Insurers and health plans hear the clarion call for domestic partner benefits. It's a product that's growing in demand as the number of large employers offering such coverage continues to rise.
But they also have fears about marketing their products too aggressively, and few carriers envision the coverage as a moneymaker separate from traditional dependent coverage.
Prodded by trend-setting large employers like Walt Disney Co., Eastman Kodak Co., Levi Strauss & Co. and Microsoft Corp., many major insurers in the U.S. now write domestic partner benefits. Competition is the major reason-better to have it than not and risk losing a large client.
"If we are in a bid for a business, we would not want to be at a disadvantage," said Marc Osborn, spokesman for Group Health Cooperative of Puget Sound, a Seattle-based health plan that covers 700,000 enrollees in the Northwest. The plan has been offering domestic partner benefits since the early 1990s-both to its clients and its own employees.
"A majority of health plans have filed with state insurance agencies to offer domestic partner benefits. They really have been forced to by employers," said John Egner, a Philadelphia-based consultant and principal for Towers Perrin.
A list compiled by Carnegie-Mellon University in Pittsburgh of employers offering domestic partner benefits reads like an excerpt from the Fortune 500. Also among the giants providing them are American Express Co., Glaxo Wellcome, Intel Corp., New York Times Co., Paramount Pictures, Polaroid Corp., Starbucks Corp. and Time Warner.
Among healthcare providers are plans such as PacifiCare Health Systems, Kaiser Health Foundation, the Blue Cross and Blue Shield plans of Massachusetts and New Hampshire, and major hospitals such as Beth Israel Medical Center and Montefiore Medical Center, New York; Boston's Children's Hospital; and Children's Hospital-Oakland (Calif.).
According to the Carnegie-Mellon data, the majority of employers offering domestic partner benefits are based in the West or Northeast.
Said Preston Weaver, benefits manager for Dallas-based Perot Systems, "We're in the Bible Belt, and I think there's a resistance to it here." In January, however, the information systems company became the first large employer in Texas to offer domestic partner benefits. The issue has been a volatile one in the Lone Star State; in recent years several municipalities have considered terminating business with any contractor that offers such benefits to same-sex couples.
But industry observers say policy changes by companies such as Perot Systems illustrate how such benefits are becoming more mainstream.
Another example came earlier this month, when San Francisco-based Bank of America Corp. announced it would extend benefits to domestic partners during open enrollment this fall. The company, said to be under pressure from the city of San Francisco-a major client that requires its contractors to offer domestic partner benefits-became the first major financial institution in the country to offer such benefits. Experts say the move means it's likely the practice will be considered by other banks, despite their button-down ways.
"Every time a high-profile employer offers them and it makes the press, it makes it easier for the next employer to offer them," said John Mackerer, senior vice president of HCM Benefits, a Torrance, Calif.-based consulting firm.
Most employers still don't, however. According to a recent Towers Perrin survey, only 7% of employers currently extend healthcare benefits to domestic partners, although 15% said they are considering doing so. But only 1% said they plan to begin offering them within the next two years.
There's also debate over who should be covered as a domestic partner. About 45% of the companies offering coverage do so to same-sex partners only, according to the survey. The remainder offer benefits to both same-sex and opposite-sex partners.
From Mackerer's experience, domestic partner benefits are mainly the domain of larger employers. "Larger businesses seem to have a greater awareness. They have the time and resources to determine the costs and handle the administrative complexities," he said. "The human resources staff of smaller employers are often understaffed and cannot deal with the issue, and their employees are inclined to be less vocal about the issue."
For the moment, carriers such as PacifiCare, Health Net and Group Health only write domestic partner coverage for groups of 50 or more employees.
Michelle Simpson, manager for PacifiCare's major accounts, said San Francisco's mandate may prompt writing for smaller businesses. "We have a lot of clients who do business with the city," she said.
The price for covering domestic partners is small: Industry experts believe they add at most 1% to administrative costs. Most of that is in the form of extra legal paperwork, such as affidavits employees would sign to confirm they have a domestic partner.
"The cost is not proving to be significantly different than any other covered dependent," Egner said, adding that domestic partners do not appear to present any adverse risk trends.
But the companies often have a windfall of free publicity when they add the benefits, while insurers reap little profit. That's because only a handful of employees typically buy the coverage, generating little additional revenue. At Perot Systems, just five employees out of 4,200 have signed up for domestic partner benefits, Weaver said.
Egner and other industry observers note that the domestic partners of most employees usually already qualify for healthcare benefits through their own jobs.
Indeed, PacifiCare and Group Health officials don't foresee domestic partner coverage as a large revenue generator in the near future because there are so few takers. No carrier contacted broke out revenues from domestic partner beneficiaries.
Health plans aren't using domestic partner benefits as a marketing tool,
either. They're still treating the issue with caution, offering details on their products only when asked.
"It's not something we go into in a presentation," said Group Health's Osborn. "We don't push it in part because we don't want to offend anyone."
Added Egner: "Employers are constantly doing a balancing act with their employee constituencies. One group may be in favor of extending (benefits), while another may see it as supporting a lifestyle they don't agree with."