Employer Provided Travel Benefits in Response to Dobbs and State Prohibitions on Abortion
The disparity of state laws continues to grow, especially with the Biden Administration’s issue of an executive order directing the United States Department of Health and Human Services to expand access to medical abortion pills and to encourage stronger enforcement of birth control coverage under the Affordable Care Act. As such, employers operating across state lines are facing a checkerboard of inconsistent and evolving laws. Some employers are offering to pay travel expenses for employees who travel to another state to obtain an abortion.
Along with the general public, employers are still reeling from the U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization that overturned Roe v. Wade’s constitutional right to abortion. As a result, states throughout the nation can now enforce previously unconstitutional statutes restricting abortion access, effectuate so-called trigger laws (statutes that purported to limit abortion should Roe v. Wade be overturned), or pass new laws that severely limit or outright prohibit abortion. Presently, at least nine states have entirely banned elective abortion with more states preparing to follow suit.
Meanwhile, other states continue to protect abortion and some have signaled an intent to expand these protections. For its part, the Biden administration issued an executive order that directs the U.S. Department of Health and Human Services to expand access to medical abortion pills and encourages stronger enforcement of birth control coverage under the Affordable Care Act (ACA). And within some states where state legislatures have sought to restrict abortion, the state supreme courts have blocked those legislative efforts based on state law.
Consequently, employers that operate across state lines or retain employees working remotely in states with more restrictive abortion statutes face a checkerboard of inconsistent and quickly evolving laws on the legality of abortion. These concerns are acute for those employers seeking options to continue supporting employees who may choose to obtain an abortion. Many of those employers have implemented employee benefits that would cover the cost of lodging and travel from states that restrict abortion to states that allow it.
Some employers are reacting to Dobbs by covering the cost of employee travel and lodging to other states to obtain an abortion. Employers should note that any program or policy under which payments or reimbursements are made for abortion-related travel benefits is generally defined as an employer sponsored group health plan subject to various federal laws such as Employee Retirement Income Security Act (ERISA) and Health Insurance Portability and Accountability Act’s (HIPAA’s) privacy requirements. To comply with these laws, employers should consider adopting abortion-related travel benefits as part of their existing traditional health plan (which presumably is already in compliance). Alternatively, an employer might offer abortion-related travel benefits as an option under an “excepted benefit” health care flexible spending account, a health reimbursement arrangement (HRA), or an employee assistance plan (EAP). An employer might avoid certain federal laws related to group health plans altogether by offering payments for travel outside of one’s state without requiring or inquiring as the reason for the travel. Each of these options are explained in more detail below. There are advantages and disadvantages to each approach, and employers should consider each carefully before selecting one.
The Family and Medical Leave Act, applicable to companies with at least 50 employees, requires employers to provide up to 12 weeks of unpaid leave each year for serious health conditions that an employee suffers due to pregnancy. Employers will also need to consult their state and local leave laws, as well as internal sick leave policies.
Various anti-discrimination laws are also relevant. Title VII requires employers to provide pregnancy-related leave if they provide leave for other temporary illness or family obligations. Likewise, the Equal Employment Opportunity Commission (EEOC) has cautioned that under the Pregnancy Discrimination Act, “an employer must allow women with physical limitations resulting from pregnancy to take leave on the same terms and conditions as others who are similar in their ability or inability to work.”
Under the Americans with Disabilities Act, pregnancy alone is not a covered disability requiring reasonable accommodations such as leave. Rather, these protections only arise if the employee suffers a pregnancy-related medical impairment. Nonetheless, employers should consult their state anti-discrimination laws that may require reasonable accommodation for pregnant employees generally.
For its part, the Biden administration has ordered that federal employees may use their covered paid sick leave to access out-of-state abortions.
Broadly Available Travel Reimbursements. The many administrative entanglements under ERISA, ACA, HIPAA, and COBRA can be avoided through a broadly available travel reimbursement benefit. This means the travel benefit would be generally available for out-of-state travel and could not be limited to travel for abortion or other medical purposes. Of course, such a benefit could become expensive as employees may take advantage of it for purposes other than abortion-related medical care. Employers seeking to create this type of program should not inquire or collect information related to the purpose of the travel. To limit the expense, reimbursements could be limited to a given annual amount. All payments for this purpose would be taxable income to the employee. ERISA would not apply to a broadly available travel benefit, and so any potential protection due to ERISA preemption (see below) would not apply as well. Care should be given in drafting a broadly available travel benefit to avoid triggering “constructive receipt” of taxable income equal to the amounts the employee could have elected to receive, but did not actually receive. To avoid constructive receipt, payments should be payable only as a reimbursement of substantiated travel-related expenses (and not paid to an employee who merely has to ask to receive the payment). Travel expenses would be substantiated through receipts of travel expenses, but employers should not ask the employee to provide any reason for the travel.
Traditional Health Plan. Adding an abortion travel benefit to an employer’s existing traditional health plan takes advantage of the existing structure in place for plan administration and compliance with federal laws such as ERISA, ACA, Consolidated Omnibus Budget Reconciliation Act (COBRA), and HIPAA. Adding a benefit to an existing plan requires an amendment to the plan’s “summary plan description,” and the employer would first need to confirm that their plan’s insurer and service providers can accommodate the new benefit. Insurers are subject to state insurance laws and some states banning abortion prohibit (or are generally expected to prohibit) insurers from providing abortion travel benefits. Employers might avoid insurance limitations by adding a self-funded abortion travel benefit to the existing plan, but employers should first consult with their plan’s claims administrator to determine whether they are willing to administer such benefits. Some employers may elect to administer such benefits in-house, but employers should consider their ability to meet various ERISA, COBRA, and HIPAA requirements, as well as securely manage the sensitive and personal information involved. Participants might be reluctant to take advantage of such benefits if managed in-house. A disadvantage of offering a travel benefit as part of a larger health plan is many employees opt out of such plans and therefore may not have access to the travel benefit at all.
Note that an employer offering a traditional health plan might also provide abortion travel benefits through a health care flexible spending account (a “health FSA”) or an HRA that is integrated with their traditional health plan. A health FSA or an HRA is integrated with an employer’s traditional health plan only if the employee must participate in the health plan to also participate in the health FSA or HRA. Employers may also offer health FSAs and HRAs separately from the employer’s traditional health plan—but in such situations, the health FSA or HRA must generally qualify as an excepted benefit health FSA or HRA (see below for qualification requirements) to avoid violating the Public Health Service Act.
Excepted Benefit Health Reimbursement Arrangement (EBHRA). An employer may provide an EBHRA if it makes a traditional group health plan available to the EBHRA participant. Expenses covered by the EBHRA are paid by the employer. Availability here is key; the EBHRA participant is not required to accept the group health plan coverage to participate in the EBHRA. EBHRAs may reimburse each participant up to a limited amount each year. The current plan year limit is $1,800 (it is indexed to increase with the cost of living and will be $1,950 in 2023), which might be sufficient to cover the full travel costs. Offering an EBHRA for medical travel purposes will also impact an individual’s option to contribute to a health savings account (HSA) (see below).
Excepted Benefit Health Care Flexible Spending Account (EBFSA). A health FSA is an arrangement under which an employee elects to contribute pre-tax compensation to an account that is used for medical expenses. Employers may also contribute to the account. EBFSA contributions are limited to $2,850 for 2022. The limit generally increases each year based on increases in the cost of living. As with an EBHRA, an EBFSA may only be made available to employees for whom an employer’s traditional group health plan is also available. Payments from an EBFSA cannot exceed the greater of: (a) two times the employee’s elected contribution for the year; or (b) the employee’s contribution election for the year plus $500. While the larger overall limit on annual contributions to an EBFSA are greater than the maximum annual payments from an EBHRA ($2,850 vs. $1,950), in order for the EBFSA to cover $1,950 in medical travel benefits, a participant would have to contribute at least $975 of their own compensation (on a pre-tax basis). To cover $2,850 in medical travel costs through an EBFSA, an employee would have to contribute $1,425. If an employee does not contribute to the EBFSA, the maximum annual benefit would be $500 (all contributed by the employer).
Eligibility to Contribute to an HSA and Use of an HSA’s Funds to Pay for Medical Travel. HSAs are often paired with High Deductible Health Plans (HDHP) to help employees to cover the cost of high deductibles. Employees who participate in a High Deductible Health Plan (HDHP) may contribute to an HSA only if the employee must satisfy the HDHP’s deductible before expenses for medical services (including medical travel related expenses) are paid by an employer sponsored plan, health FSA, or HRA. To protect an employee’s option to contribute to an HSA, payments for medical travel benefits from the employer’s plan, health FSA, or HRA should be available only after the deductible is satisfied. Payments from the HSA may count towards the HDHP deductible and may be used to pay for qualifying medical expenses (which include medical travel expenses).
Excepted Benefit EAP. An excepted benefit EAP can be offered to all employees and does not impact an individual’s eligibility to contribute to an HSA (see above regarding Eligibility to Contribute to an HSA). An EAP is an excepted benefit EAP if it: (a) does not provide significant medical care; (b) is not integrated with another group health plan; and (c) does not cost the employee any money to participate (e.g., no premiums or deductibles apply). Although an excepted benefit EAP is not subject to a strict maximum annual benefit amount (as with an EBFSA or EBHRA), the amount of EAP benefits provided is considered in determining whether the medical care provided is significant. Currently, there are no clear guidelines as to what amounts constitute significant medical care. Also, adding a medical travel benefit to an existing EAP will make it more likely that it could lose the excepted benefit status. Loss of an EAP’s excepted benefits status would subject the EAP to regulation under ACA as a group health plan (and the EAP would fail a number of requirements for this purpose). On the political front, whether abortion-related travel benefits are deemed to be significant medical benefits could turn on the policy of the executive branch of the federal government (i.e., the definition of significant medical benefits could change from one administration to another).
ERISA Preemption. ERISA broadly preempts state laws that relate to health plans with notable exceptions. For example, state insurance laws are not preempted and criminal laws of general applicability are usually not preempted by ERISA. States that seek to limit or prohibit abortions or travel assistance to obtain an abortion will also prohibit insurers from covering such benefits and ERISA will not preempt such insurance laws. However, where an employer or employer sponsored health plan offers abortion travel benefits as a self-funded benefit, ERISA preemption might offer some protection against civil suits brought against the employer or its employees and service providers who administer the benefit; whether ERISA preemption will apply in this context has not yet been determined and might not be for years.
HIPAA Privacy Requirements. HIPAA privacy obligations generally apply to any type of group health plan offered by an employer (except plans self-administered by a sponsoring employer that have fewer than 50 participants). For HIPAA’s purposes, all of the options listed above are considered group health plans except the broadly available travel benefit.
Mental Health Parity. Federal law requires “parity” for mental health or substance abuse disorder (MH/SUD) benefits. If a group health plan provides for MH/SUD benefits and adds a reimbursement for travel expenses related to other medical benefits (such as abortion), then the plan likely also must reimburse travel expenses related to MH/SUD benefits. Plans that provide only excepted benefits are not subject to the MH/SUD parity requirements.
Taxation of Medical Travel Benefits. Employer payments to an employee for travel that is not for business purposes are generally treated as taxable income to the employee unless the travel is primarily for and essential to receiving medical care (note that abortion constitutes medical care for this purpose). Where the travel is for medical care, amounts that exceed the following are treated as taxable income:
- Reasonable costs of plane, train, or bus tickets
- 22 cents per mile for travel by automobile
- $50 per night for lodging; $100 per night maximum lodging expense if the participant is traveling with a companion
Employer provided abortion travel benefits that exceed the limits described above must be reported as taxable income on the individual’s Form W-2. Payments for abortion travel benefits from a Voluntary Employee Benefit Association (VEBA) that are in excess of the limits above may jeopardize the VEBA’s tax-exempt status.
Self-Administered vs. Third-Party Administered Benefits. Employers that self-administer medical-related travel benefits will obtain sensitive and personal information about employees that may cause some employees to avoid obtaining the benefits. Employers should consider using a third-party administrator to administer any benefits that require handling private information.
Liability under Anti-Abortion Laws. Employers offering abortion-related travel benefits may be concerned about their potential exposure to liability under abortion laws that target persons helping others access abortion and prohibit out-of-state travel to access abortion.
Several states have passed or are considering legislation to restrict employers that fund or otherwise assist employees in accessing abortion. These current or pending statutes would allow states to bar companies from operating in their state if they pay for abortion-related expenses, could empower shareholders to sue for breach of fiduciary duties, and could impose felony criminal liability on executives. Where federal anti-discrimination law requires employers to provide such prohibited assistance, the state prohibitions will likely be held preempted. The same is not true, however, where employers provide reasonable accommodations to pregnant employees based on the law of the state where they reside if that law conflicts with a statute prohibiting abortion where the employee resides. It is unclear how courts will resolve such conflict-of-law questions.
In regard to laws prohibiting interstate travel, these restrictions run afoul of current Supreme Court precedent upholding a constitutional right of travel. Justice Brett Kavanaugh, concurring with the result in Dobbs, affirmed this right of interstate travel to access abortion. While the application of such precedent to abortion restrictions is untested, the Biden administration has taken the express position “that Americans must remain free to travel safely to another state to seek the care they need.” The U.S. Department of Justice has committed to defend the proposition that “women who reside in states that have banned access to comprehensive reproductive care must remain free to seek that care in states where it is legal.”
If you’re an employer wrestling with these decisions or have questions, feel free to contact a Schwabe lawyer to see whether we can help.
1 Self-funded basically means non-insured. Self-funded benefits are generally paid for directly from the employer’s general assets or a trust created for payment of health benefits. https://www.eeoc.gov/laws/guidance/enforcement-guidance-pregnancy-discrimination-and-related-issues.
2 Enforcement Guidance on Pregnancy Discrimination and Related Issues, EEOC (Jun. 25, 2015), available at https://www.eeoc.gov/laws/guidance/enforcement-guidance-pregnancy-discrimination-and-related-issues.
3 FACT SHEET: President Biden to Sign Executive Order Protecting Access to Reproductive Health Care Services, The White House (Jul. 08, 2022), available at https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/08/fact-sheet-president-biden-to-sign-executive-order-protecting-access-to-reproductive-health-care-services/
4 Attorney General Merrick B. Garland Statement on Supreme Court Ruling in Dobbs v. Jackson Women’s Health Organization, Department of Justice (Jun. 24, 2022), available at https://www.justice.gov/opa/pr/attorney-general-merrick-b-garland-statement-supreme-court-ruling-dobbs-v-jackson-women-s
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
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