Friday, July 13, 2012

Dollar Costs of Marriage Inequality

A week ago, my sweetie and I registered our domestic partnership with the State of California. This week, I worked with my employer's HR department to register my new status and add her to my health insurance plan.

In many ways, this process is the same as if we'd been legally married -- the company recognizes us as a unit, and offers the same insurance coverage as it does to spouses. If she had children, they would be my eligible dependents as well. However, while both the company and the state recognize our partnership, the federal government does not. So how these benefits are treated varies between state and federal level.

For example:

Prior to our registered domestic partnership, I was on a High-Deductible Health Plan (HDHP) with a premium payment of $0. (If I did pay a premium, it would come out of my paycheck pre-tax, reducing my taxable income at the end of the year.I didn't have to pay anything until I incurred medical costs, so that's more cash to tuck away into savings. I put it into a Health Savings Account (HSA), and I don't have to pay taxes on those contributions. My employer pays premiums on my behalf, though.

After our registered domestic partnership, I added my partner to the HDHP. Now I pay $110 in premium per paycheck (biweekly payroll, so that's $220 most months). It's a good deal. It costs $2,860 per year, just like anyone else who got married and added their (opposite-sex) spouse to the same plan. That's pretty awesome, compared to not having health insurance at all! It's also much better than what she would pay as an individual seeking private health insurance with similar benefits.

Those premiums aren't eligible for pre-tax treatment, though, says the federal government. (California state government says they are, because RDPs are treated just like spouses at the state level.) So I'll have the funds taken out of my paycheck, but will still have to pay federal taxes on that total $2,860 at the end of the year. If our RDP was a federally-recognized marriage, I wouldn't have to pay those taxes.

On top of that, the amount that my employers pays in premiums for my partner's plan ($145/paycheck, or $3,770/year) is taxable income. They call it imputed income. That's money that I don't receive directly (can't save it or invest it or spend it), but that does benefit me/my partner by covering the costs of her HDHP. If she doesn't need medical care during the year, then I just have to pay tax on the $3,770 (on top of the premiums and the tax on the premiums). If she does need medical care, she pays out of pocket for it (until the deductible is reached: the point of a HDHP) and then I pay tax on the $3,770 (on top of the premiums and the tax on the premiums). If our RDP was a federally-recognized marriage, I wouldn't have to pay those taxes, either.

One good point about the HDHP setup (the same as an opposite-sex marriage) is that she could open an HSA in her own name and use pre-tax savings to pay for her medical costs. (Like opposite-sex couples, I can't use my HSA funds to pay for her costs.) We'll look into doing that soon. I like the HSA setup because it's tax-free savings, and it rolls over from year to year. I don't pay tax when I make a contribution, and -- as long as I'm spending on qualified medical expenses -- I don't pay tax on what I take out. Rather than pay high monthly or biweekly premiums against the chance that I will have lots of medical expenses that year, I prefer to pay less in premiums and save more for the times when I *will* have medical expenses -- whether that's this year or ten years from now. If I have a catastrophic injury or illness or something, I know those costs are covered after I reach the out-of-pocket (or out-of-HSA) deductible.

So overall, I'm very pleased that my sweetie is now insured. She was hit by a car last year while riding her bike to work, and treatment for that was an expensive process even with the health insurance she had at the time, although thankfully there don't seem to be lingering physical effects. It feels good to know that both of us are covered should we need to be. I just wish it were equitable treatment under both state AND federal law.

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