Will Employee Benefits Depend on Whether Embryos Have Legal Rights?

Employers Consider Post-Dobbs Playbook in Dealing with Alabama Ruling on IVF Treatments

by Benjamin Conley and Diane Dygert

at Seyfarth Shaw LLP

Seyfarth Synopsis: The Alabama Supreme Court recently ruled that cryogenically frozen embryos are children and are protected from destruction under state law. This is the latest in a series of post-Dobbs judicial rulings and state laws that have upended access to reproductive healthcare. In the wake of the ruling, employers are considering creative options to aid employees in Alabama whose family planning goals have been disrupted. 

What Was the Case About?

While the Alabama Supreme Court’s decision has been widely covered in the news, we thought it was worth providing some background for context.

Three sets of couples, who had sought treatments to help with infertility issues from the Center for Reproductive Medicine, P.C. (the “Clinic”), brought the case against the Clinic as well as the hospital associated with the Clinic, the Mobile Infirmary Medical Center (the “Hospital”). As part of those treatments, each couple underwent in vitro fertilization (“IVF”) and had created several embryos. While the couples had some of their embryos implanted and successfully became parents of healthy children, other “extra” embryos were cryogenically frozen and maintained at the Clinic.

Unfortunately, a patient of the Hospital wandered out of his room and into the Clinic’s area where the embryos were maintained. He managed to remove the couples’ embryos, but dropped them from his hands due to their extreme cold. As a result, the embryos were destroyed.

The couples then sued the Clinic and the Hospital claiming wrongful death of a child under Alabama’s 1872 statute—the Wrongful Death of a Minor Act (the “Act”)—or in the alternative, claiming common law negligence if the embryos were considered property (and not a child within the meaning of the Act). The lower trial court dismissed their claims under both sets of theories, finding with respect to the Act that the embryos were not a child with the meaning of the Act. The couples then appealed to the Alabama Supreme Court.

What Did the Court Say?

The main opinion, authored by Justice Mitchell, was very narrowly crafted and stated that it chose to not address ethical issues of IVF or the public-policy implications of treating embryos as humans. The only issue the Court weighed in on was whether the Act considers embryos to be children. The opinion then posited that “the relevant statutory text is clear: the [Act] applies on its face to all unborn children, without limitation.” The decision also averred that all parties (including the Clinic and the Hospital) and “all members of this Court, agree that an unborn child is a genetically unique human being whose life begins at fertilization and ends at death.”

The opinion then provocatively frames the question before the Court as “whether there exists an unwritten exception to that rule for unborn children who are not physically located ‘in utero’— that is, inside a biological uterus—at the time they are killed.”  Unsurprisingly, framed in that manner, the Court determined that there was not such an exception.

Interestingly, the Chief Justice authored a special concurrence. This is the part of the opinion that has received a lot of press coverage, as Chief Justice Parker quotes extensively from religious texts to discuss his view of the meaning of the “sanctity of unborn life” found in the Alabama Constitution, which was not at issue. This reliance on religious principles was not in the main decision and thus not part of the holding.

Finally, Justice Cook authored a dissent, in which he argued against the majority’s expansive interpretation of the Act, which was passed in 1872, a time in which the drafters of the statute could not possibly have envisioned IVF and so could not possibly have considered embryos as children. The evolution of the Act over the years to cover first unborn children and now embryos, the dissent argues, was inappropriately advanced by the courts. Instead, he believes the courts should limit themselves to the language and meaning of the statute as passed. Any expansion of that meaning is a matter for the legislature and not the courts.

What Does this Mean for IVF Treatments for Health Plans?

While this is all very interesting to contemplate generally, in our role as employee benefits legal advisors, we want to focus on what this decision means for plan sponsors and plan participants. We have attempted to outline of few of the potential issues below.

Coverage for maintenance of embryos in frozen state

If embryos are children, this decision raises the practical question of what can happen to “excess” embryos once a couple successfully has the healthy child/ren they wanted. In the normal course—that is before this decision—the excess embryos would be destroyed. In fact, each couple in the Alabama case had signed a contract with the Clinic that their excess embryos could be destroyed, either directly or as a result of being used in research. It would appear these types of contracts would now be void in Alabama, as a person cannot contractually agree to kill a child, which would be the result of the destruction of the embryos.

To remain viable, an embryo must be frozen and maintained at extremely cold temperatures. There has been some chatter that if an embryo is considered a child, then that embryo could not be frozen, which of course would mean the embryo would not remain viable, creating a vicious circle. The main opinion, however, seemed to accept that an embryonic “child” may be frozen.

So, are parents and fertility clinics required to maintain the embryos in a frozen state forever?  Scientifically, there may be a limit as to how long this could go on for, but it could be decades. The cost of maintaining embryos is extremely large and raises the next question of who pays for that cost—the perspective parents, the fertility clinic, or even a health plan?

For a health plan to pay to maintain a frozen embryo, that service would have to be considered incurred for “medical care” under Internal Revenue Code Section 213(d), which means for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body. However, the IRS has not directly addressed the issue of whether cryogenic preservation of an embryo constitutes a qualifying medical expense.

While there is some support for the premise that short-term freezing may be a qualifying expense (e.g., because the donor is undergoing a medical treatment), there has historically been a debate as to whether long-term storage would qualify. This ruling may shift that debate. The maintenance in a frozen state would certainly not fit the definition for medical care of the covered employee, spouse or domestic partner. But, if the embryo is considered a covered child of the employee under the health plan, and maintenance in a frozen state is necessary to remain “alive” so to speak, it could conceivably be covered. Moreover, if the law prohibits destruction or potentially transportation of the embryo (more on that below), there’s a stronger argument that the preservation is primarily for the purpose of receiving the medical care (not for lifestyle or convenience reasons).

This raises the question of whether an embryo could be a covered dependent under an employer’s health plan, which strives to meet the requirements of the Section 105 of the Internal Revenue Code for the coverage and underlying benefits to have tax preferred status. This would, in turn, depend on whether taxpayers could consider an embryo a dependent under IRC Section 152. While that is a result that seems far-fetched at the moment, commentators have pointed out that the logical implications of the Court’s ruling would allow Alabama taxpayers to take a deduction on their state tax returns.

Transportation of embryos outside of state for destruction

As an alternative to maintaining the excess embryos in a frozen state indefinitely, couples (or even providers) may consider transporting the embryos out of Alabama to a different state where they could be destroyed. For purposes of this article, we are putting aside whether Alabama would allow such transport or would consider it transportation with the intent to commit murder. Instead, we are focused on whether a health plan could cover such travel.

In our post on the impact of the Dobbs decision, we discussed travel benefits for women leaving their state of residence to access an abortion in a state where it is legal, and concluded that travel could be a covered benefit if access to the necessary medical care is not reasonably available to them in their home geographic area.

In this case, however, none of the employee, spouse, domestic partner, or embryo are traveling to directly access health care. So, in that sense it diverges from the earlier analysis on travel for abortion access.  However, transportation expenses could arguably be covered if embryonic destruction would have been a covered benefit if done in Alabama, but as that is not available, the embryos have to be transported to complete that aspect of the fertility-related health service.

Travel and transportation for access to IVF Treatments out of state

Because of the foregoing issues, several fertility clinics in Alabama (including the University of Alabama Birmingham—the largest in the state) have announced that effective immediately they are no longer providing IVF treatments. The cessation of service even includes implanting embryos that have already been created. This has left many couples in the lurch who were in the process of IVF and have embryos not yet implanted.

Presumably, covering travel benefits for purposes of initiating IVF treatments outside of Alabama would be a covered benefit for the same reasons as accessing abortion.

A closer question would be whether the cost of transporting embryos from Alabama to another state for the purpose of implanting them, would be covered. If IVF is a covered benefit, and travel for the prospective parent is covered, it could extend to transportation of the embryo as a necessary part of the IVF treatment itself. However, this question may be moot right now, as it is our understanding that Alabama fertility clinics are not allowing couples to transport their embryos out of state, regardless of the reason. This appears to be based on a concern that the embryos would not survive the transport.

This article touches on just a few of thorny issues that plan sponsors will face when confronting coverage issues for their employees and dependents in Alabama. We will be monitoring developments in closely and note that there is already an effort underway in the Alabama legislature to protect access to IVF.