Amazon. Bank of America. Citigroup. Dick’s Sporting Goods. JP Morgan. Kroger. Goal. Microsoft. Procter & Gamble. Goal. Walt Disney Company. These are just some of what is a growing list of companies who have offered to cover the costs of employees who may now need to travel out of state for abortion services in light of the Supreme Court’s decision in Dobbs v Jackson Women’s Health Organization. But companies that are stepping up to further protect their employees’ reproductive rights are choosing to do so in the face of potential public backlash and uncertain legal risks.
Just days after Citigroup announced that it would provide such travel benefits, a Texas state representative announced that he would be introducing a bill prohibit the bank from writing Texas municipal bonds unless it terminated its new employee benefit. America First Legal, the conservative organization founded by former Trump senior adviser Stephen Miller, recently demanded that the EEOC open a civil rights investigation to a company that provides such benefits, alleging that it was discriminating against female employees who choose to carry their pregnancies to term. Texas legislators have also argued—through cease and desist letters sent to Lyft and others—that financing abortion trips constitutes a beach of a company’s fiduciary duties to its shareholders. And a group of Texas legislators have companies threatened who choose to offer such benefits with possible criminal liability under existing Texas law and plan to introduce new legislation that would impose additional civil and criminal penalties on Texas employers who offer such benefits.
Some of these threats are almost certain to lead to litigation. And although Judge Kavanaugh wrote in a concurring opinion in dobbs While attempts to prohibit women from traveling to another state where abortions are legal would violate the constitutional right to interstate travel, it is far from clear to what extent states can prevent employers from facilitating such travel. Until the courts provide clarity on the issue, companies that want to ensure that their employees have the same access to reproductive health benefits, no matter where they reside in the US, must consider how best to minimize legal risks involved in offering such benefits.
Travel reimbursement as a group health benefit
Most employers will want to offer travel reimbursement as part of their existing group health insurance plan to take advantage of the protections ERISA offers. ERISA preempts state laws that interfere with the administration of an employee’s benefits covered by ERISA and would likely provide a strong defense against attempts by states to ban travel benefits for abortion services. Using an existing group health plan also has the benefit of administrative convenience, as employers can use existing processes and procedures that are designed to comply with other applicable laws and regulations (such as HIPAA, COBRA, or ACA).
However, it is unclear whether ERISA’s preference protections would guard against state laws that seek to impose criminal liability on employers for helping their employees obtain an out-of-state abortion.
Using an existing group health plan may also not be feasible for employers that do not have a self-insured plan, but rely solely on a health insurance company to provide such benefits. Using an existing group health plan will also limit the availability of benefits to only those employees and their dependents who choose to enroll in the company plan.
Scope and amount of benefits
Employers will also need to consider the scope and amount of benefits offered. Most employers may want to consider offering coverage for travel required to obtain none medical treatment (including mental health or addiction) that is not available near an employee’s home. Expanding the benefit beyond abortions will help ensure compliance with the Mental Health Parity and Addiction Equity Actwhich requires health plans to cover mental health and substance abuse services as generously as medical and surgical services and reduce the risk of discrimination claims by employees who would not otherwise take advantage of abortion-only benefits.
While employers may reimburse travel associated with qualified medical care (including abortions) tax-free, the The IRS limits such reimbursement just $50 per night lodging or car mileage at IRS-approved rates. Employers who want to offer more generous benefits will need to report it as taxable income to their employees. Additionally, for employers using high-deductible health plans, travel reimbursement benefits can only be provided after the plan’s deductible has been met.
Employee Privacy Concerns
Both employers and employees are likely to have privacy concerns about abortion-related health insurance benefits. Although existing laws and regulations, such as the ADA and the HIPAA privacy rule, regulate the confidentiality of employee medical information, the protections may not apply to law enforcement lawsuits or subpoenas from state prosecutors investigating employees who may have had an abortion. Employers will want to consider ways in which they can minimize the amount of information they need to obtain from plan beneficiaries or receive from third party plan administrators when providing such benefits.
One striking aspect of the threats directed against companies that choose to provide abortion-related health benefits is their national reach. For example, Texas lawmakers have threatened to treat the provision of abortion benefits as a per se Breach of a company’s fiduciary duties to its shareholders, eliminating the protections afforded to directors and officers under the business judgment rule, for any publicly traded corporation whose shareholders reside in Texas. For many companies, these arguments will be in tension with the “internal affairs doctrine”—applied in most states, including texas—ordering that the internal affairs of a corporation be governed by the laws of the entity’s state of incorporation. In addition, the Supreme Court has previously held that state laws purporting to regulate the internal affairs of nonresident corporations may be unconstitutional under the Commerce Clause. But it remains to be seen how well these doctrines will hold up in the face of concerted efforts to restrict the conduct of all companies doing business with a given state, regardless of their state of incorporation, as well as efforts to elevate ordinary corporate governance. questions about criminal acts.
Use of insurance to mitigate legal risks
Regardless of how carefully a company structures its approach to providing reproductive health benefits, it may be forced to defend its decisions in court. Businesses attacked for offering such politically polarizing benefits in alleged violation of state law may fall back on their existing insurance coverage to defend against such claims or lawsuits.
- For private companies, coverage may be available under the company’s D&O or management liability insurance policy. Such policies generally cover the cost of defending claims for alleged illegal acts committed by the company or its officers in the course of conducting the company’s business. And for public companies, D&O coverage may be available to defend claims brought against executives of specific companies. Such allegations, even if threatened with criminal prosecution, must qualify as a covered “wrongful act” within the meaning of the standard D&O policy language.
- Coverage may also be available under a company’s fiduciary liability insurance. Fiduciary liability insurance policies may extend coverage to claims for alleged acts, errors or omissions committed by an Insured in the administration or in its capacity as “trustor” of the benefits of the employee plan—including deciding what benefits the plan will offer. Businesses are advised to double check to see if their existing fiduciary liability policy includes such “capacity of settlor” coverage.
- Civil liability insurance for labor practices may apply to claims alleging that a company’s reproductive health benefits are provided in a discriminatory manner.
Even if the states don’t comply, their threats to date could lead to other potential claims, such as shareholder securities lawsuits, that would also trigger D&O coverage. Companies that have been threatened with legal action because of their decision to offer out-of-state employee health care travel benefits should therefore consider giving notice of circumstances under your existing D&O, Trustee and/or Labor Practices liability insurance policies, as such threats may reasonably be expected to give rise to future claims.
In this uncertain legal landscape, insurers may attempt to claim coverage is prohibited for a variety of reasons, such as exclusions for criminal, intentional, or knowing violations of the law or for bodily injury claims. But none of these exclusions should exclude coverage. Mere allegations of criminal misconduct are generally not enough to relieve an insurer of its obligation to pay defense costs. And bodily injury exclusions generally only exclude claims “for” bodily injury, and the lawsuits proposed by state officials are for alleged violations of state law, not bodily injury, regardless of any alleged harm asserted. Insurers may also seek to bolster their substantive arguments by filing declaratory lawsuits in venues they view as hostile to abortion rights, triggering complex choice-of-law and venue disputes. Before giving notice, companies should retain an experienced coverage attorney to ensure their claims are presented in a manner that maximizes potential coverage.