Last month the US Supreme Court struck down Section 3 of the 1996 Defense of Marriage Act (DOMA) in its ruling in United States v. Windsor.
The Court’s landmark decision to overturn DOMA extends federal benefits to legally married, same-sex couples. What does this mean in terms of health insurance reform and implementation of the Affordable Care Act (ACA)?
Here are some key points:
Eligibility for Federal Health Insurance Subsidies Within the Exchanges
In an earlier post entitled Making Insurance Affordable we explained that a subsidy — issued in the form of an income tax credit — will be given to individuals earning between 100% and 400% of the Federal Poverty Level (FPL) when they purchase health insurance in the exchange. But, the key in determining a person’s income level is family income, not individual.
As explained in a comprehensive analysis issued by Jackson-Hewitt Tax Services, depending on a person’s income level and that of his/her spouse, this change could impact — positively or negatively — a person’s eligibility for the subsidy.
Treatment of Same-sex Couples in Employer-sponsored Group Health Plans
Under DOMA, employer-paid contributions towards a domestic partner’s health insurance coverage were reported as wages and were therefore taxable to the employee. Now that DOMA has been overturned, legally married same-sex couples — no longer considered domestic partners — will not incur the additional cost of health care coverage that came in the form of taxable income to the employee.
But, the ruling raises some practical questions for employers.
- What should an employer do now for legally married same-sex spouses that are already on the group plan? Is there an immediate change in the tax treatment of benefits, and how is that handled with Internal Revenue Service (IRS)?
- What about employers with locations and employees in multiple states? A same-sex employee that was legally married in one state now must be treated as legally married in all. If the employer did not previously offer benefits to same-sex couples but did offer coverage to spouses, now coverage must be offered to legally married same-sex spouses.
- When will legally married same-sex couples be able to enroll their spouses in their health plans? Employees usually must wait until open enrollment before enrolling a spouse in their health plan unless there’s a “qualifying life event.” If the Supreme Court decision is treated as a qualifying life event, employees may be able to add their spouses to their health plans pretty soon.
Here in Virginia, Maryland and DC, our local Blue Cross organizations — Anthem and CareFirst — currently offer coverage for domestic partners in the non-group market (and have for several years) so our current clients can expect to see little change.
We will be following this closely and awaiting guidance from the IRS and Department of Health and Human Services (HHS). Stay tuned as we continue to learn more.
As always, please give us a call if you have any questions.