News Alert: Dobbs v. Jackson Women’s Health Organization Decision Analysis

On Friday, June 24, 2022, the U.S. Supreme Court issued its decision in Dobbs v. Jackson Women’s Health. Overturning two prior precedents, Roe v. Wade and Casey v. Planned Parenthood, the Dobbs decision permits states to regulate and/or prohibit access to abortion at any stage of pregnancy. Following the decision, it is expected that at least 26 states will ban or severely curtail access to abortion.

Dobbs will likely have an immediate and significant impact on third party administrators (“TPAs”), pharmacy benefit managers (“PBMs”) and employers which sponsor group health plans. We discuss the most-pressing concerns below.

Aiding and Abetting Laws. Most employer-sponsored group health plans provide at least some coverage for abortions. In fact, the federal Pregnancy Discrimination Act (“PDA”) requires that many group health plans provide abortion, if the life of the mother is endangered. And, the PDA generally requires that complications of other abortions also be covered. Note that the PDA does have some exceptions, such as for small employers with less than 15 employees.

TPAs, PBMs and employers generally have not needed to consider state laws which limit abortions. Now, it appears that they should. Many of these laws are old – some are over 100 years old. Prior to Dobbs, the laws were almost certainly not enforceable. After Dobbs, the laws most likely are enforceable, although some are being challenged and a few have been put on a temporary hold by courts.

Many state laws impose civil or criminal penalties on health care providers. Those penalties are not likely to impact TPAs. However, some of the state laws also impose those penalties on other third parties who assist in the provision of abortions. These “aider and abettor” law pose a risk to TPAs, PBMs and employers which sponsor health plans.

For example, Alabama has a law (here:  http://alisondb.legislature.state.al.us/alison/CodeOfAlabama/1975/13A-13-7.htm) which says:

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Inducing or attempting to induce abortion, miscarriage or premature delivery of woman.

Any person who willfully administers to any pregnant woman any drug or substance or uses or employs any instrument or other means to induce an abortion, miscarriage or premature delivery or aids, abets or prescribes for the same, unless the same is necessary to preserve her life or health and done for that purpose, shall on conviction be fined not less than $100.00 nor more than $1,000.00 and may also be imprisoned in the county jail or sentenced to hard labor for the county for not more than 12 months.

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Does a TPA or PBM “aid” or “abet” an abortion when it processes a claim relating to a pregnant woman’s drug to induce an abortion, miscarriage or premature deliver? Does an employer “induce” an abortion, miscarriage or premature delivery when it promises, under the health plan, to pay for that result? The answer is not clear. However, it appears that an aggressive district attorney in Alabama could at least make such an argument. Note that the law imposes both civil and criminal penalties (including the penalty of “hard labor” if convicted).

Some states have tried to tie their laws even more-specifically to insurance or, perhaps, even to self-funded group health plans. For example, Texas has a law (see here: https://capitol.texas.gov/tlodocs/87R/billtext/pdf/SB00008F.pdf) which provides a penalty for any person who “aids or abets the performance or inducement of an abortion, including paying for or reimbursing the costs of an abortion through insurance or otherwise”.

Would a TPA which approves an abortion claim, per the terms of its client’s health plan, be viewed as “reimbursing” the costs of the abortion “through insurance or otherwise”? On its face, this is a plausible reading of the Texas law.

TPAs and PBMs are, arguably, in a more-vulnerable position than employers are with respect to these issues. TPAs and PBMs sometimes have a more-difficult time arguing that ERISA preempts a state law. And a TPA or PBM is vulnerable to pressure that it could lose its license in a particular state if it violates that state’s law. Losing a license in a particular state could also require the TPA or PBM to inform other states of the loss of the license. That could cause a loss of its licenses in other states.

Preemption. It is possible that some of these state laws could be preempted by ERISA, at least for ERISA-covered plans. It also seems possible that abortions which are strictly limited to those mandated by the PDA might be preempted by the PDA (a federal law). That raises the question of whether a TPA should work with its clients to ensure that the health plan only covers PDA-covered abortions. That could eliminate certain “elective” abortions. Presumably some clients would not approve of such a change, while others may welcome it.

Unfortunately, it probably is not possible to assume that federal law preemption will completely resolve these issues. Some states – such as Alabama, noted above – impose criminal penalties in this context. ERISA generally does not preempt state criminal laws of general applicability. Thus, it does not seem possible to simply ignore these issues.

Extraterritorial Issues. Another related question is which state’s law controls. For example, suppose that an employer is based in California. It has physical locations in four other states. Some of those states have abortion restrictions. But others do not.

If the TPA processes a claim for the health plan, must the TPA take into account all five state laws, and apply the most-restrictive law? Should the TPA base its processing on the state where the company’s headquarters are? Should the TPA only look to the state where the abortion service was provided?

Perhaps the TPA should look to the state where the plan enrollees live. If so, is the analysis based on where the employee lives (e.g., an employee who lives in California), or where a dependent or spouse lives (e.g., a college student whose parents live in California, while the college student lives in Alabama)? Does the TPA even have enough information to make this determination?

All of these questions are important. But the answers are not yet clear. They will require an analysis by the TPA and perhaps a discussion with the TPA’s clients about next steps, taking into account these newly-created state law risks.

Travel-Related Expenses. Many plan sponsors have already announced that they will be adding a travel benefit to allow covered individuals access to abortion services if they live in a state where abortion is prohibited. Travel benefits could be provided in a number of ways, including group health plans, health reimbursement arrangements (“HRAs”), employee assistance programs (“EAPs”) and taxable reimbursement programs, or even in some other alternative.

Each option comes with pros and cons. An EAP and a taxable reimbursement program limited to medical travel would still be considered ERISA benefits and, as such, would require additional administration. Further, an EAP would need to qualify as an “excepted benefit” in order to satisfy ACA requirements. As such, the direct group health plan coverage and HRA reimbursement seem to be the most viable options.

However, some employers have expressed interest in a broader arrangement under which a wide variety of travel expenses could be covered – not just for abortion-related travel expenses. The thinking is that this type of “broad benefit plan” would help the employer argue that it is not “aiding or abetting” an abortion, if the broad benefit plan is not limited to only abortion-related benefits. It is not clear if this argument would succeed. But it seems to provide an additional argument for employers.

Group Health Plan Coverage. Plan sponsors may be able to provide travel-related benefits under currently existing group health plans, which would allow the sponsor to implement the benefit with minimal administration changes. Furthermore, travel-related expenses may not be considered “essential health benefits” under state benchmark plans, which would allow sponsors to cap total travel benefits at a certain dollar amount.

Plan sponsors should also consider the risk under the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) of providing travel benefits for medical/surgical procedures and not mental health and substance use disorder treatment. One way to address the MHPAEA concern could be to provide a generally applicable travel benefit that would apply to any covered service under the plan, or perhaps to benefits which have significant access issues at the state or local level.

The limits under section 213 of the Internal Revenue Code (the “Code”) for reimbursement of medical related travel (e.g., $50 per night for lodging) would apply, but plan sponsors could provide a more robust taxable benefit. If taxable benefits will be provided, the plan sponsor should discuss with the TPA and PBM who will track and report the taxable benefits.

Health Reimbursement Arrangement Coverage. Plan sponsors could also provide reimbursement for travel and lodging expenses through an integrated HRA. However, as a group health plan, an HRA would have similar issues as the direct group health plan coverage discussed above and an HRA would have start-up and administrative costs in the event the sponsor does not already have one in place. Furthermore, any reimbursement provided through an HRA would be subject to the limits under Code section 213, without the ability to provide the greater taxable benefit.

Summary. The Dobbs decision poses immediate and novel concerns for TPAs, PBMs and employers. All involved should quickly review these issues and determine their strategies to minimize risk.