Judge Richard Young, a U.S. District Judge, found Indiana’s law forbidding same-sex marriage unconstitutional in a ruling issued on July 25.  He joined a long line of jurists who have ruled similarly, most recently in Utah and Pennsylvania.

What followed next was quite predictable; hundreds of couples stormed county clerk offices across the state in pursuit of marriage licenses until the inevitable stay of the judgment was made by the 7th Circuit Court of Appeals on July 28.  County clerks accordingly ceased issuing marriage licenses to gay couples.  The Circuit Court will likely take up the issue late this year or early next year.

I was struck by the number of gay couples on the news who seemed to think that their marriage qualifies one or the other for health insurance benefits at their respective employers.  Unfortunately, that is not as clear cut as one might assume.

Insurance offered by employers are fully insured or self- insured plans. Fully insured plans, representing about 55% of employer plans in the U.S, require the employer to pay a premium to a third party insurance company every month. That insurance company then provides coverage for employees – including paying claims. These contrast with self-insured plans, where the employer hires an administrator (usually an insurance company) to manage the plan and process claims. Importantly, the employer itself provides the coverage for employees and pays claims. Most employees do not have a clue as to how their health insurance plan is funded since in both types of plans the employees usually receive benefit cards from insurance companies. But while the distinction isn’t clear to employees, it is very clear to the law – and it makes all the difference for whether employers can or will offer health insurance benefits to legally married same-sex couples.

Fully insured plans are governed by state insurance regulation of the state where the owner of the plan is located (usually the headquarters office).   If the owner of the plan is in a state that recognizes same-sex marriages, the plan must cover same-sex couples just as it covers opposite-sex couples.  The opposite is typically true in a state that does not recognize same sex marriage (such as Indiana). In the event that the Supreme Court ultimately establishes gay marriage recognition nationwide, which I regard as likely, employers with fully insured plans will be required to offer same-sex couples benefits on par with their opposite-sex counterparts.

Self-insured plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA), and have consistently been found to trump state insurance regulation for such self-insured plans. Rather, these self-insured plans are governed by federal law, including the Title VII of the Civil Rights Act of 1964 which does not recognize sexual orientation as a protected class.  Absent any change to the CRA (ENDA failed to gain passage in Congress) employers that offer self-insured will have no duty or requirement to provide spousal or family benefits for same sex couples even if a state did recognize same sex marriage.

Marriage equality and its impact on the laws applicable to businesses is a fast-moving area of the law and can have significant impact on a wide range of employer policies and practices. I strongly recommend employers consult with skilled professionals before making any significant changes to benefit plans or human resources policies.