for health plan participants and their dependents that will need to travel to a different state to obtain an abortion.
Whether or not the ERISA preemption arguments will withstand a legal battle over a state anti-abortion law is yet to be seen, as the law is still developing. Moreover, it is essential to note several exceptions to the ERISA preemption rules that could become even more relevant after the Supreme Court's decision. One such exception is that ERISA does not supersede "any generally applicable criminal law of a state." This exception is becoming more critical as states adopt aiding and abetting laws that subject those who help facilitate abortions to civil and/or criminal penalties. The term "generally applicable criminal law" has been interpreted to mean laws such as larceny, but state laws that specifically only regulate employee benefit plans would not be a generally applicable criminal law. As the state laws are rapidly changing in the wake of the Supreme Court's decision, employers will need to pay close attention to state anti-abortion laws to make a reasonable assessment as to whether the ERISA preemption rules may apply.
In addition, when looking to add travel and lodging reimbursement to a plan and potentially obtain ERISA preemption protections, an employer must first consider the type of plan sponsored. In this regard, there are two types of plans. The first type of plan is a fully-insured plan, whereby the employer pays insurance premiums to an insurance company that then pays the medical claims. The second type of plan is a self-insured plan whereby the employer pays claims out of its general assets, and the employer engages a claims administrator to process and pay medical claims.
In the case of a fully-insured plan, the insurance policy will need to comply with the state law where the policy is issued. In addition, even if the state law allows for abortions and travel and lodging reimbursement, the insurance company may not agree to add abortion-related travel and lodging expense reimbursements to the policy. As such, employers will need to work with their insurance broker and insurance company to determine the policy design and whether to add benefits.
Self-insured plans have a lot more leeway as far as plan design. In this regard, the employer will need to work with the claims administrator to see if the claims administrator will agree to add abortion-related travel and lodging expense reimbursement as a plan benefit. It is not a given that all claims administrators will take on this task. In cases where a claims administrator will not take on this task, we have heard of some employers wanting to take on this task themselves either by processing abortion-related travel and expense reimbursements or creating a separate reimbursement policy outside of the health plan. Employers should carefully consider the implications of either approach. For example, processing reimbursements involves access to employee and dependent information that could add privacy considerations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) or state privacy laws. Also, reimbursing travel and lodging expenses outside of the health plan would generally remove the ERISA preemption argument from an employer's protection against state aiding and abetting laws.
In addition, other items to consider are the taxation of travel and lodging reimbursements and how to treat travel and lodging expense reimbursements under high-deductible health plans. First, current IRS rules limit tax-free lodging expenses to no more than $50/daily and transportation expenses to no more than $50/daily for each person traveling. Amounts reimbursed above these limits would be taxable benefits. Second, many employers have adopted high deductible health plans that require a participant to incur expenses up to a certain deductible before the plan pays medical expenses. Based on current IRS rules, the travel and lodging expenses would need to be included in the deductible before the plan begins to pay benefits.
As evident, the implications of the Supreme Court's decision has added complexity to the already complex health plan compliance rules.
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.