Domestic Partners: New Wedge Issue for Reform?

With abortion dominating the health reform debate, another hot-button issue is flying under the radar.

Workers who insure their domestic partners, including same-sex partners, would get some tax relief under a provision of the House health reform bill that passed over the weekend. Normally, such a proposal would enrage conservative Christian groups, but their attention is focused elsewhere at the moment.

Almost 60 percent of Fortune 500 companies provide domestic-partner benefits for their employees, according to the Human Rights Campaign, a Washington-based advocacy group says.

But the government treats the coverage as a taxable benefit rather than health insurance, which is paid before taxes. That means the worker pays hundreds of dollars more in annual taxes related to that benefit. A worker making $33,000 with a typical employer health plan pays more than $1,700 a year in additional taxes on average, the Human Rights Campaign estimates.

"The private sector has been leading the way," says Trevor Thomas, a spokesman for the Human Rights Campaign. "We're hoping Congress will get up to speed."

Changing the tax law would simplify the paperwork for employers who offer domestic-partner benefits, says Helen Darling, president of the National Business Group on Health.

While her group doesn't have an official position on the tax law, Darling says "employers should have maximum flexibility to provide the benefits for their workforces." Domestic-partner benefits are a key recruiting tool for many big employers, she says.

Neither the U.S. Chamber of Commerce nor the National Federation of Independent Business have positions on the issue. But the idea of changing the tax treatment is backed by more than 60 big U.S. employers. Major U.S. companies, including AMR Corp., Citigroup Inc., and Microsoft Corp., support it.

The number of employers offering partner benefits has grown over the past two decades. According to the Human Rights Campaign, about two dozen employers offered it in 1990. By 2006, a majority of Fortune 500 companies offered the coverage. The Village Voice was the first to offer same-sex domestic-partner benefits to employees in 1982, according to the group's website.

While encouraged that the amendment was added to the House bill, Thomas acknowledges there's a ways to go before a final reform legislation is hammered out. Neither version of the Senate's two reform bills address domestic-partner benefits.