15 Aug What the Same-Sex Marriage Ruling Means for Health and Welfare Benefits
On June 25, 2015, the Supreme Court, in Obergefell v. Hodges, held that same-sex couples have the legal right to marry in all U.S. jurisdictions and that states must recognize same-sex marriages performed in other jurisdictions. Same-sex spouses have generally been treated the same way as opposite-sex spouses under federal law (including rules related to health and welfare benefits and qualified retirement plans) since the Court’s decision in 2013, United States v. Windsor. The decision in Obergefell requires all states to provide same-sex spouses the same rights and tax treatment under state law as opposite-sex spouses. The summary below outlines some of the changes to health and welfare benefit plans as a result of the Court’s recognition of same-sex marriage. Many of these changes became effective after the Windsor decision. Further considerations are noted where the Obergefell decision may have additional impact.
In states that denied same-sex marriage, fully insured health plans were permitted to deny coverage to same-sex spouses. While the issue has not yet been fully settled, fully-insured health plans will likely now be required to cover same-sex spouses. However, self-insured health plans can arguably continue to exclude same-sex spouses from coverage, although they may be at risk of challenges under sex discrimination laws.
Employer-paid health benefits, including amounts provided through a cafeteria plan, are generally excludable from an employee’s income. After Obergefell, the value of health coverage provided to a same-sex spouse should not be taxed if the same coverage is tax-free when provided to an opposite-sex spouse. Additionally, a participant in a same-sex marriage may change his or her election under a cafeteria plan during the plan year if there is a change in status event, such as marriage, death of a spouse, legal separation or annulment.
COBRA and HIPAA
The same-sex spouse of a covered participant can elect COBRA continuation coverage in the event of an employee’s termination of employment and upon the participant’s death, divorce or legal separation. Similarly, group health plans must offer HIPAA special enrollment rights that allow participants to enroll a new same-sex spouse mid-year, or to change their coverage elections in the case of marriage, divorce, or legal separation or when an employee loses coverage under a same-sex spouse’s plan.
FSAs, HRAs and HSAs
Flexible spending arrangements (FSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs) provide for tax-free reimbursement of qualifying spousal medical expenses. Expenses of a same-sex spouse can be reimbursed from these accounts. However, the maximum family contribution will limit the amount that same-sex spouses can contribute to an HSA.
Anne Tyler Hall, ERISA & Benefits Attorney at Hall Benefits Law