Unmarried couples looking for domestic partner health care benefits may encounter some unwelcome changes this open-enrollment season.
After the June 2015 landmark Supreme Court decision that declared bans against same-sex marriage unconstitutional, many Fortune 500 companies started to rethink their health care coverage for unmarried partners. Now that same-sex partners can get married, the thinking goes, there’s no need to continue to offer domestic partner coverage.
In a recent Mercer consulting survey, 11 percent of large employers say they’re no longer making same-sex domestic partners eligible for health care insurance in the 2017 coverage year. The percentage of companies covering same-sex domestic partners fell from 62 percent in 2015 to 57 percent in 2016, according to Mercer data. “With 11 percent of companies dropping domestic partner coverage, it’s probably safe to assume that domestic partner coverage will continue to decline,” said Tracy Watts, senior partner at Mercer.
Companies that don’t offer opposite-sex domestic partner benefits along with same-sex partner benefits are more likely to discontinue coverage, added Todd Solomon, partner at McDermott Will and Emery. “Those companies may have been offering the benefit simply to level the playing field before same-sex partners were allowed to marry,” he explained.
That brings its own complications. Dropping domestic partner coverage may encourage same-sex couples to get married. But a couple that has been together for years, maybe decades, may already have property ownership and estate plans in place that take into account their nonmarried status. They may not be willing to change all of that and get married for the sake of health care and other corporate benefits.
What’s more, eliminating this benefit can be seen as taking away something from employees, which is never a positive, according to Solomon.
Another more mundane but no less real reason for the shift is the administrative duties associated with domestic partner benefits. As any unmarried couples seeking coverage knows, proving eligibility can be a cumbersome process. Employees often must present signed affidavits and other evidence of the relationship. That same level of paperwork will likely continue to exist in companies that continue to offer domestic partner coverage, but plenty of employees are more than happy to get rid of the headaches.
In addition, unmarried couples face additional tax consequences when they sign up for domestic partner benefits. Premiums for the domestic partner are not paid for on a pretax basis as they would be for married spouses, and the value of domestic partner health care coverage and other benefits is often considered as taxable income for the employee.
“So far, the only way to avoid this is to get married or get coverage separately,” said Gilbert Gonzales, assistant professor of health policy at Vanderbilt School of Medicine. It makes sense for unmarried couples to calculate the tax burden versus the cost of separate coverage before automatically signing up for domestic partner coverage.
While you’re at it, be sure to look at the Affordable Care Act insurance exchanges for individual coverage for a partner. You may find costs are lower, especially if the partner qualifies for a subsidy.
Finally, many companies planning to drop domestic partner coverage are offering a grace period of a year or so, giving couples time to find alternatives for the 2018 benefit year. Other companies are freezing benefits, meaning employees who currently receive domestic partner health care may continue to do so, but no new domestic partner benefits will be offered, said Solomon.
Be sure to read your open-enrollment materials carefully to determine where your company stands on domestic partner benefits.