Tuesday, April 19, 2011

Cost of Delaware's Civil Union Bill

Picked up from the Delaware House of Representatives' e newsletter



Cost of Delaware's Civil Union Bill in Question - Monday, April 18, 2011

April 18, 2011- Expected to be signed into law at a ceremony next month, the ultimate cost of Delaware's civil union legislation remains an open question.

Starting New Year's Day, Delaware will join a group of eight states where same-sex couples can enter into pacts giving them spousal rights. Hawaii, Illinois and New Jersey have enacted civil union laws. Massachusetts, Iowa, Connecticut, Vermont and New Hampshire currently issue marriage licenses to same-sex partners.

What was recognized by all sides during the debate on Delaware's civil union bill is that its enactment will drive up state costs. How deep taxpayers will have to reach into their pockets to finance the measure is still being debated.

An analysis by UCLA's Williams Institute estimated that establishing civil unions in Delaware will cost the state $93,000 in the first year, jumping to $630,500 by the third year. The study considered cost factors such as higher spending for benefits to state employees entering into civil unions and the loss of revenue due to tax advantages granted to spouses. It also weighed elements believed to offset these expenses, including increased tourism and reductions in public assistance.

A separate report compiled by the Delaware Office of Controller General looked solely at the increased costs associated with offering spousal group health insurance benefits to the same-sex partners of state employees who enter into civil unions. The analysis estimated healthcare claims arising from civil unions could be as high as $670,000 in the first full fiscal year after the law is implemented and $840,000 in the subsequent fiscal year.

Taking issue with both reports is State Rep. Dan Short (R-Seaford). "The projections are extremely low and I think ... it could cost us hundreds-of-thousands, if not millions of dollars for what we've just done."

Rep. Short owns an insurance agency and is a specialist in employee benefit packages. Several of his clients are "self-insured." Self-insured entities, like the State of Delaware, do not contract with an insurance company to cover their risks. Rather, using actuarial and insurance information, they set aside money to pay healthcare claims from their own internal funds.

"What most people don't realize is that while state employees have health coverage from Blue Cross Blue Shield of Delaware and Aetna, these companies are only used by the state to process claims," Rep. Short said. "It is the State of Delaware that pays for all claims out of its own fund."

State Rep. Short has detailed knowledge of the system. While an employee of Blue Cross Blue Shield, he managed the State of Delaware's account with the company.

According to the Williams Report, there are 2,677 same-sex couples living in Delaware, an estimated 268 of which have one state employee. Of this number, the report estimates 75 of these couples will enter into civil unions in the first three years after they are established and that most (72 couples) will enter partners into one of the state health coverage plans.

Additionally, the report states: "A recent study shows that people with unmarried partners-either same- or different-sex-are much more likely to be uninsured or on Medicaid than are married people. People in same-sex couples were twice as likely as married people to be uninsured; one in five with a same-sex partner does not have medical insurance."

Fiscal critics of the civil union legislation note that neither the Williams Report nor the Controller General's analysis makes any mention of the additional exposure to the state presented by the opportunity civil unions will create.

"There is no waiting period for healthcare coverage and we cannot exclude anyone for pre-existing conditions, nor charge them a higher premium," Rep. Short said. "It is not difficult to imagine a scenario where someone with a serious illness or condition will enter into a civil union with a state employee solely to take advantage of the health benefits. Even a single major health issue suffered by just one of the new enrollees will swamp the cost estimates in both reports because all of that claim money will come directly from the pockets of taxpayers."

Some of the questions regarding the bill's cost to the state should have been explored in the Senate and House Appropriations Committees, but the bill was not considered by either. Senate Bill 30, which took just over three weeks from first introduction to passage by the General Assembly, circumvented a House of Representatives' rule that requires that any bill with a cost to taxpayers in excess of $50,000 be considered by the Appropriations Committee. House Democrats, who control the chamber with a 26 to 15 majority, suspended the rule and avoided the process designed as a safeguard against increased state expenditures.

The state is not the only organization likely to experience higher costs. During debate on the House floor, State House Minority Whip Gerald Hocker (R-Ocean View), who owns several small businesses in Sussex County, said the civil union law will increase employment costs for small businesses and hurt job creation.

Rep. Hocker also questioned the timing of establishing civil unions, saying it would increase state spending in the service of one group, while funding to programs helping senior citizens and the disabled is being cut.

Speaking on that issue on WDEL 1150-AM (4/15), State Rep. Helene Keeley (D- Wilmington South) said Senate Bill 30 addressed what she perceived as a civil rights shortcoming and that the cost of the legislation was justified based on that consideration.

Exactly what that cost will be will not be known for several years, if ever. Rep. Dan Short said the expenses associated with the legislation would have to be tracked and tabulated, a task he believes will hold little benefit for the people that control the government and supported the new law.

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