Considerations for Employers After Roe v. Wade Reversal

By Timothy J. Stanton and Hillary M. Sizer

The Supreme Court of the United States overruled long-standing abortion precedent contained in Roe v. Wade (1973) and Planned Parenthood of Southeastern Pennsylvania v. Casey (1992) in a landmark decision on June 24, 2022. Justice Alito penned the majority opinion in the case, Dobbs v. Jackson Women’s Health Organization. The majority determined that there is no federal constitutional right to abortion, giving states full reign to regulate abortion.

That state authority is making employers’ heads spin.

There are several types of state abortion laws that are either effective or will soon become effective after the ruling. Many states have old abortion laws, like the 1925 Texas law that was under review in Roe v. Wade, that were invalidated by the Roe decision but remained on the books. Now that Roe has been overruled, many of these laws have become effective again. Some states have also enacted “trigger laws” designed to take effect automatically at some point soon after Roe was overturned.

States have also been passing new abortion bans such as the so-called fetal heartbeat laws in Texas (2021) and Oklahoma (2022), and will continue to pass new laws and strengthen existing laws through amendments. Fetal heartbeat laws restrict abortions beginning at around six weeks of pregnancy. Other laws restrict abortions beginning in the second trimester, at around 15 weeks of pregnancy. States may also restrict abortions in all cases except when necessary to save the mother’s life. Some laws also target abortions through prescription drugs, by prohibiting them outright or creating hurdles such as requiring the presence of a doctor to administer the drug. This requirement effectively rules out telehealth visits and mail-order medications. About half of the states in the country already, or are expected to, restrict abortions as a result of the ruling in Dobbs. 

Employers with employees in states that prohibit abortions are analyzing the risks of continuing to cover abortions in their health plans, and making decisions on whether they want to pay for employees to travel out of state for abortion drugs and procedures. In order to make these decisions, employers must understand the governing laws. The Employee Retirement Income Security Act of 1974 (ERISA) does not restrict employers from covering abortion benefits, including reimbursing travel costs for out-of-state abortions. ERISA also does not require employers to cover abortion benefits. However, another federal law, the Pregnancy Discrimination Act, requires employer health plans to cover abortion where the life of the mother would be endangered if the fetus were carried to term, or where medical complications have arisen from an abortion.

ERISA broadly preempts state laws that relate to employee benefit plans, and courts have frequently upheld that preemption over the past 40 years. There are two important limitations on that preemption. Insurance laws are not preempted, and ERISA would also not preempt “generally applicable” criminal laws of the states. Several state abortion bans include liability for aiding or abetting or furnishing the means for procuring an illegal abortion.  It is very unclear how these laws will play out in federal court in the context of benefit plan coverage, especially due to the limited precedent with respect to the criminal laws exception to ERISA preemption. 

Constitutional law scholars have raised concerns about the extraterritorial application of the civil and criminal liability provisions of state abortion laws. For example, the Texas fetal heartbeat law creates a private civil cause of action against any person who aids or abets a prohibited abortion. If an employer based in New Mexico pays for an employee who resides in Texas to travel out of state to obtain an abortion, may a Texas citizen sue the employer? This sort of question has lawyers dusting off law books covering old doctrines, such as the Dormant Commerce Clause. That doctrine, dating from the 19^th century, permits states to regulate within their borders but bars them from passing legislation that unnecessarily burdens interstate travel.

Practically, however, an employer’s analysis of what abortion benefits to cover, if any, depends in part on what type of plan an employer has. Insured plans are subject to state insurance laws. Employers with these types of plans may have less flexibility with the design of the medical plan. Insurance providers may offer expanded benefits, such as expanded medical travel reimbursements, in an insurance certificate rider. Employers with self-funded health plans will have more flexibility to make plan design decisions, and are not subject to state insurance laws. But all plan sponsors will need to cover abortions in cases of medical complications or when the life of the mother is threatened, to comply with the Pregnancy Discrimination Act.

Employers that wish to add or expand their medical travel reimbursement benefits have several considerations. Employers focused on adding a travel benefit targeted at abortion could face compliance issues with the Mental Health Parity and Addiction Equity Act (MHPAEA), which requires restrictions on mental health and substance use disorder benefits to be no less stringent than restrictions on medical and surgical benefits. Employers may instead want to expand medical travel benefits to include mental health benefits that are subject to state bans, such as gender dysphoria treatments. Several states have passed or introduced laws prohibiting gender dysphoria treatments like puberty blocker drugs in minor children. 

Alternatively, an employer may consider reimbursing travel and lodging costs for any service or treatment that is covered by the plan, if a network provider is not available within a 50- or 100-mile radius. Many employer health plans already cover travel and lodging costs for services such as bariatric surgery, organ transplants, and treatment performed by a center of excellence. Limiting reimbursements to cases where services are unavailable locally helps avoid claims for travel to sought-after specialists in other states even though in-state doctors are available.

The language limiting reimbursements to services that are unavailable within a certain distance prevents the reimbursement of travel costs for desired out-of-state specialists if an in-state network provider is available. While employers may want to restrict travel to the closest state in which the service is available for cost containment reasons, there are additional considerations with that approach. An employee who lives in a state that restricts abortions may want to travel to a state in which she has friends or relatives in order to obtain an abortion, which may actually result in lower costs if she stays with the people she knows.

Employers seeking to add or expand medical travel reimbursements will also need to consider federal tax law reporting and withholding obligations. Internal Revenue Code Section 213(d) treats certain travel costs as a deductible (or employer reimbursable) “medical care” expense if it is “primarily for and essential to” obtaining medical care. Employer reimbursement policies need to be drafted carefully to limit reimbursement to travel necessary for medical care. Reimbursable expenses include: transportation expenses, up to $50 per night of lodging (hotel) expenses, and transportation and lodging expenses for a travel companion whose presence is necessary for the patient to obtain medical care. Transportation expenses eligible for reimbursement are broad and may be narrowed by employers as desired. They include airfare, train tickets, mileage, tolls, and costs for parking, gas, car rental, tips, and rideshare fees. Internal Revenue Service (IRS) regulations provide detail on mileage allowances for medical travel. Benefits beyond these levels would create taxable income and related reporting obligations.

Reimbursement benefits may be offered in several forms. One thing employers should keep in mind when considering their options is that a program established by an employer to reimburse medical expenses (including medical travel) will generally be a group health plan subject to ERISA and other group health plan laws (HIPAA, the Affordable Care Act, COBRA, etc.). Options for a medical travel reimbursement benefit include an amendment or rider to the employer’s existing medical plan, a health reimbursement arrangement (HRA), and an employee assistance program (EAP). EAPs that do not provide “significant” medical benefits will be exempt from certain ERISA requirements. 

Some final recommendations for employers include working with current service providers including third-party administrators, pharmacy benefit managers, and payroll and tax providers, to see what abortion benefit designs they can work with. Some large insurance companies such as United Healthcare and Blue Cross Blue Shield have published guidance on abortion and abortion travel expense coverage, but not all insurers and third-party administrators may be able to accommodate these benefits. Employers may also want to review liability insurance policies such as directors and officers and ERISA fiduciary liability insurance. These policies may provide some relevant protections that affect the amount of risk an employer is willing to take on if they are seeking to expand abortion benefit offerings.