In the United States, you can deduct your abortion for tax purposes if your total health care expenses are high enough. That hasn’t changed with last week’s Supreme Court ruling.
If you work for a non-government employer that offers health insurance that covers abortions, the federal government will help there too. That hasn’t changed.
If you’re privileged to have a good benefits package through your job, you can use an employer-sponsored flexible spending account to set aside money for an abortion and associated travel expenses, and you don’t have to pay federal income taxes on that Money you deposit into the account.
That hasn’t changed with last week’s ruling, which means federal employees, including employees of 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 quick course on how they work, some surprising places where there are no subsidies at all, and an explanation of what would need to happen for that to change.
employer health insurance
Employer 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 paycheck that lets you know what’s gone before your compensation lands in your bank account — from personal income tax, as long as your employer sets your plan up correctly.
So if your plan pays for abortion, the federal government has made it easy with a discount. (It doesn’t work that way for most federal employees, by the way; we’ll get to that in a moment.)
The US Internal Revenue Code regulates the tax-advantaged status of health insurance contributions. And the code can only be changed by an act of Congress, subject to presidential veto.
Tax deductions for medical expenses
People who file the deductions on their tax returns can deduct medical expenses as long as they’re more than 7.5 percent of their adjusted gross income.
And abortion – whether by pills or a procedure – is a medical issue. Internal Revenue Service Publication 502 defines a medical expense as “the cost of diagnosing, curing, alleviating, treating, or preventing any disease and for the purpose of affecting any part or function of the body.”
(By the way, Publication 502 is also the authoritative document on eligible expenses for those of you who have health savings accounts—the tax-advantaged vehicles you can only contribute to if you also have a high-deductible health plan.)
People who must travel for an abortion may spend more on getting to a clinic than on the procedure itself. Most travel expenses are also eligible under the IRS for this purpose, subject to certain limits.
How might the list of eligible medical expenses change? Again, an act of Congress — or an aggressive change in guidance from the IRS under, say, a different presidential administration — would be necessary. Republican senators are trying to remove abortion from the list.
Flexible spending accounts
Millions of people have access to what is known as a flexible health spending account. Here, an employer—along with an outside 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. Then you can use that money for reimbursable medical expenses that your health insurance won’t cover.
Again, at least in theory, Bulletin 502 applies. Employers may choose to exclude some expenses that they do not want their flexible spending accounts to cover. Even now, these exclusions sometimes include abortions.
Could more employers exclude them? Here’s what you might be concerned about: Your medical procedures must be legal.
So consider this possibility: An employee in a state where abortion is almost entirely illegal orders abortion pills to her home and then submits the receipt for reimbursement from the flexible spending account. Is it a reimbursement? Maybe, although at some point a state will try to prosecute someone who takes the pills.
Then there is the employee who travels from a state where abortion is almost entirely illegal to have an abortion in a state where it is still legal. This process may seem fine for reimbursement, but which state laws should take precedence? Or could it depend on where the company is headquartered – maybe in a third country? Again, the ultimate risk could end up with the person performing the abortion, rather than the employer or plan administrator.
We asked HealthEquity, a leading third-party administrator of these plans, about eligibility. It appears willing to approve 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 should be the primary rule-making 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. He also pointed out that abortion pills are legal nationwide.
“Even for individuals in states that ban abortions, they should still be legally available,” said Nicky Brown, HealthEquity’s vice president of advocacy and public affairs, citing Mr Garland’s statement.
This makes some logical sense, but so far no entity in a position of authority has actually interfered.
“We’re only six days away from a decision that doesn’t involve benefits,” said William Sweetnam Jr., legislative and technical director of the Employers Council on Flexible Compensation. He was formerly a welfare accountant for the Treasury Department, where he and his attorneys handled issues like these.
Mr Sweetnam wondered if there might be a backlash against companies that allowed people to pay for abortions through flexible spending accounts (assuming users would even want to leave a paper trail in this new legal environment).
“Companies really should talk to their legal counsel to determine what their tolerance for risk is in providing these types of benefits,” said Mr. Sweetnam.
Amy M. Gordon, a partner at Winston & Strawn, is one of these social attorneys. “We can’t say definitively that ‘that’ is the answer, and there’s no risk in relying on that answer,” she said. “I really think it will depend on enforcement.” Future regulatory guidance will also be important.
Again, Congress has the power to change the list of procedures covered 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 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 designed primarily for low-income households, the program is funded from both federal and state funds. Then the states take over the administration – and ultimately decide how broad the coverage will be.
Federal law does not allow federal funds to be used to fund abortions unless the pregnancy results from rape or incest or causes a life-threatening condition for the woman.
States can choose to cover abortion in Medicaid plans beyond the limited circumstances set forth in what is known as the Hyde Amendment, as long as they fund it through state funds. Sixteen states had such policies last year, according to the Kaiser Family Foundation.
The principles of the Hyde Amendment have also found their way into government employee benefit programs. These workers don’t have coverage for most abortions in their health insurance plans, though Hyde’s reach hasn’t yet extended to their flexible spending accounts. Could it happen? Many dozens of people are probably already trying to accomplish this in a way that would stand up to Supreme Court scrutiny.
Some federal workers are now urging the Biden administration to give all these workers paid time off — not from sick pay or vacation pay — to travel for abortions.