This report offers, instead, estimates of the number of new enrollees based on the experiences of other employers providing domestic partner benefits.Ê Such estimates would be more useful for employers considering extending benefits to partners if the employers are using common eligibility criteria and if they are operating in locations and industries that are similar to those of employers currently offering domestic partner benefits.Ê Using experience data eliminates the need to identify the first two enrollment factors separately, since by definition the experience statistics reflect the number of people with partners who enroll.

The International Society of Certified Employee Benefits Specialists found in 1995 that 56% of employers offering partner benefits saw a 1% or smaller increase in enrollment.Ê Another 19% reported a 2% enrollment rate for domestic partners.Ê A recent survey by the Policy Institute of the National Gay and Lesbian Task Force collected data from cities offering domestic partner benefits.Ê All fourteen cities reporting enrollment rates offered benefits to both same-sex and opposite-sex partners.Ê The average enrollment increase was 2.1%, with a 0.4% average enrollment rate for same-sex partners. ¹⁰

Data collected directly from other employers shows a very similar pattern across region and industry.Ê Table 1 shows that increases in enrollment are very small. In most cases, the enrollment increase from opposite-sex and same-sex partners combined is less than 1%.

Enrollment of same-sex partners is quite low, resulting in less than a 1% increase in individuals covered.Ê Enrollment of opposite-sex partners is larger and tends to vary more across employers.Ê Occasionally a public sector entity has reported a higher than average enrollment rate.Ê This is not surprising, since clusters of people with partners might develop by chance at one employer, or a particular geographic location might be a magnet for people with partners for reasons having nothing to do with employment practices.Ê

For instance, Table 1 shows that the State of Vermont saw a 5% enrollment rate of opposite-sex partners, and another report found that 6.9% of the City of Berkeleyâs employees signed up an opposite-sex partner.ÊÊ The very high rate in Vermont is almost certainly related to an unusually high number of unmarried opposite-sex couples living in that state.Ê The 1990 United States Census of Population shows that 5.7% of Vermont households contain opposite-sex unmarried partners, the second highest percentage in the country.¹¹ The City of Berkeley also has a reputation for being a particularly liberal place to live that is welcoming to unmarried couples, so perhaps the city attracts residents and employees who are in nonmarital relationships.Ê As the other examples show, the high rates for Vermont and Berkeley are quite unusual and do not reflect the experience of the vast majority of employers that offer domestic partner benefits.Ê

To summarize, putting all available data together suggests that the most common experience for private employers is a combined enrollment rate of less than 1%, and public employers most commonly experience an increase from 1% to 2%.Ê

(3)   Average health care costs for new enrollees

When domestic partner plans were first implemented, employers worried that a large number of gay men would sign up HIV-infected men as partners.Ê Employers feared that such a situation would increase their average health care costs and would increase insurance premiums for all employees.Ê (This is known as ãadverse selectionä in insurance lingo.)Ê

These fears have proven unfounded.Ê Initially, some insurance companies required employers to pay higher premiums in case domestic partners increased average health care costs.ÊÊ As time passed, those employers were allowed to drop the fees because the feared cost increases did not occur. ¹²

The absence of evidence of higher costs per partner makes sense, since most people signing up partners will be lesbians plus heterosexual people, not the gay men who initially generated these concerns.Ê Furthermore, AIDS is no more expensive to treat than some other chronic illnesses, and employers offering domestic partner benefits have not reported catastrophic AIDS-related claims. ¹³

Therefore, this report does not factor in any increase in health care premiums.Ê

(4)   Additional cost of covering those new enrollees

With the data from the previous sections and with information on an employerâs number of employees and on the added insurance premium for a partner, it is possible to estimate the impact on an employerâs costs.Ê This section will describe some simple calculations for a fictional employer that can be easily customized for an actual employer. ¹⁴

Letâs estimate the cost impact on Makestuff, Inc., a company with 1200 employees.Ê To start with a simple example, we will first assume that the company has only one health care plan with two coverage levels÷individual and individual-plus-one (covering the employee and one other person)÷and that Makestuff pays 85% of the health care premiums or premium equivalent (if it is self-insured) for all its employees and their family members.Ê We will assume that the premium for an individual employee is $5,000 per year and is $10,000 for the individual-plus-one tier. If half of Makestuffâs employees are in individual-plus-one plans, the companyâs total health care costs are $7.65 million. ¹⁵

Now we can figure out what happens if the company decides to cover domestic partners.Ê If 0.5% of Makestuffâs employees sign up a domestic partner, then 6 more people are covered;Ê if 1% sign up partners, 12 more people are covered.Ê To keep this example simple, we will assume that none of the employees with partners has children and that none of the new partners have children to be covered.Ê (We will change this assumption in the next scenario.)

With these assumptions, the added cost of a domestic partner to Makestuff is 85% of the higher premium level, or 85% of $5,000, which is $4,250.Ê Because the IRS considers the employerâs payments for partner benefits as taxable income to the employee, the company will also have to pay social security (FICA) taxes for employees on the money spent on partner benefits, adding 0.0765% to the cost per partner.Ê Figuring out the total increase involves a little multiplication using these factors, summarized below in Table 2.

n this example, domestic partner coverage leads to a 0.4% increase in health care costs if 0.5% of employees enroll their domestic partners, ¹⁶ or 0.7% of total health care costs if 1% of employees sign one up.

If Makestuff pays more for the employee than for the spouse or family member, as is common, then the companyâs costs will rise even less.Ê If the employee pays the full premium for his or her spouse or partner, then the companyâs costs do not rise at all.Ê If the employer pays 50% for any additional person, then the companyâs costs rise by $2,500 per partner added, boosting costs by $32,295 for a 1% enrollment rate after adding in taxes.Ê That ends up as a 0.4% increase in costs, since the companyâs total in the denominator would now be $6.6 million.¹⁷

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NOTES:
10. Averages are not weighted by city employment.Ê Data from Sally Kohn, ãThe Domestic Partnership Organizing Manual for Employee Benefits,ä The Policy Institute of the National Gay and Lesbian Task Force, 1999.
11. The proportion of unmarried opposite-sex partner households in 1990 ranged from 6.0% in Alaska to 1.8% in Alabama.Ê ãUnmarried-Partner Households, by State: 1990,ä spreadsheet from Population Division, Bureau of the Census, dated 7/13/93.
12. Spencerâs Research Reports on Employee Benefits, ãDesign Features of Domestic Partner Benefits,ä Vol. 327, No. 4, May 22, 1992.
13. The most recent estimate of the cost of caring for an HIV-infected person was $119,000 over many years (Fred J. Hellinger, ãThe Lifetime Cost of Treating a Person with HIV,ä The Journal of the American Medical Association, Vol. 270, 1994, pp. 474-478).Ê Recent advances in treatment with protease inhibitors have added costly drugs but are likely to cut hospitalization cost (Fred J. Hellinger, ãCost and Financing of Care for Persons with HIV Disease:Ê An Overview,ä Health Care Financing Review, Vol. 19, 1998).
14. Small employers might have a difficult time convincing their insurance companies to cover domestic partners.Ê In that case, the employer could either add the equivalent amount to the paycheck of partnered employees or could pay the same amount toward insurance premiums paid by the employeeâs partner.
15. To see this, 600 employees cost the company $4,250 (85% of $5,000) for a total of $2.55 million, and 600 employees cost the employer $8,500 (85% of $10,000) for a total of $5.1 million.Ê The total cost for health insurance is $7.65 million.
16. The percentage is calculated as [(change in costs)/(old total costs)] times 100.Ê For example, (25,000/7,650,000) x 100 = 0.3%.
17. The company pays 85% of $5,000 for all 1200 employees, or $5.1 million, plus half of $5,000 for the 600 employees in the individual-plus-one tier, or $1.5 million.Ê The total cost is now $6.6 million.Ê