A change in sta­tus

Same-sex cou­ples el­i­gi­ble for ben­e­fits, tax breaks

Modern Healthcare - - THE WEEK IN HEALTHCARE - Joe Carl­son

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.

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