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A sticky wicket: church plans and domestic partners in California


Guest erisafried
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Guest erisafried

Just entertained a question from a large church organization about the effects of the new California law AB2208 (insurers and HMOs must offer coverage to registered domestic partners on non-discriminatory terms if they offer any spousal coverage at all). The church is trying to determine whether AB2208 will require its self-funded health plan to offer benefits to domestic partners.

As a self-funded plan, you might intially think that ERISA's "deemer" clause (i.e., self-funded plans are not deemed to be insurance for purposes of state regulation) would preclude the application of AB2208. However, unless the plan at issue is an electing church plan, ERISA doesn't apply, so no deemer clause. This means that you get dumped back into the state insurance regulatory system. Further, the Church Plan Parity and Entanglement Prevention Act of 1999 indicates that state insurance laws are applied to church welfare plans as if they were insurers licensed by the state.

A literal application of these rules means that church plans, whether insured or self-funded, are now required to offer coverage to registered domestic partners if they offer spousal coverage.

Without debating the merits of the position, many churches have strong objections to this sort of thing. Then again, the California Supreme Court ruled last year that a non-profit entity affiliated with the Catholic Church had to provide contraceptive benefits through its health plan.

Anyone have any thoughts about this? Have you fought any battles on this topic yet?

Thanks!

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Not withstanding AB 2208, California also passed AB 205 which confers certain rights on domestic partners as defined in Section 297 of the California Family Code. Our counsel has opined that, as an employer, we must extend to a registered domestic partner basically EVERY benefit that we would extend for a spouse. Perhaps we're a little different being (a governmental body) not subject to ERISA, but this extends to family sick leave usage, bereavement leaves, and the California Family Rights Act, which is similar to FMLA but expansive in some important ways. I'm not sure if you can get around AB 205.

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erisafried:

Let me make your life a little bit more complicated than it already is.

I think that it is a safe assumption that the employer has purchased a stop loss policy to protect it against large losses. Do the California rules require that the health plan to which the stop loss insurance policy relates must comply with AB 2208 before a stop loss insurance policy can be issued with respect to the plan?

My recollection is that California took that approach regarding the regulation of insurance plans for small employers (AB 1672?) many years ago. It is nothing more than an artifice designed to skirt ERISA premption rules by indirectly regulating the content of health plans.

I also seem to recall that some state on the East Coast (Maryland?) did the same thing too. That statute was challenged in court on the grounds that it was preempted by ERISA, and I'm almost positive that the court said the statute was prempted.

Kirk Maldonado

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Guest erisafried

JSB: That's an interesting point you raise. For what it's worth, I agree with you about AB 205 and public sector employers. AB 205 uses pretty broad language to extend to registered domestic partners all of the "benefits, rights, and responsibilities" typically associated with the marital relationship. Since public plans are largely creatures of state law, when you have a state law that says "registered domestic partners=spouses," public plans are well and truly caught.

However, I think that there may be a difference between how AB 205 applies to governmental entities vs. churches. Admittedly, both are outside of ERISA's reach (at least non-electing church plans, anyway) and therefore subject generally to state law. My thought is that public entities in California (the operations of which are subject to state law) are now operating in an environment where the law expresses a clear preference for equality between registered domestic partners and spouses. For churches, the hand of government doesn't fall quite so heavily and so might not require the same sorts of responses. Also, the idea of a state interfering with the operations of churches is a bit more troublesome than the idea of a state changing the rules under which its own instrumentalities operate.

I guess we may have to wait until the courts start to work AB 205 over to know exactly how far it extends. I have a pretty good idea how my client is going to react to this though, and it ain't going to be pretty.

Kirk: I don't believe (but will check--thanks for the heads-up) that AB 2208 tries the nifty little stop-loss related end-run you mentioned (I'll bet some legislative aid was pretty proud of cooking that one up).

Since I am dealing with an actual church (rather than a church-related non-profit entity as in the contraception case last year), I think you'd have some interesting issues if the state really tried to force the church to provide these benefits. Might make for a nice test case.

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There are constitutional prohibitions on state laws which would impose requirements that violate fundimental tenants of a Church's teachings, e.g., state insurance law cannot require a Catholic hospital to perform abortions. A church which believes marriage between men and women to be the only form of realtionship it approves of cannot be required to offer equal benefits to domestic partners under state law because imposing such a law would violate the first amendment.

mjb

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Why not fire the employee? If the employer doesn't want to cover domestic partner benefits because the arrangement violates church doctrine, why have they employed them in the first place? Before anyone criticizes me for this statement, let me say I don't necessarily agree with doing this, but this is how one church in particular usually deals with these issues.

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Guest erisafried

mbozek: I am with you on this, but the law is so new that nobody's taken a shot at it in court. I think the state officials would have a hard time pushing on this in the church context, but this is California we're talking about. :rolleyes:

Jeanine: Interesting idea. The problem I see is that AB 205 (the broader California domestic partner legislation) applies for purposes of state employment law. I'd get nervous about firing someone who exercised his/her rights under AB 205, but I'll leave that for the employment lawyers. Also, we are talking about a plan that covers in excess of 5,000 lives, so we are dealing with a volume of folks that might not lend itself to picking off the isolated grumpy person as needed. They seem to think that there are more than a few folks flying under the radar at this point who might surface if coverage for domestic partners becomes available.

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EF This case will be determined by a federal court, not a CA state ct interpretating the First amendment to the US constitution. If the gvt cant impose a requirement on a church which violates its fundimental beliefs (e.g., require a hospital operated by the Catholic church to perform abortions), I dont think a state law could require that a church provide equal benefits to domestic partners.

mjb

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Whether the plan is an ERISA plan or not, it is self funded. Why would the state be able to dictate to a self funded plan, the benefits it must include. The only entity that can require benefits, is the federal government, for only the DOL (and Treasury) has regulatory authority.

Don Levit

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Paying claims for medicial or health benefits of an employee would be the doing of an insurance business under most state laws regulating insurance unless exempted. ERISA preempts state insurance laws from regulating a self funded single employer health or disability plan as an insurance company. There is no similar protection from regulation under state insurance laws for non ERISA plans.

mjb

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I agree with mbozek about no express protection for non ERISA plans.

The Supreme Court implies that the key is self insured, versus fully insured, as opposed to ERISA v non ERISA. I don't have the case at my fingertips, but can get it for purposes of this discussion.

I wonder if that CA law passed in 1999 was ever contested in a federal court? To say that self insured plans should be subject to all the regulation of a fully insured, commercial plan is comparing an apple tree to an entire orchard (still apples to apples, though).

This contradicts the deemer clause, in substance, if not in form.

The other alternative is to become subject to ERISA. If that was the case, wouldn't this plan, technically, be a MEWA?

By the way, are any of you aware that CA bans any new MEWAs from forming, according to a state law passed in 1995? Isn't that prohibition in direct conflict with ERISA?

Makes me wonder about the legality of that 1995 law.

Don Levit

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Please let us see this case that shows that the key is self insured rather than ERISA.

It would turn quite a few issues regarding non-ERISA plans such as Church plans and governmental entity plans. Who would then have regulatory powers and which laws would be applied since it would not be DoL, ERISA and now according to you not the State.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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GBurns:

The case is Metropolitan v MA, 471 U.S. 724 (1985).

This case affirmed that a MA statute requiring certain mental health care benefits be provided to any MA resident under a general health insurance policy or an employer health care plan. So, we see that the distinction between ERISA and non ERISA is not significant.

It states, "We therefore decline to impose any limitation on the saving clause beyond those Congress imposed in the clause itself and in the "deemer clause" which modifies it. If a state law regulates insurance, as mandated-benefit laws do, it is not preempted.

We are aware that our decision results in a distinction between insured and uninsured plans, leaving the former open to indirect regulation while the latter are not. By so doing, we merely give life to a distinction created by Congress in the deemer clause, a distinction Congress is aware of and one it has chosen not to alter."

What is that distinction? It is between fully insured and self insured plans. The deemer clause gives life to self insured plans, in that they cannot be regulated by the states, directly or indirectly, except for MEWAs (whether self insured or fully insured). The deemer clause also modifies the saving clause, by disallowing states to regulate self insured plans.

The problem here is that this church self insured plan could be deemed a MEWA. And, according to CA law, it would have to cease and desist. No new MEWAs are allowed to form in CA, whether self insured or fully insured (A direct conflict with ERISA, for MEWAs are expressly provided for in ERISA).

Don Levit

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