DSI Blog

Domestic Partner Coverage – The End Appears Near

In the weeks since Obergefell vs. Hodges SCOTUS ruling, DSI has been carefully tracking Domestic Partner coverage trends within our existing client base as well as new clients.  As a national provider of Dependent Eligibility solutions for nearly a decade, we are uniquely positioned to manage and administer client eligibility changes and identify trends on a broad scale.

Domestic Partner Coverage – The End Appears Near

Well Domestic Partner Coverage… It was only a matter of time:  

  • “Domestic Partners will no longer be covered as of January 1, 2016.”  
  • “Effective January 1, 2016, Domestic Partnership is no longer an eligible class of dependent.”  
  • “As of November 1, 2016, Legal Spouses will continue to be eligible for benefits.  However, Domestic Partners will no longer be offered coverage.”

These actual statements were part of larger announcements sent proactively in recent weeks by three separate large employers to US employees in over 45 states.  The attempt to prepare employees (or warn them) that benefits eligibility is moving toward Legal Spouse and away from Domestic Partnership appears to be picking up speed, according to a recent non-scientific survey DSI conducted on our own book of business.

In the last week of July 2015, DSI (Dependent Specialists, Inc) sent clients a simple 6 Question Survey with a raffle drawing incentive to respond by August 7th.  This sample size of respondents ranged from 165 to 4,800 employees, and types of clients included non-profits, publicly traded, high-tech, government, blue collar manufacturing, hospitality, education and more.

Survey Questions

1. In light of legalized same-sex marriage in all 50 states, will your organization begin to phase out Domestic Partner coverage?

A.    Yes
B.    No
C.    Not Applicable – we have not covered Domestic Partners

2. If you responded Yes to question #1, what plan year do you believe you will phase out Domestic Partner benefits?

A.    2015
B.    2016
C.    2017
D.    2018 or beyond
E.    Unsure, my Yes was more of a maybe
F.    Not Applicable

3. If you responded Yes to question #1, will you provide advance notice to employees before open enrollment?

A.    Yes – more than one month in advance
B.    Yes – one month in advance, maybe less
C.    Probably – too soon to tell
D.    No – they will find out at the start of Open Enrollment along with any other benefit changes
E.    Not Applicable

4. If you responded Yes to question #3 and intend to forewarn employees of the move away from Domestic Partner coverage, what method or media would you intend or prefer to use to reach employees?  (check all that apply)

A.    Letter to home
B.    Company-wide Email or Newsletter
C.    Individual Email
D.    Intranet Announcement (includes Employee Self Service Portal, etc)
E.    Payroll Stuffers
F.    Posters in workplace, break rooms, etc.
D.    Video
H.    Robocall to home
I.    Other or not sure
J.    Not Applicable

5. How do you think your organization’s employees will respond to the decision to phase out Domestic Partner coverage?  (may choose up to two)

A.    More weddings, very little noise
B.    More weddings, some manageable noise
C.    More weddings, a lot of noise
D.    Same amount of weddings, very little noise
E.    Same amount of weddings, some manageable noise
F.    Same amount of weddings, a lot of noise
G.    Increased turnover due to disgruntlement
H.    Domestic Partners being removed from coverage rather than get married
I.    Other (type here)

6. If you answered “No” to question #1, and plan to keep Domestic Partner benefits for the foreseeable future despite the Supreme Court ruling, please select reason(s): (check all that apply)

A.    Recruitment tool
B.    Retention tool
C.    We don’t suspect abuse of the DP coverage
D.    Fear of employee backlash
E.    Other (type here)

Unofficial Survey Results

This was a non-scientific survey of clients who take eligibility management seriously, and the responses point strongly toward a trend to phase out Domestic Partner coverage.  Moreover, most clients plan to do it in 2017.  Of the respondents who offered Domestic Partner coverage as of August 1, 2015, 78% intend to phase out Domestic Partner coverage.  Out of the employers who believe they will phase out Domestic Partner coverage, over 70% said they will probably do it in the plan year beginning in 2017.  Over 17% percent believe they will phase it out in 2016 and another 7.0% suspect they will phase it out in 2018 or after.  Somewhat surprisingly, roughly 5% said they are implementing the change already, for plan years that begin within this calendar year 2015.

In communicating the change to employees, over 80% of respondents who believe they will phase out Domestic Partner coverage will alert employees more than one month prior to the Open Enrollment.  The most popular communication methods were letters to employee homes, company-wide emails and Intranet announcement (i.e. Employee Self Service).

Perhaps optimistically, over 55% of the organizations who plan to phase out Domestic Partnership eligibility think their employee population’s response to the new rule will only include more weddings and manageable noise.  Of note, 0.0% expect turnover as a result of their new eligibility rules.

Lastly, 22% the groups who completed the survey DO plan to keep Domestic Partner coverage. The reasons they will keep Domestic Partner coverage were heavily weighted toward Recruitment and Retention (over 81% of respondents to this question selected both Recruitment and Retention).

The Bottom Line

The Supreme Court ruling in Obergefell vs. Hodges legalizes same-sex marriage in all 50 states.  The movement of organizations to offer Domestic Partner eligibility launched in response to the inability of some same-sex couples to wed in their states, and picked up steam when employers had to keep up with competitors who were offering coverage.  In most cases, Domestic Partner benefits were only extended to same-sex couples under the assumption that if they could they would get married just as opposite-sex couples could.

The Supreme Court has removed the barrier that was the general impetus for Domestic Partner eligibility, and a large number of companies (78%, unofficially) are headed toward streamlined eligibility for Legal Spouses only, no Domestic Partners.  This will make benefits eligibility easier for employees to understand and easier for HR to administer the plans.  However, the biggest win for employers might be a reduced number of covered adult dependents that were covered as Domestic Partners would not be on the plan if they had to get married.

As one VPHR wrote in her survey, “We are relieved that our committed same-sex couple employees can finally marry, and we celebrate with them.  We are absolutely removing DPs for 1/1/16.  We had to offer DP coverage to be competitive in recruiting but we’ve always hated it because we know some employees abuse the eligibility.  Why on earth would we continue to pay for boyfriends/girlfriends to receive benefits, same-sex or opposite, just because they are playing house and manage to technically qualify as a DP?  Now, if they want benefits they can find a courthouse or a church, I hear Vegas has no shortage.”

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