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Health Insurance Benefits
Same Sex Marriage
Same sex marriage is now the law of the land. In June 2015, the United States Supreme Court legalized same-sex marriage in the landmark decision Obergefell v. Hodges. The Court overturned prior policy which had allowed some states to deny marriage licenses – and by default, employee spousal benefits – to same-sex couples. Now, employers are required to treat same-sex marriage in the same manner as opposite-sex marriage. What does that mean for employer-provided group health insurance benefits?
The Affordable Care Act mandates that employers offer health coverage to their employees, but there are no requirements for spouses. (Note that on January 20, 2017, President Trump issued an Executive Order minimizing the requirements of the Act pending the expected repeal of the Act.) Obergefell v. Hodges simply says: if an employer chooses to insure employees’ spouses, the employer cannot choose which spouses to insure. To exclude same-sex spouses from group benefits is now a violation of the U.S. Constitution’s Fourteenth Amendment.
Eligibility depends on the terms of the group health insurance plan the employer has in place. The Employee Retirement Income and Security Act (ERISA) requires employers to administer their plans according to the terms of the plan, which means that the plan’s definition of a covered spouse is key. A plan that covers “spouses” or “lawful spouses” must offer coverage to same sex spouses.
This applies to group life and health plans, cafeteria plans, and health reimbursement arrangements. Marriage equality simplifies benefits administration by allowing employers to consistently apply the same rules to all married couples.
The law is less clear for employers who choose to self fund these plans. There is some indication from lower courts that a self-funded plan that specifically limits eligibility to opposite-sex spouses is not required to provide coverage to a same-sex spouse because ERISA does not prohibit discrimination based on sexual orientation. It is questionable whether that prohibition would be upheld by the Supreme Court if challenged in an individual lawsuit. Although the law is still developing in this area, most practitioners agree that self-funded employee group health insurance plans are required to cover same-sex spouses.
CAFETERIA PLANS (FSA, HSA, HRA)
Flexible Spending Accounts (FSA), Health Savings Accounts (HSA) and Health Reimbursement Accounts (HRA) known as Cafeteria Plans allow for the tax-free reimbursement of a spouse’s medical expenses. Same-sex couples may now contribute to these plans up to the maximum family contribution. The same qualifying events for changing elections—including marriage, divorce, legal separation, or death of a spouse—apply to same-sex couples.
The United States Department of Labor, the United States Department of Health and Human Services, and the Internal Revenue Service have issued several notices that explain how same-sex spouses must be treated for purposes of Section 125 cafeteria plans. Specifically,
- A new same-sex marriage is a change in status event that allows a mid-year change to pre-tax and health and dependent care FSA elections consistent with the marriage.
- Expenses of the new spouse or dependent child may be reimbursed from the FSA or HSA from the date of the marriage.
- As of the date of the marriage, imputed income for covering the new same-sex spouse (who may have been covered previously as a domestic partner) ends.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) generally requires that group health plans sponsored by employers with 20 or more employees offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end, such as when an employee’s employment is terminated. In such an event, an eligible employee can elect to continue insurance coverage for a same-sex spouse (as well as for the employee and dependents) at group rates. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.