Businesses Seek to Provide Abortion Travel Benefits in Light of Potential Supreme Court Decision

*Updated on 5/13/22*

Seyfarth Synopsis: In light of recent state-level trends, businesses have begun exploring avenues to assist employees in states with restrictive abortion laws with travel to nearby states to receive abortion services. In implementing these programs, employers should consider the various ERISA and tax code-related provisions that may impact design.

In recent years, various state efforts to impose more restrictive abortion laws were blocked by the courts because they were found to violate U.S. Supreme Court precedent established in Roe v. Wade and Planned Parenthood v. Casey. Two recent developments have changed the landscape in certain states:

• On September 1, 2021, Texas SB 8 went into effect, offering a $10,000 reward to any person who successfully sued another individual who performed or facilitated an abortion. The U.S. Supreme Court declined to block the law’s implementation. While the law is being challenged in many other venues, its unique enforcement scheme has slowed judicial review and it remains in effect today.
• On May 2, 2022, Justice Samuel Alito’s draft majority opinion in Dobbs v. Jackson Women’s Health Organization was leaked to the public, suggesting that the Court intends to overrule Roe and Casey, permitting each state to independently determine whether to ban or restrict abortion services. At issue in the case was Mississippi’s “Gestational Age Act,” which would generally ban all abortions after 15-weeks’ gestation.

While the draft majority opinion has no immediate legal impact unless and until issued (likely in late June), the signal from the opinion, combined with the currently-in-force Texas law, has led many employers with employees in states that have (or will) restrict abortion services to consider whether and to what extent they can assist employees in those states.

Overview of State Abortion Laws

Aside from the currently-in-force Texas law, 12 other states have so-called “trigger” laws that could immediately restrict or prohibit abortion services in the event of a Supreme Court ruling overturning Roe. As of date of publication, those include:

Idaho	Wyoming	North Dakota	South Dakota
Utah	Oklahoma	Missouri	Arkansas
Kentucky	Tennessee	Louisiana	Mississippi

Several other states are moving forward legislation in anticipation of the Supreme Court’s ruling this summer. Notably, on May 3, Oklahoma signed into law a Texas-style private enforcement right of action against abortion providers, and other states are considering similar legislation.

These restrictions take a variety of forms, from imposing shorter timeframes to receive abortion services following conception, to outright bans on abortions. Some of the laws are enforced in a so-called “bounty-style” format where individual citizens can sue persons who assist in facilitating abortions. Others allow for governmental enforcement (with both civil and criminal sanctions). Some state laws would propose banning both abortion procedures as well as shipment of abortifacient drugs to residents within the state.

At present, we are not aware of any states that would limit or restrict travel out of the state to receive abortion services, but at least one state, Mississippi, is considering such a measure.

This is merely a summary of the current state of affairs, which is constantly evolving. For more up-to-date information, you can visit The New York Times’ state tracker.

Design of Employer Provided Abortion Travel Benefits

While issues continue to arise as employers explore how to structure an employee travel benefit, there are, we believe, a few key categories of concern:

ERISA Preemption

Many employer health plans provide coverage or reimbursement for abortion-related services (including abortifacient drugs) in some form. In light of the Texas law and proposed laws that would prohibit shipping abortifacient drugs to employees in certain states, some employers have asked whether they could face potential liability based on services covered under their health plans.

At present, the abortion laws “on the books” only restrict coverage for abortion services provided within the state at issue. We are not aware of any laws that would restrict or limit a plan that assisted an employee with interstate travel to receive abortion services. Even so, we are aware of at least one state that is considering passing a law that would impose liability on any party assisting a resident with travel to another state to receive abortion services. And in light of the draft language in the Supreme Court opinion, more states may feel emboldened to go even further.

Generally, ERISA preempts state laws that “relate to” any ERISA plan. However, ERISA will not preempt state laws that only have an indirect impact on ERISA plans. A number of lower court and Supreme Court decisions have outlined the scope of ERISA preemption. Here, the analysis is primarily driven by the following decisions:

• Gobeille v. Liberty Mutual Ins., 136 S.Ct. 936 (2016). In Gobeille, the Supreme Court reviewed a Vermont database reporting law that required plans to keep records and report certain information to the state, which was developing an “all-payer” database. There, the Court held that the state law was preempted by ERISA because it “impose[d] duties that are inconsistent with the central design of ERISA, which is to provide a single uniform national scheme for the administration of ERISA plans without interference from laws of the several States.” The Court further noted that such requirements, if imposed in various jurisdictions, could “create wasteful administrative costs and threaten to subject plans to wide-ranging liability.”
• Rutledge v. Pharmaceutical Care Management Association, 2020 WL 7250098 (2020). More recently, the Supreme Court in Rutledge upheld an Arkansas law requiring pharmacy benefit managers (including PBMs for self-funded ERISA plans) to reprice claims for prescription drugs at certain established levels, and to offer a unique appeals process for pharmacies disputing their reimbursement levels. In upholding the law, the Court noted that “ERISA does not preempt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.”

There is an argument that state abortion laws are more similar to the Vermont law that was found to be preempted in Gobeille than the PBM law that was upheld in Rutledge. Similar to the Vermont law in Gobeille which imposed a duty on plans that was inconsistent with the design of ERISA to provide a uniform national scheme without the interference of laws from several states, state abortion laws could potentially require a plan to be administrated in a different manner in each state. Moreover, unlike the Arkansas law in Rutledge, state abortion laws do not seek to merely alter costs and incentives, but rather impose a substantive plan design restrictions. Notably, however, the abortion laws at issue here do not mention employer health plans.

One caveat to the strength of the preemption argument is that it is unclear if the Court in Rutledge upheld the law because it viewed the law as substantively different than the Court in Gobeille, or if the Rutledge ruling presents a fundamental shift in the Court’s preemption jurisprudence. Additionally, the Court’s make-up has changed since Rutledge and Gobeille. Given that ERISA preemption is not a doctrine that breaks clearly along ideological lines, it is difficult to predict how the new Justices may view the scope of ERISA preemption. We should also note that ERISA contains a “savings clause” that allows states to regulate fully-insured health plans. So employers offering a fully-insured health plan in a state with abortion restrictions may have fewer coverage options.

Moreover, ERISA does not preempt criminal laws. At present, given that Roe remains on the books, there are no enforceable criminal laws that relate to abortion services (at least with respect to the attempted application to an organization aiding and abetting the provision of abortion services). Even so, there are a number of legislative proposals as well as pre-Roe laws that could go into effect if the Supreme Court were to overturn Roe (so-called “trigger laws”). Notably, certain of these laws would purport to extend to persons “aiding or abetting” the provision of abortion services or “persuading” a person to receive abortion services. These include Alabama (aiding and abetting), as well as North Carolina, South Dakota and Arizona (persuading). It is also important to understand in this regard that these trigger laws are, in most instances, decades old. It is unclear whether they would immediately go into effect post-Roe or if further action would be required. Moreover, some of these states have governors who may resist enforcement of such laws (although it is unclear whether they have the authority to limit enforcement by state officials). Further, given that most of these laws have not been enforced ever, or at a minimum, in the modern era, it’s unclear whether and to what extent state officials would attempt to prosecute an employer for offering a travel benefit that is used to receive abortion services.

Scope of Eligibility

Generally, and as described below in “Emerging Trends,” most employers are currently considering offering some form of travel reimbursement for employees in states impacted by current or future laws restricting abortion services. One immediate question that employers should consider is whether this benefit will only be offered to participants in the employer’s health plan, or if it will be made available to the employer’s entire workforce.

Generally speaking, employer-sponsored “group health plans” are subject to a host of federal mandates, including the requirements that the benefit (i) cover a pre-defined list of preventive care services and (ii) impose no annual or lifetime dollar limits. To the extent an employer-sponsored abortion services travel benefit were to be considered a “group health plan,” it likely could not be offered on a stand-alone basis without running afoul of these federal guidelines.

At the outset, we should note it is unclear whether reimbursement for travel relating to abortion services would even constitute an ERISA benefit, let alone a group health plan. On the one hand, the tax code would permit, the benefit to be provided under health plan on a tax-free basis or reimbursed through an HRA or health FSA (as described in greater detail below). On the other hand, a benefit is only a group health plan to the extent it provides “medical care,” and viewed narrowly, travel expenses are typically not medical care.

Assuming, for the sake of argument, that the DOL would view a travel reimbursement benefit as a group health plan, we believe there are several options for employers who seek to offer a more broad-based benefit:

• Integrated HRA. DOL guidance would permit employers to offer a stand-alone health reimbursement arrangement (HRA), but only if that HRA is deemed to be “integrated” with another health plan. Generally, that guidance would allow an employer to offer a stand-alone HRA to its employees as long as those employees (i) were offered the employer’s coverage, (ii) declined that coverage, (iii) were enrolled in other group coverage (g., coverage through a spouse’s plan), and (iv) were permitted to opt-out of the HRA at least annually.
• Expand Scope of Coverage. A broad-based travel benefit would be less likely to be viewed as a group health plan providing medical care (even if some employees were to take advantage of the benefit for medically necessary care). Employers may want to impose some guardrails regarding how the benefit may be used, but employers should be aware that the closer the benefit is tied to medically necessary care, the greater the likelihood that it would be viewed as an ERISA benefit. A less direct form of restriction might limit the scope of the benefit to wellness-related travel, including travel for general health and wellbeing.
• Standalone Telehealth. Telehealth is viewed by the DOL as a “group health plan”, meaning it is subject to the same restrictions under federal law noted above and typically could not be offered on a stand-alone basis. That said, during the COVID-19 pandemic the DOL relaxed these restrictions and temporarily exempted telehealth from most Affordable Care Act’s mandates (including the preventive service requirement). The exemption continues through the end of the plan year beginning before the end of the Public Health Emergency (PHE). The PHE was renewed in April and is currently set to expire in mid-July, unless further extended. The DOL has advised, however, that it will offer plans a 60 day advanced notice before allowing the PHE to expire, so it is looking increasingly likely that it will be extended further, at least through mid-October. While the PHE remains in effect, employers might consider offering a broad-based telehealth benefit, which would allow employees in most places to access medical consultation and potentially to receive a prescription for abortifacient drugs. We do note, however, some states currently ban telehealth for medication abortions by requiring an in-person element or prohibit the shipment of abortifacient drugs to residents within the state. So, this option may be limited in its effectiveness.
• Employee Assistance Program (EAP). DOL guidance exempts certain “excepted benefits” from most federal mandates. For a benefit to qualify as an EAP excepted benefit: (i) the EAP cannot provide “significant benefits in the nature of medical care”; (ii) the EAP cannot be coordinated with benefits under a group health plan; and (iii) benefits under the EAP cannot be financed by another group health plan. Unlike the standalone telehealth option outlined above, the excepted benefit guidance is not tied to the COVID-19 pandemic. Additionally, an EAP can be provided to a broader employee population than those employees who participate in the employer’s medical plan. Arguably, if a program is structured to provide only travel benefits it could qualify as an EAP, meaning it would be exempt from various group health plan mandates.
• Taxable Benefit. Employers may also choose to reimburse travel on a post-tax basis either under the plan or outside of the plan. Providing such reimbursements on a post-tax basis provides greater flexibility on what expenses may be reimbursed, and makes the benefit appear less related to medical care (which can always be provided on a tax-free basis).

HIPAA Privacy Considerations

Whether for tax reasons (described below) or otherwise, we assume most employers will attempt to put some form of guardrails around any travel benefit and will seek substantiation of their employees’ expenses. To offer the benefit on a tax-free basis, it seems as though such substantiation would actually be required. To the extent an employer is offering the benefit outside of its ERISA plan, that creates an unusual situation where an employer is soliciting individually identifiable medical information from employees, but because it is not in connection with a health plan, it could be viewed as outside of the scope of HIPAA privacy protections (although other privacy laws could still apply). For purposes of preserving an ERISA preemption argument, and to bring the data collection into the HIPAA privacy fold, many employers may instead pursue one of the approaches outlined above that integrate the benefit into the employer’s medical plan or into its health plan more broadly.

HSA Impact

An employee enrolled in a High Deductible Health Plan (HDHP) cannot be covered by a plan that covers or subsidizes medical services (other than preventive services, like the flu vaccine) before satisfying his/her deductible. If services are covered before the deductible is met, the plan will fail to be a HDHP, rendering the covered person ineligible to make tax-favored contributions to a health savings account (HSA) for that year. Depending on how an employer’s travel benefit is structured (as discussed above), employers may want to require that employees in an HDHP satisfy their deductible prior to receiving reimbursement for travel costs relating to abortion services. More guidance from the IRS on this issue would be welcome.

Tax Considerations

Many employer plans already include a travel benefit for the employee (and, in some instances a guest) related to the provision of certain medical procedures or services that cannot be obtained near where the employee resides, or to direct the employee to certain network providers or “centers for excellence”. Travel benefits may, depending on the employer plan, cover the cost of reasonable travel expenses, including limited reimbursement for lodging and meals (if certain criteria are met).

Such coverage may potentially be provided on a tax-free basis so long as travel is “primarily for and essential to” receiving medical care. In limited circumstances, and subject to restrictions on the amount of reimbursement, tax-free coverage might be able to be provided for lodging, meals, and for parents traveling with a child. Similarly, such qualifying expenses could be reimbursed under a health flexible spending account, a health reimbursement account, or a health savings account.

Notwithstanding the foregoing, employers should be aware that Code Section 213(d) (which generally defines what benefits may be provided on a tax-free basis under health plans, including flexible spending accounts) generally excludes amounts expended for illegal operations or treatments. For these purposes, the IRS usually looks to the laws in effect where a service was received or procured. In general, this should not impact employers who are assisting employees in traveling to states where abortion is permitted, but it could restrict tax-free reimbursement for services received in any state where abortion is illegal.

Emerging Trends

While more reports of companies offering travel-related abortion benefits are emerging daily, we are summarizing below a few of the programs that seem to be emerging in the marketplace. These include:

• Broad-Based Travel-Benefit (within medical plan). Many employer plans already provide some form of travel benefit (usually associated with Centers of Excellence, or to address network gaps). Given the existing framework and administrative process (usually outsourced to the plan’s third-party administrator), a number of employers appear to be expanding this benefit to cover abortion services. While some employers are narrowly expanding the scope, others are extending the travel benefit to cover all circumstances where an employee would be unable to receive covered medical services due to restrictions or limitations under state law, or due to network or provider access issues. The benefits of this approach are twofold: (i) as states move to restrict or limit services for gender-affirming care, the travel benefit could mitigate the impact on transgender employees/dependents, and (ii) a generic travel benefit is more benign and could be less likely to trigger civil penalties, criminal penalties, or other forms of retribution.
• Travel Benefit (outside of medical plan). While less common due to the complications noted above, some employers also appear to be rolling out a travel benefit outside of their medical plan. We have seen employers structure this under an EAP framework to preserve the tax-preferred nature of the benefit while attempting to avoid creating a group health plan subject to federal mandates. Employers who are establishing this as a stand-alone EAP will need to address the ever-present challenge of how to address the application of COBRA.
• Support Foundation. Many employers already maintain some form of employee relief fund. Historically these funds have existed to assist employees going through financial or medical hardship. While the structure of these types of programs are beyond the scope of this alert, the benefit to this approach is that it creates an entity that is separate an legally distinct from the employer to mitigate some of the concerns raised above.
• Review of Impacted Benefits. The potential changes in abortion law have also caused some employers to revisit the underlying medical services in their health plan. Not all health plans cover elective abortions, so some employers are now adding that benefit. Moreover, employers are revisiting the design and parameters of their prescription drug benefit in light of some of the proposed laws restricting mailing of such drugs to residents of certain states. Also of note, many employers are revisiting their infertility benefit offering. While still uncertain, the language of some state “trigger” laws would impose liability for termination of any fertilized egg/embryo — a relatively common outcome following a successful IVF procedure.
• Relocation Benefit. While less common, some companies are considering offering a relocation benefit, reimbursing employees for the cost of moving to another state. While this type of benefit could be offered on a tax-free basis in past years if certain requirements were met, the Tax Cuts and Jobs Act suspended the preferred tax treatment for employer-provided relocation reimbursement through 2025.

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Employers implementing a travel benefit for abortion services should continue to closely monitor state law developments, as well as federal guidance which could serve to expand or restrict the scope of permissible coverage.

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.

This information was posted with permission from Seyfarth Shaw LLP and was written by:

Benjamin Conley, Partner, Employee Benefits, Seyfarth Shaw LLP

Danita N. Merlau, Partner, Employee Benefits, Seyfarth Shaw LLP