With this ring – we get benefits
The United States Supreme Court ruling in Obergefell v. Hodges may have implications for employers’ health plans, but not in the way one might initially anticipate. The Court determined that States could not ban same-sex marriages and had to treat same-sex married couples in the same manner as opposite-sex married couples.
As a practical matter, what this means is that benefits that are provided state income tax-free for opposite-sex married couples must be tax-free for same-sex married couples. Additionally, in terms of state insurance laws covering the insurance products for insured health plans, any definition of marriage must apply to same-sex married couples the same as opposite-sex married couples. Arguably, self-insured plans could, until further guidance is given, provide health benefits to opposite-sex couples and not provide health benefits to same-sex couples.
All of these consequences are probably anticipated. What could be a dramatic change, however, is how employers treat unwed domestic partners in the future. For many years, a number of employers had attempted to equalize the benefit treatment of gay and lesbian couples with heterosexual couples by providing benefits to same-sex domestic partners because same-sex partners in committed relationships were unable to marry and, therefore, were unable to receive benefits as a couple. By covering domestic partners, that issue was partially resolved.
But with the Obergefell decision the underlying rationale is gone. Same-sex couples may marry and, if married, they can receive the identical benefits as opposite-sex married couples.
Employers are faced with a decision of whether to dismantle the domestic partner benefits. If the decision is to eliminate domestic partner benefits, there are practical administrative issues in how to unwind them.
Perhaps the simplest is to have them in place for 2015, and eliminate them for 2016 and the future. If same-sex domestic partners want to keep benefits, they will need to marry. Marriage is a life event that will permit benefit changes mid-year on a prospective basis.
If employers want to keep domestic partner benefits, they face the issue of extending such benefits to opposite-sex domestic partners now that the rationale for the distinction is gone. A number of employers have already done so. But, if the employer has only offered domestic partner benefits to same-sex couples and if the decision is to continue to offer only to same-sex couples, opposite-sex couples may see that as discriminatory. The practice may not violate any discrimination rules, but it could lead to unhappy employees.
There is no good answer. Each employer offering domestic partner benefits needs to decide where to go from here – and whether all couples need to walk down the aisle.