As has been widely reported, the Supreme Court has overturned the 1973 decision Roe v. Wade. In Dobbs v. Jackson Women’s Health Organization, the Supreme Court concluded there is no directly embedded Constitutional right to an abortion. Instead, the Court ruled that individual states can now regulate abortion.
So what will this mean for medical plan sponsors?
Some states have already passed laws restricting abortion, while others have enacted “trigger laws” that ban or restrict abortion when Roe is overturned. (Laws regarding abortion vary by state and a complete rundown of these laws is beyond the scope of this initial write-up.) Additionally, it is likely that further legislative changes at the state level will be made in response to this decision, so this is a highly fluid situation.
That said, the immediate impact for a state like Arizona can be summed up in one word - uncertainty. Experts predict an immediate challenge to Arizona's anti-abortion laws as well as a fight to determine which of two anti-abortion laws will take precedence. One law was written 158 years ago while one is practically brand new.
The old law, created in Arizona’s territorial days, is a strict ban on providing or helping to provide an abortion, except to save the mother's life. It calls for a mandatory prison sentence of two to five years for violators.
Republicans in the state Legislature passed the new anti-abortion law this year; Gov. Doug Ducey signed it into law in March. Scheduled to take effect 90 days after the Legislature adjourns its current session (which may happen by the end of June), it bans abortions after 15 weeks of pregnancy except if necessary to save the mother’s life. Violating physicians face potential felony charges and loss of their professional licenses.
The state court system, likely the Arizona Supreme Court, will need to settle the issue as women seeking abortions and abortion service providers wait for guidance. Since this question remains unanswered, Planned Parenthood of Arizona has paused all abortions, both medical and surgical, and seven of nine licensed providers in the state have immediately halted abortions.
FEDERAL REGULATION OF HEALTH PLANS
Notably, in the employee benefits context this decision indirectly affects group health plans, especially insured plans issued in states that ban or limit abortion. Self-insured plans are also impacted, because though exempted from complying with state-mandated health care services, they must comply with state laws whenever reimbursing medical expenses incurred by plan participants.
Shown below is a list of key issues employers should consider in response to this decision. Note, however, that just as state laws are likely to be enacted in response to this decision, new federal rules may be introduced to modify the treatment of certain healthcare services, which would impact some of the considerations noted below.
- Tax treatment of abortion procedures: Under current federal tax law, medical services must be legal to be eligible for tax-free reimbursement. Since abortion will likely be illegal under several states’ laws, health plans (insured and self-insured) cannot provide tax-free coverage for abortion procedures rendered in states banning or limiting abortion. Insured plans issued in states banning abortion may also be prohibited from paying for abortions in states where abortion is legal. Additional guidance is anticipated from Insurance Commissioners in states that ban or limit abortions as to what insured plans are allowed to cover out-of-state. This also means that employees could not seek reimbursement under health FSAs, health reimbursement arrangements, or health savings accounts (“HSAs”) if the abortion is conducted in a state that prohibits abortion. Abortion would most likely be legal where the life of the mother is in danger.
- Medical tourism: The tax code imposes specified dollar limits on tax-free travel benefits ($50 per night per person for lodging and the cost of transportation) for medical services, but again, the services themselves need to be legal. Lodging expenses that exceed the IRS limit of $50 per night per person would be included in the employee’s income.
- Mental Health Parity: Providing travel benefits on a stand-alone basis, versus as a component of a medical plan, may also raise concerns under the Mental Health Parity and Addiction Equity Act (MHPAEA) if the travel benefits are limited to covering medical/surgical services and prescription drug services and exclude treatment for mental health services.
- HDHP/HSA Concerns: Providing reimbursement for any service or a travel benefit before a deductible is satisfied could jeopardize the ability of employees to contribute to an HSA if they are enrolled in a high-deductible health plan.
- Prescription Drug Coverage: There is a lack of clarity on whether medications that terminate a pregnancy will be allowed to be prescribed and shipped across state lines, into states that ban or limit abortions after a set number of weeks.
- ERISA Concerns: Providing a travel benefit or other coverage outside a major medical plan may create a separate group health plan for various compliance purposes, such as the Affordable Care Act, ERISA, COBRA, and HIPAA. This is not a recommended approach at the present time.
This is likely to be an evolving area in the coming months and years. Employers should consult with experienced benefits advisors and tax counsel for specific guidance about questions related to the issues described above or other similar concerns.
JP Griffin Group, a division of Hub International Limited, nor Hub International Limited, nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.