In the wake of the Supreme Court's ruling in Dobbs v. Jackson Women's Health, employers are questioning what impact, if any, this decision will have on their group health plans. In the Dobbs decision, the Supreme Court reversed 50 years of precedent by ruling that the Constitution does not provide for a right to abortion and therefore that states have the Constitutional right to legislate abortion. How, then, does this ruling impact employer-sponsored group health plans? In this alert we address four items of immediate concern and expect to supplement this analysis as this drastic change in the law develops.
1. Must a Group Health Plan Provide Coverage for Abortions?
There are no federal laws or regulations that require an employer-sponsored group health plan to provide coverage for elective abortions. The Patient Protection and Affordable Care Act of 2010, as amended (ACA), set forth standards that require coverage of "essential health benefits" for fully insured non-grandfathered plans. In addition, the ACA eliminated annual and lifetime dollar limits on such essential health benefits for all group health plans, including self-insured plans. At present, elective abortions would not be deemed essential health benefits. The determination of which medical expenses are and aren't "essential health benefits" is made by the U.S. Department of Health and Human Services, an administrative agency under the Executive Branch, and such guidance could change the definition to include elective abortion. In such event, the only employer-sponsored group health plans that would be subject to the change are those that are both non-grandfathered and fully insured.
2. May Group Health Plans Still Provide Coverage for Abortions, Even in States Where Banned?
Upon first impression, it appears that the broad preemptive provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), should allow for group health plans to continue to provide coverage for abortions, whether elective or necessary, regardless of any state law prohibiting the procedure. ERISA is the federal statute that attempts to set uniform standards for the laws governing employer-sponsored benefit plans and applies to all employer-sponsored benefit plans, except those sponsored by non-electing churches and federal, state, and local governments. ERISA contains broad language that preempts "any and all state laws" that "relate to" an employee benefit plan, with the exception of the states' right to regulate insurance. Thus, if an employer group health plan provides coverage for abortion, then the plan should not be affected even though some states in which the employer has employees may ban abortion procedures.
3. Can Group Health Plans Provide Coverage for the Travel Expenses to a State Where Abortion is Legal?
To the extent that travel expenses are allowable under the Internal Revenue Code, then a group health plan (or health reimbursement account) should be able to provide this coverage. Many group health plans provide reimbursement for eligible travel expenses for participants who must obtain medical care outside their geographic home. However, the tax treatment of those benefits turns on whether the amounts are treated as exempt from tax under Section 213 of the Internal Revenue Code of 1986, as amended (Code).
Code Section 213(d) excludes from taxable income amounts reimbursed for expenses for medical care of an individual, the individual's spouse, or a dependent under a policy of insurance or group health plan. This exclusion defines "medical care" as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.
Under current applicable law, a group health plan that reimburses or directly pays the "travel expenses" for "medical care" should be exempt from the taxpayer's taxable income and otherwise deductible by the employer (if self-insured). A fully insured health plan is subject to the terms and conditions of the insurance policy, so employers with this type of health plan could provide a self-insured rider or adopt a health reimbursement arrangement (HRA) to that policy to pay for travel expenses for women to obtain abortions if abortions are not available in their town of residence.
In general, to qualify as a medical expense:
i. The travel expenses must be essential to the medical care – presumably essential if no legal abortion is available in the taxpayer's geographic area, which is usually 35-50 miles for most IRS purposes; and
ii. Travel expenses must be limited to:
a. Transportation costs. The Code defines transportation expenses to include the cost of traveling by bus, air, taxi and/or train, as well as the cost of gas and oil if driving by car. Additionally, if a guardian, caretaker or medical provider is required to travel with the individual to obtain the medical care, those costs associated with the person accompanying the individual seeking medical care are also considered eligible expenses. Costs of car insurance, car maintenance and/or car repair expenses are not eligible medical expenses. The current mileage reimbursement rate is $0.18/mile (for 2022) for medical expenses. However, the taxpayer can use actual expenses (gas receipts);
b. Lodging of up to $50/night; and
c. Meals only if provided by the medical provider.
4. Are Employers at Risk of Liability for Violation of a State's Aid and Abet Law that Creates Liability for Those That Assist a Woman in Obtaining an Abortion?
At this time, the answer to that question is unknown. This is an issue ripe for debate and litigation. While ERISA's preemption provisions are broad and theoretically should protect the plan and the employer from a state's attempt to impose liability on those who assist a woman in obtaining an abortion, there is no certainty on how such a dispute would be resolved in the courts. Further, there are concerns regarding a state's ability to obtain through subpoena information regarding those obtaining abortions out of state. While group health plans are "covered entities" for purposes of the Privacy Rule under the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA), employers are not covered entities. Thus, employers would be wise to make certain that they receive no individually identifiable health information about their employees so that they will not have knowledge of which participants are receiving abortion-related benefits under the group health plan.
Obviously, this is an issue that presents a great deal of political debate. Our alert is intended to advise employers on their legal options with respect to their group health plans. These issues will continue to develop for the foreseeable future, and Baker Donelson will provide updates and commentary as appropriate.
Colorado became the first state in the country to have a state-designed health care insurance option for its residents approved by CMS last Thursday.
Approval of the Colorado Option through the federal1332 waiver now means the state can proceed with rate setting for its standardized health insurance plan, which is mandated to be sold at lower prices and should be finalized by summer’s end to take effect in 2023, culminating a decade’s worth of health policy efforts aimed at reducing health care costs.
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Those efforts include the state’s reinsurance program, which was extended for an additional 5 years last year and spreads risk across the health insurance market to help insurers pay expensive claims, and the Hospital Provider Fee that supports hospitals serving Medicaid and uninsured patients.
The Division of Insurance recently finalized its reinsurancepayment parameters for 2023 that aims to maximize rate reductions, increase enrollments, and improve morbidity all while encouraging engagement and competition among carriers and providers in the individual marketplace.
In its most recent legislative session, Colorado enacted 3 pieces of consumer protection legislation, House Bills1284,1285, and1370, all designed to lower health care costs.
HB 1284 requires emergency medical services to be billed at the in-network rate regardless of the facility and guards against unexpected and costly charges. HB1285 prohibits hospitals from pursuing debt collection if federal price transparency standards are not followed, requiring providers to publicly post their standard pricing for various services.
Meanwhile, HB 1370 requires carriers to implement a copayment-only structure for prescription medications in at least a quarter of their health plans.
CMS hailed Colorado as a national leader in health care cost reduction efforts.
“Through thisnew model, Colorado leverages federal savings to expand affordability and coverage in the state like no other state has done before,” said CMS Administrator Chiquita Brooks-LaSure. “The Colorado Option is groundbreaking and a step in the right direction to reduce the uninsured rate, while investing in health insurance coverage affordability and improvements, and advancing health equity. We encourage all states to consider innovative ways to use section 1332 waivers in the future to expand and improve coverage and lower costs for their residents.”
Passed in 2021, the Colorado Option instructed state regulators to write up a “standardized plan”—a consistent package of benefits and cost structures like co-pays—that insurance companies are mandated to sell with premiums 5% below what they were in 2021, after inflation adjustments. That target increases to 15% below by 2025.
Offered only on the individual and small group markets, the plan is designed to save the federal government on its existing insurance premium subsidies by creating what are known as “pass-through” savings that can come back to the state.
The state’s waiver application estimates those savings would amount to $13.3 million in 2023 and $147.9 million by 2027.
The moves come as Coloradans struggle with higher costs of living.
In the current environment of inflation, cost of living has emerged as a “serious” problem according to nearly 90% of those recentlypolled by the Colorado Health Foundation. In its adjacentpoll, two-thirds of Coloradans characterized the cost of health care as a “very serious” problem.
This sentiment was reflected by the Colorado electorate who voted for moderate candidates in Republican primaries, results that reflect broad support for “kitchen table” issues, according to local politics reporter Marianne Goodland.
The percentage of personal consumption expenditures on health care services climbed to 14.9% in 2019 prior to the pandemic.
Source: Colorado Department of Health Care Policy and Finance
The inflationary trends have insurance companies skeptical that reduction targets can be met while being actuarially sound. The Colorado Association of Health Plans stated that the methodology used to calculate inflation, the Consumer Price Index’s medical index, will not reflect the true rise in costs being seen on the ground.
That delay in care along with the persistent workforce shortage have contributed to rising health maintenance costs, according to the Colorado Hospital Association (CHA), as providers struggle to meet the pent-up demands of a growing population.
“Much of the focus of state policy in recent years has been on health care affordability,” said Katherine Mulready, Chief Strategy Officer and Vice President for Legislative Policy at CHA. “The reality is that when supply outstrips demand, prices rise. So this does not portend well for affordability, which in turn, doesn’t portend well for access. We’re talking about both indirect access of costs, but also direct access.
The provider is not there when you need them to be there. There’s not a lot of optimism I can paint in that picture right now other than we’re doing everything we can to stave off [the] continued crisis.”
Providers nationwide are coordinating efforts to reimagine health care where telemedicine is emerging as a solution to meeting demand and improving access.
Mulready said the association is utilizing new tools and roles as a part of that reimagination, such as advocating a policy that would allow greater use of certified registered nurse anesthetists in advanced practices to manage some anesthesiologist services.
“The policy principle that underlies all of our workforce is allowing the market or allowing employers the flexibility they need to continue to deliver high quality and accessible care,” Mulready said. “As long as we can find a professional who has the experience and training to do the tasks that’s being contemplated, we should be able to use them and we shouldn’t see artificial limitations on their scope through their licensing boards or other places. Some of that’s reimbursement policy, some of that’s licensing policy, some of its facility policy, but there’s a lot of work. [CHA is] invested there to try to advance that reimagination of care delivery.”
Gov. Jared Polis has made clear his administration’s goal of lowering health care costs for consumers. In 2020, for instance, Polis vetoed a bill that would have increased coverage for alternative opioid treatments over concerns the measures would increase private insurance costs.
As costs rise and the midterm elections approach, health policy advocates will look to continue striking that balance between holding the line on health insurance prices and adding benefits for Coloradans in next year’s legislature.