In the United States, you can get tax deductions for your abortion if your total health care costs are high enough. That did not change with the Supreme Court ruling last week.
If you work for a non-governmental employer that offers health insurance that covers abortion, the federal government will help there too. That hasn’t changed.
If you have the privilege of having a good benefits package through your job, you can use an employer-sponsored flexible spending account to set aside money that can be paid for an abortion and related travel expenses, and you won’t have to pay federal income tax on it. money you put into the account.
That didn’t change with last week’s ruling, either, meaning federal employees, including clerks for Supreme Court justices, can use federally subsidized funds to pay for abortions.
So what would have to change to make these subsidies disappear? Here’s a short course on how they work, some surprising places where there are no subsidies at all, and an explanation of what would need to be done to change this.
Employer health insurance
Employer-provided health insurance generally works like this: your employer pays part of the cost and you pay the rest.
The federal government makes this easier by shielding your portion of the expense — the line item on your paycheck lets you know what’s gone before your allowance lands in your bank account — from personal income tax as long as your employer plans your correctly.
So if your plan pays for abortion, the federal government has enabled it with what is basically a discount. (By the way, this isn’t how it works for most federal employees, we’ll get to it in a moment.)
The US Internal Revenue Code regulates the tax-advantaged status of health insurance premiums. And the code can only be changed by a resolution of Congress, subject to a presidential veto.
Tax deduction for medical expenses
People who itemize the deductions on their tax returns can deduct medical expenses as long as they exceed 7.5 percent of their adjusted gross income.
And abortion — whether through pills or a procedure — is a medical expense. Internal Revenue Service Publication 502 defines medical expenses as “the cost of diagnosing, curing, mitigating, treating or preventing disease, and for the purpose of affecting any part or function of the body.”
(By the way, Publication 502 is also the leading eligibility document for those of you who have health savings accounts — the tax-friendly vehicles you can only contribute to if you also use a high-deductible health insurance plan.)
People who have to travel for an abortion may spend more on getting to a clinic than on the procedure itself. Most travel expenses also qualify for medical expenses in this regard, according to the IRS, with certain limits.
How might the list of eligible medical expenses change? Again, an act of Congress — or an aggressive change in IRS guidance under, say, another presidential administration — would be necessary. Republican senators are trying to remove abortion from the list.
Flexible Spending Accounts
Millions of people have access to something called a flexible health care spending account. Here, an employer—along with a third-party administrator—allows you to put money aside from your paycheck, up to annual limits, on which you don’t have to pay federal income tax. Then you can use that money for eligible medical expenses that your health insurance doesn’t cover.
Publication 502 applies here too, at least in theory. Employers have the option, if they wish, to exclude certain expenses that they do not want to be covered by their flexible spending account. These exclusions sometimes already include abortion.
Can more employers rule it out? Here’s what they might be concerned about: Your medical procedures must be legal.
So consider this possibility: An employee in a state where abortion is almost completely illegal orders abortion pills from her home and then submits the receipt for reimbursement from the flexible spending account. Is it a covered expense? Perhaps, though at some point a state may try to prosecute someone who takes the pills.
Then there’s the worker who travels from a state where abortion is almost completely illegal to have an abortion in a state where it’s still legal. That procedure may seem fine for reimbursement, but which state laws should prevail? Or could it depend on where the company’s headquarters is – perhaps a third state? Again, the risk here may ultimately end up with the person getting the abortion and not the employer or the plan administrator.
We submitted expense eligibility questions to HealthEquity, a leading third-party administrator of these plans. It seems ready to approve abortion-related expenditures in all of the above cases, at least for the time being.
Here’s the company’s reasoning: When it comes to employee benefit plans, federal tax laws and regulations should be the primary regulatory mechanism. And on June 24, Attorney General Merrick B. Garland issued a statement noting that states cannot prevent residents from traveling to another state for care. In addition, he pointed out that abortion pills were federally approved.
“They should still be legal even for individuals in states that prohibit abortion,” said Nicky Brown, HealthEquity’s vice president for advocacy and public affairs, referring to Mr. Garland’s statement.
This makes sense to some degree, but no entity in a position of authority has weighed in with specificity thus far.
“We’re just six days away from a ruling that doesn’t talk about benefits,” said William Sweetnam Jr., the legislative and technical director of the Employers’ Council for Flexible Remuneration. He was a benefits counselor at the Treasury Department, where he and the attorneys reporting to him dealt with these types of questions.
Mr. Sweetnam wondered if there could be backlash against companies allowing people to pay for abortions through flexible spending accounts (assuming users even want to leave a paper trail in this new legal environment).
“Companies really should talk to their legal counsel to determine their risk tolerance in providing these types of benefits,” Mr. Sweetnam said.
Amy M. Gordon, a partner at Winston & Strawn, is one of those benefit attorneys. “We cannot definitively say that ‘this’ is the answer and there is no risk of relying on that answer,” she said. “I really think it will depend on enforcement.” Future regulatory guidelines will also be important.
Again, Congress has the option to change the list of lawsuits discussed here if it has the votes. A few years ago, menstrual products were eligible for flexible spending reimbursement.
Flexible spending accounts don’t help people who don’t work for employers who offer them, and those on lower, part-time, or freelance incomes are more likely to fall into this category. If they qualify for Medicaid, the public health program usually aimed at lower-income households, both federal and state money will pay for the program. Then the states do the administration – and ultimately decide how wide the coverage will be.
Federal law does not allow federal funds to be used to pay for abortions unless the pregnancy is the result of rape or incest or causes a life-threatening condition for the woman.
States can choose to cover abortion in Medicaid plans outside of those limited circumstances set forth in what is known as the Hyde Amendment, as long as they fund it with state money. According to the Kaiser Family Foundation, 16 states have had such policies since last year.
The principles of the Hyde Amendment have also made their way into federal employee benefit programs. Those employees don’t have coverage for most abortions in their health insurance plans, though Hyde’s reach hasn’t expanded to their flexible spending accounts yet. Could it happen? Many dozens of people are probably already trying to make it happen, in a way that would survive the Supreme Court investigation.
Some federal workers are now urging the Biden government to give all of these workers paid time off — that doesn’t come from sick or vacation pay — to travel for abortions.
