When a new state law went into effect this year requiring employers to provide health insurance benefits to domestic partners equal to the coverage spouses receive, many California companies worried that their premiums would rise.
For San Diego-based SKF Condition Monitoring, which manufactures testing equipment and does not offer domestic partner benefits, the cost of insurance could double or triple, according to company estimates, when it renews its health insurance plan early next year and must comply with the legislation.
But for Catie Profeta, who has been denied such coverage by San Diego employers in the past, the law could have a more favorable impact.
Profeta said that when she moved to San Diego in early 2002, she encountered at least nine potential employers, including large corporations such as Home Depot, Inc., that were unwilling to offer domestic partner coverage in their group insurance plans to employees.
Profeta, 26, and her partner, Nicki Walker, 38, have been together for almost three years and are planning to have a child. “Having a joint plan was important to us because we intend to share the responsibility for medical care for our child,” Profeta said.
Profeta said she was lucky to have found her job at Will Copy and Print, a commercial print shop near Little Italy in Downtown San Diego, that offers an HMO plan that covers 75 percent of her medical, dental and vision insurance, and voluntarily offers coverage to Walker that is equivalent to what a spouse would receive.
Some couples in San Diego have had a harder time.
Charlie Balogh, a sales representative at Home Depot on Sports Arena Boulevard in the Midway area, was unable to secure health insurance for his partner, Nick Jerrard, a physician who recently left a larger medical group and, as a consequence, is uninsured. Atlanta-based Home Depot, which had renewed its policy for 2005 before the law went into effect on Jan. 2, nonetheless has decided to expand coverage to same-sex domestic partners. The coverage, however, will not begin until April for individuals such as Jerrard.
That Home Depot has voluntarily extended its benefits means Balogh and other employees of the company will join the ranks of the 18 percent of workers across the country who have the option of same-sex domestic partners’ health insurance through their employers’ plans, according to a 2004 Kaiser Family Foundation survey.
Although most large firms in San Diego, including all three Fortune 500 companies based here (Qualcomm Inc., Science Applications International Corp. and Sempra Energy) voluntarily offered health coverage to domestic partners before Jan. 2, many other companies have not followed suit.
As of this year, employers will no longer have the option to refuse.
Assembly Bill 2208, also known as the California Insurance Equality Law, requires all group health insurance plans that are issued or renewed on or after Jan. 2, and all other forms of insurance, including health, dental, vision, disability, accident and auto, must be provided to domestic partners, on par with spouses, statewide. This law defines domestic partner as unmarried people who share a residence and are of the same gender. (Jan. 1 was the effective date for individual plans.)
As a result of the law, insurance carriers must include domestic partner coverage under the same terms and conditions that would otherwise apply to coverage for a spouse, according to Sylvia Wallace, a spokeswoman for the health-care organization Kaiser Permanente in San Diego.
While the initial burden of the law falls on the insurance company, the cost of expanding coverage indirectly falls to those California employers that are not self-insured, and that must renew or take out new policies on or after Jan. 2, according to Sam Hoffman, a partner at the San Diego office of Foley & Lardner LLP who specializes in employee benefit matters.
For the first time, the state is providing a mandate rather than a recommendation, with which employers, regardless of their particular moral or religious convictions, must comply, according to John Garner, the president of Pasadena-based Garner Consulting, an employee benefits consultant.
“Many, many employers and employees are affected by this, and they should know who they are,” said Hoffman.
He points out that AB 2208 is, in reality, only conforming provisions of already-existing insurance laws to more recent California non-discrimination laws that ensure domestic partners receive equal treatment.
The legislation, however, has important implications for companies such as SKF in Kearny Mesa, which could see its cost of coverage per employee double, or even triple, for each domestic partner added to the plan, according to its director of human resources, Raenell Transue.
SKF does not voluntarily offer the expanded coverage to its 115 employees because of cost, said Transue. “We’ve done everything we can to offer a comprehensive benefits program without significantly increasing the cost. The less people we have on our benefits program, in general, the lower the probability that someone will get sick and file a claim, which increases costs not only to the employer, but to the employee as well,” she added.
SKF pays 85 percent of the employees’ medical bill in an HMO plan from Aetna. Because it renewed its plan on Jan. 1, the company avoided the Jan. 2 deadline for complying with AB 2208. Although Transue said the company will comply with the law when it comes time to renew in 2006, she is not certain the requirement will still be in place 11 months from now.
“There may be some companies that challenge the law,” she said, on the grounds that it is pre-empted by a federal law commonly known as ERISA , the Employee Retirement Income Security Act , that protects consumers who participate in health plans sponsored by private employers.
Still, employers such as SKF are taking AB 2208 seriously, voicing what has become a standard criticism: extending these benefits increases the employer’s cost of providing insurance.
There are less obvious costs to employers associated with the new insurance provisions beyond the additional premiums employers will pay on behalf of registered domestic partners in their plans, such as the additional reporting costs they will pay (because a domestic partner’s insurance benefits are not tax-deductible by the individual under federal law), according to a research paper produced by Torrance-based insurance broker Keenan & Associates.
This is a typical concern for San Diego employers, according to Bob Bruni, the director of policy and legislative affairs for the San Diego Employers’ Association, which provides human resources and employment law counseling for local businesses. He said the two key issues confronting employers as a result of the law are cost and whether employees can share some of the burden by increasing their co-payments.
Others say that employers’ worries over costs are overblown.
“The economics tell you that the cost of covering domestic partners is relatively small and, from an economic perspective, all I can say is that employers who have covered domestic partners (voluntarily) have not faced significantly higher costs,” said Hoffman.
Hoffman points to a 2004 study from the Williams Project at the UCLA School of Law that found that the average increase in costs for California employers who provide same-sex domestic partner benefits is less than $3,000 per year.
Additional research from the project showed that fewer than 2 percent of California employers would have any additional costs at all from offering domestic partner benefits, according to Brad Sears, a spokesman for the project.
Sears said that when the number of domestic partners who have registered with the state of California as of February is taken into account , 30,774 couples, or .09 percent of the state’s population , the impact of the law on businesses’ bottom lines is even less substantial.
“So, the worst case scenario is that all 30,000 registered domestic partners work for an employer that is forced to offer health benefits, and the partners of these employees do not have access to benefits and so they each enroll. That is a ridiculously unlikely scenario,” said Sears.
Furthermore, many companies in San Diego, such as La Jolla-based real estate brokerage Willis Allen Co., which provides coverage for fewer than 20 people, will not be affected at all by the legislation.
According to Jane Dreher, the director of human resources at Willis Allen, since the firm offers only individual coverage with its insurance provider, Healthnet, and does not cover spouses or families, AB 2208 will have no effect on the premiums it pays.
The Williams Project’s study showed that, statistically, few California businesses will be affected by the legal obligation to provide the extended benefits and those that are affected will see only a slight increase in their overall compensation costs.
In San Diego, however, where 99 percent of businesses employ fewer than 200 workers (such as SKF Condition Monitoring), and where anecdotal estimates from local consultants show that few of these small businesses offer domestic partner benefits as of 2004, the costs associated with the new law could be substantial.
But for individuals such as Profeta, who hopes she will never again be denied health-care benefits for her or her partner, the Insurance Equality Law feels like an important milestone, she said.
“This is a way for companies to say that they have diverse corporate cultures and diversity in their work force and they support it,” Profeta said.