Examples of common hazardous activities and hobbies includeskydiving, bungee jumping, automobile racing, and travel tocountries with advisory warnings. (Photo: Shutterstock)

In recent weeks, many states have created plans to slowlyreopen the economy. In addition to re-openingbusiness in phases, these plans also include modifying oreliminating certain social distancing requirements as well as "stayhome" or "shelter in place" orders.

Not surprisingly, domestic and foreign travel has been at anall-time low over the last several months due to the vast array of"stay at home" orders and almost universally closed borders.Additionally, many employers in the United States created companypolicies either significantly reducing or banning business travel.As states and foreign nations begin to reopen and relax travel bansand border closures, travel for business and leisure is likely toincrease.

Related: Crucial issues to consider when evaluating yourcompany's business travel insurance program

Employers across the country have had to scramble to evaluateand adjust business procedures, including difficult decisions tolay off and furlough employees. Employers with self-funded healthplans have also had to make quick changes to their Summary PlanDescriptions and Plan Documents ("SPD/PDs") and other planmaterials to address coverage for employees during layoffs,furloughs, and other leaves of absence and to address regulatorychanges requiring the coverage of COVID-19 testing.

At the onset of the COVID-19 pandemic, many employers and planswere concerned about how costly coverage of COVID-19 testing and treatment would be–andthat now proves to be just the tip of the iceberg. Not only does aplan have to be concerned about participants contracting COVID-19while at work, but also contracting COVID-19 while going abouttheir daily lives. Self-funded health plans have flexibility whendetermining their plan exclusions, but what is the extent of thatflexibility and what limitations are reasonable to begin with?

In light of the reopening of states and foreign nations,questions have arisen as to whether or not a self-funded plan couldlimit its exposure and consider travel to a "hotspot" or "highrisk" area inside and outside the United States as a "hazardousactivity or hobby."

A "hazardous activity or hobby" is generally defined anddetermined by the text of the SPD/PD exclusion, and this definitionoutlines the exclusion's applicability in combination with theparticular facts and circumstances for the particular claims, usingthe plan administrator's discretionary authority. Examples ofcommon hazardous activities and hobbies include skydiving, bungeejumping, automobile racing, and travel to countries with advisorywarnings. But what happens when the world is one big advisorywarning?

While excluding claims resulting from travel to areas that havebeen hardest hit by COVID-19 essentially follows the rationalebehind hazardous activity exclusions (in that the plan should notbe held responsible for claims incurred because the participantvoluntarily put themselves at unreasonable risk of harm), in thiscontext, the practical issues with administering an exclusion aretroubling.

Medical experts are attempting to gather and analyze data asquickly as they can; however, the medical community still has morequestions than answers. The main challenge to applying a hazardousactivity exclusion to COVID-19 (and similar viruses) is that itwill rarely be possible to definitively determine where anindividual contracted the disease – be it at their local grocerystore or when they flew to Florida to visit family. The timingwould also be difficult to determine as individuals could have beeninfected prior to travel and may not show symptoms for severalweeks after infection.

As data and tracking have shown, the virus is essentiallyeverywhere. If containment had occurred, enforcement of anexclusion based on geographic lines could have been more feasible.For example, in a situation where the virus only existed in onestate, and a participant contracted it after traveling to thatstate, the potential causation link may be much easier toestablish. The present situation does not provide such clear causallinks however, and it's uncertain whether it will or could in thefuture.

Without a causal link to establish definitively where or when anindividual was exposed to the virus, enforcement of a hazardousactivity or hobby exclusion due to voluntary travel bears a highrisk of being deemed arbitrary. Arbitrary decisions are not easilydefended on appeal or in a court of law. As always, the situationcontinues to evolve, but based on what has occurred thus far, it isdifficult to imagine a scenario in which the COVID-19 pandemicreorganizes itself within territorial borders.

Kelly E. Dempsey is an attorney withThe PhiaGroup, LLC. As vice president of Phia Group Consulting, Kelly'sspecialization is an interesting mix of compliance mattersimpacting self-funded plans (such as issues relating to ERISA, ACA,COBRA, FMLA, MHPAEA, and MSP) and "outside-the-box thinking,"finding creative and innovative ways to help plans, brokers, andTPAs achieve their various self-funding goals. Kelly is admitted tothe Bar of the State of Ohio and the United States District Court,Northern District of Ohio.

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