Employer Considerations for Coverage of Abortion Benefits

By Bolton July 1st, 2022

The U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization overturned Roe v. Wade, which previously held that there was a constitutional right to decide whether to continue a pregnancy and that states may not prohibit abortion prior to fetal viability. Following Dobbs, states can establish their own laws to regulate or prohibit abortion. In anticipation of the recent ruling, many states enacted various laws regarding insurance coverage of abortion. Some states have banned or restricted abortion coverage, while other states require plans to cover abortions.

Certain states (such as Oklahoma and Texas) now enable individuals to bring civil lawsuits against anyone who assists in the performance or inducement of an abortion, including paying for or reimbursing the costs of the procedure through insurance or otherwise. It is unclear whether individuals can sue companies that cover travel expenses for legal out-of-state abortions.

This article outlines some factors for employers to consider regarding providing abortion-related benefits. However, many of the issues surrounding these benefits remain open questions. Legal challenges to these laws are already underway, and more are expected in the future.

Coverage of Abortion Benefits

There are several ways coverage of abortion-related expenses may be provided through a health insurance plan. Several factors may affect the benefits that are offered, such as plan funding (fully insured or self-funded), location, tax considerations and the applicable state regulations (whether coverage is required or prohibited).

Federal Law

Two key laws address abortion benefits at the federal level: the Pregnancy Discrimination Act (“PDA”), which amended Title VII of the Civil Rights Act of 1964, and the Patient Protection and Affordable Care Act (“ACA”). The PDA applies to employers with 15 or more employees, including state and local governments.

Pregnancy Discrimination Act

The PDA protects women from being fired for having an abortion or contemplating having an abortion. It also prohibits adverse employment actions against an employee based on their decision not to have an abortion. For example, it would be unlawful for a manager to pressure an employee to have or not to have an abortion to retain their job, get better assignments, or stay on a path for advancement.

Open Issue: Whether the PDA’s protections will play a role in cases involving state laws prohibiting abortion.

Insurance Coverage of Abortion

The PDA states that if an employer provides health insurance benefits, it is not required to pay for health insurance coverage of abortion, except where the life of the mother would be endangered if the fetus were carried to term or medical complications have arisen from an abortion. If complications arise during an abortion procedure, the health insurance plan is required to pay the costs attributable to those complications.

In addition, an employer’s health plan is permitted, but not required, to provide health coverage for an abortion. If the plan covers the costs of abortion, it must do so in the same manner and to the same degree as it covers other medical conditions. Potential problems could arise, for example, if the plan covers abortions but on different terms and conditions than those that apply to other medical conditions, or if the plan provides comprehensive medical benefits but does not cover abortion when the life of the mother would be endangered if the fetus were carried to term.

Patient Protection and Affordable Care Act

The ACA does not require abortion coverage beyond what is already required under Title VII, as amended by the PDA. According to Executive Order 13535, the ACA was intended to maintain the abortion-related restrictions found in existing law (e.g., “Hyde Amendment” restrictions) at the time of the ACA’s enactment. Under the ACA, federal laws to protect conscience (such as the Church Amendment and the Weldon Amendment) remain intact, and new protections prohibit discrimination against health care facilities and health care providers because of an unwillingness to provide, pay for, cover or refer for abortions.

State Law

While there is no specific mandate or ban on covering abortion costs at the federal level, many states have passed their own regulations regarding abortion coverage. In the wake of the Dobbs decision, more states are likely to ban or restrict abortion coverage under all health plans. The scope of benefits that may be provided by a health plan will depend on the specific restrictions that are imposed at the state level. This section outlines key state law issues to consider.

Extraterritorial Jurisdiction

In states like Texas and Oklahoma that bar “aiding and abetting” the procurement of abortions, it remains to be seen how state courts will apply these laws to employers providing benefits for their employees to receive abortions in states or jurisdictions where they are legal. While the plain text of the laws state that paying for or reimbursing the costs of abortion “through insurance or otherwise” is prohibited, it is unclear whether, and to what extent, this would apply to coverage of lawful out-of-state procedures. This type of jurisdictional issue will likely need to be decided in court, with interstate issues usually within the jurisdiction of the federal courts.

Open Issue: The extent to which one state’s insurance laws will apply to employers’ reimbursement of travel expenses for employees to procure out-of-state abortions.

ERISA Preemption

In general, self-insured health plans are not subject to state insurance laws because of the preemption clause of the Employee Retirement Income Security Act of 1974 (ERISA). If a self-insured plan is not subject to ERISA, ERISA’s preemption clause does not apply, and the plan may be subject to state laws. Similarly, state insurance laws generally apply to ERISA-covered fully insured health plans.

ERISA preemption could potentially be used as a defense for self-insured health plans providing abortion benefits in states that regulate abortion. However, it is unclear whether a state law criminalizing the practice—or state laws that prohibit persons from “aiding and abetting” the procurement of illegal abortions—could be used against employers providing abortion benefits through self-insured, ERISA-covered plans.

Open Issue: Whether ERISA’s preemption provisions can be used as a defense in a potential criminal or civil case brought under state anti-abortion laws.

Tax Considerations

As with any employee benefit, employers should analyze the tax treatment of abortion-related coverage. Legal abortions are considered a deductible qualifying medical expense (for which Health Savings Account, Health Reimbursement Account and Flexible Spending Account funds may be used on a tax-free basis). However, the open legal questions regarding reimbursing travel-related expenses for out-of-state abortions may also affect tax treatment. Employers should consult with a tax advisor on any questions regarding the tax implications of these benefits.

Employer Action

Employers should closely analyze any abortion benefits offered under their group health plans to ensure full compliance with applicable restrictions. Carriers and third-party administrators may be able to provide information regarding specific plan provisions. Contact a Bolton consultant for assistance reviewing your plan’s compliance with the new ruling.

Please Note: The information contained in this article is not legal advice and should not be relied upon or construed as legal advice. This article for general informational purposes only and does not purport to be complete or cover every situation. Please consult your own legal advisors to determine how this article may affect you.