Dec 28, 2008

Benefits for Domestic Partners | Plan Provisions and Taxation

In the mid-1980s, the plans of a few employers began to define the term dependent broadly enough to include unmarried domestic partners. For example, one plan covers unmarried couples as long as they live together, show financial interdependence and joint responsibility for each other's common welfare, and consider themselves life partners. This type of requirement is fairly typical, as is the additional requirement that the employee's relationship must have lasted some specified minimum period of time, such as 6 or 12 months. The employee must usually give the employer an affidavit that these requirements have been satisfied.

By the late-1990s, an estimated 10 percent of employers provided medical expense benefits to domestic partners. (A smaller percentage of employers offer other types of group benefits.) Most plans provide benefits to domestic partners engaged in either heterosexual or homosexual relationships. Some plans provide benefits only to persons of the opposite sex of the employee, and a small number of plans limit benefits only to persons of the same sex. The rationale for the latter is that persons of opposite sexes can obtain benefits by marrying, whereas this option is not available to persons of the same sex.

The number of employees obtaining coverage for domestic partners has been relatively small, with many employers experiencing enrollment of less than 1 percent when only partners of the same sex are covered. Some employers have experienced enrollment of up to 4 percent if partners of either sex are covered. (Enrollments of partners of the opposite sex are more than double the enrollments of partners of the same sex.) This low enrollment is due primarily to two factors. First, the domestic partner is probably also working and has medical expense coverage from his or her employer. Second, some employees are unwilling to make their living arrangement or sexual preference known in the workplace.

Despite predictions that domestic partners would have adverse claims experience (primarily due to AIDS), the claims experience has been good. This is probably due in part to the fact that domestic partners, on the average, tend to be younger and therefore probably healthier than employees in general. Also, same-sex partners have few maternity claims. Most, if not all, insurers that levied surcharges on premiums for domestic partners when the coverage was new have now dropped the surcharges.


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