The Dobbs Decision: Initial Implications for Employee Benefits

In response to the Dobbs opinion and resulting restrictions on abortion services in some states, a number of national employers have announced their intentions to offer travel benefits to their employees to access those services in other states through their employer health plans.  Although the ability to reimburse amounts expended to travel for medical care is not new, employers are taking a fresh look at this benefit.  Depending upon an employee’s location and the legal landscape of states that ban abortion, an employee possibly could have to travel hundreds of miles to get an abortion, which may or may not be feasible. The legal considerations with offering any employer-based travel benefit (i.e., whether to offer it under the employer health plan or as a stand-alone employee benefit) can be complicated and requires careful analysis.  This section focuses solely on the implications of offering a travel benefit through the employer’s health plan.  Each employer who wants to offer this benefit must decide the approach that best aligns with their existing benefit designs and participant populations.

Group health plans can generally offer abortion coverage on a tax-free basis, because abortion falls within the definition of “medical care” under Internal Revenue Code Section 213(d).  One caveat is that only health care services that are legal under the law qualify as medical care, so abortion would not be so covered in states where it is illegal.  However, travel to obtain legal medical care may also be covered by a group health plan, allowing pre-tax reimbursements for lodging and transportation, up to certain limits (currently, lodging up to $50 per person per night and reasonable travel costs).  Any amounts reimbursed over and above the Internal Revenue Code limits will need to be imputed as taxable income to employees.  Additionally, employers with a high deductible health plan should ensure that participants satisfy the plan’s deductible before being eligible for travel reimbursement.   

Two threshold questions for employers to consider are (1) the geographical makeup of their employee population and (2) whether they currently have an insurance company plan or a self-insured health plan.  If an employer’s workforce is only in states that do not restrict access to abortion, providing a travel benefit will not be necessary.  Additionally, employers with self-insured health plans have more flexibility to amend their plans to enhance benefits than employers with fully insured group health plans, where the insurance company is largely responsible for plan design.

These considerations are noteworthy not just for their practical considerations, but also for how they affect preemption under the Employee Retirement Income Security Act of 1974 (ERISA).  It is currently unclear to what extent individual state laws that penalize aiding or abetting an abortion would apply to an employer sponsoring a travel benefit as described here.  Companies interested in offering this benefit should work with their legal counsel to understand the laws of the various states where they have employees.  ERISA preempts state laws that relate to an ERISA plan, so one could argue laws limiting travel benefits would be preempted.  However, ERISA preemption does not apply to insured products (such as with fully insured plans) or to any criminal laws that might apply to the covered service.

As of this writing, more than 20 companies have publicized their intention to add some variation of a travel benefit for out-of-state abortions for their employees.  As that list grows, we hope there will also be guidance from the Internal Revenue Service and/or the Department of Labor on the myriad of new issues raised by this benefit and the impact of the Dobbs decision, and we will continue to update you on that guidance on our Dobbs Decision Resource Center page.