How Does the Collapse of Roe v. Wade Impact Employer Health Plans?

On June 24, 2022, the U.S. Supreme Court overturned its prior decisions in Roe v. Wade and Planned Parenthood v. Casey, which held that the U.S. Constitution prohibits states from banning abortion or unduly burdening access to abortion services in the initial phases of pregnancy. This decision means that abortion rights are now governed by state, not federal law. Currently, at least 24 states have laws that prohibit or limit abortion beyond that allowed by Roe v. Wade (allowed before fetal viability). Other states have laws that protect access to abortion (usually subject to limits). Some states do not have laws that address the issue.

The relegation of abortion rights to state law has created considerable uncertainty regarding its effect on employee benefit plans. Employers in jurisdictions like Maine, which protects the right to abortion, will see no changes unless they have employees based in states which do not have similar protections. The question is: what do employers need to know going forward?

First, some basics. Federal ERISA law governs most employee benefit plans (the law does not apply to plans sponsored by governmental entities or churches). ERISA neither requires nor prohibits abortion coverage.  ERISA preempts all state laws relating to employee benefit plans except those concerning insurance, banking, and securities regulation.  ERISA does not preempt state criminal laws of general application. These rules affect employer plans in different ways depending on how the benefits are paid for.

Most employers fund their benefit plans through insurance. This means employers pay premiums to an insurer who then provides the coverage described in its policy to employees who participate in the plan. Although the benefit plan is not subject to state law, the insurer is and can only offer coverage that is authorized under state law. In this way, a state can require or prevent the issuance of any policy that covers abortion services.

Some larger employers choose to self-insure their group health coverage. Since no state regulated insurance company is issuing a policy, the employer can offer abortion services as part of its group health plan because of ERISA’s preemption provision.

But what if a Maine employer has an employee based in another state? If the employer purchases insurance to provide benefits in that jurisdiction, the insurance company will have to comply with state law. If the employee is in New Hampshire, for example, there shouldn’t be a problem because there currently is no prohibition against offering abortion coverage. But if the employee resides in a state that bans abortion, the employer will not be able to offer a plan that covers abortion services. Even a participant in a self-funded plan that covers abortion would have to travel to a state where the services are permitted.

In either case, an employer that wishes to assist employees located in states that prohibit abortion services might consider covering travel and lodging expenses incurred to obtain such services.

One option might be to add travel and lodging benefits to an employer’s existing group health plan. Such benefits would still be subject to ERISA requirements, including Health Insurance Portability and Accountability Act (HIPAA), Affordable Care Act (ACA), and Mental Health Parity Act rules. This approach would not be available to a fully insured plan in a state that restricts abortion access.

Another approach might use an employer-funded health reimbursement arrangement (HRA) to reimburse travel and lodging expenses associated with securing abortion services. An HRA is subject to ERISA, but the reimbursement limits imposed by Section 213 of the Internal Revenue Code and Affordable Care Act (ACA) requirements will limit the usefulness of this option.

An Employee Assistance Programs (EAP) might also be used to offer travel and lodging benefits. But because an EAP covers all eligible employees without charging a premium, this could be expensive. Although an EAP qualifies as an ERISA plan, the proposed benefit could also add administrative burdens in determining whether it is a permitted expense.

An employer could simply pay for any travel or lodging expense incurred by an employee for “wellness” related travel. If such payments fall outside the scope of the employer’s benefit plan, ERISA preemption does not apply, and the payments are taxable to the employee.

Now that abortion services are subject to a kaleidoscope of state laws, employers will have to carefully review their existing benefit plans and potentially consider new options if any of their employees work in states that regulate the provision of abortion services. It is early days yet. The implications of the demise of Roe v. Wade won’t be fully understood for some time to come.