The Federal Court for the Southern District of New York Rules that Employers with Self-Insured Health Plans Need Not Offer Medical Coverage to Same-Sex Spouses

The issue of same-sex spousal rights is now largely resolved for qualified retirement plans. However, substantial questions about same-sex spouse health benefits remain unanswered. In Roe v. Empire Blue Cross Blue Shield, 2014 WL 1760343 (S.D.N.Y. May 1, 2014), however, a court ruled that employers with self-insured health plans are not required under ERISA to offer coverage to same-sex spouses, even though opposite-sex spouses receive coverage.

In United States v. Windsor, 133 S.Ct. 2675 (2013), the Supreme Court struck down most of the Federal Defense of Marriage Act (DOMA), and a subsequent string of recent lower federal court rulings have likewise struck down individual state bans on same-sex marriage. Additionally, the U.S. Department of Labor issued a Technical Release in September of 2013 recognizing that "spouse" for purposes of federal regulations includes "individuals married to a person of the same sex." Likewise, the U.S. Department of the Treasury and the Internal Revenue Service jointly issued a Revenue Ruling announcing that the Internal Revenue Service recognizes "all legal same-sex marriages…for federal tax purposes." As a result of this and subsequent further guidance, it is now clear that same-sex spouses with a valid marriage license from any state must be recognized for purposes of qualified retirement plans, and if a retirement plan defines "spouse" as an individual of the opposite sex, the retirement plan must be amended by December 31, 2014.

For health benefit plans, however, the answers are not quite as clear. Unlike the tax code, which provides for certain spousal rights, ERISA is silent on the issues. Therefore, it is not clear whether the same rules should apply. For example, are employers required to cover same-sex spouses of employees under their health plan, or is it legally permissible under federal law for employers to offer health benefits to opposite-sex spouses of employees, but not same-sex spouses? What about state discrimination laws? Will excluding same-sex spouses from an employer’s health plan violate state or local anti-discrimination laws? Some of these questions were recently, and for the first time, considered by a federal district court. As explained below, the answers depend largely on whether the employer’s health plan is self-insured and whether or how the health plan defines "spouse."

Self-Insured Health Plans

If a health plan is self-insured, the federal benefits law (ERISA) generally preempts state law and is the exclusive source of authority. In what seems to be the first post-Windsor federal court decision to consider same-sex spouse health benefits, the Roe court held that employers with self-insured health plans are not required under ERISA to offer coverage to same-sex spouses, even though opposite-sex spouses receive coverage.

In Roe, the plaintiff filed suit against her employer for refusing to offer health benefits to her legally married same-sex spouse. The plaintiff and her spouse were citizens of New York, a state that recognizes same-sex marriage, and the employer was also located in New York. The employer’s self-insured health plan provided benefits for spouses of employees but excluded coverage for same-sex spouses. The court held that, in the absence of conflicting federal law prohibiting such discrimination, employers have the freedom under ERISA to tailor the terms of their plans. This includes the ability to exclude people from the definition of "spouse" in such a way "that the outcome is that same-sex married couples are not entitled to the same benefits under their employer-sponsored plan as other legally married couples." The court explained that "ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe discrimination in the provision of employee benefits." Accordingly, the court held that, under ERISA, a self-insured health plan may explicitly and legally exclude coverage of same-sex spouses while offering coverage to opposite-sex spouses.

The Roe court also distinguished an earlier case dealing with spousal rights under the tax code, Cozen O’Connor P.C. v. Tobits, 2013 WL 3878688 (E.D. Pa. July 29, 2013). The Roe court observed that, in Cozen O’Connor, the court extended benefits to a same-sex spouse of a deceased employee because the plan document did not explicitly define "spouse," and, therefore, same-sex spouses were included in the non-specific definition. Accordingly, under the holding of the Roe court, a same-sex spouse of an employee may be eligible by default to receive coverage under a self-insured health plan if the plan documents do not have a clearly stated definition of "spouse."

Insured Health Plans

If a health plan is fully insured, ERISA preemption generally will not apply to state insurance laws. Thus, state laws that prohibit discrimination on the basis of sexual orientation could almost certainly carry over to insured health plans. Currently, more than 20 states (as well as the District of Columbia and many local municipalities) have laws that prohibit employment discrimination on the basis of sexual orientation or similar grounds. Many of these laws require private employers to provide equivalent benefits to same-sex and opposite-sex couples. However, most state and local discrimination laws do provide for some limited exceptions or exemptions for religious and certain non-profit employers.

In sum, employers with self-insured health plans should review the plan documents (including the summary plan description and benefit booklets) to ensure that they define the term "spouse" in a manner that fits with the employer’s intent, and employers with insured plans should review the plan documents to ensure that they comply with applicable state law. In addition, following the demise of DOMA, all health plan documents that reference DOMA to define "spouse" should be amended because DOMA’s definition of "spouse" was declared unconstitutional.