NTF Issue Paper: ccwatch22.doc.  4-04 

NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
THE COST OF SAME-SEX EMPLOYEE BENEFITS. 

BACKGROUND.  The City of Omaha police union has requested the city government to extend employee benefits to same-sex domestic couples.  This coverage, though not initially, eventually could include health, dental, vision, accident, and life insurance, sick, parental, and bereavement leave, and pension and death benefits, following the pattern in other metropolises. 

THE COST.  No one has assembled a reliable, objective, reasonable, or accurate mass of years-long data on the cost.1 The Tampa, Fla. human resources director stated that the cost there was less than $60,000 annually for 4,600 city employees.  It would have cost Charlotte, N.C. at least $94,000 in FY 2005 if implemented.2  The amendment to the city contract will cost households 40c each yearly in Cleveland Heights, OH.3  The Detroit City Council fiscal analyst estimated that it would cost $73,000 yearly, if 1% of employees signed up.4 Lansing State U. estimates that it will spend about $30,000 annually on same-sex insurance at its 19,000-student campus, with its budget of $92 million.5  Homosexuals represent a high-risk health subset. People with same-sex sexual behavior stand at greater risk for psychiatric disorders.6 Group health insurers often add a 2% surcharge to premiums as a precaution for higher risk groups of customers.  Insurers also believe that they will suffer fraud.7  The average lifetime cost of treating someone through an HIV infection to death from AIDS is $120,000.8  Ironically, the National Gay & Lesbian Task Force, which lobbies companies and governments to offer health benefits to same-sex couples, cut 1/2 of its domestic partner benefits, saying costs were prohibitively expensive.  The group now has a 50% payment plan for partners of staff.9  The Corporation Resource Council, a non-profit consulting company in Scottsdale, AZ. found that a small business group health insurance pool covering 700,000 in California paid 17.1% more in 2002 for same-sex couples than normal couples.  Accounting for high-risk enrollees and same-sex medical costs, employers should expect to pay 3-5% higher costs, if only 1-2% of their employees choose same-sex partner benefits.10  Because insurance companies cannot reasonably forecast the health care costs for co-habiting same-sex couples, insurers are unwilling to risk the profitability of individual same-sex partner insurance policies.  Insurers make their actuarial tables and set premium prices using years of historical data.  Not having such data, forecasts become guesswork and pricing more possibly fluctuating.  In cities that already have expanded benefits, many same-sex couples may add a beneficiary during an open enrollment period, with no proof of good health required.  A same-sex employee can wait to choose insurance for his or her partner until discovering this partner has a serious illness, like AIDS.  Contrarily, married employees ordinarily may add a beneficiary to a group insurance plan without proof of good health only within 30 days of marriage, birth, or adoption.11  Because of the instability of same-sex partnerships and apparent ease of adding partners to a benefit plan at any time, such policy would invite abuse.12  It would encourage fraud, because it is difficult to legally prove when domestic partnerships begin and end. The city would have to determine when a same-sex partnership qualified, re-qualified, or ceased to qualify for benefits, there being no legal precursor in NE law. An ordinance would create legal recognition of a relationship that many Nebraskans scorn and elevates such relationships to the same legal category as marriage.13  The estimated costs per individual per year for overall AIDS treatment is $38,000.  An ordinance would place city and employee health care dollars at risk unnecessarily.  Actuarial tables used to determine health insurance rates will become distorted.14  Benefits promoting marriage make better economic sense, because married employees are more stable and have fewer health risks than shack-up couples.  Jack Dannemiller, former CEO of Allied Industrial Technologies, said his company incurred medical bills for AIDS costing between ¼ and ½ million dollars.  It seems unfair to ask current employees to bear the cost of aberrant lifestyles of others by paying higher premiums.1   The unavoidable adverse selection associated with domestic partner benefit plans will exacerbate health insurance costs for participating entities.  An employer with a 1% shift in enrollment and only 25% adverse selection will see an increase of almost 14% in health care costs.  This excess cost will pass along to other city employees2 and raise their deductibles.3   There will be a collateral financial impact in the administration of expanded benefits because of the disconnect between city ordinance and federal law.  This proposal possibly could violate COBRA federal law provisions. Expensive dual systems would track payroll and benefits for same-sex and opposite sex couples.   

POSSIBLE EXPANSION.  City employees caring for dangerously ill blood relatives may feel their relationships less valuable than one that many consider immoral. Employees who give care to a sick parent or sibling may demand health benefits.  All other city employees with same-sex partners may demand like treatment.  Opposite sex cohabiters may demand like benefits.  An employee could demand to sign up multiple domestic partners. Widowed or divorced persons could use this expansion as a scam to protect themselves financially by claiming “ghost” partners. The city would see increased demand that all contract benefits go to same-sex partners. 

AN ALTERNATIVE.  The Colorado Springs, CO. city council considered a buy-in plan, under which anyone living in the same household as a city employee could participate in the city benefits programs by paying the full premium.  No general fund dollars spent.  Participants would save money, because their premium paid to join the city group plan is about ½ that paid to gain individual insurance.  However, it would cost the city additional monies, if insurance claims increased disproportionately in future.4 

QUESTIONS & PITFALLS.  The number of prospective new enrollees and the health risks associated with these individuals requires clarification.  If a city insurance carrier refuses to extend coverage to same-sex couples, the city might have to drop the carrier and negotiate with a more expensive company.  An insurer may demand an additional charge to administer the revised insurance contract.  As many same-sex couples both work and have their own health plans, the need remains doubtful. Taxpayers may have to pay the medical bills for sex change and other bizarre surgeries, as in San Francisco.  The city may face lawsuits like that in New Orleans, where plaintiffs accuse the city of illegally forcing taxpayers to fund immoral lifestyles, thus violating the Louisiana Defense of Marriage Act, similar to one in Nebraska.  The NE Constitution states, “The uniting of two persons of the same sex in a civil union, domestic partnership, …..shall not be valid or recognized in Nebraska.” Our state constitution prohibits cities from creating their own definition of civil relationships. UNL law school Prof. Rick Duncan believes that the proposed contract clearly would violate the constitution.  Such lawsuits already have ended benefits for same-sex couples in Philadelphia and 4 other cities.  In Virginia, the state supreme court ruled that the City of Arlington wrongfully expanded its legal definition of eligible dependents to include domestic partners.5   

CONCLUSION.  The police union membership, mayor, and city council majority must approve such a contract.  Lobby your city councilman and Mayor Fahey today to vote NO on this contract.  A city employer should not place taxpayers at risk, as salaries and benefits constitute the largest city expense.  Email us for Omaha city official contact information.  

Research, analysis, and documentation for this issue paper done by Nebraska Taxpayers for Freedom, with express prior permission granted for its use by Taxwatchers, Inc., Citizens for Local Control, Cherry County Taxpayers, Dawes County Taxpayers, and other groups in the Tax Freedom Network.  4-04.  C