Health Care Challenges for Same-Sex Couples

Over the last decade the limited statutory legalization of gay marriage across the country has given rise to a steady increase in the number of same-sex couples who are seeking custom approaches to fulfill their insurance needs.

When pursuing health insurance, it is imperative that same-sex couples are well-educated in the differences between how federal and state governments view their marriage and, thus, the distinctions between the rights that are implicit and those that may be withheld.

The federal trouble

The federal Defense of Marriage Act (DOMA) prevents married same-sex couples from being acknowledged, and, therefore, such couples are not recognized for federal income-tax purposes.

Let’s use a hypothetical couple: Tom and Bill. Let’s say Bill receives benefits through Tom’s employer-sponsored plan. Tom, then, cannot use pre-tax dollars to pay the premium. The fair-market value of those benefits is treated as income to Tom and is subject to federal income tax. In addition, Bill is not eligible for tax-free reimbursement for medical expenses from a health savings account (HSA) unless he qualifies under IRS rules as a health care dependent. Claiming this is a burdensome task because, to do so, Bill must earn less than the established personal exemption amount.

For federal government employees, health plans are offered via the Federal Employees Health Benefits Program (FEHB) and do not cover same-sex spouses anywhere. This same restriction applies to military personnel covered by the TRICARE program.

Because COBRA is a right available through federal law, employers can choose to deny COBRA continuation coverage to same-sex spouses but they are not prohibited from continuing coverage. Often employers may offer especially limited coverage that is unavailable in some insurance markets.

The HIPAA open-enrollment law provides special rights only to traditional married couples that allow the dependents of the employee to enroll outside of a plan’s open enrollment period.

Complications in states that legalized same-sex marriage

While the situation is fairly clear in states that don’t permit same-sex marriage, it gets more complicated in the states that allow it.

Even if the relationship is recognized as a marriage in one of the nine applicable states (and the District of Columbia) and the state insurance laws trump federal law, this does not always obligate the employer to cover a same-sex spouse. For example, self-insured employers are not regulated by the states, and private-sector employers can either cite DOMA in denying coverage to a gay spouse or they can choose to use the state definition of a spouse and extend benefits.

There are some private employers whose health plans are governed by federal law and not subject to state insurance laws, though those are in the minority. Using our couple from before, if the employer does not allow these benefits, then Bill may be forced to purchase health insurance on the public market if his own if his employer doesn’t offer it, subjecting him to medical underwriting and making him susceptible to the possible denial of coverage.

Therefore, you’ll need to consult with an insurance broker or the relevant state agency to find out just what rights and restrictions apply.

Further considerations

In addition to understanding the means by which same-sex couples can obtain health insurance, it also behooves them to make sure that they can maneuver their way through the system itself. Each couple should have a complete and clear health care proxy document in place. This will entitle each partner to hospital visitation rights, as well as the power to make important medical decisions for their partner in the event of a medical emergency or incapacitation.

The United States Supreme Court is considering a case on the constitutionality of DOMA. If it overturns the law, then that might eventually diminish many if not all of the aforementioned health insurance distinctions — at least in states that recognize same-sex marriage. The Supreme Court is expected to rule in late June.

Todd Sandstrom is a plan design specialist with Longfellow Benefits, a Boston, Mass., firm that offers employee and executive benefits. He can be reached at tsandstrom@lf-ben.com.