The Unlikely Intersection Between ERISA and State Laws Regulating Abortion

JOSEPH C. FAUCHER and BRIAN D. MURRAY, November 10, 2022

In the wake of the Supreme Court’s recent decision in Dobbs v. Jackson Women’s Health Org., which overturned Roe v. Wade and its progeny, many states have passed, or are in the process of passing, laws that severely restrict abortion services. Assuming no federal legislation outlawing abortion is passed, issues will likely arise relating to whether health plans can cover travel expenses incurred by employees who travel to states where abortion services remain legal.

This article analyzes whether laws such as the recently passed Texas Heartbeat Act (“SB 8”) — which imposes civil liability upon, and allows for injunctive relief against, persons who “aid and abet” abortions — are preempted by the Employee Retirement Income Security Act of 1974  (ERISA), in the context of health plans that provide travel expense reimbursement for abortion-related services.

If and when the issue is litigated, we believe courts will hold that state laws that prohibit (or impose significant restrictions upon) employer-sponsored, self-funded welfare plans from paying for or reimbursing abortion-related expenses, including travel and lodging expenses, have an impermissible connection with ERISA plans, and are therefore preempted by ERISA. Contrary to Congress’ intent when it passed ERISA, such laws impact the relationships between plans and their participants and beneficiaries, interfere with national uniformity of plan admin­­istration, regulate a key facet of plan admin­istration, and present an obstacle to plan fiduciaries’ ability to administer plans in accordance with their terms. 

By contrast, courts are likely to conclude that laws like SB 8 are not preempted by ERISA in the context of fully insured welfare plans, which are more subject to state regulation under ERISA’s statutory scheme. 

In a subsequent article, we will address ERISA’s potential impact vis-à-vis state laws that purport to criminalize aiding and abetting abortions.

The Texas Heartbeat Act (SB 8)

In 2021, Texas passed SB 8, an addition to the Texas Health & Safety Code. The primary effect of SB 8 is to preclude physicians from performing abortions after they detect embryonic or fetal cardiac activity in their patients — which normally occurs approximately six weeks post-conception. The law allows for limited exceptions in instances where the physician believes a medical emergency warrants performing an abortion. 

SB 8 also provides a private right of action in favor of any person, other than an officer or employee of a state or local governmental entity in Texas, against any person who performs or induces an abortion in violation of the statute, knowingly aids or abets the performance or inducement of an abortion in violation of the statute, or “intends to engage in the conduct” described above. 

The term “aids or abets” within the meaning of the legislation is defined to include “…paying for or reimbursing the costs of an abortion through insurance or otherwise, if the abortion is performed or induced in violation of this subchapter, regardless of whether the person knew or should have known that the abortion would be performed or induced in violation of this subchapter.” Sec. 171.208(a)(2).The statute allows the claimant in such cases to obtain injunctive relief sufficient to prevent the defendant from violating the statute or engaging in acts that aid or abet violations of the statute, as well as statutory damages in an amount not less than $10,000 for each abortion that the defendant performed, induced, aided or abetted. Other states have passed or are in the process of passing similar and even more restrictive legislation. For example, Oklahoma recently passed legislation that prohibits all abortions “except to save the life of a pregnant woman in a medical emergency.” 

Since Dobbs gives states broader leeway to regulate abortion services within their own borders, one significant open issue is the extent to which those states can limit employers’ ability to pay for travel expenses for their employees to obtain abortion services in other states.

ERISA’s General Preemption Provision

ERISA’s general preemption language generally provides that ERISA’s enforcement and fiduciary provisions shall supersede all State laws that “relate to” any ERISA-governed employee benefit plan. 

ERISA’s “saving clause,” however, carves out from ERISA’s general preemption provision state laws that regulate insurance. The so-called “deemer clause” effectively narrows the scope of the saving clause, by providing that employee benefit plans are not deemed to be insurance companies. 

Taken together, the saving clause and deemer clause establish that fully insured plans — and the insurance policies through which their benefits are provided — are subject to state regulation, while self-funded plans are not subject to state regulation to the same extent.

“Relates to …”

Courts — including the Supreme Court — have long struggled to define what it means for a state law to “relate to” an employee benefit plan. In Shaw v. Delta Air Lines, 463 U.S. 83, 96-97 (1983), the Supreme Court held that a state law “relates to” a plan if it has a “connection with” or makes a “reference to” a plan. 

“Reference To”

State laws have a “reference to” ERISA plans when they “…act[] immediately and exclusively upon ERISA plans…or where the existence of ERISA plans is essential to the law’s operation….” Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 320. “A law does not refer to an ERISA plan if it applies neutrally to ERISA plans and other types of plans.” Louisiana Health Serv. & Indem. Co. v. Rapides Healthcare Sys., 461 F.3d 529, 536 (5th Cir. 2006).

It is unlikely that courts would consider SB 8 to make an impermissible “reference to” ERISA plans for purpose of the preemption analysis. In N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995), the Supreme Court held that the New York statute at issue there (which required hospitals to collect surcharges from patients covered by a commercial insurer but not from patients insured by a Blue Cross/Blue Shield plan) did not include a “reference to” ERISA plans, and explained that “[t]he surcharges are imposed upon patients and HMO’s, regardless of whether the commercial coverage or membership, respectively, is ultimately secured by an ERISA plan, private purchase, or otherwise, with the consequence that the surcharge statutes cannot be said to make ‘reference to’ ERISA plans in any manner.” Travelers at 656. Since SB 8 makes no mention of ERISA plans and treats plans no differently than insurance companies or other payors, it is unlikely that courts would consider the statute to “refer to” ERISA plans for purposes of preemption analysis.

“Connection With”

The “connection with” prong of the “relates to” analysis turns on whether the state law “governs…a central matter of plan administration” or “interferes with nationally uniform plan administration.” Gobeille, 577 U.S. at 320, citing Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 148 (2001). A state law may also have an impermissible connection with ERISA plans if “‘acute, albeit indirect, economic effects’ of the state law ‘force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers.’” Gobeille at 320.

In assessing whether a state statute has an impermissible “connection with” ERISA plans, courts consider ERISA’s objectives “…as a guide to the scope of the state law that Congress understood would survive” and “the nature of the effect of the state law on ERISA plans.” Id. ERISA is “primarily concerned with preempting laws that require providers to structure benefit plans in particular ways, such as requiring payment of specific benefits, or by binding plan administrators to specific rules for determining beneficiary status.” Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474, 480 (2020). 

The Fifth Circuit Court of Appeals (whose territory includes Texas) has recognized that “[a] uniform administrative scheme serves to minimize administrative and financial burdens by avoiding the need to tailor plans to the peculiarities of the law of each state.” Bank of Louisiana v. Aetna U.S. Healthcare Inc., 468 F.3d 237, 242 (5th Cir. 2006), cert. denied, 549 U.S. 1281 (2007). Fifth Circuit cases finding preemption note that preempted claims have “at least two unifying characteristics: (1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities — the employer, the plan and its fiduciaries, and the participants and beneficiaries.” Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236, 245 (5th Cir. 1990). 

Applying these principles to SB 8, there is a strong argument that SB 8 has an impermissible “connection with” employee benefit plans to the extent its provisions could be deemed to restrict self-funded plans’ ability to pay for or reimburse participants’ travel expenses for travel to a state in which abortion services are legal.

ERISA Preempts State Laws that Impact the Relationships Between Plans and Their Participants and Beneficiaries

First, as stated above, the Supreme Court has noted ERISA’s concern with “…preempting laws that require providers to structure benefit plans in particular ways, such as requiring payment of specific benefits…” Rutledge, supra, 141 S.Ct. at 480. Although SB 8 does not require payment of specific benefits, it may be interpreted to prohibit payment of benefits that plans may otherwise provide. In that sense, SB 8 arguably “…create[s] a relationship between the plaintiff and defendant that is so intertwined with an ERISA plan that it cannot be separated.” Bank of Louisiana at 243.

SB 8 also directly impacts the relationship between the Plan and its participants and beneficiaries, by regulating the circumstances under which some participants and beneficiaries (i.e., Texas residents) may receive benefits. 

SB 8 Makes Nationally Uniform Administration of Plans Impossible

Second, there is a strong argument that SB 8 would render national uniformity of ERISA plans’ administration impossible, since it would potentially preclude plans from providing benefits to participants who are Texas residents, while still enabling them to provide those same benefits to participants who reside in other states without similar abortion restrictions. The “impact on national uniformity of plan administration” issue may turn on whether a court finds that the law’s impact on plan administration is significant enough to trigger preemption. 

Because SB 8 does not limit Texas residents’ ability to sue for aiding and abetting abortions that take place within Texas, we may see Texans suing plans and/or plan sponsors for paying for abortion-related expenses for procedures that take place outside Texas. That would impact payment of claims for any abortion-related expenses incurred by Texas residents, while allowing payment of those same claims for the benefit of residents of other states. For example, if SB 8 is deemed to subject payors to liability for (and an injunction against) paying for travel and lodging expenses for Texas residents to travel outside Texas to obtain abortion services, it would (in effect) prevent those Texas residents from receiving the same benefits as participants residing outside Texas.

Persons that invoke SB 8 in suing for paying the cost of abortions or abortion-related travel expenses may also argue that their claim is not preempted because “not every state law that affects an ERISA plan or causes some disuniformity in plan administration has an impermissible connection with an ERISA plan. That is especially so if a law merely affects costs.” Rutledge, 141 S.Ct. at 480. Specifically, plaintiffs in Texas cases may argue that SB 8 “merely affects costs,” because it subjects payors to statutory damages. However, in addition to imposing potential additional costs upon the Plan (i.e., statutory damages and attorney fees), SB 8 also provides for “injunctive relief sufficient to prevent the defendant from violating the statute or engaging in acts that aid or abet violations of the statute.” (Emphasis added.) This injunctive relief provision enables a plaintiff to seek an injunction against the payor from paying the benefit provided for by the plan, and therefore potentially precludes participants in Texas from receiving the same benefits plans provide to participants in other states that do not restrict abortion services in the same way. Thus, there is a strong argument that SB 8 does not “merely affect[] costs.” 

Because SB 8 Regulates a Key Facet of Plan Administration, it Is Arguably Preempted by ERISA Notwithstanding Any Argument That it Is an Exercise of Texas’s Traditional State Regulation of Health Issues

Plaintiffs who bring claims pursuant to SB 8 are likely to argue that there is a presumption against preemption in cases involving areas of traditional state regulation. However, through SB 8, the State may be inserting itself into a key facet of plan administration, which courts in other cases have held triggers preemption of laws that involve areas of traditional state regulation.

In cases involving state laws that required employers to provide certain benefits, the Court found that state laws requiring the provision of pregnancy benefits (Shaw) and requiring benefit plans to include minimum mental health benefits (Metropolitan Life v. Massachusetts, 471 U.S. 724 (1985)) “related to” ERISA plans and were therefore preempted by ERISA. 

Since cases such as Shaw and Metropolitan Life hold that state laws requiring plans to provide certain benefits are preempted by ERISA, an argument can also be made that state laws prohibiting benefits — such as travel benefits — are similarly preempted. That is, while Texas may be attempting to exercise its power to regulate public health, it is also attempting to regulate “…a key facet of plan administration,” as did the law found to be pre-empted in Gobeille.

SB 8 Presents an Obstacle to Administering Plans According to their Terms

Finally, as noted in Egelhoff, ERISA requires plans to specify the basis on which payments are made from a plan, and requires that fiduciaries administer plans in accordance with their terms. To the extent SB 8 prohibits payment of benefits in accordance with a plan’s terms, it arguably has an impermissible “connection with” a plan and should be found to be preempted by ERISA to the extent plaintiffs sue a plan or plan sponsor for payment or reimbursement of travel and lodging expenses incident to securing legal abortion-related services outside Texas.