Blue Cross and Blue Shield has reversed its policy of refusing health insurance to gay and lesbian households under the federal health law and canceling their coverage in North Carolina.
The insurer said Wednesday it will now offer family coverage for same-sex couples and unmarried couples, and will also extend the benefit to small businesses for the first time.
In mid-January, Blue Cross systematically canceled 20 family policies and notified the affected customers they would have to reapply as unmarried single individuals. Some were married legally in other states and feared they would be required to lie on an insurance application form by denying their marriage.
The controversy rattled Blue Cross, the state’s largest insurer, and created a sense of embarrassment among many employees. CEO Brad Wilson extended a public apology in the company’s announcement.
“We should have more thoughtfully considered this decision, with full appreciation of the impact it would have on same-sex married couples and domestic partners,” Wilson said. “We’re sorry we failed to do so.”
The cancellations by Blue Cross stunned the affected couples because the insurer offers same-sex benefits to its own employees and is considered a gay-friendly company.
Those whose family coverage had been denied, and is now being reinstated, cheered Blue Cross’s decision. Some are still absorbing what it means for them.
David Whitley, who married his partner Al Hinman four years ago in Connecticut, said he was “reeling from confusion.” He said he and his husband, both residents of Durham, spent days trying to buy separate individual policies, living in limbo as they waited for their insurance cards to arrive.
“We just finished getting our separate policies, paying money, getting our cards, only to get the call from them today,” Whitley said. “How they’re going to fix this and turn it back to what it was, I have no idea.”
Blue Cross said it consulted with the Centers for Medicare and Medicaid Service and the N.C. Department of Insurance to remedy the problem. New applicants will be able to buy family coverage starting Monday and those plans will go into effect March 1. Those whose policies were canceled can have their coverage restored retroactively.
Coventry Health Care of the Carolinas, the other insurer that offers subsidized policies under the Affordable Care Act, which is commonly called Obamacare, did not have a provision preventing coverage of same-sex couples.
Following legal advice
The U.S. Department of Health and Human Services, which is administering the health care law, had issued legal guidance in September advising that denying coverage to same-sex couples was illegal under the new law.
“The Affordable Care Act also includes critically important, nondiscrimination provisions,” HHS Secretary Kathleen Sibelius said in a Sept. 17 notice. “It will be illegal for any of the insurance companies who offer coverage through the marketplace to discriminate on the basis of sexual orientation or gender identity.”
Blue Cross said last week that it canceled the policies on the legal advice of the N.C. Department of Insurance, which said that under state law Blue Cross was legally bound to follow the boilerplate language in its policies defining married couples as “opposite sex.”
But Department of Insurance spokeswoman Kerry Hall said Wednesday that the problem was fixable by filing an amendment to the policies the agency had approved last year.
Blue Cross spokeswoman Michelle Douglas said the company’s first mistake was not to offer same-sex couples family coverage, and the second blunder was to cancel sold policies rather than request an amendment.
The cancellations put same-sex couples who were married in other states in an untenable position, said Winston-Salem lawyer Richard Rutledge Jr., who specializes in gay and lesbian legal issues.
Marriages recognized by the federal government can’t apply for individual, separate health policies if they jointly file their federal tax returns, he said. The only legal out for these couples would be to file taxes singly and suffer financial penalties for doing so, he said.
Their combined household income would be applied to each individual applicant for the purposes of calculating an insurance subsidy.
“They were pretty much looking at losing their subsidy,” Rutledge said. “They would basically be forced to count their income twice, which would have disqualified them from the subsidy.”
Blue Cross had explained its decision not to offer same-sex family coverage this year as a logistical move to buy extra time to prepare for what turned out to be a troubled October roll out of the Affordable Care Act. Blue Cross had planned to delay offering family coverage for gays and lesbians until 2015.
But after affected couples complained and went public, Blue Cross suddenly found an end-around to the problem. The company will manually process all same-sex and domestic partnership applications.
“It’s a duct tape and fishing line solution,” said Douglas. “We’re rigging it to make it go.”