In the United States, you can get a tax deduction for your abortion if your overall health care expenses are high enough. That did not change with the Supreme Court ruling last week.
If you work for a non-government employer that provides health insurance that covers abortion, the federal government helps there, too. That has not changed.
If you’re privileged to have a nice benefits package through your job, you can use an employer-sponsored flexible spending account to set aside money that can pay for an abortion and related travel expenses, and you don’t have to pay federal taxes . income taxes on the money you deposit in the account.
That also didn’t change with last week’s ruling, which means federal employees, including clerks to Supreme Court justices, can use federally subsidized funds to pay for abortions.
So what would have to change for these subsidies to go away? Here’s a short course on how they work, some surprising places where there is no subsidy, and an explanation of what would have to happen for this to change.
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 share of the cost (the line on your pay stub that lets you know what’s missing before your compensation hits your bank account) from personal income tax, as long as Have your employer set up your plan correctly.
So if your plan pays for abortion, the federal government has made it easy for you at what is, effectively, a discount. (By the way, that’s not how it works for most federal employees; we’ll get to those in a bit.)
The US Internal Revenue Code governs the tax-favored status of health insurance contributions. And the code can only be changed by an act of Congress, subject to a presidential veto.
Tax deductions for medical expenses
People who itemize deductions on their tax returns can deduct medical expenses as long as they add up to more than 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 a medical expense as “costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.”
(By the way, Publication 502 is also the governing document on eligible expenses for those of you who have health savings accounts, the tax-advantaged vehicles you can contribute to only if you also use a deductible health insurance plan. tall).
People who need to travel for an abortion may spend more to get to a clinic than for the procedure itself. Most travel expenses are also eligible medical expenses in this context, according to the IRS, subject to certain limits.
How might the list of eligible medical expenses change? Again, an act of Congress would be necessary, or an aggressive change in IRS guidance under, say, a different presidential administration. Republican senators are trying to remove abortion from the list.
Flexible spending accounts
Millions of people have access to something called a health care flexible spending account. Here, an employer, along with a third-party administrator, allows you to set aside money from your paycheck, up to annual limits, on which you don’t have to pay federal income taxes. You can then use that money for eligible medical expenses that your health insurance doesn’t cover.
Publication 502 also applies here, at least in theory. Employers have the ability, if they wish, to exclude some expenses that they do not want their flexible spending accounts to cover. Already, these exclusions sometimes include abortion.
Could more employers exclude him? This is what they may be concerned about: their medical procedures must be legal.
So consider this possibility: An employee in a state where abortions are almost completely illegal orders abortion pills delivered to her home, then presents the receipt for reimbursement from the flexible spending account. Is it a covered expense? Perhaps, although at some point a state may try to prosecute someone who takes the pills.
Then there is the employee who travels from a state where abortion is almost totally illegal to get an abortion in a state where it is still legal. That procedure may seem correct for reimbursement, but which state laws should prevail? Or could it depend on where the company’s headquarters are located, perhaps in some third state? Again, the risk here could eventually lie with the person performing the abortion and not with the employer or plan administrator.
We put expense eligibility questions to HealthEquity, a leading third-party administrator of these plans. He appears to be on the verge of approving abortion-related spending in all of the above cases, at least for now.
Here’s the company’s reasoning: When it comes to employee benefit plans, federal tax laws and regulations are supposed to be the primary rule-making mechanism. And on June 24, Attorney General Merrick B. Garland issued a statement saying states cannot prevent residents from traveling to another state for care. Furthermore, he pointed out that the abortion pills were approved by the federal government.
“It should still be legal to get them even for people in states that ban abortions,” Nicky Brown, vice president of advocacy and public affairs at HealthEquity, said, citing Mr. Garland’s statement.
This makes some logical sense, but no entity in a position of authority has intervened with specificity yet.
“We’re only six days away from a ruling that doesn’t talk about benefits,” said William Sweetnam Jr., legislative and technical director for the Employers Council on Flexible Compensation. He used to be a benefits tax consultant at the Treasury Department, where he and the attorneys who reported to him tackled questions like these.
Mr. Sweetnam wondered if there might be a backlash against companies that have allowed 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 what their risk tolerance is in providing these types of benefits,” Sweetnam said.
Amy M. Gordon, a partner at Winston & Strawn, is one such benefits attorney. “We can’t say definitively that ‘this’ is the answer and there is no risk in relying on that answer,” she said. “I really think it’s going to depend on law enforcement.” Future regulatory guidance will also be important.
Again, Congress has the ability to change the list of procedures covered here if it has the votes. A few years ago, menstrual products became an eligible expense for flexible spending account reimbursement.
Flexible spending accounts don’t help people who don’t work for the employers that offer them, and people with lower incomes, part-time or self-employment are more likely to fall into this category. If they qualify for Medicaid, the public health program that is primarily for low-income households, both federal and state money pay for the program. The states then do the administration and ultimately decide how broad the coverage will be.
Federal law does not allow federal funds to be used to pay for abortions, except when the pregnancy is the result of rape or incest or causes a life-threatening condition.
States can choose to cover abortion in Medicaid plans beyond those limited circumstances, established in what is known as the Hyde Amendment, as long as they fund it with state funds. Sixteen states had such policies as of last year, according to the Kaiser Family Foundation.
The principles of the Hyde Amendment have also found their way into federal employee benefit programs. Those workers do not have coverage for most abortions in their health insurance plans, though Hyde’s reach has not yet been extended to his flexible spending accounts. It could happen? Many dozens of people are probably already trying to make it happen, in a way that will survive Supreme Court scrutiny.
Some federal employees are now pushing the Biden administration to give all those workers paid time off — not from sick or vacation pay — to travel for abortions.