A recent Alabama Supreme Court case, LaPage v. Center for Reproductive Medicine, has made headlines and raised questions about the legal implications of providing in vitro fertilization (IVF) benefits. During IVF, eggs are fertilized outside the body to create an embryo, and in the case at hand, the parents sued after several embryos were accidentally destroyed. The court ruled that frozen embryos are children and are protected from destruction under the state's wrongful death law. This ruling is significant at this time because, in the wake of the Dobbs decision, which overturned Roe v. Wade, there has been a recent trend by many employers to offer increased coverage of fertility benefits.
What Are the Implications for Plan Sponsors?
The LaPage decision raises a number of potential benefits considerations for plan sponsors:
Should the Plan Pay?
The first question for plan sponsors to consider is whether, in light of the fact that embryos can no longer legally be destroyed in Alabama, the plan can or should cover the cost of preserving embryos in perpetuity (or as long as modern science will allow). To be preserved, the embryos must be kept at extremely cold temperatures, which is very expensive.
To be treated as a tax-advantaged medical expense under a plan, the cost of embryo preservation would need to meet the definition of "medical care" under the Internal Revenue Code (the Code). Medical care is defined in Section 213(d)(1)(A) as amounts paid "for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." Plan sponsors have historically justified the cost of preserving the embryos for some period of time on the basis that the covered participant is receiving medical care for assistance with the ability to conceive and/or carry a child via the IVF process. However, plan sponsors should consider whether the frozen embryo would have to be considered a dependent, as defined under the plan and Code, for the long-term cost of preserving the embryo to be covered under the plan's terms. Query whether the frozen embryo could be deemed to have the same principal place of abode as the taxpayer (as required under Code Section 152(c)(1)(B).) On the other hand, plan sponsors are left to wonder whether the cessation of payment for preservation would be punishable under Alabama's wrongful death statute.
Should the Plan Provide Travel Benefits to Participants Seeking IVF?
While the initial response of fertility clinics in Alabama was to stop IVF treatment, the Alabama legislature has since taken steps to protect IVF doctors from criminal or civil liability and otherwise protect IVF services. Nevertheless, given the emerging legal complexity of IVF in Alabama, plan sponsors should consider whether to add or extend travel benefits to cover travel expenses so participants can access IVF benefits in other states.
As we noted in the wake of the Dobbs decisions in 2022, Code Section 213(d) covers certain amounts paid for travel for medical care, and as a result, a travel benefit to cover IVF could be provided by a group health plan. In fact, the broad travel benefits added to many plans following the Dobbs decision might already cover this type of travel benefit. Plan sponsors should proceed with caution if a travel benefit is not included as part of a group health plan because travel benefits offered outside the terms of a group health plan could unintentionally create a group health plan that would raise compliance issues under the Affordable Care Act, ERISA, COBRA, and HIPAA. As a result, we generally do not recommend that employers offer travel benefits for medical care outside of their group health plans.
Can Employers Offer a Travel Benefit to Transport Embryos for Destruction?
Plan sponsors should also consider whether to cover travel expenses where the purpose of the travel is to transport the embryo outside the state of Alabama for destruction. This analysis is complicated by moral questions and the unanswered issue of whether Alabama would allow for the transportation of frozen embryos across state lines. Under a strict reading of the Code, payment of travel expenses by the group health plan must be for medical care, so the issue becomes whether the destruction of an embryo qualifies as medical care. It would be difficult to argue that travel for destruction would be for the diagnosis, cure, mitigation, treatment, or prevention of disease of the embryo, so the travel would have to be considered part of the covered IVF process for the participant parent.
Conclusion
Because this is an emerging legal change that is quickly evolving at this time, plan sponsors should consider these issues carefully and avoid rushing to make any definitive decisions. It is worthwhile to remind plan sponsors that even if they do not have work locations in Alabama, given the prevalence of remote work today, they might have remote employees or employees who have a covered dependent residing in Alabama to whom these new laws would apply.
Plan sponsors might get questions from employees because this is a hot topic receiving a lot of media attention, so it would be wise to have a prepared response that has been approved by the executive team and legal counsel and can be provided consistently to all inquiries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
