In 1996, San
Francisco boldly passed a law that required virtually all
companies doing business with the city to provide domestic
partners equal access to health insurance. The
landmark legislation paved the way for 13 progressive
cities and counties (such as Seattle; Berkeley, Calif.; and
Portland, Ore.) to subsequently adopt their own
equal-benefits ordinances.
Yet even with
these laws, getting access to domestic-partner insurance
plans was a problem -- especially for small businesses of 50
or fewer employees. While many private insurers offer
DP plans to large companies, they almost universally
don't offer them to small businesses. Passing a
law was important because it provided the leverage to
approach insurers about offering such plans to small
companies.
Surprisingly, New
York -- a city where small businesses make up about 97%
of the market -- fell short of enacting its own ordinance in
2004. But what has happened since then may prove
revelatory for governments that can't muster
the political will to pass equal-benefits legislation. Not
that political will was lacking in New York: The city has
provided domestic-partner insurance to municipal
employees since 1998. Six years later the city council
voted to require the same of city vendors, passing an
equal-benefits law not once but twice--the second time
overriding Mayor Michael Bloomberg's veto.
The mayor, who
built Bloomberg LP into a multibillion-dollar business
before venturing into politics, was convinced the ordinance
wasn't legal. According to his lawyers, it
conflicted with state and federal laws that say city
contracting processes are strictly controlled by the state.
Essentially, cities don't have the power to add other
considerations (e.g. which companies provide DP
benefits) to the bidding process because it disrupts
the free market.
Despite his
reasoning, Mayor Bloomberg took a lot of heat from gay
activists, who saw his veto as nothing less than antigay
bigotry. When the city council overrode the veto,
Bloomberg refused to implement the law, so the city
council sued him. Ultimately, the New York state court
of appeals sided with the mayor, ruling that the
equal-benefits ordinance was in fact illegal.
So the mayor
began asking a different question: In the absence of an
equal-benefits law, how do you convince private insurers to
make domestic-partner plans available to small
businesses? His solution: Go directly to the insurance
companies and, well, ask. Anthony Crowell, counselor
to the mayor, recalls Bloomberg saying, "If you get a
couple insurers to do it, everyone will do it, because
a natural market will be created."
The
mayor's team approached two of the eight insurers
that provided health insurance in New York City at the
time, Group Health Inc. and Health Insurance Plan of
New York. Marjorie Cadogan, executive deputy
commissioner of the city's Office of Citywide Health
Insurance Access, remembers thinking it would be a
difficult road, but the best incentive for insurers
would be peer pressure. "If we could get the ear and
attention of some of the bigger insurance players in New
York City, market pressure and competition"
would get the others on board, she says.
"Insurers really work across the market -- if their
competitors have a product or an offering that they
don't, that's a bit of p market share
that they're losing."
The biggest
hurdle was to convince insurers that providing DP insurance
for small businesses wouldn't be costlier than
providing it for firms with more than 50 employees.
While insurance rates for big companies are based on
actual usage, small groups get a flat rate -- which is more
expensive for insurers and could be especially problematic
if domestic partners tended to seek more medical care
than spouses do.
"At first,
it appeared that there could be several incorrect
assumptions about the risk pool involved and costs of
coverage," says Bill Heinzen, deputy counselor
to the mayor, who with Cadogan took part in the initial
discussions. Those assumptions included concerns that
domestic partners might cost more to cover due to
applicants with HIV or AIDS; possible increased use of
in vitro fertilization; and even some non-economic
religious concerns. "We really had to encourage the
insurers to sit down with their actuaries and do some
homework," adds Cadogan.
One insurer,
Group Health, had the benefit of analyzing data it had
collected from having already provided DP coverage to New
York City employees. "We did experiential
studies on that population and found, in fact, their
experience was no different than the non-domestic
partner experience," says Steve Kessler, senior
vice president for actuarial and underwriting at Group
Health. "So that's why we extended
coverage."
By October 2005,
when Mayor Bloomberg signed an executive order to
educate businesses about the value and availability of DP
insurance, four insurers had agreed to voluntarily
provide domestic-partner plans: Group Health, Health
Insurance Plan of New York, Empire Blue Cross/Blue Shield,
and Horizon (since merged with another insurer). Over the
next 20 months the city engaged in what Cadogan calls
a "charm offensive," and by summer 2007
the remaining insurers had fallen in line: Oxford, Aetna,
Atlantis, Cigna, and HealthNet.
Matt Foreman,
executive director of the National Gay and Lesbian Task
Force, was blown away. "We worked for years to get
the New York State Insurance Department and health
insurance companies to offer domestic-partner coverage
to companies with fewer than 50 employees, and got
nowhere," he says, referring to his days working at
the New York City Gay and Lesbian Anti-Violence
Project and the Empire State Pride Agenda.
Cadogan hopes the
accomplishment doesn't stop at the border of New
York. "I think it's a model that can be
used fairly effectively in other parts of the
country," she says, "without creating the kind
of tension that legislation can."
But passing
legislation does have several advantages, says Cynthia
Goldstein, who oversees the city of San Francisco's
equal-benefits program as a senior contract compliance
officer. First, legislation provides a real carrot for
employers to offer DP benefits: If they don't,
they aren't eligible to bid on contracts with the
city. (That's not the case in New York.)
Goldstein estimates that roughly 500 companies
nationwide offered DP insurance back in 1996; now about
4,700 small businesses that contract with San
Francisco provide DP coverage. Equal-benefits
ordinances also mandate more extensive benefits, like
family leave, bereavement leave, long-term disability
insurance, dependent life insurance, and retirement
plans.
But whether the
push for benefits comes from legislation or a
strong-willed politician, the effect on private insurers is
the same. They get on board once they realize
there's more business to be gained than there
is money to be lost. That fact wasn't lost on
Denver-based Anthem Blue Cross and Blue Shield in
Colorado, which started offering small-group DP plans
in the state this summer without either the
pressure of a law or wrangling from a bureaucrat. Says
Anthem spokeswoman Sally Vogler: "I think 50%
of Fortune 500 companies offer same-sex
domestic-partner benefits to their large groups--it
just simply made sense to us to expand this to small
groups."
For Goldstein,
Anthem proves there's a market for DP benefits just
waiting to be tapped. "I think that if the
shareholders of these insurance companies that are
still not offering domestic-partner benefits were
informed about it, they'd be furious," she
says. "They're missing out on profits
that they'd like to obtain."
