Gay and Lesbian Couples Save on Health Insurance Plans

Many groups will see changes in their health insurance plans as a result of the House of Representatives’ healthcare reform bill. While much of the impact could be considered negative, one demographic stands to benefit from a little-noticed provision. A section of the bill will broaden the availability of affordable health insurance for gays and lesbians. Democratic Washington State Rep. Jim McDermott sought to eliminate the discrepancy in the tax rates of health coverage for domestic partnerships versus that of heterosexual spouses.

An increasing number of employers allow gay and lesbian employees to buy insurance for their partners through the lower family rate. This results in significant savings on premiums, as opposed to partners who are either unemployed or work for a business without insurance and must buy individual health insurance on the open market. However, many eligible couples choose not to take part in such employer-sponsored health insurance plans.

Why? According to gay rights advocates, discriminatory tax laws prevent more uninsured partners from signing up for their significant others’ health insurance plans. Legally, many homosexual couples (regardless of the length of their relationship) are considered as singles by the IRS, because the majority of states do not allow gay marriage. As a result, they are taxed individually, as opposed to the lower joint rate for couples. Insurance is normally tax-exempt, but gays or lesbians trying to get their partner covered face a double whammy of taxes their married heterosexual counterparts do not. A partner’s health benefits are considered an employee’s taxable income in the eyes of the federal government, which makes coverage unaffordable for many people. An economist’s study found that married employees paid over $1,000 less in taxes for the exact same insurance than employees with domestic benefits.

The taxes also impact employers that provide the domestic partners of employees with a health insurance plan; they must pay payroll taxes on the fair market value of a domestic partner’s policy, which can be expensive. This may serve to decrease the availability of group insurance for these people. After all, part of the justification for employer-provided health insurance since its inception during World War II has been its status as a tax-free way to compensate employees when unable to increase their salaries. McDermott’s proposal fixes this dilemma caused by outdated tax code.

The proposal also serves to fulfill the Obama administration’s stated goal of insuring as many Americans as possible. It received relatively little debate. Reasons for that include its burial in the nearly 2,000 healthcare reform bill, as well as many gay rights opponents being occupied with the amendment that would prevent subsidized health insurance plans from covering elective abortions. For whatever reason, gay and lesbian partners can now worry less about being uninsured. Coincidentally, lower stress levels have been associated with better health, leading to lower health care costs!