Companies Rethink What Constitutes a Family : Benefits: Corporations such as Xerox have extended health insurance coverage to same-sex domestic partners. Other changes are afoot.

David Frishkorn worked as a financial analyst at Xerox Corp. for five years, but only this year did he start receiving benefits for his family that other colleagues had taken for granted.

Frishkorn’s partner of seven years is a man and wasn’t eligible for the health insurance provided traditional employee spouses. But in April, Xerox said it would help gay employees pay the cost of health coverage for a steady companion.

“We have been looking for ways to help employees cover benefits beyond the traditional,” said Judd Everhart, a Xerox spokesman.

Responding to changes in American households, a growing number of large companies are rethinking what constitutes a family and loosening the rules about who can receive benefits.

Companies including Levi Strauss & Co., Lotus Development Corp., Time Warner Inc. and Microsoft Corp. now allow domestic partners coverage under their health insurance programs. Some give partners allowances previously granted only to married couples at times of relocation, bereavement or adoption of a child.

“A lot of employers are trying to react to the fact that there is a diverse work force and the traditional way of defining dependents for a health-care plan leaves several holes,” said John Hickey, a principal with the benefits consulting firm Kwasha Lipton.

The new plans may cover unmarried heterosexual couples, older children living at home or elderly parents dependent on their working children. For now, however, the coverage is often limited to same-sex couples.

Still, despite the growing interest, domestic partner health coverage remains rare. According to a 1994 survey by the Philadelphia-based consulting firm, The Hay Group, only 7% of 246 respondent companies offered the coverage, with an additional 2% considering it.

Most employers who extend their health coverage make couples sign an affidavit saying they live together, share financial obligations and intend for the relationship to be a permanent, caring and committed one.

Benefits usually cover the children of a dependent partner and treat the “significant other” as they would a traditional spouse, Sherman said.

At Xerox, which handles the issue differently, the company lets same-sex couples needing health coverage draw on a $10,000-per-employee lump sum previously dedicated mostly to home mortgages and dependent care.

The struggle for recognition of a single-sex domestic partner is one that began in the early 1980s. Change, when it has come, has usually been at the urging of employees.

Initially, companies started looking at domestic partner benefits as an equity issue, said Andrew Sherman, a vice president of The Segal Co., the Boston employee benefit consulting firm. The thinking was that people working in similar jobs should receive similar benefits, he said.

“What any employee wants is to be treated fairly and equitably in the workplace,” said Jane Moyer, a human resource manager at Xerox and head of the company’s gay and lesbian employee group.

In addition, many companies have employment policies that say they won’t discriminate on the basis of race, sex, religion or sexual orientation.

“They see recognizing the domestic partner relationships and providing benefits as an important part of following through with that,” said Sherman, who helped Lotus and other large companies set up their programs.

As demographics change and global competition grows, some companies have also started to see the new approach as a tool in recruiting and retaining valued employees, he said.

But there are still significant barriers to domestic partner health coverage, not the least of which is the moral issue raised by people who oppose homosexuality, observers say.

Some companies worry about shareholder reaction, while others fret about a possible negative campaign or boycott against the company by conservative groups, Sherman said.

“It can become a topic of hot debate,” Hickey said.

There are other concerns. Some companies have resisted adding domestic partners to their health rosters partly because of concerns about the expense of treating people with AIDS.

Indeed, the cost of adding more people to the company’s health insurance plan was a significant deterrent at Xerox, Everhart said.

But employers who adopted domestic partner benefits have found it inexpensive, said Marie Du-Fresne, senior vice president at The Hay Group.

In many instances, the coverage involves fewer payouts than for traditional couples, who might have a premature baby that runs up bills, she said.

Same-sex couples also tend to be younger and a high percentage are female partners, who have a low incidence of AIDS transmission, Sherman said.

Furthermore, a company offering the benefit often finds usage is slight, Sherman said. In same-sex relationships, both members of the couple are usually employed and have their own policies.

Some employees worry about the stigma attached to signing up a domestic partner and, despite assurances of confidentiality, resist doing so.

At Lotus, out of 3,400 employees in North America, only 35 have signed up for domestic partner benefits, spokesman Andrew MacDavid said.

“We believed this was an equal pay for equal work issue,” MacDavid said of the company’s policy, instituted in 1991. “We agreed that it was part of compensation.”

Another problem for the employee is the tax consequences of benefits for a domestic partner.

Based on the federal tax code, domestic partners are not dependents for tax purposes. Money paid by the employer on behalf of domestic partners must be included in the employee’s taxable income.