insurance

After DOMA: Gay marriage and health insurance

Married gay couples now enjoy many of the same health insurance benefits as their straight counterparts, through changes that have followed the U.S. Supreme Court's decision striking down the federal Defense of Marriage Act, or DOMA. That 1996 law had defined marriage as the union of one man and one woman; the court's majority found that the result was inequality in marriage, as a growing number of states legalized same-sex unions.

Activists and legal observers had said in the wake of the court's ruling that it effectively extended hundreds of federal insurance and other benefits to married gay couples, though only in 13 states and the District of Columbia -- the places where same-sex marriage is legal. But federal agencies have moved to apply many of those benefits to married gay couples nationwide, even if they live in states that don't recognize their marriages.

Because DOMA denied them marital status under federal law, same-sex couples wed in states allowing gay marriage had faced multiple disparities in health insurance that cost an average $1,069 per year in additional taxes, according to a 2007 study by the Center for American Progress and the Williams Institute..

Take a couple we'll call Lori and Dawn, for example.

  • Under DOMA, any benefits Dawn received through Lori's employer-sponsored health plan were treated as income for Lori and were subject to federal income tax. Lori's employer also faced a tax on this amount, in the form of higher payroll taxes.
  • Lori couldn't use pretax dollars to pay for Dawn's coverage.

However, in the wake of the Supreme Court's DOMA ruling, the Internal Revenue Service has decided that legally-married same-sex couples will be regarded as married for federal tax purposes, no matter which state they live in. The IRS says that means any such spousal health insurance benefits may get pretax treatment and be excluded from income.

Some federal benefits denied under DOMA

Many federal insurance protections and benefits were completely off-limits because of DOMA.

For example, legally married same-sex couples could have been denied spousal coverage under Medicare and Medicaid. DOMA's impact on these "safety net" programs also could have brought unexpected penalties, such as a lifetime of increased Medicare premiums for failing to enroll at age 65 in the program's medical insurance plan.

Changes are in the works, says Health and Human Services (HHS) Secretary Kathleen Sebelius. "HHS is working swiftly to implement the Supreme Court's decision and maximize federal recognition of same-sex spouses in HHS programs."

In what Sebelius says will be "the first of many steps," her department has announced that same-sex married couples in Medicare Advantage plans will be protected from the prospect of finding themselves living in separate nursing homes. That had been a possibility under DOMA.

"It's going to take months and months to sort out all of this and get people on the same page," says Todd Sandstrom, a plan design specialist with Longfellow Benefits, a Boston-based employee benefits firm. "It could take a decade for the word 'spouse' to mean the same thing everywhere. It's going to take a very, very long time."

State same-sex marriage laws sow confusion

Though DOMA was a federal law, its sting was perhaps harshest at the state level. The legal recognition of same-sex unions in 13 states and D.C. has created a state-by-state crazy-quilt of overlapping definitions of what is permitted and prohibited based on gender, marital status and jurisdiction.

Sandstrom says in Massachusetts and other states that recognize same-sex marriage, DOMA essentially created two classes of workers.

"Employers here have the opportunity to offer health coverage, but if they wish to not offer same-sex benefits, they always have DOMA to back them up," he explains, adding that DOMA also prevented those working for federal or federally subsidized employers in Massachusetts from securing employer health benefits for their same-sex spouses."

States say 'I do' to marriage differently

While Sandstrom estimates that most Massachusetts employers do offer health benefits to same-sex partners -- "It's good leverage to obtain and retain valuable employees," he says -- the issue is far more complicated in other states.

"The states that presently accept gay marriage are all different," he says, explaining that some, but not all, extend marriage rights to same-sex couples joined in civil unions or another alternative, domestic partnerships.

Given the confusing legal landscape, economics professor M.V. Lee Badgett, director of the Center for Public Policy and Administration at the University of Massachusetts Amherst, predicted that health insurers and major employers alike would welcome an end to DOMA.

Badgett points out that members of the Business Coalition for DOMA Repeal, an offshoot of the same-sex advocacy group the Human Rights Campaign, included insurers such as Aetna, Massachusetts Mutual and Prudential Financial and major employers such as Alcoa, Bristol-Myers Squibb and Marriott.

"They don't like the uncertainty of having different state laws to address," she says.

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