A deal would exempt most firms
from having to pay health benefits

By Linda Hosek
Star-Bulletin

A federal judge this morning agreed that a new controversial law to extend health benefits to adults who can't legally marry won't apply to most private companies.

But U.S. District Judge David Ezra said the state and seven companies who challenged the law had to reword the agreement before he would sign it.

Both the state and the companies anticipated they could fix the wording by Tuesday, essentially ending the debate over whether the state Legislature can offer benefits to so-called reciprocal beneficiaries such as same-sex couples.

Ezra said that the state law would fail because it conflicted with a federal law that already covers health benefits to most private employers.

He said it was possible that the state law could apply to private companies who contract with insurance companies for health care, but that the federal suit before him didn't include insurance companies.

The majority of private employers contract with health maintenance organizations or mutual benefit societies, such as Hawaii Medical Services Association.

Of 320,000 individuals with health plans, 318,000 represent those with HMOs or HMSA, said John D'Amato, attorney for the seven companies who sued the state to block the new law.

"This was a surprise," said D'Amato, representing the companies, Bank of Hawaii, C. Brewer & Co. Ltd., Hawaiian Electric Industries, Outrigger Hotels & Resorts, Theo. H. Davies & Co. Ltd. and two others. "We would have preferred to reach a decision on the merits, but we now have relief for the foreseeable future."

The companies filed the federal suit against the state Labor and Industrial Relations Department, shortly after it took effect July 8, but reached an agreement earlier this week.

Ezra said his ruling had "absolutely nothing to do with the question of rights of people with any particular sexual orientation," adding that his court would protect people of any sexual-orientation.

"This is the result we expected," said Bev Nagy, senior vice president with Theo Davies.

Deputy Attorney General Girard Lau said the state also was satisfied. He said the attorney general in August had issued an opinion saying that the law could apply only to employers who contracted with insurance companies for health coverage.

He said he didn't think the state Legislature was clear about its intent.

Lau also said he didn't think the ruling on the reciprocal beneficiary law would have a direct effect on the same-sex marriage case before the state Supreme Court.

Dan Foley, the attorney representing the three same-sex couples who sued the state for the right to marry, agreed.

But he also said the high court "doesn't live under a rock." He said health coverage was the cornerstone of the new state law and that Ezra now has found that the law can't require employers to extend coverage to reciprocal beneficiaries or same-sex couples.

"The only way to access equal rights is through the institution of marriage," he said. "I don't think that will go unnoticed by the court."

In the federal suit, the companies alleged that the new law raises far-reaching legal and economic questions that could affect the state's economy and existing health plans.

The law grew out of an effort to stop same-sex marriage, an issue now in its final stages before the state Supreme Court.

Justices ruled in 1993 that banning same-sex marriage violates the state Constitution's equal protection clause and are expected to rule by early next year on an appeal.

In recent years, senators proposed domestic partnerships as a way to offer equality to same-sex couples, giving the justices a way to reject same-sex marriage, but not equal benefits.

But, based on House proposals, lawmakers this year approved a law to extend benefits to any two adults, offering rights to same-sex couples, but not making them the focus.

D'Amato said the companies he represents have no position on whether benefits should be extended to same-sex couples. "That's an issue for the Legislature, the courts and the people," D'Amato said.

As of this week, the state had registered 234 relationships, including 18 from out of state, said Patrick Johnston, state Health Department spokesman.

"It's less than we anticipated," he said, adding that the state has distributed 5,000 applications.

D'Amato said the federal law the companies cited has locked in place what the state can offer through its Prepaid Health Care Act.

It requires employers to provide coverage for employees, but not dependents or reciprocal beneficiaries by extension.

The federal law is the Employee Retirement Income Security Act, which governs health plans and establishes consistency in benefits among states.