With the sweep of a pen, the US Supreme Court eliminated an estimated $1.3 billion in annual costs to businesses for administering different employee benefits plans under the patchwork of state laws on same-sex marriage, according to calculations by Marsh.
The court’s ruling last month in Obergefell v. Hodges invalidated the last 14 state bans on such marriages and entitled same-sex spouses to equal rights with opposite-sex spouses under both federal and state law.
But the decision to legalize same-sex marriage without superseding an earlier ruling allowing religious exemptions by some employers could usher in new employment practices liability insurance claims for workplace discrimination, said Ann Longmore, managing director, multinational FINPRO North America at Marsh & McLennan Companies.
“In an area of law that is uncertain, where same-sex marriage is allowed, but employment discrimination can still happen, there could be an uptick in EPLI claims,” Longmore told Advisen.
Not only could employees of a privately owned company led by religious conservatives conceivably sue over benefits for same-sex spouses, they may be more likely now to challenge hiring, firing and other decisions and practices on the basis of alleged sexual-orientation and gender-identification discrimination anywhere.
“A group of claims or class actions would be meaningful for carriers,” Longmore said, adding that it’s a bigger concern for those with a “broader base.”
As with same-sex marriage—until now—there exists a state-by-state patchwork of laws that bar bias on the basis of sexual orientation and/or identification.
The Equal Employment Opportunity Commission, meanwhile, views discrimination against gay men, lesbians and transgender people as illegal sex discrimination under Title VII of the Civil Rights Act, though this theory is being challenged in the courts.
The decision Friday also eliminated the tax penalty associated with “imputed income” on benefits for domestic partners in states that didn’t allow them to marry.
In fact, the decision is likely to reduce the number of companies offering domestic-partner health care coverage, according to Aon Hewitt, which said in a statement following the ruling that 77 percent of employers offer such coverage.
“Some employers may move toward offering spousal benefits under one common umbrella,” said J.D. Piro, national practice leader in the Aon Hewitt Health Law Group. “Others will continue to offer benefits coverage to both same-sex and opposite-sex domestic partnerships.”
Employers will need to revisit wording for retirement and other plans to cover same-sex spouses in states where they were not previously allowed to marry. Enrollment processes and consent and eligibility forms will need to be modified or created anew.
The Supreme Court’s decision a day earlier to uphold subsidies for the purchase of health care insurance on the federal exchange, meanwhile, has more companies considering outsourcing coverage to these platforms.
“We modified our fiduciary policies specifically for companies eliminating health care plans,” said Longmore, who said these companies faced a communications risk under reporting requirements mandated by the Affordable Care Act.
“If the plan goes away, so does the fiduciary of the plan,” said Longmore, adding that companies will still be responsible for communicating with employees about stipends for use on the exchanges, for example, as well as for reporting information about these employees to the government.
“What are the odds that someone gets confused? Very high, we think,” Longmore told Advisen.
According to Aon Hewitt, 64 percent of companies said complying with ACA reporting rules would be one of their biggest challenges.
“This case was the last major hurdle that the ACA had to clear before full implementation,” said Aon Hewitt’s Piro, referring to the decision Thursday in King v. Burwell. “Now employers have to focus on reporting on compliance with the individual and employer mandates for 2016.”
