Following the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, some states have enacted or considered new laws, or resurrected dormant laws, prohibiting abortion services or imposing greater restrictions than were permissible previously under Roe v. Wade. For example, such state laws may criminalize obtaining or providing abortion services. Or they may seek to penalize anyone, perhaps including residents of another state, assisting an individual in obtaining an abortion. At the same time, other states are considering laws to preserve or enhance access to abortion services.
The emergence (or reemergence) of these state laws raises a variety of preemption questions under the Employee Retirement Income Security Act of 1974 (ERISA) for employer-sponsored health plans and the employers and service providers that establish and administer those plans. A number of such plans provide (or may be considering) benefits such as coverage for elective abortion services, coverage for medications commonly prescribed in connection with abortion services, and coverage for travel costs incurred to obtain abortion services that are not available locally. (For more on this, see Travel and Lodging Benefits for Abortion Services in this issue.)
The provision of these types of benefits may be restricted or prohibited in a number of states, whether indirectly or directly, under either existing state laws or laws that may be passed in the future. Such laws may lead to possible civil or criminal sanctions under state law for employers, service providers, and others involved in offering and administering them. ERISA is widely recognized as having one of the most sweeping federal preemption provisions in all of federal law. A key question thus becomes: how, and to what extent, will ERISA preempt such state laws?
In each case, the answer depends on the nature of the benefit plan and the specific terms and application of the state law at issue. Due to the number of variables involved, the answer will likely not become clear until some specific cases are addressed through litigation or controlling guidance. But we can look at the established principles of ERISA preemption and begin to gain some sense of where ERISA preemption is more (or less) likely to impact state laws related to abortion services.
Section 514(a) of ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” Three basic elements for ERISA preemption can be extracted from this deceptively simple statutory phrase. (1) The law at issue must be a “State law.” (2) There must be an “employee benefit plan.” (3) The state law must “relate to” that employee benefit plan.
We’ll start with the easiest of these three elements. ERISA Section 514(c)(1) defines a state law as including “all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.” For this purpose, a state is defined as including “a State, any political subdivisions thereof, or any agency or instrumentality of either, which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this subchapter.”
ERISA Section 3(10) separately defines a state as including “any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, and the Canal Zone.”
In effect, then, any state or local laws or legal actions (including laws or legal actions of the District of Columbia or the listed territories) are potentially subject to preemption by ERISA Section 514(a).
ERISA does not preempt other federal law, except federal law applicable only to the District of Columbia.
ERISA Section 3(3) defines an employee benefit as “an employee welfare benefit plan or an employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan.” For purposes of this discussion, we are primarily concerned with employee welfare benefit plans.
ERISA Section 3(1) defines an employee welfare benefit plan as “any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise … medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services.”
Various elements of this definition have themselves been the subject of interpretive litigation, but for our purposes, it is sufficient to state that most employer-sponsored plans or programs providing for the payment or reimbursement of medical care (including medical-related travel) will be considered “employee welfare benefit plans” within the meaning of ERISA Section 3(1) (and therefore will be “employee benefit plans” within the meaning of ERISA Section 3(3)), whether benefits are provided directly by the employer or through an insurance policy purchased by the employer.
Determining whether a state law relates to an employee benefit plan has proven to be one of the more confusing aspects of the ERISA preemption analysis. In the interest of clarity, this article will focus on the general principles without wandering too far into the exceptions and nuances.
A state law “relates to” an employee benefit plan if it has a “connection with” or “reference to” such a plan.
Putting all of this together, state and local laws generally cannot directly regulate ERISA plans, dictate plan terms, or interfere with core ERISA functions and requirements, such as plan administration and reporting. But ERISA preemption may not reach laws that have some indirect impact on ERISA plans but nominally act only upon service providers to those plans or other parties that are not themselves a part of the “plan.”
The preceding description of preemption under ERISA Section 514 is sometimes referred to as “express preemption” under ERISA, because it is based on the express language of ERISA.
Courts have also recognized situations where state law is preempted not because it falls within the scope of ERISA’s express preemption provision but because it conflicts with the purposes and objectives of ERISA. This is sometimes referred to as “conflict preemption” or “implied preemption.”
Conflict preemption is said to apply if a state law “conflicts with the provisions of ERISA” or “operates to frustrate its objects.” Thus, for example, state community property laws have been held preempted by ERISA because they conflicted with various provisions of ERISA, such as the anti-alienation provision.
If a state law is preempted by virtue of conflict preemption, it is not necessary to also evaluate whether the law would be preempted by virtue of express preemption. This can be important, because express preemption is subject to various exceptions (discussed further below) that do not apply to conflict preemption. A state law that would otherwise be saved from express preemption, such as a criminal law of general applicability, may nonetheless be preempted by virtue of conflict preemption if it directly conflicts with a provision of ERISA or “frustrate[s] the achievement of a statutory purpose.”
Although likely not relevant in this context, a survey of ERISA preemption principles would not be complete without noting yet a third form of preemption recognized under ERISA. Generally speaking, a state law cause of action is said to be “completely preempted” by Section 502(a)(1)(B) of ERISA, if (1) the claim could have been brought as a claim for benefits under ERISA Section 502(a)(1)(B), and (2) there is no other independent legal duty that is implicated by the defendant’s actions.
Complete preemption is an exception to the well-pleaded complaint rule and allows for removal of a cause of action from state court to federal court notwithstanding that the complaint does not state a federal question on its face.
There are exceptions to ERISA preemption. Some of these exceptions are specific to the express preemption provision in ERISA Section 514 and therefore may not be exceptions to implied preemption. Other exceptions relate more generally to coverage under ERISA and therefore would be applicable to all types of preemption.
Section 514(b)(2)(A) of ERISA saves from express preemption “any law of any State which regulates insurance, banking, or securities.” This recognizes the historic role that states have played regulating in these areas.
The exception for state insurance law means that ERISA-covered plans providing benefits through a group insurance policy issued by a regulated insurer will nonetheless be indirectly governed by state insurance laws that regulate the terms and conditions of group insurance policies issued in that state, such as mandated benefit requirements. For example, if state insurance law mandates that group health insurance policies cover (or prohibits them from covering) abortion services, an ERISA-covered plan providing benefits through a group health insurance policy will be subject to that mandate (or prohibition) notwithstanding that it directly impacts the nature and scope of benefits provided under the plan, because the state law is one regulating insurers.
By comparison, a state law directly prohibiting employers in the state from covering abortion services under an ERISA-covered group health plan provided to their employees would not be saved from express preemption under this provision, because it is not a law regulating insurers.
Importantly, the so-called “deemer clause” in Section 514(b)(2)(B) of ERISA goes on to provide that no employee benefit plan “shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.” In other words, although state insurance law can continue to regulate insurers, an employee benefit plan cannot be deemed to be an insurer for purposes of applying state insurance law directly to the plan.
This protects most self-insured ERISA plans from having to comply with state insurance law, including mandated benefits under state insurance law, because ERISA will otherwise preempt those laws and the savings clause does not apply. Thus, for example, a state insurance law prohibiting group insurance policies from coverage of abortion services or abortion-related travel costs could not be applied to most self-insured ERISA plans, leaving them free to determine the scope of coverage they wish to provide. (Self-insured, multiple-employer welfare arrangements are a key exception to this general rule because, as discussed later, they can be regulated by a state as insurers.)
Section 514(b)(4) of ERISA saves from express preemption “any generally applicable criminal law of a State.” This exception has received increased focus post-Dobbs due to state laws that criminalize (or impose criminal-like penalties on) the provision of abortion services.
Although this exception has not historically been a significant consideration in the context of ERISA preemption, there is some guidance and case law that helps distinguish between criminal laws that are “generally applicable” and those that are not.
Laws that are “directed” at employee benefit plans or that apply “primarily” to employee benefit plans are not “generally applicable” and have not been saved from preemption by ERISA Section 514(b)(4). Examples include:
“Generally applicable” laws have instead been characterized as “criminal laws that apply to general conduct like larceny and embezzlement.” For example, a provision of a state consumer credit code imposing criminal penalties for violation of interest rate limitations in consumer loans has been held to be a generally applicable criminal law saved from preemption by ERISA Section 514(b)(4).
Due to the limited authorities addressing this issue, it is not clear exactly where the line is that divides “generally applicable” laws from those that are not, particularly with respect to laws that are not specifically directed at employee benefit plans but may also not prohibit a broad category of conduct, such as theft. Is a state law making it a crime to provide or obtain abortion services, or to aid or abet such conduct, a “generally applicable” criminal law? It applies to specific conduct, so in that sense is not “generally applicable” in the same way that laws criminalizing theft, assault, battery, or murder are “generally applicable.” But it also is not directed at a specific group or subgroup of actors—and certainly is not directed at employee benefit plans.
Section 514(b)(6) of ERISA provides a limited exception from preemption for state laws regulating insurance in the context of multiple employer welfare arrangements or “MEWAs.” In general, a MEWA is a health plan or other welfare benefit arrangement maintained by two or more employers that are not under common control. Although there are some distinctions between the treatment of fully insured MEWAs and self-insured MEWAs, the key point is that MEWAs can generally be regulated as insurers under state insurance law, notwithstanding the “deemer” clause in ERISA Section 514(b)(2)(B). Thus, for example, state insurance law could require a self-insured MEWA to provide mandated benefits or could prohibit the coverage or exclusion of certain benefits.
Preemption under ERISA only applies to employee benefit plans that are covered by ERISA. Church plans and governmental plans are not covered by ERISA.Therefore, those plans cannot claim ERISA preemption of state and local laws.
Whether a particular plan is a church plan or a governmental plan can itself be a complicated question to answer, but in general, church plans are plans sponsored by churches and organizations closely affiliated with churches (but not necessarily organizations with historical church association, such as some colleges, universities, and healthcare organizations),and governmental plans are generally plans sponsored by federal, state, and local governmental entities, including agencies and instrumentalities of those governmental entities.
Certain benefits provided by an employer may not rise to the level of a “plan, fund or program” and therefore may not constitute an “employee welfare benefit plan” subject to ERISA. A benefit provided by an employer that “requires no administrative scheme” has been held not to qualify as an employee benefit plan within the meaning of ERISA and therefore not subject to coverage by ERISA, including its preemption provision.
Employers will sometimes seek to avoid the application of ERISA in reliance on this argument to avoid the compliance obligations that go along with the provision of ERISA-regulated benefits. Relevant here, an employer might take the view that a standalone policy to reimburse medical-related travel expenses incurred by employees is similar to other traditional expense reimbursement policies (e.g., reimbursement of business travel expenses). That employer might argue the policy does not constitute a “plan, fund, or program” for which ERISA compliance obligations do not apply. Employers taking such a hypothetical position, however, would also not benefit from any protection offered by ERISA preemption, either.
With that background, let’s consider how state and local laws regulating coverage of abortion-related items and services and associated benefits (e.g., travel benefits) might be affected by ERISA preemption.
A useful framework to start the discussion is presented by a widely reported letter sent by the Texas Freedom Caucus to Sidley Austin LLP in July 2022. The letter recites an understanding that Sidley Austin intends to reimburse the travel costs of employees living in Texas who leave Texas to obtain abortion services. The letter also indicates that Sidley Austin provides for coverage of abortion-related items and services under its employee benefit plans, including coverage of prescription drugs utilized in connection with certain abortions. The letter outlines the following as potential legal consequences faced by Sidley Austin in connection with its benefit programs:
Sidley Austin is a private (non-governmental) employer, so its benefit plans and programs, including group health plan coverage offered to its employees, are presumed to be covered by ERISA. Would ERISA preemption apply to block application or enforcement of any of the state laws outlined in the Texas Freedom Caucus letter? The analysis and conclusions vary based on the nature and scope of the law at issue.
Two criminal laws were identified in the Texas Freedom Caucus letter. The first is an existing criminal law that establishes a general prohibition on furnishing the means for procuring an abortion. The second is threatened legislation that would criminalize an employer paying for elective abortions or abortion-related expenses, presumably including expenses to travel to obtain an abortion outside Texas.
To the extent either of these laws is applied to prohibit (or penalize) an employer from providing an ERISA-covered benefit, ERISA’s express preemption provision likely would be implicated, because that application likely would cause the law to have an impermissible “connection with” an ERISA-covered benefit plan in the same way that laws mandating or prohibiting specific benefits have a “connection with” ERISA-covered plans.
However, that is not the end of the analysis, because these are criminal laws, so consideration must be given to the exception for “generally applicable” criminal laws.
The potential legislation that would specifically prohibit paying for elective abortions or abortion-related expenses is the easier of the two to analyze. As described, it would appear to be a law “directed” at employee benefit plans and thus would not be “generally applicable.” Therefore, it would not be saved from preemption and likely would be subject to preemption under ERISA’s express preemption provision.
The existing law prohibiting furnishing the means for procuring an abortion is a closer call. It is not directed specifically at employee benefit plans. However, it also is not clearly “generally applicable” in the same way that a law criminalizing theft, embezzlement, assault, or murder would be generally applicable, since it applies specifically to conduct involving an abortion. Further case law will be needed to understand how “generally applicable” is to be interpreted in the context of a law like this.
But that is not the end of the preemption analysis either, because implied preemption may apply without regard to whether a criminal law is generally applicable. Would a law like this “conflict with the provisions of ERISA” or “operate to frustrate its objects”?
A similar analysis applies to other state criminal laws that deal specifically with abortion services but do not directly implicate employee benefit plans. Consider, for example, a state law making it a crime for a healthcare provider to provide an abortion or prescribe abortion-inducing medications, and suppose an employer is accused of aiding and abetting such a crime by providing payment for those services or medications through an ERISA-covered employee benefit plan. It is not clear whether a law of this nature would be considered a generally applicable criminal law, but application of the law to penalize an employer for offering ERISA-covered benefits might be said to “frustrate” the objects of ERISA, thereby resulting in preemption under implied preemption principles.
In summary, preemption of state criminal laws by ERISA will continue to be a gray area until there is further clarity on what it means for a law to be “generally applicable” or to “frustrate” the objects of ERISA. However, any laws that directly implicate employee benefit plans, such as the proposed criminal law described in the Texas Freedom Caucus letter, would seem likely to be held preempted by ERISA. Laws that are more general in nature but are nonetheless applied to penalize an employer for providing specific ERISA-covered benefits are at least arguably preempted by reason of conflicting with the purposes of ERISA.
Two civil laws were also identified in the Texas Freedom Caucus letter: One, the Texas Heartbeat Act, under which it is alleged an employer might have civil liability in connection with funding the costs of a drug-induced abortion undertaken in another state but for which a dose of medication was taken following the patient’s return to Texas; and two, a potential civil law that would provide for civil penalties on anyone paying for costs related to an elective abortion (including travel costs) obtained by a Texas resident, regardless of where the abortion occurs.
As with the criminal laws discussed previously, to the extent either of these laws is applied to penalize an employer providing an ERISA-covered benefit, ERISA’s express preemption provision likely would be implicated, because that application would likely cause the law to have an impermissible “connection with” an ERISA-covered benefit plan. Applying state law in that manner would interfere with nationally uniform plan administration by requiring employers to design and administer their plans differently in restrictive states than in non-restrictive states.
For these laws, there would not appear to be any exception that would save them from express preemption. For civil laws, the principal exception is the carveout for state insurance laws in the context of fully insured plans. The Texas Heartbeat Act is a health law, not an insurance law, and nothing indicates the potential statute would be an insurance law either. Even if a future law of this nature is enacted as an insurance law and therefore applicable to insurers and fully insured ERISA plans, it would still be preempted by ERISA as applied to self-insured ERISA plans by virtue of the ERISA “deemer clause.”
Other types of civil laws attempting to restrict or regulate the coverage of abortion services and related benefits by an ERISA-covered plan would similarly be likely to face preemption. Given state-by-state differences, there would be an argument in each case that any such laws would interfere with nationally uniform plan administration, thereby resulting in an impermissible “connection with” ERISA-covered plans.
Some laws may also impact a “central matter of plan administration,” which would also create an impermissible “connection with” ERISA-covered plans. Consider, for example, a state law that requires a health plan to report information to a state agency about individuals (or their healthcare providers) who have obtained abortion or other reproductive services for which claims have been paid or processed by the plan. The HIPAA privacy rule may not preclude a plan from complying with such reporting, but state laws requiring the reporting of information by a health plan have been held to be preempted on the basis that reporting requirements are a central matter of plan administration.
In short, the preemption analysis is more straightforward for civil laws than for criminal laws, largely due to the more extensive body of case law outlining its scope and the limited exceptions that may apply. It is anticipated that most civil laws attempting to restrict or regulate the coverage of abortion services and related benefits by an ERISA-covered plan or employer would likely be preempted.
ERISA preemption should be helpful for ERISA-covered benefit plans maintained by Sidley Austin and other similar employers that may provide for coverage of abortion-related items and services. But what about the lawyers involved with establishing, administering, or advising those plans? Will ERISA preempt laws or rules that might be used to discipline or disbar them for that conduct?
It does not appear the issue has been squarely addressed in any prior cases. In general, ERISA preemption is limited to laws and rules that have a direct impact on an ERISA-covered benefit plan and does not extend to laws and rules regulating persons who may be within the orbit of an ERISA-covered benefit plan but are not themselves the plan. A common example is state laws regarding licensure of third-party administrators for benefit plans, which have been said not to “relate to” ERISA-covered plans “any more than licensing statutes for other individuals such as attorneys, physicians, chiropractors or accountants who may, in the course of their business service ERISA plans or who may service ERISA plans exclusively.” State laws imposing requirements on drug pricing practices of pharmacy benefit managers have similarly been held to be outside the scope of ERISA preemption. Thus, as a general proposition, we would not expect state laws and rules regarding attorney licensure and discipline to be preempted by ERISA, since they do not relate to ERISA-covered plans.
But context matters, and there may be preemption arguments that distinguish the attorney discipline scenario raised by the Texas Freedom Caucus letter from other more traditional cases involving state licensure and regulation of non-plan persons, such as third-party administrators (TPAs) and pharmacy benefit manager (PBMs).
This will remain an uncertain area unless and until there is decisional law or controlling guidance interpreting the scope of ERISA preemption in this context. Undoubtedly, no one wants to be the test case. But there are at least arguments that ERISA preemption could prevent attorneys from being subject to discipline for their conduct in connection with ERISA plans.
The state and local laws regulating coverage of abortion-related items and services that might be subject to ERISA preemption are not limited to those identified in the Texas Freedom Caucus letter. The laws described in the letter have been used as examples to illustrate the concepts of the preemption analysis that may be applied to any state or local laws.
A key area not implicated by the Texas Freedom Caucus letter is state insurance law. A state might enact insurance law provisions that either prohibit coverage of abortion-related items and services or require coverage of those items and services by group health insurance policies issued in the state or covering individuals residing in the state.
As noted above, state insurance laws are generally saved from preemption when applied to fully insured plans but, by virtue of the “deemer clause,” are generally preempted when applied to self-insured plans. Thus, a fully insured plan generally would be required to comply with a state mandate to cover, or not to cover, abortion-related items and services, while a self-insured plan generally would be permitted to determine the scope of its coverage without regard to state insurance law.
A complicated question that goes beyond the scope of ERISA preemption is the extent to which state insurance law may be applied extraterritorially. Consider, for example, an employer headquartered in State A that also has significant operations in State B and covers all of its employees in both states under a group health insurance policy issued in State A. What if state insurance law in State A mandates coverage of items and services related to elective abortions, but state insurance law in State B prohibits any policy covering residents of State B from covering such items and services? Is the employer required to comply with both states’ laws?
ERISA preemption does not help resolve the question. The insurance savings clause in ERISA Section 514(b)(2)(A) tells us the group health insurance policy purchased by the employer must comply with state insurance law, but it does not tell us which state’s insurance law applies in the case of competing state laws. That is a question to be addressed under state insurance law (perhaps without optimal clarity).
ERISA preemption is notoriously complicated. Because the ERISA statute itself offers little guidance, the contours of ERISA preemption have developed almost exclusively through case law. The case law, in turn, offers principles that have been described as “vague” and offering “little guidance or predictability.” It would, therefore, be folly to predict exactly how ERISA preemption will affect an emerging and uncertain area like state regulation of plans, programs, and policies covering abortion-related items and services. However, it appears ERISA preemption will play an important role in navigating some of the more direct efforts by state and local jurisdictions to regulate whether and to what extent employer-sponsored health plans may or must provide benefits related to abortion services.
