Same-sex couples applauded in June when the Supreme Court ruled that the federal ban on recognizing same-sex marriages was unconstitutional, but they are still anxiously awaiting federal guidance about how the ruling affects health insurance benefits.
The court's 5-4 decision in the challenge to the federal Defense of Marriage Act didn't address the law's provision that permits states not to recognize same-sex marriages that were legally performed elsewhere. That leaves many couples in limbo if they are living in one of the 37 states that don't permit same-sex marriages.
From a health insurance perspective, a key question is whether the Internal Revenue Service will recognize same-sex marriages based on the state where the couple lives or the state where they were married, often referred to as the "place of celebration."
In recent years, the number of employers that offer health insurance coverage to same sex spouses has grown steadily. Until the DOMA decision, however, employees who took advantage of the insurance benefit had to pay federal income tax on the value of that coverage, which is considered "imputed income." Now, for couples living in the 13 states and the District of Columbia that allow same-sex marriages, that will no longer be necessary.
But same-sex couples who married in other states and now live in a state that doesn’t recognize their marriage face uncertainty in this area. If the IRS decides to follow its standard practice and recognize marriages based on where a couple lives, these couples could still be responsible for paying income tax on the value of a spouse’s health insurance. The decision could also affect their eligibility under the federal law known as COBRA to hang onto their employer coverage for up to 18 months when an employee loses a job.
"In terms of health insurance, one of the biggest questions is the imputed income issue," says Brian Moulton, the legal director at Human Rights Campaign, an advocacy group. "We are urging the IRS to follow the place of celebration standard."
Advocates are encouraged that the federal Office of Personnel Management announced that the legally married same-sex spouses of federal employees will be eligible for health insurance coverage, regardless of where they live.
"That will bring health insurance to many, many people across the land," says Susan Sommer, director of constitutional litigation at advocacy group Lambda Legal, noting that the federal government is one of the nation’s largest employers.
For couples that have been paying federal tax based on income imputed to them for health insurance benefits, the IRS also must address how to handle those tax payments, say experts.
"For 2013, are you taxed for the portion of the year that DOMA was in effect?" says J.D. Piro, a senior vice president at benefits consultant Aon Hewitt. "What about prior years? Can they get refunds, and how far back can they go?"
For same-sex married couples who live in states that don't recognize their marriages and have been unable to obtain health insurance for a spouse, it's unclear what, if anything, will change, say experts.
"If the federal government says that marriage is defined by state of celebration, this sets up a conflict between state and federal law," says Catherine Stamm, a consultant at benefits consultant Mercer's Washington Resource Group. "Once the federal government announces a policy, states will undoubtedly weigh in on how they intend to respond."
Jennifer Shearin and Julie Naff hope that this decision might be a stepping stone to eventual recognition of their marriage. They were married in the District in 2010, and live with their two sons, aged 4 and 1, in Annandale, Va., where their marriage is not recognized.
Health insurance is their biggest concern, says Shearin, 42. Shearin and their two children have health insurance through the school district where she teaches high school social studies. The premium is $450 a month. Naff, 44, a freelance television editor and producer, can’t join their plan as a same-sex spouse, so they pay $650 monthly for an individual plan to cover her.
Virginia voters approved a constitutional amendment banning same-sex marriage in 2006. "It's possible the commonwealth of Virginia won't cover the same-sex spouse and won't provide a state tax break for health coverage," says Stamm.
"The DOMA decision is a huge step forward," says Shearin. "But we'd like to have our marriage recognized to have same rights as other married couples."
While they await federal guidance, some employers have begun reaching out to employees to tell them that even if they don't have answers yet, they're working on it, says Julie Stone, a senior consultant at Towers Watson.
"At a high level they're saying, 'We hear you, we know this is an issue,' " says Stone, and they're also reaching out to couples that will be directly affected.
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