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Next same-sex marriage fight could center on benefits

July 15, 2015

In 2002, when courts were still rejecting the notion of same-sex marriage, Indiana University extended the benefits it offered for married spouses to same-sex couples.

Other companies and universities have also provided coverage for gay and lesbian couples in committed relationships since these individuals were either not allowed or had only a limited ability to get married. Typically, entities offered domestic partner benefits that could have included medical and dental insurance along with retirement options as a way to compete in the marketplace. They saw treating same-sex couples equally created a welcoming and diverse work environment that attracted talented employees.

But after the Supreme Court of the United States legalized marriage between adults of the same gender in its June decision, Obergefell v. Hodges, I.U. is rethinking its employee policies.

The school extended the benefit because same-sex couples could not marry, but since “thankfully, finally they have the right to marry,” said Jacqueline Simmons, the university is looking to phase out spousal coverage for non-married gay and lesbian couples. Simmons is vice president and general counsel at I.U.

Attorneys anticipate other entities will pull their domestic partner benefits as well. Companies may wait to see what their competitors do, but they are seen as likely to curtail coverage to only married couples.

Mann Mann

“I’ve got to imagine a lot of companies will start (stopping domestic partner benefits) because they are looking for any way they can to not have to cover people,” said attorney Richard Mann.

Mann, the lead attorney in one of the cases that overturned Indiana’s ban on same-sex marriage in 2014, expects some people losing benefits might contact his office for help, but they may have few legal remedies. The business sector no longer has a reason to provide coverage since same-sex couples can legally marry, he said.

Major corporations like Verizon Communications, Delta Air Lines Inc. and IBM previously announced plans to rescind benefits to non-married gay and lesbian couples. When Minnesota legalized same-sex marriage in 2013, the Mayo Clinic and the University of Minnesota phased out their coverage for domestic partners.

In Indiana, some large companies have expanded their domestic partner benefit packages to include same- and opposite-sex couples. Cummins, Dow Chemical Co., which has its subsidiary Dow ArgoSciences in Indiana, and Eli Lilly and Co. all offer benefits for non-married partners, regardless of gender.

Eskenazi Health had expanded its benefits even more by providing insurance to an employee’s designated adult, enabling siblings, parents, another adult living in the household, and unmarried partners to be covered. Once the employee provides proof that the adult is living in the same household and has no access to employer health care, benefits will be extended under the health system’s family plan.

“We wanted to be as accommodating as we could to all employees,” Todd Harper, spokesman for Eskenazi, said.

Giving, and taking away

At I.U., the trustees will have to vote on any plan to phase out domestic partner benefits, but Simmons said the university would likely give couples 12 months notice before ending the program. Providing advanced notification will give these partners enough time to plan a wedding, she said.

Like the university, Angie’s List also offers domestic partner benefits just to same-sex couples. According to the company, it has not discussed the future of those benefits.

Attorney Calvin Chambers of Hall Render Killian Heath & Lyman P.C. reiterated Mann’s expectation that more companies will rein in their domestic partner policies over time. Although businesses and schools have had no legal obligation to offer the benefits, he noted taking them away could be difficult.

chambers-calvin-mug Chambers

“I think we’ll see more of that movement over the next couple of years,” Chambers said of ending domestic partner benefits. “But the countervailing risk is alienating employees by doing away with the benefit.”

Yet, requiring gay and lesbian employees to get married or face losing their benefits could bring a financial benefit to both the companies and workers alike. Businesses may be able to lower their health care costs while employees will be able to ease their tax burden.

Currently, benefits provided to domestic partners are counted as part of an employee’s income and are subject to federal and state taxes. Traci Thomson, vice president of human resources at Emmis Communications, estimated such benefit plans add $400 to $600 each month in additional taxable income.

The Indianapolis-based media company, which has holdings in Los Angeles, implemented domestic partner benefits in 2004 after California passed the Insurance Equality Act, which mandated employers provide spousal benefits to non-married partners.

Like some large companies, Emmis took the domestic partner package a step further by extending the benefits to both same- and opposite-sex couples. It plans to continue to offer these benefits, according to Thomson and Scott Enright, executive vice president and general counsel.

Couples who have shared a residence and have had joint financial responsibilities for at least six months are eligible for the benefit. Thomson said only a small segment of the Emmis employees, about 5 percent, opt for the domestic partner coverage.

Dow’s corporate vice president of human resources and aviation, Johanna Söderström, pointed to the Supreme Court decision’s impact on company operations. Marriage equality, she said, positively impacts the equity and ease of administration of the business’s employee benefits.

“Dow can now extend the same advantaged tax treatment to all married employees in the U.S., regardless of whether they are in same-sex or opposite-sex marriages or the state in which they reside,” she said.

‘The next civil case’

Companies that continue to offer benefits to unmarried same-sex couples but do not include unmarried opposite-sex couples could open themselves to a discrimination lawsuit. In addition, entities that have self-funded benefit plans could also get served with a discrimination complaint if they do not include same-sex couples in their coverage.

Chambers explained organizations that are self-funded are not governed by state insurance laws so they are not under the same legal requirement to offer benefits to same-sex spouses. However, not extending coverage to married gay and lesbian couples could bring a discrimination action from the U.S. Equal Employment Opportunity Commission.

Still, an organization might raise a religious objection to providing benefits to same-sex families.

“That could be the next civil case,” Chambers said.

William Groth, partner at Fillenwarth Dennerline Groth & Towe LLP, said he would not be surprised if an Indiana employer cited religious freedom for not covering gay and lesbian spouses. However, he does not think the company would be successful.

The Indiana Supreme Court established precedent on this issue in 1893 with Smith et al. v. Pedigo et al. There, the justices acknowledged individuals have the freedom to practice their religious beliefs, but that practice could not adversely impact a third party.

Just over 100 years later, the California Supreme Court ruled in Smith v. Fair Employment and Housing Commission, Kenneth C. Phillips et al. that a landlord could not claim religious objections as grounds to deny renting an apartment to unmarried couples. The court echoed Indiana when it noted that granting the accommodation to Smith would impair the rights and interests of the third parties.

Another issue for any employer making a religious argument would be the sincerity of the belief, said Groth, who was part of a team that challenged Indiana’s marriage law in 2014. In particular, the sincerity could be questioned if the business refused to offer benefits to same-sex couples but still provided coverage to opposite-sex employees who were either divorced or remarried.•

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