During its most recent session, the U.S. Supreme Court released two opinions on cases that impact ERISA health & welfare plans. One of those cases, Dobbs v. Jackson, took center stage and remains in the national conversation today. In that case, the U.S. Supreme Court overturned Roe v. Wade and allowed States to regulate abortion.
While the decision did not directly implicate ERISA health and welfare plans, many fiduciaries and trustees in states that have outlawed or restricted abortion may be considering expanding coverage for abortion related services. Prior to Dobbs, most plans only covered abortion where the continued pregnancy jeopardized the life of the mother. Whether plans can expand that coverage to elective abortions depends on several factors. Moreover, even if a plan can extend abortion coverage, there are several considerations that trustees should account for before acting.
First, a fully insured plan is limited to what is permissible under state law. That includes not only the services themselves, but also travel and lodging expenses. On the other hand, self-insured plans have greater flexibility since they are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA preempts state insurance laws, and abortion related services along with associated travel and lodging are considered “medical expenses” under IRS Code 213(d) and therefore eligible for coverage.
But ERISA does not preempt criminal laws and some states have adopted “aid and abet” laws. These laws make it a crime to “aid and abet” someone in obtaining an abortion, even if those services are performed in a state where the procedure is legal. Moreover, these laws are often drafted broad enough to include covering or reimbursing the costs through insurance. That means if a self-insured plan located in a state that has adopted one of these “aid and abet laws” expands abortion coverage, the plan itself would be covered under federal law but the trustees or plan administrator could be subject to state criminal prosecution. The U.S. Department of Justice has already pushed back on these laws, and it is likely they will be challenged by private groups on the state or federal level. Nevertheless, many unanswered questions exist today.
There are also additional issues that fiduciaries and trustees should consider. For example, any travel and lodging reimbursements should be adopted in a manner that does not unwittingly violate the Mental Health Parity and Addiction Equity Act (“MHPAE”). The DOL has stepped up enforcement on MHPAE violations and any DOL inquiry or audit will probably include a review of the quantitative and non-quantitative treatment limits for mental health and substance abuse benefits. A policy that is more beneficial for abortion related services could potentially violate the MHPAE.
Additionally, IRS limits for travel and lodging should also be considered. While plans can reimburse expenses above the IRS limits, any amounts that exceed these limits are considered taxable to the participant. This concern only extends to lodging costs since the IRS limits reimbursements to $50 per night ($100 per night if the patient is accompanied by one support person). Hotel stays above this nightly rate are taxable payments to the participant. When it comes to transportation costs, plans can reimburse the reasonable cost of a plane, bus, or train ticket on a non-taxable basis. It can also reimburse automobile expenses on a non-taxable basis at the current medical mileage rate (22 cents per mile as of 7/1/2022).
Trustees and fiduciaries of self-insured ERISA health and welfare plans should be aware that plans can expand coverage to include elective abortions. That even includes plans located in States which have banned or restricted abortion. But trustees and fiduciaries should be aware that significant legal questions exist, especially if the state has adopted an “aid or abet” law. Moreover, even if state law isn’t an issue, trustees and fiduciaries should consider both the MHPEA rules and the IRS limits on travel and lodging reimbursements. Essentially, there are several moving parts here and trustees and fiduciaries should consult with their advisors prior to acting.