The Value and Cost of Adding Domestic Partner Benefits

COMM/215
February 3, 2011

Without a doubt, in a little more than a decade, domestic partner benefits have gone from virtually nonexistent to the predominant plan among the largest U.S. employers. More than 51 percent of Fortune 500 companies offer Domestic Partner Benefits; these employers have found an added greater value for them at minimal cost.Studies reveal employers who offer Domestic Partner Benefits are able to attract talented employees, increase employee morale, and experience low or minimal increase in cost. This research paper will reveal the Values of offering domestic partner benefits as well as address the Cost associated with it.
Can Be Used to Attract Talented Employee Competitively:
The value of offering domestic partner benefits is that it can be used as a powerful recruiting tool as well as to help retain talented and committed employees, according to the League of Minnesota Cities. Studies suggest that employees make decisions about job offers based on domestic partner benefits. Very skilled and highly trained workers may hold out for a company that offers domestic partner benefits. A benefit package that appeals to a diverse workforce gives employers an edge when it comes to recruiting. Also, there is value in the statement that offering the benefits makes about your company's acceptance of domestic partner relationships.
Employee Enrollment is Minimal: While there is value in offering domestic partner benefits, enrollment is low even among employees who are eligible. According to Salary.com only two to three percent of same sex couples who work for a company with domestic partner benefits take advantage of the programs.
Current Employees will be healthier, more satisfied, and less likely to leave their jobs:
Offering domestic partner benefits shows a supportive workplace climate with supportive policies. A supportive workplace allows “disclosure”, which has positive benefits to worker’s health; which means lower levels of anxiety and less conflict between work and personal life. Studies revealed that lesbian, gay and bisexual workers who “disclosure” report greater job satisfaction. Additionally, partner benefits reduce gay, lesbian and bisexual worker’s turnover and increase their commitment to employers.
Socially and Economically Just: The movement toward domestic partnership benefits in the workplace is rooted in the egalitarian principal that equal work warrants equal pay, including employment benefits. According to the 2000 U.S. Census, one-fifth of male same-sex households and one-third of female same-sex households were raising children. Estimates of children living in same-sex households range between six and ten million; no percentage of these children should be without access to health insurance. For some employees, it could represent health insurance they would otherwise be unable to get. Diversity for Everyone:
Everyone profits from a more diverse environment as it creates a welcoming atmosphere for all. Offering domestic partner benefits would demonstrate that the company embraces diversity.

Increased Productivity:
Employees in domestic partnerships become more productive, morale increases as well as loyalty because the financial pressures on their households are relieved to the same degree as other employees, and because their employers recognize, value, and support them.
Cost Factors:
The cost of health insurance is continually on the rise, which makes health care compensation more of a concern for employees and their dependents. However, the total costs of adding domestic partner benefits to the employees' benefits packages are insignificant. A study taken in 2005 by Hewitt associates shows that the majority of employers experience a total benefits cost increase of less than one percent (Luther, 2006 ). When a company needs to stay competitive, the last thing it needs to neglect are the necessities of its own employees. Adding to the constantly growing number of solid companies to consider when seeking employment; Company’s should consider which benefits are offered. J.D. Piro, chairman of the health law group at Hewitt, says the major driver of health care costs for many employers are triggered by women of child-bearing age because of maternity expenses. For "obvious reasons," he says that is not a factor for gay couples (Moon, 2005).
Health benefits are shown to be a greater portion of a persons compensation offered by an employer as opposed to receiving wages and salaries alone. Since the 1950s' the average compensation one receives from an employer in the form of either salary or wages has decreased by 14% (Luther, 2006). Numerous studies have shown that domestic partner benefits do not have a significant impact on the overall cost of health care insurance and can have a positive impact on hiring, retention and employee morale. Domestic partner benefits have a positive effect on productivity because it provides a safety net to employees. “As of March 1, 2006, 49% of the Fortune 500 and 78% of the Fortune 100 largest corporations offered health benefits to employees' domestic partners, compared to just 25 % of the Fortune 500 in 2000” (Luther, 2006).
Although conservative groups such as the American Family Association call domestic partner benefits a "prohibitively expensive" and says they "increase costs across the board for all employees." A recent study by Hewitt associates disputes that allegation. Less than 1% of workers opted to enroll their same-sex spouses in Massachusetts even after same-sex marriage was legalized in the state two years ago (Moon, 2005).
An exact cost of benefits to employees to companies is not easily attainable due to lack of current statistic during this research. However, in relation to health benefits, employers do typically pay the bulk the bill, paying for about 75% of the health costs. While this does dot not represent benefits to domestic partners, it does offer a framework as to what employers would consider paying for domestic partners benefits.
Cost is certainly an important consideration but it is not the only issue to deliberate. Appreciating the complexity and orientation of the family is important because organizations are made up of people. People are the engines that run all the corporations of the world and if any reason, that is why corporations should understand what makes the people happy. People like working at happy places, so they're more likely to stick around and do a better job (Murphy, 2002). Murphy reported Philip Strand stating, "One very large organization told us that their savings as a result of (employee) retention was several million dollars. Certainly saving millions of dollars in employee retention is worth considering.
According to a Human Rights Campaign paper, a 2005 Hewitt Associates study revealed that the majority of employers, 64%, experience a total financial impact of less than 1% of total benefits cost, while only 5% of employers experience financial impacts of 3% or greater of total benefits cost. Furthermore, according to the Society for Human Resource Management, employers that have offered domestic partner benefits report that coverage for domestic partners is no more expensive than coverage for other dependents. Although some people assume that HIV/AIDS will increase the number of catastrophic claims, those diagnoses have proven similar in cost and incident rate to most other life-threatening illnesses. A 1997 Hewitt Associates study revealed that the impact on companies' costs "has been minimal, with the addition of domestic partners, regardless of whether coverage was extended to same-sex or opposite-sex domestic partners. Companies report increases in medical claims of less than 1% after domestic partner coverage was introduced." A 2000 Hewitt Associates survey confirmed that adding health benefits for domestic partners is no more expensive than insuring spouses. Similarly, rates of enrollment have not been particularly high. Possible explanations most commonly cited for this are that same-sex domestic partners are likely already covered by their own employer, or that the employee is simply unwilling to disclose their sexual orientation for fear of discrimination. (Human Rights Campaign, 2006) According to information provided by the San Francisco Human Rights Commission's website, health insurance providers do not have a surcharge on policies written to include domestic partner benefits. Each state regulates whether or not an employer can provide such benefits. (San Francisco Human Rights Commission, 2006) Stated several times in the Helgeland v. Wisconsin case - The True Cost of Providing DP Health Benefits (2005), the financial costs are less than a 1% increase. If the figures are looked as being distributed over the entire work force, the cost involved amounts to pennies on the dollar. (American Civil Liberties Union, 2005)
When the State of Minnesota provided domestic partnership health benefits to state employees, the Minnesota Department of Employee Relations reported that the increase in cost in 2002 was only $189,000 - out of a total health care budget of $331 million (or, an increase of only .05 percent in state employee health care costs). Julien Carter, Commissioner of the Department of Employee Relations, also reported that if the value of these benefits ""were redistributed to each state employee in the form of wages, they would represent approximately .002 cents per hour"" (or, 4 cents per year). -**found at www.aclu.org in an article titled "The true cost of providing domestic partner benefits"
A survey conducted by the Society for Human Resource Management revealed that 85 percent of companies that provide domestic partner benefits reported that their health care expenses remained about the same after offering these benefits. See Society for Human Resource Management, ""Domestic Partner Benefits Survey"" (1997). Read the report (subscription required). As reported by the Employee Benefit Research Institute in March 2004, ""employers are no more at risk when adding domestic partners than when adding spouses. Experience has shown . . . the costs of domestic partner coverage to be lower than anticipated."" Domestic Partner Benefits: Facts and Background, EBRI (2004). Common Arguments Against Offering Domestic Partner Benefits: * Potential for fraud.
Legally binding affidavits and stigma associated with declaring one’s domestic partnership are strong disincentives for fraudulently applying for these benefits. * Backlash or Adverse Publicity.
Employers should stress that their corporate policies are designed to foster an atmosphere of fairness and professional respect, not to change personal values. * Cost
Several studies have shown that enrollment rates tend to be in the 1 percent to 2 percent range; including a 2005 Hewitt Associates study.

In conclusion, although employers fear it can be more costly, offering Domestic Partner Benefits are minimal in cost, add value for employers for two main reasons. First, it can be a powerful tool for recruiting and retention. Secondly, it can increase productivity and it promotes a more diversified atmosphere. But most importantly, it promotes fairness and equality.

References:
Luther, S (2006, March). Human rights campaign foundation. Retrieved August 29, 2006, from Domestic Partner Benefits: Guide to Employer Trends and Benefits Equivalency for the GLBT Family Web site: http://www.hrc.org/content/NavigationMenu/Work_Life/Get_Informed2/The_Issues/DomesticPartnerBenefits-March2006-Final.pdf
Moon, S (2005, August 1). Making a business case for domestic partner benefits. Financial Times Ltd, p NA.
Murphy, D. (2002). Going to school with Fish; happy employees can save companies more than a few fins. San Francisco Chronicle, pJ1
American Civil Liberties Union. (2005). Helgeland v. Wisconsin - The True Cost of Providing DP Health Benefits. Retrieved on May 31, 2006, from http://www.aclu.org/lgbt/relationships/20306res20050713.html
Human Rights Campaign. (2006). Domestic Partner Benefits. Retrieved May 30, 2006, from http://www.hrc.org/content/NavigationMenu/Work_Life/Get_Informed2/TheIssues/DomesticPartnerBenefits-March2006
M.V. Lee Badgett and Gary J. Gates, “The Effect of Marriage Equality and Domestic Partnership on Business and the Economy,” The Williams Institute, 2006.
Http://www.law.ucla.edu/williamsinstitute/publications/MarriageEqualityontheEconomy.pdf; Michael Ash and M.V. Lee Badgett, “Separate and Unequal: The Effect of Unequal Access to Employment-Based Health Insurance on Same-sex and Unmarried Different-sex Couples,” Contemporary Economic Policy, Oct.2006