Domestic partner coverage under a group health plan can be a complex issue for employers, particularly in light of the U.S. Supreme Court's 2015 ruling that legalized same-sex marriage nationwide (Obergefell v. Hodges). California law continues to require domestic partner coverage of some employer-sponsored plans, while others are faced with the decision. But important considerations exist for all employers with respect to domestic partner coverage.
In the context of group health plans, there are three types of employee relationships that are central to the issue of domestic partner coverage:
- Spouses: A spouse is an individual to whom the employee is legally married, and may be the opposite-sex or same-sex as the employee.
- Registered Domestic Partners: A registered domestic partnership is created when the employee and his/her partner file a valid Declaration of Domestic Partnership with the Secretary of the State of California. California requires that the partners either be same-sex or opposite-sex where at least one partner is aged 62 or older.
- Unregistered Domestic Partners: An unregistered domestic partnership is an informal relationship that is not legally recognized. As such, there is no legal definition of what constitutes a domestic partnership, though a common requirement is that the partners share a residence.
Fully-Insured vs. Self-Funded Health Plans
The California Insurance Equality Act (the Act) requires an employer that sponsors a fully-insured health plan that provides coverage to the spouses of employees to offer equal coverage to registered domestic partners. Thus, an insured plan that permits spouses to enroll must also extend an offer of coverage to registered domestic partners.
Unregistered domestic partners are not included within the scope of the Act, which means that employers have total discretion with regard to whether or not unregistered domestic partners may participate in the group health plan.
A self-funded health plan is not subject to the requirements of the Act. As a result, an employer that sponsors a self-funded health plan has the flexibility to decide whether it wants to offer coverage under the group plan to the registered – and unregistered - domestic partners of employees.
Whether or not an employer is required to offer domestic partner coverage under a group health plan, there are several key points to consider.
- Tax Treatment: Domestic partnerships, whether registered with the State of California or not, are not recognized under federal law. Consequently, contributions made to the premiums for registered and unregistered domestic partner coverage are taken post-tax, and the employee is subject to imputed income for the value of benefits provided.
- Children of Domestic Partners: Employers have the freedom to decide whether to extend eligibility to the children of a domestic partner – subject to any limitations imposed by an insurance carrier. However, the same tax consequences outlined above will apply.
- Definitions: Employers that choose to extend coverage to unregistered domestic partners of employees should clearly define what constitutes such a relationship. While no definition exists under California law, employers may borrow from the law's criteria for registered partnerships. The definition should provide a clear basis for eligibility.
- Proof: Employers are free to ask for proof of the domestic partnership relationship prior to or at the time of enrollment. However, domestic partnerships should not be singled out or unduly burdened when compared to the proof required of other relationships.
- Trends: While an employer may not be required to offer coverage to registered domestic partners, it may nevertheless wish to do so in order to keep up with current trends in group health plan coverage and remain competitive.
- Consistent Application: Regardless of an employer's decision in regard to domestic partner coverage, the eligibility criteria for all family members must be clearly defined and consistently applied to all employees.