Last month, the United States Supreme Court rendered its decision in Dobbsv. Jackson Women’s Health Organizationoverruling Roe v. Wade and returning the issue of abortion to the states. Since the decision, abortion has become illegal in several states while continuing to be available in others. In response, some companies have announced that they will reimburse employees’ medical travel expenses—expenses incurred to obtain medical care that is not locally available. This article describes some of the employee benefit considerations with respect to these reimbursement arrangements, which we call Medical Travel Benefits.
Before we delve into the details, let us be clear about The Main Message: A company cannot simply amend its corporate travel reimbursement policy. Because the reimbursement is contingent upon receipt of medical care, the arrangement will be a group health plan, or part of one. Making the reimbursement taxable does not change that fact. If the Medical Travel Benefit is not properly designed, it will violate the Affordable Care Act (ACA). The penalty for such a violation is $100 per affected person per day of noncompliance. The Medical Travel Benefit must also comply with other employee benefit laws.
What does “properly designed” mean?
The ACA generally favors broad-based major medical plans and disfavors narrow single-benefit medical plans, though there are some exceptions. If a company wants to offer a single medical benefit—like a Medical Travel Benefit—it must fit into one of these exceptions. For example:
- The Medical Travel Benefit can be added as a part of the company’s existing major medical plan, subject to coinsurance and deductibles just as most other covered benefits would be. Many major medical plans already reimburse travel for transplant procedures—the company would simply expand that benefit to cover additional travel.
- The Medical Travel Benefit can be offered as a stand-alone program:
- To employees enrolled in the company’s major medical plan and, if the company wishes, to employees enrolled in another employer’s major medical plan;
- To employees who are eligible for the company’s major medical plan, even if they are not enrolled, subject to certain annual limits; or
- To all employees (or any nondiscriminatory group of employees), provided that the program does not provide “substantial benefits in the nature of medical care.”
All of these options have additional requirements beyond the scope of this article. In designing the Medical Travel Benefit, the company will need to consider eligibility, overall cost, ease of administration, coordination with health savings accounts, health information privacy, and whether the benefits will be taxable or nontaxable. For example, a Medical Travel Benefit that is included within an existing major medical plan will generally be non-taxable and will need to follow IRS regulations regarding medical travel reimbursement. Those regulations do not allow reimbursement for meals, limit reimbursement for lodging to $50 per day ($100 with a companion), and require detailed substantiation.
What does “other employee benefit laws” mean?
Generally, when a company offers a group health plan, the plan must comply with a variety of laws, including but not limited to the ACA, ERISA, COBRA, and HIPAA. The ACA compliance has been briefly addressed above. Some of the major compliance points of the other laws are listed below.
ERISA. The Medical Travel Benefit must be embodied in a plan document and summary plan description, which must include ERISA-compliant claims and appeals procedures. The Medical Travel Benefit will generally be subject to the Form 5500 requirement.
COBRA. If the employer had at least 20 full-time employees in the prior calendar year, the Medical Travel Benefit must comply with COBRA. Among other things, companies will need to determine a COBRA premium and contact their COBRA administrators to ensure that the Medical Travel Benefit is included in any COBRA election notices.
HIPAA. Unless the Medical Travel Benefit is administered by the company in-house and covers fewer than 50 employees, it will be subject to HIPAA privacy and security. The company should ensure that it has established an effective HIPAA compliance program to protect individually identifiable health information.
Companies understandably want to support their employees. However, Medical Travel Benefits present many traps for the unwary. Companies should not proceed down this road without a trusted advisor.