Confusion in New Insurance Laws

by Senator Ted Gatas

The Democrat Majority put into law three pieces of legislation that will have unintended consequences on the insurance laws of New Hampshire as well as the small business owners and their employees. These bills will cause enormous problems because of the taxes that New Hampshire families will be obligated to pay. The legislation that will effect the families of New Hampshire are House Bill 790 which is relative to dependent coverage for health insurance, House Bill 437 permitting same gender couples to enter civil unions and have the same rights, responsibilities, and obligations as married couples and Senate Bill 197 relative to continuation of group health insurance in the event of divorce or legal separation.

These extraordinary changes in New Hampshire law regarding insurance coverage does not coincide with current federal law -- and many employers and employees will have to bear the brunt of severe, negative tax consequences. The cost to the employer and employee may outweigh the benefit because of the ranging definition of the word “dependents” under the Internal Revenue Code and these three bills that were signed into law by Governor John Lynch.

For example, House Bill 437 (which established Civil Unions) causes some concern because of the Defense of Marriage Act (DOMA) which was signed into law by then President Bill Clinton.  The (DOMA) act was enacted in 1996 and defines marriage as "only a legal union between one man and one woman as husband and wife.” "Spouse," under federal law, "refers only to a person of the opposite sex who is a husband or a wife." Consequently, the State of New Hampshire is powerless to provide the promised equality in the areas controlled by federal law. For benefits as varied as health insurance and family leave, House Bill 437’s language rings false, while in matters governed solely by state law, employers must be careful to treat civil union couples and married couples in the exact same manner.

As you may know, current federal law allows an employer to provide, as a non-taxable benefit, health insurance for a spouse. However, the amount of employer contribution for coverage for a civil union partner and non-IRS eligible dependent is considered income and the employer will be required to include that income in the federal wages reported on the employee’s W-2.  But what’s more astounding is any premiums the employee pays for coverage for their partner and non-IRS eligible dependents will not qualify for a federal tax exemption.

Yet another concern is House Bill 790 (which allows unmarried New Hampshire young adults to remain eligible for insurance until the age of 26) regardless of educational status. The Federal Internal Revenue Code’s definition requires the dependent to be 23 years of age and younger. 

When the employee’s dependent who meets the eligibilities as described in House Bill 790, but does not meet the definition of dependent under the Internal Revenue Code, the employer will need to consider the percentage of any insurance premium that will be paid by the employer on the employee’s behalf.  And further, what amount should be included in the employee’s federal income tax filing because the employer must pay its share of employment taxes, which could cause massive increases in federal income tax filings for the employee and eventually be a detriment to New Hampshire’s once favorable business climate.  

Senate Bill 197, legislation that was passed and signed by Governor John Lynch, which allows a divorced or legally separated spouse to continue group health insurance coverage.  Federally, like the previous bills mentioned, this law enacts a larger taxable income that is passed on to the employee.

The bottom line and ambiguity with the aforementioned pieces of legislation is there’s a wide scope of differences between existing federal and state laws.   And unfortunately for the people of New Hampshire many will be confused when it comes to filing their taxes next year.   The onus will certainly be on the employer and employee to file correctly.  Yet the negative unintended consequences put into law by the Democrat Majority could equate to thousands in unexpected tax bills for New Hampshire families and our business community.

Senator Gatsas Represents Senate District 16 which comprises: Bow, Candia, Dunbarton, Hooksett and Wards 1, 2 and 12 in the city of Manchester.