March 31, 2010, 12:56 a.m. EDT

Same-sex couples face higher health costs

By Anya Martin

DECATUR, Ga. (MarketWatch) -- 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 partner and children than their heterosexual counterparts do.

Here's why: While the value of health benefits that employers pay on behalf of workers' spouses are excluded from employees' gross income by federal law, same-sex couples aren't extended the same tax break. 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, director of the LGBT (Lesbian-Gay-Bisexual-Transgender) Resource Center at the University of California at 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%, thanks to 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 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, research director of the Williams Institute, a think-tank at the University of California at Los Angeles School of Law which 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 Obama signed into law in March.

Employers step up

About 20% of Americans in same-sex couples lack insurance, according to federal data from the mid-90s 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 just one in five, or 21%, of all U.S. employers, as opposed to 31% who cover unmarried opposite-sex partners, according to the Kaiser Family Foundation's most recent annual survey of employer benefits. Of firms 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 firms 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 U.S.'s 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 admit to 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-based 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.

Meanwhile, whether an employer will cover the child of a same-sex couple often depends on the relationship of the child to the employee, Kridel said. If the employee is the biological or adoptive parent, then an employer may treat the child as it would for any other worker. But if that child is the domestic partner's biological or adopted son or daughter, it's up to the employer, he said.

"I've heard stories anecdotally that when a couple with a child is deciding who works, they have to think very carefully [about] the health-care coverage," Badgett said. "It leads to complicated decisions for same-sex couples that are not the same for different-sex couples."

The situation is further complicated by laws in some states that prohibit both members of a same-sex relationship to hold custody rights for adopted children, she said.

Women less likely to be insured

Women in same-sex households may be hit hardest when employers don't offer partner coverage, according to the AMA findings. Only 39% of all women are insured through their job as opposed to 49% of men, and they are twice as likely as men to be insured through another person -- 25% compared with 13%.

Based on its study results, the AMA released a policy statement in November supporting the elimination of discriminatory health-care laws for gay and lesbian couples and their children. The American Psychiatric Association, the American Academy of Family Physicians, the American Academy of Pediatrics and other medical groups all have issued similar policy statements promoting equality of insurance access and alleviating other barriers to care for LGBT Americans.

Unequal insurance access only compounds other hurdles that same-sex couples and their children face in the health system, said James Beaudreau, education and policy director of the Gay & Lesbian Medical Association.

"There are other forms of discrimination in the insurance industry that people often overlook, but it's difficult to get a true handle on the nature of those issues," he said. "For example, we often hear about people having higher premiums because they had a hepatitis B vaccination or had an HIV test more than once."

Yet clinicians often recommend both for sexually-active gay men, Beaudreau said. Also, some small studies with limited geographic focus have suggested that lesbians may have higher rates of cervical, breast and other cancers, which some researchers say may be related to decreased access to cancer screenings or nervousness about admitting sexual orientation to a physician, he said.

"Having access to a welcoming provider who is able to share with you information about health risks can in some cases prevent a whole host of negative health-care outcomes down the line," Beaudreau said.

If more companies offered benefits for same-sex partners and their children, enrollment would rise by about 0.1% to 0.3% for gay and lesbian partners and it would only cost an estimated 1% to 2% more, Badgett said.

"Mainly it's because there aren't that many same-sex partners," she said. "In a country of 300 million, there are only about 600,000 same-sex couples."

Anya Martin is a freelance writer based in Decatur, Ga.