From: dcoster@phoenix.Princeton.EDU (David P. Coster)
Subject: Stanford's "Report of the Subcommittee on Domestic Partners' Benefits"
Originator: news@nimaster
Organization: Princeton University
Date: Mon, 17 Aug 1992 22:44:03 GMT

      Report of the Subcommittee on Domestic Partners' Benefits
	  University Committee on Faculty and Staff Benefits
				   
				   
			      June, 1992
				   

SUMMARY

At the request of the University Committee on Faculty and Staff
Benefits, this subcommittee has studied the implications of Stanford's
extending fringe benefits that are now made available to employees'
spouses and children to the domestic partners of employees and such
partners' children.  We considered a number of factors, including the
ethical, administrative, legal, and cost implications of extending
coverage.  The following summarizes the analysis and conclusions
contained in the body of the report.


1.  Recommendations.

The subcommittee unanimously recommends that the University extend all
benefits now available to spouses and children of faculty and staff to
the same-sex (gay and lesbian) and opposite-sex domestic partners of
faculty and staff and such partners' children.  The relevant benefits
include health benefits, benefits under the tuition grant program,
athletic privileges, library privileges, the right to audit University
courses, and the partner's right to remain in on-campus housing after
an employee's death under the same terms now provided for surviving
spouses.  The subcommittee is unanimous in the view that the case for
extending benefits to heterosexual partners is weaker than for gay and
lesbian partners.  As a result, the subcommittee recommends that if
current cost considerations militate against extending coverage to
both groups, coverage be extended now to gays and lesbians, and the
question of coverage for heterosexual partners be reconsidered at a
later date.

We recommend that ``domestic partnership'' for these purposes be
defined to mean two individuals who live together in an intimate,
longterm relationship of indefinite duration, with an exclusive mutual
commitment similar to that of marriage, in which the partners share
the necessities of life and agree to be financially responsible for
each other's wellbeing, including basic living expenses, and each
others' debts to third parties.  It should further be stipulated that
partners are not married to anyone else, do not have another domestic
partner, and are not related by blood, closer than would bar marriage
in their state of residence.  Employees should be required to sign a
declaration that the foregoing conditions have been met, as part of
the process of enrolling their partners.

The definition of ``domestic partnership'' we propose here is similar,
but not identical, to that currently used by Stanford for domestic
partners of students.  Unlike the definition for students, this
definition explicitly requires that the partners agree to be
financially responsible for each others' debts.  We recommend that the
same definition be used for students and employees, and would
recommend changing the student definition to coincide with the more
stringent requirements outlined above.


2.  Policy Considerations in Extending Coverage.

The core case for extending benefits to domestic partners and their
children rests on the University's express policy barring
discrimination in employment (including in compensation) on the basis
of sexual orientation or marital status.  Were Stanford to pay a
different cash salary to employees based on their marital status or
sexual orientation, it would clearly violate Stanford's
nondiscrimination policy.  The effect of the current benefits program
is on its face identical.  Employee benefits are a form of
compensation, currently representing a significant percentage (roughly
30 percent) of total compensation.  By providing benefits to married
employees that are not available to unmarried employees living in
domestic partnerships that are the functional equivalents of marriage,
it is argued, Stanford therefore discriminates in compensation on the
basis of sexual orientation and/or marital status.

In evaluating the nondiscrimination claim, the subcommittee has
followed the conventional philosophical interpretation given to the
principle of nondiscrimination.  Under that view, Stanford is not
barred from making _any_ distinctions between married and unmarried, or
heterosexual and gay or lesbian, employees.  Rather, it must show that
any distinction it does make between the groups has a strong
justification that overrides the presumption of equal treatment.  We
considered a number of grounds that are frequently suggested, or might
be suggested, for differentiating between traditional families and
domestic partnerships in setting the benefits portion of compensation.
They include the claims that (1) Stanford must offer benefits to
traditional families in order to remain competitive with other
employers, but need not offer them to domestic partners; (2) the tax
advantages of employer-provided family benefits are available only for
traditional families; (3) traditional families have greater financial
needs that family benefits are intended to alleviate; (4) Stanford
ought not to endorse domestic partnerships by treating them as the
moral equivalent of marriage; and (5) the costs to Stanford of
extending coverage to domestic partners would be prohibitive.

We conclude that the first three arguments do not justify
differentiating between domestic partnerships and marriages.  As to
(1), we believe the optimal competitive strategy for Stanford is at
best indeterminate.  More importantly, we believe it would violate
important norms of fairness, reflected in Stanford's general
compensation policies, to discriminate against unmarried employees
simply because competitive forces make it economically efficient to do
so.  As to (2), at least some of the family benefits Stanford provides
would be tax-preferred for domestic partners as well.  Moreover, the
existence of tax advantages for employer-provided benefits does not
explain why we pay employees different total compensation based on the
composition of their families.  It merely explains why we provide the
option for employees to use a portion of their compensation to
purchase tax-preferred benefits.  As to (3), we believe that
need-based considerations explain at least partly the most costly
family benefits Stanford provides---_subsidized_ family health coverage
and college tuition grants to employees' children.  If family benefits
were extended to domestic partnerships, we presume that "domestic
partnerships" would be defined to reach those relationships that are
the functional equivalents of marriage---longterm, intimate, committed
relationships, in which as a practical (and in some cases legal)
matter the partners assume financial responsibility for each other,
akin to the responsibility that is practically and legally imposed by
marriage.  Given that fact, we see no reason for assuming that the
financial needs of an employee in a domestic partnership would differ
from those in a traditional marriage.

Thus, we believe that the case for domestic partner benefits
ultimately turns on the last two issues: whether the University should
treat domestic partnerships as the moral equivalent of marriage, and
how it should weigh cost considerations.

_The moral equivalence of domestic partnerships and marriage_.  We
believe there is a strong claim on behalf of gay men and lesbians to
have their longterm, committed relationships treated with the same
respect as marriage for purposes of Stanford's benefits program.
While we think there is a case to be made on behalf of heterosexual
domestic partners in longterm, committed relationships, we think the
case is considerably weaker.  We base this conclusion on a number of
considerations.

First, we believe Stanford has already implicitly committed itself to
treat domestic partnerships as equivalent to marriage for these
purposes in its internal nondiscrimination policy.  While that policy
probably has no legal force in determining benefits policy, we believe
it has significant moral force.  If we conclude otherwise, we are in
effect stating that while unmarried heterosexual, gay and lesbian
employees are entitled to equal treatment and respect with married
employees, the intimate, longterm committed relationships they form
are not.  At least in the case of gay and lesbian employees---for whom
such relationships are the core fact of group identity---we do not
think that is a morally persuasive reading of Stanford's
nondiscrimination policy.  In the case of heterosexual partners, who
have the legal option to marry, the question is more complicated.  We
believe the argument for covering heterosexual domestic partnerships
notwithstanding the availability of marriage is that for some
heterosexual partners, the choice not to marry reflects a political or
ideological opposition to marriage, not merely the absence of
commitment.  The argument that the University ought not to penalize
such political or ideological convictions is reasonably powerful.  But
we believe the argument that it ought not to penalize the longterm
relationships of those (gay and lesbian) who do not have the option to
marry at all is more compelling.

Second, Stanford has already concluded that its nondiscrimination
policy commits it to benefits parity for the domestic partners of
_students_.  In October 1990, citing among other things the University
policy ``against discrimination on the basis of sexual orientation,''
the University extended all benefits available to students' spouses to
students' domestic partners as well.  These benefits include access to
campus housing previously reserved to married students, access to
medical services through Cowell Student Health Center, and a courtesy
card permitting access to libraries, athletic facilities and campus
events on an equal basis with spouses.  Benefits parity for _employees_
would obviously be far more costly than for students, as the
University does not subsidize medical coverage for student spouses or
provide any other derivative benefits of significant cost.  But it is
hard to see how the principles of fairness implicated in the decision
would be any different for employees than for students.  Indeed, the
mere fact that we now have two different policies for employees and
students is one important reason for change.

Third, we think that redefining "family" for purposes of the benefits
program to include longterm, committed domestic partnerships
appropriately reflects the changing social reality and values of the
Stanford community.

Finally, we believe that a decision to extend benefits will have
enormous symbolic significance for all gays and lesbians at Stanford,
conveying more forcefully than any general statement of
nondiscrimination ever could the University's belief that they are
full and valued members of this community, whose relationships and
whose needs are as deserving of attention as others'.  In this respect
as well, we believe the case for extending coverage to heterosexual
domestic partners is less compelling.  Unmarried heterosexuals face
little if any social stigma at Stanford or most other parts of
American society anymore.  Few if any would think to conceal their
private living arrangements out of fear of social or professional
ostracism, loss of jobs, or physical or verbal violence.  All of these
are daily realities for gays and lesbians in our society.  Given the
almost total acceptance that heterosexual partners can count on in the
rest of their lives, the symbolic importance of this additional
gesture is (we believe) relatively slight.

_Cost considerations_.  Finally, some may agree in principle that
Stanford ought to extend family benefits to domestic partners, but be
reluctant to incur the costs that entails.  Our conclusions as to
costs are summarized below.  In brief, our best guess is that
out-of-pocket costs will be relatively small, given the overall
benefits budget.  We find it harder to estimate potential costs in
alumni/ae relations.

We do not believe such practical considerations should be ignored.
However, they must inevitably be weighed against the arguments for
extending coverage.  The stronger the arguments for extending benefits
on fairness grounds, the heavier the burden on the University to show
that practical considerations outweigh it.  We believe that at least
with respect to gays and lesbians, the fairness arguments for
extending benefits are very strong.


3.  Costs to the University of Extending Coverage.

_Out-of pocket costs_: Of the benefits at issue, only three are likely
to involve any significant out-of-pocket costs for the University:
medical coverage, dental coverage, and the tuition grant program
(TGP).

With respect to medical coverage, our best guess, based on the
experience of other employers to date, is that between 40 and 60
employers would enroll same-sex domestic partners, and between 90 and
135 employees would enroll opposite-sex domestic partners.  On those
assumptions, our best guess is that it would cost the University in
the range of $30,000 to $60,000 a year to cover gay and lesbian
partners, and $70,000 to $140,000 a year to cover gay, lesbian _and_
heterosexual partners.  These estimates represent a relatively trivial
portion of the University's current $24 million budget for medical
benefits---ranging from 0.014 percent to 0.05 percent.  The estimates
are based on the assumptions that the percentage of Stanford employees
that would enroll would be consistent with the experience of other
comparable employers; that Stanford would contribute the same amount
to domestic partner coverage as it does now to spousal and family
coverage; and that domestic partner coverage would be no more
expensive than spousal coverage.  The last assumption is supported by
the experience of all employers to date who have adopted domestic
partner coverage.  The first assumption (that our enrollments will be
consistent with comparable employers) is the more troubling one.
Unlike the available data on cost per enrollee---which consistently
points to the conclusion that domestic partner coverage is no more
expensive than spousal coverage---the percentages of employees that
have enrolled domestic partners has varied significantly for different
plans.  We have based our projections on the experience of those
employers whose medical plans we believe are most comparable to
Stanford's (principally in the percentage of the total premium cost
borne by the employee), and within that range have chosen what we
think is a fairly conservative figure.  However, it is possible that
Stanford's experience will diverge in ways that cannot now be
anticipated.  We believe if our ``best guess'' projections are
vulnerable, it is more likely to be on the _numbers_ of domestic
partners enrolled than the _cost_ per enrollee.

Since the cost experience of other employers to date is rather
limited, we also developed numbers for what we considered to be the
plausible worst-case scenario.  For these purposes, we hypothesized
very pessimistic cost experience for the domestic partner pool
(primarily as a result of HlV-related illnesses) and a significant
degree of adverse selection.  Under that worst-case scenario, assuming
the same range of enrollments as above, the incremental cost of
coverage, over the costs of covering the same numbers of spouses,
would range from $115,000 to $175,000 a year for gay and lesbian
partners only, and from $135,000 to $200,000 for gay, lesbian and
heterosexual partners.  If the University bore that incremental cost
itself, its _total_ annual costs would range from $150,000 to $230,000
for gay and lesbian partners only, and from $220,000 to $325,000 for
gay, lesbian and heterosexual partners.  If the incremental cost were
instead added to all employees' share of the premiums, it would
increase employee costs by amounts ranging from $1 a month for 40
same-sex partners to $1.85 a month for 135 same-sex and opposite-sex
partners.  {\bf We wish to stress that these worst-case numbers do not
reflect any employer's actual experience to date with domestic partner
medical coverage.}

As to dental and TGP benefits, we have no data available from other
employers on which to estimate the likely costs of extending coverage
under either program to domestic partners and their children.  With
respect to dental benefits, we expect the numbers of enrollees to be
higher than for medical benefits, because the University subsidizes a
higher portion of the costs.  On the other hand, the per enrollee
costs to the University are relatively trivial as compared to medical
care.  With respect to TGP grants, the opposite is true: the annual
costs per child receiving TGP grants are quite high, but we believe
the numbers of additional children that would claim such benefits each
year if the benefits were extended to domestic partners' children is
likely to be extremely small.  Given the foregoing, and given that
both programs are only a small portion of the benefits budget as
compared to medical costs, our best guess is that extending either
program would not entail significant costs for the University.
However, the absence of any empirical data from other employers makes
it difficult to be certain.

_Administrative costs_: Based on the experience of other employers, we
estimate that the costs of administering a domestic partners' benefits
program will be relatively trivial.  The main costs are likely to be
the one-time costs of collecting and circulating eligibility, tax, and
other information to employees, and setting up the payroll systems to
withhold taxes for those employees who are subject to tax on the
University's contribution to benefits.  Unless enrollment figures are
much higher than anticipated, we expect the ongoing administrative
costs of handling additional enrollments to be negligible.

_Costs in alumni/ae relations_: There are also potential costs to the
University in loss of alumni/ae support as a result of a decision to
extend domestic partner benefits.  Based on the response to Stanford's
decision two years ago extending student spousal privileges to
domestic partners of employees, we expect that a comparable decision
with respect to employees would be unpopular with at least a vocal
minority of alumni/ae.  Whether that displeasure would translate into
a significant loss of moral or financial support for the University is
much harder to say.  On the other side, we note that the recent
decisions of high profile employers like Levi Strauss, Lotus and MCA
extending health benefits to domestic partners have received uniformly
positive press coverage.  We also assume that a decision to extend
benefits would generate good will among some (particularly gay and
lesbian) alumni/ae, although it is again impossible to guess how much
of that good will would translate to vocal, concrete support.  On
balance, we expect that at least in the shortrun, a decision to extend
benefits will adversely affect alumni/ae support.


4.  Legal Considerations in Extending Coverage.

_Antidiscrimination law_. We conclude that all of the alternatives
under consideration---Stanford's current policy, a policy expanding
the definition of family to include same-sex partners only, or one
that includes same-sex and opposite-sex partners---are likely to be
upheld under current antidiscrimination law.  Thus, we believe the
decision must be made on policy grounds, not legal ones.

_Tax considerations_. Under current federal and state tax law, at
least some of the benefits provided on behalf of the employee's
domestic partner or partner's children will be treated as taxable
income to the employee.  These include college tuition grants for a
partner's child, and Stanford's contribution towards health benefits
for the partner or partner's child, unless the employee can claim the
covered party as a dependent for tax purposes.  For those employees
who are taxable on such benefits, Stanford will be obligated to
withhold both income and payroll taxes.


5.  Administration Or Domestic Partners' Benefits:

(a) _Definition of "Domestic Partnership_: Most employers offering
some form of domestic partners' benefits have adopted the same basic
requirements for a domestic partnership, with minor variations.  We
have followed that definition in our recommendation in section 1
above.

(b) _Registration and Deregistration Process_: We recommend that one
central registration process be used for all employees' domestic
partners' benefits, analogous to that now used by Stanford for student
domestic partner benefits.  Where possible, we recommend that the same
process be used for partners and spouses---the current procedure for
students.  We recommend that as part of the registration process, all
employees seeking to cover a domestic partner be required to sign a
declaration that they meet all the requirements of ``domestic
partnership,'' and advise Stanford whether, under applicable tax laws,
the University should withhold taxes on its contribution towards
benefits.  Finally, all employees should be informed at the time of
registering that they are required to notify the University of any
change in eligibility, and that the same time period for notification
in the case of termination of marriage apply to termination of
domestic partnerships.


               Subcommittee on Domestic Partners' Benefits,
               University Committee on Faculty and Staff Benefits


               Barbara Fried, Chair (Law)
               John Ferejohn (Political Science)
               Jim Franklin (Benefits)
               Hank Greely (Law)
               Mark Kelman (Law)
               Jane Meier (Cowell Health Services)
               Debra Satz (Philosophy)
               Ken Sharigian (Faculty Practice Program)



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dcoster@princeton.edu
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