Out-of-State Care Stipends: The Ultimate Guide

An out-of-state care stipend is a set amount of money an employer offers its employees who need to undergo medical procedures outside their home state or network.

By Amy Spurling


Disclaimer: Compt does not provide tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. 

Most health insurance benefits will only cover certain medical procedures in your home state or within a specific network of providers. But what if an employee needs to undergo a medical procedure or obtain treatment outside those boundaries?

An estimated 112 million American adults (or, nearly half the adult population) struggle to pay medical bills. Without insurance coverage, the cost of an out-of-state or network procedure can easily break their bank.

That's where out-of-state care stipends come in. They're fantastic for employers who want to offer additional support and peace of mind to employees who may need specialized medical care outside their state.

In this comprehensive guide, we'll cover:

  • What an out-of-state care stipend is
  • What it covers
  • Why offer one?
  • Stipends vs. health insurance benefits
  • Potential risks
  • Implementing a stipend program at your company

What is an out-of-state care stipend?

First, let's define it:

An out-of-state care stipend is a set amount of money an employer offers its employees who need to undergo medical procedures outside their home state or network.

For example, if an employee needs to travel from Texas (where their insurance plan is based) to California for a medical procedure, this amount would help cover their expenses.

There are plenty of reasons someone might need to undergo a medical procedure outside their state or network.

  • Their preferred healthcare provider is located in another state (e.g., if they relocated for your position).
  • The procedure they need is not available within their network of providers.
  • They want to seek a second opinion from a specialist outside their state.
  • Wait times for appointments or procedures are extremely long in their home area.
  • Your employee works from an area with limited access to healthcare services.
  • The procedure in question is unavailable or not allowed in the state they live.

Out-of-state care stipends improve your employees' access to healthcare. They're typically made available as an annual lump sum to those who qualify. 

At Compt, here's what the out-of-state care stipend we offer looks like:

What an out-of-state care stipend covers

Your employees might need out-of-state treatment for any number of reasons. Reproductive care, specialty cancer treatments, mental health care, addiction programs, and prosthetics are among the most common.

Basically, employees put the stipend toward three types of costs:

  • Direct medical expenses, such as the cost of a consultation or procedure.
  • Additional expenses associated with travel, accommodation, and other costs incurred when seeking treatment outside their state.
  • Childcare costs, if an employee needs to leave their children at home while they are away.

Out-of-state care stipends can range from a few hundred to a few thousand dollars, depending on the company.

Why offer an out-of-state health care stipend?

Out-of-state care assistance is an inclusive employee benefit that shows your company cares about its staff's health and well-being.

Specifically, it:

  • Helps employees access medical procedures not available in their state, which can sometimes be life-saving or significantly improve quality of life.
  • Provides peace of mind for employees who are worried about the costs associated with out-of-state treatment, allowing them to focus on their health and well-being.
  • Shows your company values diversity and inclusivity, as different regions sometimes offer better healthcare options for certain communities or individuals.

While employees in your New York or San Francisco offices might have access to top-notch healthcare, residents of states like West Virginia, Arkansas, and Louisiana have considerably fewer options.

It's a financial wellness issue, too. 57% of Americans can't afford a $1,000 emergency expense. And, in a 2023 PwC survey, nearly 60% of employees noted finances as the number-one cause of stress in their lives. Taking measures to reduce their financial stress will show improvements in productivity, job satisfaction, and, ultimately, loyalty.

Stipends vs. health insurance benefits

There's an important distinction between healthcare stipends and health insurance benefits: stipends are not health insurance. And they aren't a substitute for it, either.


An out-of-state care stipend is a specific type of healthcare stipend — it’s designated for this type of health care only and has a broader application. It's a fixed, taxable amount you can reimburse to employees through payroll.

It can’t be used exclusively for health insurance premiums. Instead, it's intended to reduce or eliminate medical and related expenses insurance plans don't usually cover.

Health insurance benefits

Healthcare benefits are more comprehensive. They take the form of subsidized or fully paid-for health insurance premiums or an HSA (health savings account). They're non-taxable, meaning they aren't subject to federal income tax withholding, nor are they subject to Social Security, Medicare, or FUTA tax.

Unlike stipends, you'll pay insurance benefits directly to the organization that provides your employees' health insurance plans. Their purpose isn't solely for out-of-state care; instead, they're intended to cover a range of medical costs, including primary care visits, prescription medication, and emergency services.

Health insurance companies operate within the legal frameworks of the state where the employee is located, and as a result, coverage for certain procedures may be limited. If you’re already offering employees health insurance, an out-of-state care stipend can make this benefit truly comprehensive.  

Special considerations for out-of-state care stipends

From a legal, regulatory, and tax compliance standpoint, there are a few risks you should be aware of when offering out-of-state care stipends.

State laws

The one area that gets tricky is when your employees' medical needs are related to birth control or abortion travel

State laws regarding abortion care are constantly changing. While some states' laws protect employers from liability, Texas and Oklahoma, for example, allow private citizens to sue any person or company for "aiding or abetting" patients in obtaining an abortion.

If you are in a state where employees can’t obtain care, your organization could face potential risks. It’s important to consult with legal professionals to manage these risks strategically. 

Tax implications

The IRS refers to any benefit you offer your employees that aren’t part of their regular pay as “fringe benefits.” Out-of-state care stipends are one such fringe benefit, and they’re taxable.

This means you'll need to report them as part of your employees’ wages in their W2 forms. 

Tips for reducing your risk as an employer

Unlike other employee benefits, it’s best to keep restrictions to a minimum for the out-of-state care benefit. This minimizes your liability exposure as an employer. Here are some best practices to reduce your risk: 

  • Be inclusive. Don't specify eligibility based on gender (or other protected classes). Don't restrict eligibility based on location, either.
  • Cover a broad basis of scenarios. An out-of-state care stipend can be used for a variety of healthcare needs such as prosthetics, specialty cancer care, abortion care, etc.
  • Give everyone who meets the eligibility requirement access. Don’t require employees to submit for permission before using their benefit. When they approach you, don't ask questions about what it's for, and only require receipts for things that are not medical treatment related. 

Implementing an out-of-state care stipend

To offer this stipend to your employees, follow the steps outlined below:

1. Figure out how much you'll offer.

The first thing you'll want to do is determine how much this benefit will be worth. Since medical expenses and associated costs vary wildly, it's best to set a cap on how much you'll offer as a benefit each year. Depending on your resources, this could be anywhere from a few hundred to a few thousand dollars.

Keep in mind when budgeting that most employees won't ever need to use this stipend. You want the amount to be enough to make a difference for the individuals who do need it.

2. Design your program.

There are four main considerations, as far as stipend design is concerned.

  • Title: Keep it broad. Don't name it after a specific type of care, even if that's largely what it'll be used for.
  • Eligibility: To make it truly inclusive, It’s best to offer this benefit to all employees. 
  • What to cover: Some employers cover medical expenses. Others cover travel and associated costs. If they can afford to, they might cover both.

Documentation: At Compt, we require employees to submit receipts for everything associated with their travel, such as plane tickets and meals (but not for the care itself).

3. Use Compt to launch the program.

Compt makes it easy to administer any kind of customized stipend program. You can easily:

  • tailor your program according to employment status (in this case, employed full-time for six months or a year)
  • set an amount
  • offer complete coverage or choose specific categories
  • automate tax compliance 
  • manage reimbursement through your payroll provider

Never seen it? Schedule a demo now!

4. Onboard employees.

With employee stipend software, all you need to do is assign the one-time or recurring stipend to eligible employees.

Then, communicate this benefit to employees so they know exactly how much is offered and what the parameters are. 

Interested in learning more? Request a demo to see how Compt can help you administer an out-of-state care stipend as well as other personalized employee benefits. 


A stipend makes it possible for companies to offer lifestyle benefits, with less money and ensure that they are personalized to meet the needs of their people.

Below are some of the popular types of stipends:

Amy Spurling

Founder and CEO

Amy founded Compt, employee stipend software that enables companies to offer truly personalized employee perks while being fully tax-compliant and inclusive for global teams. Amy's experience as a former three-time CFO and two-time COO managing Finance and HR drives her belief that companies and employees can achieve much more together when employees are fully supported. Her favorite Compt stipend category is Charitable Giving.


Are you ready to set up an out-of-state care stipend?

Our experts can help you create a program that makes healthcare truly comprehensive for your employees.

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