Following the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, some employers are interested in providing some level of travel and lodging reimbursement for employees and family members who may need to travel out of their state to obtain a legal abortion. There are a variety of ways that these benefits could be offered. Some of the most common ways employers are seeking to support their employees include:
Group medical plan
HRA integrated with the group medical plan
Excepted benefit HRA
Employee assistance program (EAP)
Health FSA or HSA reimbursement
Lifestyle account
Travel reimbursement program
There is some uncertainty about how various benefit compliance requirements may apply. While providing the coverage under the employer’s group medical plan or an integrated HRA appears to be the most popular method as of right now, the safest approach may be to simply provide a broader travel reimbursement arrangement on a taxable basis, not even tied specifically to abortion-related travel and lodging, and to limit any documentation required to receive reimbursement. However, we appreciate that employers may prefer to handle it differently until further clarification is provided as to what is permitted.
Depending upon how the coverage or reimbursement is offered, the employer will be wise to consider the following compliance questions:
Can the reimbursement be handled on a tax-favored basis?
Under §213(d), qualifying medical expenses include travel and lodging expenses incurred primarily for and essential to medical care. To cover or reimburse such expenses on a tax-favored basis, they generally need to be run through a group health plan (e.g., group medical plan, HRA, health FSA, EAP) or HSA.
TRAVEL: There isn’t a specific cap, but the expenses must be reasonable (e.g., not first-class flights). They could include gas, car rental, bus ticket, airplane ticket, etc. Medically-related travel is reimbursable on a tax-favored basis at the actual cost of travel or using the mileage reimbursement rate; either is acceptable.
LODGING: Lodging expenses are reimbursable on a tax-favored basis only up to $50/night per individual ($100/night if a travel companion is required).
Travel or lodging reimbursement beyond what is permitted under§213(d) should be taxable to the employee. For further clarification these taxation rules, see IRS Pub. 502.
How do state laws apply?
If the coverage is provided through a fully insured group medical plan, the state laws of the state in which the policy is issued will apply. Therefore, if the plan is issued in a state with restrictive abortion laws, the carrier may not offer a plan providing such reimbursement. In this case, the employer may have to consider other options for providing the reimbursement, such as through an HRA.
If the coverage is provided through a self-funded group medical plan, assuming the arrangement is subject to ERISA, the employer has more flexibility with plan design due to ERISA preemption and would not be required to follow any state insurance coverage requirements or restrictions. However, the employer must still consider any very restrictive state laws imposing civil or criminal penalties for individuals or entities who “aid or abet” abortions (e.g., Oklahoma and Texas).
Providing coverage or reimbursement related to an abortion could put the employer at risk of such penalties, so employers with employees residing in such states should definitely work with counsel before implementing such coverage or reimbursement.
Is the arrangement subject to ERISA (e.g., plan documentation, SPD distribution, Form 5500 filings)?
The group medical plan, HRA, health FSA, and EAP are generally subject to ERISA. Travel benefits that are run through such arrangements will then be subject to ERISA. This may provide some protection under any state law prohibiting or restricting coverage because the plan would qualify for ERISA preemption if self-funded.
A more general travel reimbursement program that is not run through the above listed arrangements, and perhaps available more broadly than just for medically-related travel, would likely not be subject to ERISA.
If the benefit is not run through the employer’s group medical plan, does the arrangement create a stand-alone group health plan and interfere with Affordable Care Act (ACA) compliance (e.g., preventive coverage, annual/lifetime limits)?
An HRA must generally be integrated with the group medical plan to comply with ACA requirements. This would limit the offering to only those who have also enrolled in the employer’s group medical plan or the group medical plan of another employer (e.g., a spouse’s employer). However, an excepted benefit HRA (EBHRA), allowed to be funded up to $1,950 in 2023, can be offered to all who are eligible for the group medical plan rather than only to those who are enrolled in the group medical plan.
There is some argument that an EAP reimbursing solely travel and lodging, and not the actual medical procedure, might not provide “significant medical benefits,” in which case it would qualify for excepted benefit status and not have to comply with the ACA. We need further guidance from the agencies on what is considered “significant medical benefits.” If it cannot be argued that the EAP is an excepted benefit, there is a risk in not integrating the EAP with the group medical plan (i.e., limiting access only to those who actually enrolled in the group medical plan).
How does the coverage affect HSA eligibility for those enrolled in a qualifying High Deductible Health Plan (HDHP)?
If coverage is provided via a group medical plan or an HRA, participants must meet the minimum HDHP deductible before having such expenses reimbursed to maintain HSA eligibility.
For the EAP, if it can be argued that the EAP is not providing “significant medical benefits,” it may be okay to provide reimbursement right away (before meeting the minimum HDHP deductible) without interfering with HSA eligibility.
Is the arrangement subject to mental health parity rules?
If coverage is provided via a group medical plan or an HRA, it may be necessary to reimburse travel and lodging more broadly (including for mental/behavioral health as well as for medical/surgical) to avoid violating mental health parity rules.
Do HIPAA privacy and security rules apply? How about any other privacy considerations?
A group medical plan, health FSA, HRA and many EAPs will be subject to HIPAA privacy and security rules, which will greatly limit how any information collected via the plan can be disclosed without the participant’s permission. This may be of some comfort to participants.
The employer should also contemplate the Pregnancy Discrimination Act (PDA) and other privacy and nondiscrimination requirements that may limit the employer’s ability to collect or share information, or to act upon such collected information. Employers reimbursing outside of a health plan should carefully consider how to handle requests and make determinations. And, if there is a desire to require specific documentation, consider how best to review and maintain that information to ensure complete confidentiality.