A change in status
Same-sex couples eligible for benefits, tax breaks
The U.S. Supreme Court’s decision to recognize same-sex marriages in at least 13 states will have effects on families’ insurance status, healthcare taxes and benefits for serving the federal government.
“There are lots of different things that are going to be coming down the pike as a result of this decision, but the biggest thing will be the taxation of employer-sponsored health plans,” said Ballard Spahr attorney Jonathan Calpas.
The 1996 Defense of Marriage Act defined marriage as between a man and a woman, barring same-sex couples from many federal benefits, including the family exemptions from taxes on employer-sponsored insurance plans. That meant that same- sex spouses’ insurance premiums were treated as taxable income.
The high court’s June 26 decision to strike down DOMA means that many same-sex couples’ federal income tax bills will decline by thousands of dollars a year, depending on the value of the plan and the couple’s tax bracket, Calpas said.
The Supreme Court issued two decisions on same-sex marriage last week: one invali- dating DOMA and another declining to intervene in a lower-court case that invalidated Proposition 8 in California, which effectively legalized same-sex unions in the Golden State. But in the California case, the court ruled that it didn’t have standing to issue a ruling, and avoided declaring that same-sex couples have a constitutional right to marriage.
Taken together, the two cases meant that federal programs must honor same-sex marriages only in the states where they are already legal: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington and Washington, D.C.
The ruling has a particularly profound effect in Maryland, which legalized same-sex marriages Jan. 1 and is host to thousands of federal employees because it is the home of the CMS and the National Institutes of Health,
among other large federal bureaucracies. State officials say 13% of Maryland residents who have employer-sponsored healthcare coverage get it from the federal government.
The decision to invalidate DOMA means that federal employees and spouses in samesex marriages in Maryland, as in the other 12 states, will receive the same benefits as opposite-sex federal employees, including healthcare coverage, retirement benefits and military health benefits.
“It’s going to help provide a lot of stability and health coverage … for federal employees, federal retirees, for people covered through the Department of Defense and related federal programs,” said Charles Milligan, deputy secretary for healthcare financing in the state health department. “The Supreme Court’s decision has created an equitable and clear landscape for couples to make decisions.”
In the 37 states that do not recognize same- sex unions, however, the situation is far more complex. That’s because some same-sex couples may get married in states where it is legal even though they live in states where it is not.
Lawyers with Lambda Legal, a civil-rights organization for gay, lesbian, bisexual and transgender people, say that various federal agencies will continue to make their differing decisions on whether to grant full spousal benefits to same-sex couples in these crossborder situations.
Scores of gay-rights organizations said they would continue the legal battle for national recognition of same-sex marriage rights, and even Justice Antonin Scalia, in his dissent in the DOMA case, predicted that the question may come before the court as soon as the term that begins next fall.
In the meantime, the legal decisions rendered last week may increase the number of spouses eligible for benefits under Medicare in the 13 states with same-sex marriage. The change means those spouses can now take advantage of their partner’s work record to qualify for Medicare. Federal law requires Americans 65 and older and their spouses to pay premiums for Medicare hospitalization services, unless they have worked long enough to qualify for Social Security—typically about 10 years.
Medicaid programs, though, may actually see a drop in eligibility. That’s because enrollment in the state-based health insurance program for the poor and indigent is based on household income.
“You could have a situation where you have a single parent and children who could be eligible, but once you add in the same-sex partners’ income, they cease to be eligible,” said Timothy Jost, an author and health law professor with Washington and Lee University School of Law in Lexington, Va.
However, couples who lose Medicaid eligibility would likely then be able to benefit from the new system of federal income tax credits for private insurance that will be available to families with incomes between 138% and 400% of the federal poverty level included in the Patient Protection and Affordable Care Act.
Those tax credits are available to couples who file jointly and who purchase insurance through a state-based insurance exchange starting in 2014.