The United States Supreme Court decision in Dobbs v. Jackson Women’s Health Organization, concluding that the U.S. Constitution does not confer a right to abortion, could lead to lawsuits against health and welfare benefit plans and their sponsors. In general, such claims would trigger coverage under fiduciary liability policies, subject to certain limitations.
Conflicts and confusion are likely to develop over the interplay between the Employment Retirement Income Security Act (ERISA) and other federal statutes on the one hand and the new or revived state law restrictions on the other hand. As a general matter, ERISA has been interpreted to broadly preempt state law. Thus, ERISA self-insured plans should be able to argue that ERISA preempts certain state civil and insurance laws, however it is less likely that ERISA will be found to preempt state criminal laws. While most U.S. workers participate in self-insured plans (plans which are funded by their employers), most smaller company plans have benefits which are provided by insurers who are subject to state regulation. It should also be noted that even prior to the Dobbs decision many benefit plans, self-insured or not, did not cover abortion-related expenses. Note that the President of the United States and the Secretary of Health and Human Services (HHS) have taken the position that the Emergency Medical Treatment and Active Labor Act (EMTALA), which provides protections for emergency medical care including relating to pregnancy and medically necessary abortions, also preempts any contradictory state laws. Whether and to what extent state abortion-related laws will be preempted by ERISA, EMTALA and other federal laws is likely to be tested in the courts in the coming months.
Challenges to companies and their plans covering services and travel expenses are unlikely to come from participants or beneficiaries, who would presumably favor such benefits. Nevertheless, it is possible that participants could sue if they believe the special treatment for abortion-related benefits violates laws such as the Mental Health Parity Act, or if a plan’s resulting non-compliance with a law disadvantages them in some way including through tax consequences. On the other hand, if companies cut abortion and/or contraception-related benefits to comply with new state laws then they could run afoul of aspects of President Biden’s July 8, 2022 Executive Order or could conceivably face suits from participants claiming some form of promissory estoppel (although plan sponsors generally reserve the right in plan documents to amend health benefits). It also is possible that shareholders could challenge the payment of such benefits, and potential related state fines or penalties, as corporate waste (such claims would more likely implicate D&O policies as opposed to fiduciary ones), but the most likely claims will come from state agencies and officials (and private citizens suing to enforce statutes like the ones in Texas and Oklahoma which purport to grant them standing).
States (or in some cases, third-party private citizens) might investigate and ultimately sue plans and their sponsors alleging that they are violating the state anti-abortion laws. Such suits would probably trigger defense cost coverage under fiduciary liability policies, particularly if the policy in question has broad “settlor capacity” coverage which doesn’t require that specific ERISA fiduciary breaches be alleged. However, any fines or penalties which might be assessed could be excluded from coverage, as fiduciary policies cover a wide range of fines but generally exclude all unlisted fines.
In addition to the issues discussed above, an employer providing assistance for abortion-related services could be second-guessed in relation to:
Claims arising from any of the above issues would likely trigger cover under most existing fiduciary liability policies, subject to the carve-out from Loss that all fiduciary policies have for “benefits due” under a plan. It should be noted, though, that some policy forms have broader coverage for informal government investigations and/or managed care and ACA-related issues than others.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
