InsuranceActs

Even if a state or employer allows coverage for a partner, federal laws don’t offer the same tax advantages that heterosexual couples have.

Each year as the April 15 tax deadline nears, Shane Snowden is reminded how much more she pays for health coverage for her same-sex partner than her heterosexual colleagues pay for their spouses’ benefits.

While exchanging vows doesn’t guarantee access to health insurance, marriage makes having it both more likely and less expensive — if your spouse is of the opposite sex.

Even in states where same-sex marriages are legal, employers may exclude partners from coverage. When they do provide benefits, federal tax laws mean that workers spend more to insure their same-sex domestic partners and children than their heterosexual counterparts do.

Here’s why: Though the value of health benefits that employers pay on behalf of workers’ spouses is excluded from employees’ gross income by federal law, same-sex couples aren’t extended the same tax breaks. That is, the value of a domestic partner’s health insurance benefit is counted as income paid to the worker.

For 53-year-old Snowden, the director of the LGBT (Lesbian-Gay-Bisexual-Transgender) Resource Center at the University of California, San Francisco, the value of health benefits for her self-employed partner, Toni, and Toni’s 19-year-old son adds $9,396 to her annual income, increasing her yearly tax bill by about $3,000, she said. The hit is even harder to take this year because her salary is down 8% because of a mandatory furlough program for University of California employees.

“In this economy especially, that’s money we would love to have for other purposes such as college tuition, or it would be a huge amount in terms of our retirement savings,” Snowden said. “It’s a hard time of the year for same-sex persons, when you see your (income tax) refund plummet and say, ‘Wow, this is happening because I am in a same-sex relationship.’”

Still, Snowden counts herself lucky to work for an employer that provides coverage for domestic partners, a trend that has been on the rise but still has a long way to go, said M.V. Lee Badgett, the research director of the Williams Institute, a think tank at the University of California, Los Angeles, School of Law that tracks trends in law and public policy affecting LGBT Americans.

A provision in the health care reform bill originally passed by the House of Representatives last November would have extended tax-free status to all domestic partners and other non-spouse beneficiaries of employer health plans. But it wasn’t included in the landmark legislation that President Barack Obama signed into law in March.

Employers step up

About 20% of Americans in same-sex relationships lack insurance, according to federal data from the mid-1990s through the early 2000s.

Large companies are most likely to provide domestic-partner coverage; 59% of Fortune 500 companies include it in their benefits packages, a 12-fold increase since 1995, according to the Human Rights Campaign, which advocates the end of discriminatory practices against LGBT Americans.

Overall, the number of companies that extend same-sex partner benefits is about one in five, or 21%, of all U.S. employers, as opposed to 31% that cover unmarried opposite-sex partners, according to the Kaiser Family Foundation’s most recent annual survey of employer benefits. Of companies with 200 or more workers, 36% provide same-sex partner benefits, while only 20% of small companies with three to 24 workers do.

Western-region employers are most likely, at 41%, to offer same-sex benefits, with Southern companies least likely, at 6%. Even in Massachusetts, where same-sex marriage is legal, only 71% of employers reported offering benefits to same-sex spouses in 2009, as opposed to 93% who give them to opposite-sex spouses, according to a state-sponsored survey.

About three in four of the United States’ estimated 600,000 same-sex partners get around this hurdle by purchasing health benefits from their own employer, while others may obtain individual plans, Badgett said. Some may choose not to sign up their partners because of the higher tax hit or due to a fear that they will encounter discrimination at work if they disclose having a same-sex partner, she said.

In Snowden’s case, she said her partner makes enough money from her business to afford an individual plan, but she would be challenged to find one that would accept her son, who suffered an illness that many insurers would exclude as a pre-existing condition.

For those who cannot get affordable coverage from any other source, the impact can be severe and is compounded when a partner with same-sex benefits loses a job, said Dr. Russell Kridel, a Houston plastic surgeon and a member of the American Medical Association’s Council on Science and Public Health. The group recently completed a study that found that reduced access to and higher costs for employer-based insurance likely leads to lower-quality health care for same-sex households.

“Even if you have been employed by a progressive company that covered you, once you lose your job, you’re out of luck because COBRA doesn’t extend coverage for same-sex partners,” he said.

Msnmoney.