May 18-19, 2000

TO:                 Board of Regents

 

FROM:           LeRoy H. Schramm

                        Chief Legal Counsel

 

RE:                 Appeal Regarding Domestic Partner Coverage for the University Group

Health Plan

 

Date:               May 18-19, 2000

 

 

The Appeal Summarized

 

The Regents are authorized by statute to establish a group health plan “for the benefit of their officers and employees and their dependents.”   In exercising this authority the Regents several years ago created a self insured plan and gave the Commissioner of Higher Education the primary responsibility to oversee administration of the plan.  In late February the Commissioner declined to adopt a request from certain employees to extend coverage of the health plan to same sex domestic partners.  This policy decision has now been appealed to the Board under Regents appeal policy 203.5.2.

 

Policy Decisions and the Regents’ Appeal Procedure

 

In a typical appeal appellants assert that a policy has been misapplied or misinterpreted.  This appeal is different.  Here appellants challenge, not the misapplication of a Regents' policy, but rather the Commissioner’s failure to adopt a policy they favor.  Whether such “policy” questions should come before the Regents via an appeal procedure that is designed to review individual personnel or academic decisions is questionable.  Because the policy decision in question is one that has generated significant public interest it is appropriate for the Regents to discuss and review that issue, whether in the context of a formal appeal or not.  The only notable difference between the two approaches is that a formal appeal requires some specific action of the Regents (some yea or nay vote to uphold either the Commissioner or the appellants).  A mere policy review and discussion requires no such specific action.

 

The Basis of the Appeal

 

The Commissioner’s decision declining to extend coverage to domestic partners is attached hereto as Appendix A.  Also attached is a memo from me regarding related legal questions (Appendix B).  The materials submitted on behalf of the appellants are found in Appendix C.

 

The appeal itself identifies two grounds for contesting the Commissioner’s decision.  “The appeal is based on the equal protection clause of the Montana Constitution and the sexual orientation non-discrimination policies of the majority of the higher institutions in this state.”  (Page 1 of appeal letter dated March 24, 2000).  However, other materials submitted with the appeal raise a raft of other arguments.  For example, a legal memo accompanying the appeal (see exhibits attached to Appendix C) argues that the refusal to extend coverage to same sex domestic partners violates, not only the clauses noted in the body of the appeal, but also, the state statute on marital discrimination, the state statute on sex discrimination, the Montana statute forbidding discrimination in state employment generally, and the so-called “dignity clause” of the state constitution.  In addition, the appeal materials contain numerous assertions that extending coverage is the “right” thing to do, whether the grounds be moral or morale.  This memo will not address these latter non-legal arguments.  One person’s concept of morality may be another’s vision of dissoluteness.  Rather, the memo will address the legal issues raised by the appeal and its attachments.  Many of these issues have been addressed in an earlier memo (Appendix B) and while the conclusions from that memo will be summarized here the analysis in the memo will not be repeated.

 

The Authority to Grant Domestic Partner Benefits

 

The Regents do not have explicit statutory authority to grant health coverage to domestic partners.  State statute authorizes benefits only for “officers, employees and dependents” (see 2-18-702(1)(a) MCA).  Domestic partners do not fall within the most commonly used legal definitions of “dependent.”  The United States Internal Revenue Code (IRC) allows the University System to pay for its employees’ and dependents’ health insurance premiums with pre-tax dollars.  However, because the IRC does not recognize domestic partners as dependents the premiums for domestic partners could not be paid with pre-tax dollars.  Thus, premium collection for this new group of plan beneficiaries would have to be handled and reported by each campus payroll office in a manner different than that for other covered persons.  On this issue of IRC treatment of domestic partners see, William V. Vetter, “Restrictions on Equal Treatment of Unmarried Domestic Partners,” 5 Boston University Public Interest Law Jrnl. 1, 5-12 (1995); and Linda M. Laarman, “Employee Health Coverage for Domestic Partners – Identifying the Issues,” 18 Employee Relations Law Jrnl. 507, 571-77 (1993).

 

Several courts have found that when a statute specifies for whom insurance coverage may be provided that governmental entities are forbidden from extending coverage to persons outside the statutorily named groups.  In spite of that contrary case law, I have previously concluded (see prior memo) that the Regents may very well have the authority to offer coverage beyond the specific bounds of the authorizing statute.  The source of such authority would be the Regents’ broad constitutional power to govern the University System and establish a system of employee compensation for University employees.  But the Regents have generally been hesitant to flaunt their authority in the face of contrary statutory language.  And, in a worst-case scenario, the consequences of asserting this authority and being found wrong could be severe, both politically and fiscally.  In 1997 the State Auditor’s Office informed the Commissioner’s Office that offering health insurance benefits to persons beyond those authorized for coverage by statute might subject the University Health Plan to regulation as a general insurer under Title 33, including, presumably, payment of the 2 & ¾ % premium tax levied on insurers pursuant to 33-2-705 MCA.[1]  While the Commissioner’s Office did not concur in the Auditor’s 1997 rationale, the fact still exists that this argument might be available to someone challenging the Regents’ authority to extend health insurance coverage beyond the statutory parameters.  

 

Is There A Legal Obligation to Offer Coverage?

 

Appellants don’t spend much time discussing the question of whether or not the Regents possess the authority to grant domestic partner coverage.  Rather, they assume, not only that the authority exists, but that the Regents don’t have the option to not offer such coverage.  They argue that the Regents are under a legal obligation to provide such coverage.  They make this argument in spite of the fact that the general state employee health insurance plan, administered by the state Department of Administration, does not now and never has offered such benefits.  Nor do they cite any other governmental health plan in Montana that offers such benefits.  If the University System is in violation of the law by not offering domestic partner benefits, it certainly has a lot of company among other Montana units of government.

 

Appellants’ argument goes something like this.  The partners of University System employees are eligible for benefits only if they are married.[2]  Only opposite sex couples can marry under Montana law.  Therefore, same sex couples have no available avenue to secure this benefit.  This is, they assert, either discrimination on the basis of marital status, discrimination of the basis of sex, or a denial of equal protection of the laws.  All of these arguments have been raised in other states, and while some courts have been persuaded, courts in a majority of jurisdictions have not agreed.  See, for example, Rutgers AAUP v. Rutgers, the State University, 689 A.2d 828 (1997), holding that the denial of health insurance benefits for same sex domestic partners did not violate marital status discrimination or constitute a denial of equal protection; Bailey v. City of Austin, 972 S.W.2d 180 (Tex. App. 1998), holding that withdrawal of health insurance coverage for domestic partners did not constitute a denial of equal protection; Levin v. Yeshiva University, 691 N.Y.S.2d 280 (Sup. Ct. of N.Y., N.Y. Cnty, 1999), holding that refusal to allow same sex domestic partners to occupy married student housing was not discrimination on the basis of marital status; Ross v. Denver Dept. of Health, 883 P.2d 516 (Colo. App. 1994), holding that the city’s refusal to grant sick leave in order that an employee could care for a domestic partner did not constitute a denial of equal protection; Phillips v Wisconsin Personnel Commission, 482 N.W.2d 121 (Wis. App. 1992), holding that refusal to cover a state employee’s same sex domestic partner under the state employee insurance plan did not constitute marital status discrimination, sex discrimination or a denial of equal protection; Hinman v. Dept. of Personnel Administration, 167 Cal. App. 3d 516 (Cal. App. 1985), holding that denial of dental plan coverage for a state employee’s same sex domestic partner did not constitute a denial of equal protection.

 

Are the Regents Obligated to Follow Campus Policy

 

The Regents have adopted a System policy on non-discrimination (Policy  703) that parallels state statute in forbidding discrimination based on race, creed, sex, national origin and marital status.  It mirrors state statute in another significant aspect:  It does not create a protected class based on sexual orientation.  However, several campuses within the University System have adopted policies stating that they will not discriminate on the basis of sexual orientation.  In their appeal to the Regents the appellants state (at p. 4):  “In making its decisions, the Board must take into consideration the express policies of its campuses in interpreting the parameters of its own non-discrimination policy . . . The campus community as much as the legislature . . . should have the authority to make university policy.”  The appellants assert, not merely that the Regents should consult with and listen to the “campus community,” but that the Regents “must” give consideration to these campus policies and that the campus community should have “the authority to make university policy.”  This attempt to arrogate formal governance authority for the University System to the “campus community” has no basis in law, and is in fact contrary to the state constitution, state statute and Montana case law.

 

The state constitution (Art. X, Sec. 9(2)(a)) gives the Regents “full power . . . to supervise, coordinate, manage and control the Montana University System.”  State statute (20-25-301(9)) fleshes out this authority and states that the Regents have the authority to hire University System employees and “fix their compensation.”  The Montana Supreme Court has repeatedly said that individual campuses and “college administrators in this state have no authority to contract with faculty members on terms different than those approved by the Board of Regents.”  Leland v. Heywood, 197 Mont. 491, 495 (1982), citing Brown v. State Board of Education, 142 Mont. 547 (1963).

 

Summary

 

The legal rights of homosexuals is an evolving area of law.  This is only to be expected in a society where there is a highly visible and very emotional debate taking place about the moral status of homosexual conduct. Plausible arguments can be made as to why homosexual couples are legally entitled to the same public employee health insurance coverage as married couples.  In this legal and social climate no lawyer can say with certainty how a court might rule.  But up to this time courts, with a few exceptions, have not been receptive to the legal theory that sexual orientation is entitled to constitutional protection as a fundamental right.  One court, rejecting a challenge to a law restricting marriage to same sex partners, voiced this oft stated judicial sentiment:  “It seems obvious that the remedy for the dilemma facing these appellants lies exclusively with the legislature.  The Council of the District of Columbia can enact some sort of domestic partners law, bestowing on same-sex couples the same rights already enjoyed by married couples, whenever it wants to.”  In Montana the Legislature has repeatedly refused to take such a step.  The state marriage statute was recently amended to explicitly state that marriage was reserved for opposite sex couples.  None of the various state anti-discrimination statutes contain an explicit protection for sexual orientation, despite repeated introduction of bills proposing such an amendment.

 

This is not to say that imaginative lawyers cannot propound plausible legal arguments why a court might require the Montana University System to offer domestic partner health coverage.  But no binding statutory or case law exists today.  And any such holding would require a wholesale adjustment of coverages for a multitude of health care plans outside the University System.

 

This issue is one with a multitude of ethical, political, financial and societal dimensions; all or some of which various Regents might find relevant to their decision.  But the argument that the Regents are under a legal obligation to offer domestic partner health insurance is, in my opinion, without merit.                                                                          


[1] Annual premiums for the University Health Plan are in the neighborhood of $27,000,000.

[2] It has been said that the University System health plan covers opposite sex domestic partners.  However, such coverage is only available if the partners sign an acknowledgment of common law marriage.  Thus, the University Health Plan coverage for partners of employees is effectively restricted to spouses.